-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ovSSWGRFpw1Tq6KgktCz2v3ItkL/EeKnRzFbU9wxc6IWPOzomG+p8mVsLx2tMCWF pzEHwtzF/AlUSjoUw+0pTA== 0000950130-95-000086.txt : 19950607 0000950130-95-000086.hdr.sgml : 19950607 ACCESSION NUMBER: 0000950130-95-000086 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19950123 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARITY CORP CENTRAL INDEX KEY: 0000063118 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 223091314 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-57397 FILM NUMBER: 95502335 BUSINESS ADDRESS: STREET 1: 672 DELAWARE AVE CITY: BUFFALO STATE: NY ZIP: 14209 BUSINESS PHONE: 7168888000 FORMER COMPANY: FORMER CONFORMED NAME: MASSEY FERGUSON LTD DATE OF NAME CHANGE: 19600201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KELSEY HAYES CO CENTRAL INDEX KEY: 0000055149 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 383084488 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-57397-01 FILM NUMBER: 95502336 BUSINESS ADDRESS: STREET 1: 11878 HUBBARD ROAD CITY: LIVONIA STATE: MI ZIP: 48150 BUSINESS PHONE: 3135135000 MAIL ADDRESS: STREET 1: 11878 HUBBARD ROAD CITY: LIVONIA STATE: MI ZIP: 48150 S-3 1 FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1995 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- KELSEY-HAYES COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 38-3084488 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 11878 HUBBARD ROAD LIVONIA, MICHIGAN 48150 (313) 513-5000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- VARITY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 22-3091314 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 672 DELAWARE AVENUE BUFFALO, NEW YORK 14209 (716) 888-8000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- KENNETH L. WALKER, ESQ. VARITY CORPORATION 672 DELAWARE AVENUE BUFFALO, NEW YORK 14209 (716) 888-8000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ---------------- COPIES TO: ROBERT USADI, ESQ. EMANUEL S. CHERNEY, ESQ. CAHILL GORDON & REINDEL ANDREWS & KURTH L.L.P. 80 PINE STREET 425 LEXINGTON AVENUE NEW YORK, NY 10005 NEW YORK, NY 11007 (212) 701-3000 (212) 850-2800 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] ---------------- CALCULATION OF REGISTRATION FEE
======================================================================================== TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES BEING TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE - ---------------------------------------------------------------------------------------- Debt Securities......... $100,000,000 100% $100,000,000 $34,482.76 - ---------------------------------------------------------------------------------------- Guarantees of Debt Secu- rities(3).............. N/A N/A N/A N/A ========================================================================================
(1) Or, if any securities are issued with original issue discount, such greater amount as shall result in an initial aggregate offering price of $100,000,000. (2) Estimated solely for the purpose of calculating the registration fee. (3) No additional registration fee is payable in respect of the registration of the Guarantees. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JANUARY 23, 1995 PROSPECTUS KELSEY-HAYES COMPANY DEBT SECURITIES Guaranteed as to Payment of Principal and Interest by VARITY CORPORATION ----------- VARITY CORPORATION DEBT SECURITIES ----------- Kelsey-Hayes Company ("Kelsey-Hayes" or the "Issuer") and/or Varity Corporation ("Varity" or the "Company" or the "Issuer" and together with Kelsey-Hayes, the "Issuers") may offer from time to time pursuant to this Prospectus, in one or more series, up to $100,000,000 aggregate principal amount of their respective unsecured debt securities which may be either senior debentures, notes, bonds and/or other evidences of indebtedness ("Senior Securities") or subordinated debentures, notes, bonds and/or other evidences of indebtedness ("Subordinated Securities") in amounts, at prices and upon terms to be determined in light of market conditions at the time of sale. The Senior Securities and the Subordinated Securities are collectively referred to herein as the "Securities". The Issuer of each issue of Securities will be identified in a supplement hereto. The Senior Securities will rank equally with all other unsubordinated and unsecured indebtedness of the applicable Issuer and the Subordinated Securities will be subordinated to all existing and future senior indebtedness of the applicable Issuer in the manner and to the extent described herein. Varity (sometimes referred to herein as the "Guarantor"), Kelsey-Hayes' indirect parent, will unconditionally guarantee payment of the principal of and interest on the Kelsey-Hayes Securities. The guarantee of the Kelsey-Hayes Securities will rank equally with all other unsubordinated and unsecured indebtedness of Varity, but will be effectively subordinated to all liabilities, including trade payables, of subsidiaries of Varity. The specific terms of the Securities in respect of which this Prospectus is being delivered will be set forth in one or more supplements to this Prospectus (each, a "Prospectus Supplement"), that, among other things, will set forth the aggregate principal amount, maturity or maturities, rate (or method for determining the rate) and time of payment of interest, any redemption provisions, initial public offering price, proceeds to the Issuer and any other specific terms in connection with the offering and sale of a series of Securities. The Prospectus Supplement will also contain information, where applicable, about certain U.S. federal income tax, accounting and other considerations relating to, and any listing on a securities exchange of, the Securities covered by such Prospectus Supplement. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- The Securities may be sold directly by the Issuer, or through agents designated from time to time, or through underwriters or dealers. If any agents of the Issuer or any underwriters are involved in the sale of the Securities, the names of such agents or underwriters and any applicable fees, commissions or discounts and the net proceeds to the Issuer (if other than as described herein) from such sale will be set forth in a Prospectus Supplement. See "Plan of Distribution." THE DATE OF THIS PROSPECTUS IS , 1995 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY KELSEY- HAYES, VARITY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF KELSEY-HAYES OR VARITY SINCE SUCH DATE. AVAILABLE INFORMATION Varity is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files periodic reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). Such reports, proxy statements and other information may be inspected and copied at the public reference facilities of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices, 7 World Trade Center, New York, New York 10048, and Suite 140, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. Such material is also available for inspection at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Kelsey-Hayes and Varity have filed a Registration Statement on Form S-3 with the SEC under the Securities Act of 1933, as amended, with respect to the Debt Securities offered hereby. This Prospectus, which constitutes part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain portions of which have been omitted pursuant to the rules and regulations of the SEC. For further information, reference is made to the Registration Statement and the exhibits thereto, which may be inspected without charge at the office of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of which may be obtained from the SEC at prescribed rates. 2 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents previously filed by Varity with the SEC are hereby incorporated by reference herein: 1. Varity's Annual Report on Form 10-K for the fiscal year ended January 31, 1994 ("fiscal 1993"). 2. Varity's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1994 (the "April 1994 10-Q"). 3. Varity's Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 1994 (the "July 1994 10-Q"). 4. Varity's Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 1994 (the "October 1994 10-Q"). 5. Varity's Current Report on Form 8-K dated July 13, 1994. 6. All documents filed by Varity with the SEC pursuant to Section 13(a), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of this offering of Debt Securities shall be deemed to be incorporated by reference herein and to be part hereof from the date of filing of such documents. Any statement contained herein or contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes hereof to the extent that a statement contained herein or in any subsequently filed document which is also deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed to constitute a part hereof, except as so modified or superseded. Varity hereby undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, on the written or oral request of such person, a copy of any or all of the documents referred to above which have been incorporated in this Prospectus by reference (other than exhibits to such documents). Requests should be made to the Secretary, Varity Corporation, 672 Delaware Avenue, Buffalo, New York 14209, telephone number (716) 888-8000. 3 THE COMPANY General. Varity, founded in 1847, together with its subsidiaries, is a major international industrial company with core manufacturing and distribution businesses in automotive components and diesel engines. Varity conducts and manages its businesses principally under two separate operating groups: the Automotive Products Group and the Engines Group. Varity's products are marketed in more than 160 countries. Through a series of transactions completed between January, 1992 and June, 1994, Varity sold its worldwide Massey Ferguson farm machinery business to AGCO Corporation. The Automotive Products Group. The Automotive Products Group is a leading producer of brake components for passenger cars and light trucks through Kelsey-Hayes Company ("Kelsey-Hayes") and engineered brake and wheel products for medium and heavy trucks and trailers through Dayton Walther Corporation. The most significant automotive products manufactured and marketed by Kelsey- Hayes are anti-lock braking systems ("ABS"), disc and drum brakes, disc brake rotors, hubs and drums for passenger cars and light trucks. Kelsey-Hayes is one of the leaders in the production of ABS, supplying both two-wheel and four- wheel systems. Kelsey-Hayes is the leading manufacturer of two-wheel ABS in North America for light trucks. Kelsey-Hayes has been successful in developing new ABS products for both light trucks and passenger cars and has introduced a new generation of four-wheel ABS that is compatible with virtually any size passenger car or light truck and any brake configuration. In order to meet increased ABS demand, Varity recently completed construction of new plants in Fowlerville, Michigan and Heerlen, The Netherlands. Production at the Fowlerville, Michigan plant has commenced and production at the Heerlen, The Netherlands plant is scheduled to commence in the first quarter of 1995. In addition, Varity believes that Kelsey-Hayes is a leader in the production of foundation (conventional) brakes, and benefits from its strategic position as a major supplier of both ABS and foundation brakes for light trucks, vans and sport utility vehicles. North American production of these vehicles increased 15% in fiscal 1993. Varity owns, through a subsidiary, 46.3% of the outstanding common stock of Hayes Wheels International, Inc. ("Hayes Wheels"), which Varity believes is the largest supplier of cast aluminum wheels in Europe, the second largest supplier of cast aluminum wheels in North America and the largest independent supplier of fabricated steel wheels in North America. Varity believes that its ownership interest in Hayes Wheels is an important and continuing element of the Automotive Products Group. Prior to December 1992, Varity owned 100% of the outstanding common stock of Hayes-Wheels and references to Kelsey-Hayes prior to December 1992 include all of the operations of Hayes Wheels' business. In fiscal 1993, the Automotive Products Group accounted for approximately 63% of Varity's consolidated total sales and revenues. The Engines Group. The Engines Group, together with its associate companies and licensees, is one of the leading producers of diesel engines other than those used as original equipment in passenger cars. Based in the United Kingdom, the Engines Group designs, produces and markets a comprehensive array of multi-cylinder water-cooled diesel engines and adapts its basic engine designs to meet the specific requirements of its diverse customer base. As a result, the Engines Group's engines are used as original equipment in virtually every application for which diesel engines are suitable, including agricultural tractors, industrial and construction machinery, material handling equipment, generators, passenger cars, trucks, vans, buses and other commercial vehicles, pleasure and commercial boats, armored personnel carriers and battle tanks. In fiscal 1993, 10% of the Engines Group's sales were to the Massey Ferguson group. Perkins Group Limited and the Engines Group will continue to supply AGCO Corporation, the company that acquired the Massey Ferguson group, pursuant to a long term supply contract expiring in 2003. In fiscal 1993, the Engines Group accounted for approximately 35% of consolidated total sales and revenues. Varity's principal executive office is located at 672 Delaware Avenue, Buffalo, New York 14209, telephone number (716) 888-8000. Kelsey-Hayes' principal executive office is located at 11878 Hubbard Road, Livonia, Michigan 48150, telephone number (313) 513-5000. 4 USE OF PROCEEDS Unless otherwise indicated in an accompanying Prospectus Supplement, the applicable Issuer intends to use the net proceeds from the sale of the Securities for its general corporate purposes which may include the declaration of a dividend by Kelsey-Hayes to Varity or the repayment of intercompany debt, including repayments to Varity. Any proceeds paid to Varity will be used by Varity for its general corporate purposes. Pending ultimate application, the net proceeds may be used to make short-term investments or reduce short-term borrowings. 5 SELECTED CONSOLIDATED FINANCIAL DATA The following unaudited selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1994 (the "1994 10-K") and the Company's quarterly reports on Form 10-Q for the quarters ended April 30, 1994, July 31, 1994 and October 31, 1994. As a result of the June 1994 sale of the Company's worldwide Massey Ferguson farm machinery business to AGCO Corporation, financial data for all periods prior to October 31, 1994, have been restated to present the farm equipment segment as a discontinued operation. The net assets of the discontinued operation have been classified as current assets for all periods subsequent to January 31, 1993. The unaudited selected consolidated financial data for the nine months ended October 31, 1993 and 1994, contain, in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position and consolidated results of operations of the Company for those periods. Results of operations for the nine months ended October 31, 1994, are not necessarily indicative of results anticipated for the entire year.
NINE MONTHS ENDED YEAR ENDED JANUARY 31, OCTOBER 31, ------------------------------------------------- ------------------- 1990(1) 1991 1992 1993(2) 1994(2) 1993 1994 -------- -------- -------- -------- -------- -------- -------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (NOT COVERED BY INDEPENDENT AUDITORS' REPORTS) INCOME STATEMENT DATA: Total sales and reve- nues.................. $1,098.1 $2,232.2 $2,037.1 $2,233.9 $1,827.4 $1,341.2 $1,628.2 Cost of goods sold..... 884.0 1,811.6 1,713.8 1,836.6 1,514.9 1,111.8 1,339.1 Marketing, general and administration........ 116.5 183.7 171.2 192.5 150.3 109.7 125.2 Engineering and product development........... 20.6 63.9 60.6 64.0 65.5 49.3 63.0 Interest, net.......... 40.3 93.5 100.9 99.1 32.0 23.6 16.1 Exchange (gains) loss- es.................... 6.7 0.7 9.6 5.6 (1.6) (.4) (1.0) Other (income) expense, net................... (12.2) (4.2) 2.2 (5.4) (2.9) (.2) .2 Losses on sales of businesses and other restructuring charges(3)............ -- 7.8 63.8 -- -- -- -- Non-recurring (gain) charge(4)............. -- 15.5 -- (17.3) -- -- -- -------- -------- -------- -------- -------- -------- -------- Income (loss) before income taxes, earnings of associated compa- nies, discontinued op- eration, extraordinary loss and cumulative effect of changes in accounting principles. 42.2 59.7 (85.0) 58.8 69.2 47.4 85.6 Income tax provision... (18.7) (18.4) (10.5) (9.9) (11.6) (8.1) (15.3) -------- -------- -------- -------- -------- -------- -------- Income (loss) before earnings of associated companies, discontin- ued operation, ex- traordinary loss and cumulative effect of changes in accounting principles............ 23.5 41.3 (95.5) 48.9 57.6 39.3 70.3 Equity in earnings of associated companies.. -- -- -- 0.6 11.5 7.8 10.2 -------- -------- -------- -------- -------- -------- -------- Income (loss) before discontinued opera- tion, extraordinary loss and cumulative effect of changes in accounting principles. 23.5 41.3 (95.5) 49.5 69.1 47.1 80.5 Earnings (loss) from discontinued opera- tion.................. 70.8 53.1 (82.5) (16.1) 7.2 2.2 4.4 Gain on sale of discon- -- -- -- -- -- -- 23.2 tinued operation...... -------- -------- -------- -------- -------- -------- -------- Income (loss) before extraordinary loss and cumulative effect of changes in accounting principles............ 94.3 94.4 (178.0) 33.4 76.3 49.3 108.1 Extraordinary loss(5).. -- -- -- (6.4) (1.7) (1.7) -- Cumulative effect of changes in accounting principles............ -- -- -- -- (146.1) (146.1) -- -------- -------- -------- -------- -------- -------- -------- Net income (loss)...... $ 94.3 $ 94.4 $ (178.0) $ 27.0 $ (71.5) $ (98.5) $ 108.1 ======== ======== ======== ======== ======== ======== ======== PER SHARE DATA: Income (loss) before discontinued opera- tion, extraordinary loss and cumulative effect of changes in accounting principles: Primary............... $ 0.25 $ 0.93 $(4.57) $ 1.18 $ 1.60 $ 1.09 $ 1.78 Fully diluted......... $ 0.25* $ 0.93* $(4.57)* $ 1.17 $ 1.56 $ 1.08 $ 1.78 Net income (loss): Primary............... $ 3.57 $ 3.06 $(7.87) $ 0.32 $(2.23) $(3.17) $ 2.40 Fully diluted......... $ 3.11 $ 2.77 $(7.87)* $ 0.32 $(2.23)* $(3.17)* $ 2.40 OTHER DATA: Capital expenditures... $ 43.7 $ 98.1 $ 97.5 $ 88.9 $ 135.8 $ 86.9 $ 121.3 Depreciation and amor- tization.............. $ 52.7 $ 85.3 $ 92.2 $ 99.4 $ 65.4 $ 49.0 $ 56.3 Ratio of earnings to fixed charges(6)...... 1.77x 1.48x -- 1.53x 2.60x 2.43x 4.52x BALANCE SHEET DATA (AT PERIOD END): Current assets......... $1,003.5 $ 903.9 $ 815.2 $ 617.5 $ 807.3 $ 740.2 $ 814.4 Fixed assets........... $ 765.1 $ 809.2 $ 810.0 $ 515.6 $ 522.2 $ 493.6 $ 612.4 Total assets........... $2,731.3 $2,756.4 $2,521.4 $1,804.8 $1,759.6 $1,666.4 $1,887.2 Current liabilities.... $ 835.1 $ 998.5 $ 933.6 $ 663.4 $ 563.7 $ 510.5 $ 570.9 Long-term debt......... $ 805.3 $ 609.3 $ 717.2 $ 305.2 $ 185.5 $ 228.8 $ 163.7 Stockholders' equi- ty(7)................. $ 618.0 $ 720.0 $ 495.1 $ 548.5 $ 630.7 $ 577.8 $ 811.2
- ------- *Anti-dilutive. (footnotes on following page) 6 (1) Financial data reported for the fiscal year ended January 31, 1990 (fiscal 1989), and thereafter reflect the acquisition of K-H Corporation effective November 30, 1989. (2) Financial data as of January 31, 1993, and for the fiscal year ended January 31, 1994 (fiscal 1993), are not readily comparable to the financial data for the same periods of the prior year as a result of the Company's disposition in the fourth quarter of the fiscal year ended January 31, 1993 (fiscal 1992), of Hayes Wheels, which is no longer included in the Company's consolidated results, as is described in Note 15 of the Notes to Consolidated Financial Statements for fiscal 1993. (3) Losses on sales of businesses and other restructuring charges of $7.8 million and $63.8 million in the fiscal years ended January 31, 1991 (fiscal 1990), and January 31, 1992, respectively, relate primarily to provisions for employment reductions and anticipated losses on the divestment of certain non-core businesses. (4) The non-recurring charge for fiscal 1990 and gain for fiscal 1992 are described in Note 4 of the Notes to Consolidated Financial Statements for fiscal 1992. (5) The extraordinary losses in fiscal 1992, fiscal 1993 and for the nine months ended October 31, 1993, relate to the early extinguishment of debt as described in Note 10(d) and 10(h) of the Notes to Consolidated Financial Statements for fiscal 1993. (6) For purposes of calculating the ratio of earnings to fixed charges, "earnings" are computed by adding the net earnings from continuing operations, the provision for income taxes and fixed charges. "Fixed charges" consist of interest expense and a portion of operating lease rent expense deemed to be representative of interest. Earnings for the fiscal year ended January 31, 1992 were insufficient to cover fixed charges by $85,000,000; however, adjusted to eliminate depreciation and amortization, such earnings would have exceeded fixed charges by $7,000,000. (7) No dividends on the Common Stock were paid during the periods presented. 7 DESCRIPTION OF DEBT SECURITIES The following description of the terms of the Securities sets forth certain general terms and provisions of the Securities to which any Prospectus Supplement may relate. The particular terms and provisions of any series of Securities offered by any Prospectus Supplement (the "Offered Securities") and the extent to which such general provisions may apply to the Offered Securities will be described in a Prospectus Supplement relating to such Offered Securities. The Senior Securities, consisting of notes, debentures, bonds or other evidences of indebtedness (the "Senior Securities"), will constitute unsecured senior obligations of the applicable Issuer and the Subordinated Securities, consisting of notes, debentures, bonds or other evidences of indebtedness (the "Subordinated Securities" and, together with the Senior Securities, the "Securities"), will constitute unsecured subordinated obligations of the applicable Issuer. The Senior Securities to be issued by Kelsey-Hayes will be issued under an Indenture (the "K-H Senior Indenture") executed by Kelsey- Hayes, Varity and Manufacturers and Traders Trust Company (the "Senior Trustee") and the Subordinated Securities to be issued by Kelsey-Hayes will be issued under an Indenture (the "K-H Subordinated Indenture" and, together with the K-H Senior Indenture, the "K-H Indentures") executed by Kelsey-Hayes, Varity and Manufacturers and Traders Trust Company (the "Subordinated Trustee" and, together with the Senior Trustee, the "Trustees"). The Senior Securities to be issued by Varity will be issued under an Indenture (the "Varity Senior Indenture") executed by Varity and the Senior Trustee and the Subordinated Securities to be issued by Varity will be issued under an Indenture (the "Varity Subordinated Indenture" and, together with the Varity Senior Indenture, the "Varity Indentures") executed by Varity and the Subordinated Trustee. The K-H Indentures and the Varity Indentures are collectively referred to herein as the "Indentures." The Securities to be issued by Kelsey-Hayes are sometimes referred to herein as the "Kelsey-Hayes Securities" and the Securities to be issued by Varity are sometimes referred to herein as the "Varity Securities." The terms of the Securities include those stated in the relevant Indenture and those made part of such Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and holders of the Securities are referred to the relevant Indenture and the Trust Indenture Act for a statement thereof. A copy of the form of each Indenture is filed as an exhibit to the Registration Statement of which this Prospectus is a part. The following summaries of certain provisions of the Securities and the Indentures do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Securities and the Indenture, including the definitions therein of certain terms that are not otherwise defined in this Prospectus. Wherever particular provisions or defined terms of the Indentures are referred to, such provisions or defined terms are incorporated herein by reference. GENERAL The Indentures provide that Securities may be issued thereunder from time to time as a single series or in two or more separate series up to the aggregate principal amount from time to time authorized by the applicable Issuer for each series. The applicable Issuer and the particular terms of each series of Securities offered by a Prospectus Supplement or Prospectus Supplements will be described in such Prospectus Supplement or Prospectus Supplements. The applicable Prospectus Supplement or Prospectus Supplements will describe, among other things, the following terms of the Offered Securities, if applicable to such Offered Securities; (i) the title of the Offered Securities; (ii) the aggregate principal amount of the Offered Securities; (iii) the price or prices (expressed as a percentage of the principal amount thereof) at which the Offered Securities will be issued; (iv) the date or dates (which may be fixed or extendible) on which the principal of the Offered Securities is payable or the method of determination thereof; (v) the rate or rates (which may be fixed or variable) at which the Offered Securities will bear interest, if any, and the date or dates from which such interest, if any, will accrue; (vi) the interest payment dates, if any, on which any interest on the Offered Securities will be payable, and the regular record date for any interest payable on any Offered Securities; (vii) the right or obligation, if any, of the 8 applicable Issuer to redeem or purchase the Offered Securities pursuant to any optional redemption, sinking fund or analogous provisions or at the option of the holder thereof or otherwise, the conditions, if any, giving rise to such right or obligation, and the period or periods within which, and the price or prices at which and the terms and conditions upon which the Offered Securities shall be redeemed or purchased, in whole or in part, and any provisions for the remarketing of such Offered Securities; (viii) if the amount of payments of principal of, premium, if any, and interest, if any, on the Offered Securities is to be determined by reference to an index, formula or other method, the manner in which such amounts are to be determined and the calculation agent, if any, with respect thereto; (ix) if other than the principal amount thereof, the portion of the principal amount of the Offered Securities that will be payable upon declaration of acceleration of the maturity thereof pursuant to an Event of Default; (x) any listing of the Offered Securities on a securities exchange; (xi) any covenants of Kelsey-Hayes or Varity applicable to the Offered Securities in addition to those described in this Prospectus; (xii) any Events of Default applicable to the Offered Securities in addition to the Events of Default described in this Prospectus; (xiii) any provision for defeasance, if different from those described in this Prospectus; (xiv) whether such Securities are to be represented in whole or in part by a Security in global form and, if so, the identity of the depositary ("Depositary") for any global Security; and (xv) any other material terms of the Offered Securities, which terms may modify or delete any provision of the relevant Indenture as it relates to the Offered Securities. If so provided in the applicable Prospectus Supplement, Securities may be issued as original issue discount securities, which are securities sold at a discount below their principal amount. Certain United States federal income tax considerations and other special considerations applicable to Securities, if any, issued with original issue discount may be described in the applicable Prospectus Supplement. GLOBAL SECURITIES The registered Securities of a series may be issued in the form of one or more fully registered global Securities (a "Global Security") that will be deposited with a depositary (a "Depositary") identified in the Prospectus Supplement relating to such series or with a nominee for a Depositary and registered in the name of the Depositary or a nominee thereof. In such case, one or more Global Securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal amount of outstanding registered Securities of the series to be represented by such Global Security or Global Securities. Unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Global Security may not be transferred except as a whole by the Depositary for such Global Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. The specific terms of the depository arrangement with respect to any portion of a series of Securities to be represented by a Global Security will be described in the Prospectus Supplement relating to such series. The Issuers anticipate that the following provisions will apply to all depository arrangements. Ownership of beneficial interests in a Global Security will be limited to persons that have accounts with the Depositary for such Global Security. The Depositary for such Global Security will credit, on its book-entry registration and transfer system, the participants' accounts with the respective principal amounts of the Securities represented by such Global Security beneficially owned by such participants. The accounts to be credited will be designated by any dealers, underwriters or agents participating in the distribution of such Securities. Ownership of beneficial interests will be effected only through records maintained by the Depositary for such Global Security (with respect to interests of participants) and on the records of participants (with respect to interests of persons holding through participants). The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to own, transfer or pledge beneficial interests in Global Securities. 9 So long as the Depositary for a Global Security, or its nominee, is the registered owner of such Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or Holder of the Securities represented by such Global Security for all purposes under the applicable Indenture. Except as set forth below, owners of beneficial interests in a Global Security will not be entitled to have the Securities represented by such Global Security registered in their names, and will not receive or be entitled to receive physical delivery of such Securities in definitive form and will not be considered the owners or Holders thereof under the applicable Indenture. Accordingly, each person owning a beneficial interest in a Global Security must rely on the procedures of the Depositary for such Global Security and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a Holder under the applicable Indenture. Each Issuer understands that under existing industry practices, if such Issuer requests any action of Holders or if any Holder is entitled to give any consent or take any action under the applicable Indenture, the Depositary for such Global Security would authorize the participants holding Securities of the relevant beneficial owners owning through such participants to give or take such action or would otherwise act upon the instruction of beneficial owners holding through them. Payments of principal of, premium, if any, and any interest on Securities represented by a Global Security registered in the name of a Depositary or its nominee will be made to such Depositary or its nominee, as the case may be, as the registered owner of such Global Security. None of the Issuers, the Guarantor, the Trustees or any other agent of the Issuers or agent of the Trustee will have any responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership interests in such Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Each Issuer expects that the Depositary for any Securities represented by a Global Security, upon receipt of any payment of principal, premium on, if any, or any interest in respect of such Global Security, will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interest in such Global Security as shown on the records of such Depositary. Each Issuer also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing customer instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If the Depositary for any Securities represented by a Global Security notifies the applicable Issuer that it is at any time unwilling or unable to continue as Depositary or ceases to be a clearing agency registered under the Exchange Act, and a successor Depositary registered as a clearing agency under the Exchange Act is not appointed by the applicable Issuer within 90 days, the applicable Issuer will issue such Securities in definitive form in exchange for such Global Security or Global Securities representing such Securities. Any Securities issued in definitive form in exchange for a Global Security will be registered in such name or names as the Depositary shall instruct the applicable Trustee. It is expected that such instructions will be based upon directions received by the Depositary from participants with respect to ownership of beneficial interests in such Global Security. RANKING Senior Securities. The Senior Securities will be general unsecured obligations of the applicable Issuer and will rank pari passu in right of payment with other unsubordinated and unsecured indebtedness of the applicable Issuer. Subordinated Securities. The payment of the principal of, and premium, if any, and interest on the Subordinated Securities will be expressly subordinated to all Senior Indebtedness of the applicable Issuer. Upon any distribution to creditors of the applicable Issuer in a liquidation or dissolution of the applicable Issuer or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the 10 applicable Issuer or its property or in an assignment for the benefit of creditors or any marshalling of the assets and liabilities of the applicable Issuer: (1) holders of Senior Indebtedness shall be entitled to receive payment in full of all Obligations with respect to the Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness, whether or not such interest is an allowable claim in any such proceeding) before holders of Subordinated Securities shall be entitled to receive any payment of any Obligations with respect to the Subordinated Securities; and (2) until all Obligations with respect to Senior Indebtedness (as provided in subsection (1) above) are paid in full, any distribution to which holders of Subordinated Securities would be entitled but for this subordination provision shall be made to holders of Senior Indebtedness, as their interests may appear, except that holders of Subordinated Securities may receive securities that are subordinate to at least the same extent as the Subordinated Securities to Senior Indebtedness. The applicable Issuer may not make any payment or distribution to the applicable Subordinated Trustee or any holder of Subordinated Securities in respect of Obligations with respect to the Subordinated Securities and may not acquire from the applicable Subordinated Trustee or any holder of Subordinated Securities any Subordinated Securities for cash or property (other than indebtedness which is subordinated to at least the same extent as the Subordinated Securities to Senior Indebtedness), until all Obligations with respect to the Senior Indebtedness have been paid in full if: (i) there occurs and is continuing a default in the payment of any Obligations with respect to the Senior Indebtedness at the final scheduled maturity thereof or that permits holders of such Senior Indebtedness to accelerate its maturity or the maturity of which has been accelerated; or (ii) there occurs and is continuing an event of default, other than a payment default, on any Senior Indebtedness that permits holders of Senior Indebtedness to accelerate its maturity, and such event of default is the subject of judicial proceedings or the applicable Issuer receives a notice of the default pursuant to the applicable Indenture. If the applicable Issuer receives any such notice, a subsequent notice received within 360 days thereafter relating to Senior Indebtedness or which relates to a default in existence at the date of such prior notice shall not be effective for purposes of the restriction in this paragraph. The applicable Issuer may resume payments on and distributions in respect of the Subordinated Securities and may acquire them when (1) the default is cured or waived or has ceased to exist or such notice has been rescinded or annulled, or (2) in the case of a default referred to in (ii) above, 179 days pass after the applicable Subordinated Trustee receives written notice of such default and the holders of Senior Indebtedness as to which such default relates have not declared such Senior Indebtedness to be immediately due and payable, if the applicable Indenture otherwise permits the payment or acquisition at the time of such payment or acquisition. By reason of the subordination provisions described above, in the event of insolvency, funds which would otherwise be payable to holders of Subordinated Securities shall be paid to the holders of Senior Indebtedness to the extent necessary to pay the Senior Indebtedness in full. The aggregate principal amount of Senior Indebtedness outstanding for the applicable Issuer as of a recent date will be set forth in the applicable Prospectus Supplement. "Senior Indebtedness" means all Indebtedness of the applicable Issuer. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness shall not include (i) any Indebtedness of the applicable Issuer to any of its subsidiaries, or (ii) any Indebtedness created or evidenced pursuant to an instrument that expressly provides that such Indebtedness is not superior in right of payment to the Subordinated Securities. GUARANTEE Varity will unconditionally guarantee (the "Guarantee") to each holder of a Kelsey-Hayes Security issued under either of the K-H Indentures the payment of the principal of, premium, if any, and interest on such Kelsey-Hayes Security when the same becomes due and payable, whether at the stated maturity or by declaration of acceleration, call for redemption or otherwise, according to the terms of such Kelsey-Hayes Security and of the applicable K-H Indenture. In case of the default by Kelsey-Hayes in the payment of any such principal, premium or interest, Varity will punctually make such payment. The obligations of Varity thereunder will be absolute and unconditional. Varity's obligations on the Guarantee will not be discharged 11 as to any such Kelsey-Hayes Security except by payment in full of the principal of, premium, if any, and interest thereon. The Guarantee of the Kelsey-Hayes Securities will be unsecured and will rank on a parity with all other unsecured and unsubordinated debt of Varity. At October 31, 1994, the amount of Varity indebtedness which would be pari passu with the guarantee of the Kelsey-Hayes Securities was approximately $28.5 million and there was approximately $223.5 million available under various credit facilities of Varity's subsidiaries which Varity has guaranteed. However, since Varity is a holding company, all of the indebtedness, amounts due trade creditors and other liabilities of Varity's subsidiaries, whether or not guaranteed by Varity, are effectively senior to the guarantees of the Kelsey-Hayes Securities as to assets of a particular subsidiary. Although Varity has in the recent past obtained financing directly, through the sale of 5.75 million shares and 4.6 million shares of its common stock in public offerings in December 1992 and June 1993, respectively, as a holding company with no significant manufacturing or sales operations of its own, Varity has historically been dependent primarily on its subsidiaries to meet its cash requirements. However, Varity's ability to obtain cash from its operating subsidiaries is in certain instances restricted by the financial condition, operating requirements and loan agreements of these subsidiaries. These loan agreements do not directly restrict the transfer of funds to Varity; however, such loan agreements contain net worth tests, interest coverage ratio tests and other financial tests which may have the effect of restricting subsidiary dividends. FORM, EXCHANGE, REGISTRATION AND TRANSFER Securities will be issuable in definitive form solely as registered Securities. The Indenture provides that registered Securities of a series may be issuable in global form. See "Global Securities." Unless otherwise indicated in the Prospectus Supplement, registered Securities will be issued in denominations of $1,000 and whole multiples thereof. Registered Securities of any series will be exchangeable for other registered Securities of the same series of authorized denominations and of a like aggregate principal amount, tenor and terms. Securities may be presented for exchange as provided above, and registered Securities may be presented for registration of transfer (duly endorsed or accompanied by a satisfactory written instrument of transfer), at the office of the Registrar or at the office of any transfer agent designated by the applicable Issuer for such purpose with respect to such series of Securities, without service charge and upon payment of any taxes and other governmental charges. If the applicable Prospectus Supplement refers to any transfer agent (in addition to the Registrar) initially designated by the applicable Issuer with respect to any series of Securities, the applicable Issuer may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent (or Registrar) acts, except that, if Securities of a series are issuable solely as registered Securities, the applicable Issuer will be required to maintain a transfer agent in each place of payment for such series. Unless otherwise indicated in the Prospectus Supplement, the Trustee under each Indenture will be designated as the Registrar under such Indenture for registered Securities. The applicable Issuer may at any time designate additional transfer agents with respect to any series of Securities. The applicable Issuer shall not be required (i) to issue, register the transfer of or exchange Securities of any particular series to be redeemed for a period of 15 days preceding the first publication of the relevant notice of redemption or, if registered Securities are outstanding and there is no publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any registered Security so selected for redemption or exchange in whole or in part, except the unredeemed or unexchanged portion of any registered Security being redeemed or exchanged in part. PAYMENT AND PAYING AGENTS Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of and premium, if any, and interest, if any, on registered Securities will be made at the office of such Paying Agent 12 or Paying Agents as the applicable Issuer may designate from time to time, except that at the option of the applicable Issuer payment of principal or interest may be made by check to an account maintained by the payee. Unless otherwise indicated in an applicable Prospectus Supplement, payment of any installment of interest on registered Securities will be made to the person in whose name such Security is registered at the close of business on the regular record date of such interest. Unless otherwise indicated in an applicable Prospectus Supplement, the Trustee under each Indenture will be designated as the applicable Issuer's sole Paying Agent for payment with respect to registered Securities issued under such Indenture. Any other Paying Agent initially designated by the applicable Issuer for the Offered Securities will be named in an applicable Prospectus Supplement. CERTAIN COVENANTS Limitations on Liens. The applicable Issuer will covenant that it will not issue, incur, create, assume or guarantee, and will not permit any Restricted Subsidiary to issue, incur, create, assume or guarantee, any Indebtedness secured by a Lien upon any Principal Property of the applicable Issuer or any Restricted Subsidiary or upon any shares of stock or Indebtedness of any Restricted Subsidiary held by the applicable Issuer (whether such Principal Property, shares or Indebtedness are now existing or owed or hereafter created or acquired) without in any such case effectively providing concurrently with the issuance, incurrence, creation, assumption or guaranty of any such secured Indebtedness, or the grant of a Lien with respect to any such Indebtedness of such Restricted Subsidiary, that the Securities (together with, if the applicable Issuer shall so determine, any other Indebtedness of or guarantee by the applicable Issuer or such Restricted Subsidiary) shall be secured by a Lien ranking equally and ratably with (or, at the option of the applicable Issuer, prior to) such secured debt so long as such other Indebtedness is so secured. The foregoing restriction, however, will not apply to: (a) Liens on property, shares of stock or Indebtedness or other assets of any corporation existing at the time such corporation becomes a Restricted Subsidiary; provided that such Liens are not incurred in anticipation of such corporation becoming a Restricted Subsidiary; (b) Liens on property, shares of stock or Indebtedness existing at the time of acquisition thereof by the applicable Issuer or a Restricted Subsidiary or Liens on property, shares of stock or Indebtedness to secure any Indebtedness for borrowed money incurred prior to, at the time of, or within 270 days after, the latest of the acquisition thereof, or, in the case of property, the completion of construction, the completion of improvements or the commencement of substantial commercial operation of such property, for the purpose of financing all or any part of the purchase price thereof, such construction or the making of such improvements; (c) Liens to secure Indebtedness owing to the applicable Issuer or the Guarantor or to a Restricted Subsidiary; (d) Liens existing at the date of the initial issuance of the Securities of such series; (e) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the applicable Issuer or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to the applicable Issuer or a Restricted Subsidiary; provided that such Lien was not incurred in anticipation of such merger or consolidation or sale, lease or other disposition; (f) Liens created in connection with a project financed with, and created to secure, a Nonrecourse Obligation; or (g) extensions, renewals or replacements of any Liens permitted by any of the foregoing clauses (a) through (f); provided, however, that any Liens permitted by any of the foregoing clauses (a) through (f) shall not extend to or cover any property of the applicable Issuer or such Restricted Subsidiary, as the case may be, other than the property specified in such clauses and improvements thereto. Limitations on Sale and Lease-Back Transactions. The applicable Issuer will covenant that it will not, nor will it permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction with respect to any Principal Property, other than any such transaction involving a lease for a term of not more than three years or any such transaction between the applicable Issuer and a Restricted Subsidiary or between Restricted Subsidiaries, unless: (a) the applicable Issuer or such Restricted Subsidiary would be entitled to incur Indebtedness secured by a mortgage on the Principal Property involved in such transaction at least equal in amount to the Attributable Debt with respect to such Sale and Lease-Back Transaction, without equally and ratably securing the Securities, pursuant to the limitation in the applicable Indenture on Liens; 13 or (b) the applicable Issuer shall apply an amount equal to the greater of the net proceeds of such sale or the Attributable Debt with respect to such Sale and Lease-Back Transaction within 270 days of such sale to either (or a combination of) the retirement (other than any mandatory retirement, mandatory prepayment or sinking fund payment or by payment at maturity) of Indebtedness of the applicable Issuer or a Restricted Subsidiary that matures more than twelve months after the creation of such Indebtedness or the purchase, construction or development of other comparable property. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used the Indentures. Reference is made to the Indentures for the full definition of all such terms. "Attributable Debt" when used in connection with a Sale and Lease-Back Transaction involving a Principal Property shall mean, at the time of determination, the lesser of: (a) the fair value of such property (as determined in good faith by the Board of Directors of the applicable Issuer); or (b) the present value of the total net amount of rent required to be paid under such lease during the remaining term thereof (including any renewal term or period for which such lease has been extended), discounted at the rate of interest set forth or implicit in the terms of such lease or, if not practicable to determine such rate, the weighted average interest rate per annum borne by the Securities of each series outstanding pursuant to the applicable Indenture compounded semi-annually. For purposes of the foregoing definition, rent shall not include amounts required to be paid by the lessee, whether or not designated as rent or additional rent, on account of or contingent upon maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall be the lesser of the net amount determined assuming termination upon the first date such lease may be terminated (in which case the net amount shall also include the amount of the penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the net amount determined assuming no such termination. "Indebtedness" means, with respect to any person, without duplication, (i) all obligations for borrowed money, (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations, (iv) all obligations 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 accrued expenses arising in the ordinary course of business), (v) all fixed unconditional obligations issued or contracted for as payment in consideration of the purchase by such person of the stock or substantially all the assets of another person or a merger or consolidation, (vi) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction which secure Indebtedness of a person other than the issuer of the letter of credit or the accepting bank, (vii) all obligations of the type referred to in clauses (i) through (vi) of other persons guaranteed by such person to the extent of the guarantee; and (viii) all obligations of the type referred to in clauses (i) through (vii) of other persons 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 value of such property or asset at the time the Lien is created or the amount of the obligation so secured. "Material Subsidiary" means, at any particular time, any Subsidiary of any person that (a) accounted for more than 10% of the consolidated revenues of such person and its Subsidiaries on a consolidated basis for the most recently completed fiscal year of such person or (b) was the owner of more than 10% of the consolidated assets of such person and its Subsidiaries on a consolidated basis as at the end of such fiscal year, all as shown on the consolidated financial statements of such person and its Subsidiaries for such fiscal year. "Nonrecourse Obligation" means Indebtedness or other obligations substantially related to (i) the acquisition of assets not previously owned by the applicable Issuer or any Restricted Subsidiary or (ii) the financing of a project involving the development or expansion of properties of the applicable Issuer or any 14 Restricted Subsidiary, as to which the obligee with respect to such Indebtedness or obligation has no recourse to the applicable Issuer or any Restricted Subsidiary or any assets of the applicable Issuer or any Restricted Subsidiary other than the assets which were acquired with the proceeds of such transaction or the project financed with the proceeds of such transaction (and the proceeds thereof). "Principal Property" shall mean the land, land improvements, buildings and fixtures (to the extent they constitute real property interests) (including any leasehold interest therein) constituting the principal corporate office, any manufacturing plant or any manufacturing facility (whether now owned or hereafter acquired) which: (a) is owned by the applicable Issuer or any of its Subsidiaries; (b) is located within any of the present 50 States of the United States of America (or the District of Columbia); (c) has not been determined in good faith by the Board of Directors of the applicable Issuer not to be materially important to the total business conducted by the applicable Issuer and its Subsidiaries taken as a whole; and (d) has a book value on the date as of which the determination is being made in excess of 1%, in the case of Kelsey-Hayes, or .5%, in the case of Varity, of consolidated total assets of the applicable Issuer as most recently determined on or prior to such date. "Restricted Subsidiary" shall mean any Subsidiary of the applicable Issuer which owns any Principal Property. "Sale and Lease-Back Transaction" shall mean any sale or transfer by the applicable Issuer or one of its Restricted Subsidiaries of any Principal Property that is being sold or transferred by such person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof, if such sale or transfer is made with the intent of leasing, or as part of an arrangement involving the lease of, such Principal Property to the applicable Issuer or one of its Restricted Subsidiaries. "Subsidiary" means, with respect to any person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such person, by one or more Subsidiaries of such person or by such person and one or more Subsidiaries thereof and (ii) any other person (other than a corporation), including, without limitation, a joint venture, in which such person, one or more Subsidiaries thereof or such person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, have at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other persons performing similar functions). CONSOLIDATION, MERGER AND SALE OF ASSETS The Indentures will provide that neither Kelsey-Hayes or Varity, in the case of the K-H Indentures, nor Varity, in the case of the Varity Indentures, will, in any transaction or series of transactions, merge or consolidate with or into, or sell, assign, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any person or persons, unless at the time and after giving effect thereto (i) either (A) Kelsey-Hayes or Varity, as the case may be, shall be the surviving person of such merger or (B) the successor corporation shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, (ii) the successor corporation if other than Kelsey-Hayes or Varity, as the case may be, shall expressly assume by a supplemental indenture executed and delivered to the Trustee under the applicable Indenture, in form satisfactory to such Trustee, all the obligations of Kelsey-Hayes and Varity, in the case of the K-H Indentures, and Varity, in the case of the Varity Indentures, as the case may be, under the applicable Indenture and Securities and Guarantees, as the case may be, issued thereunder, and in each case, such Indenture shall remain in full force and effect and (iii) immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing with respect to Securities of any series under such Indenture. 15 EVENTS OF DEFAULT Under each Indenture, an Event of Default is defined as, with respect to each series of Securities issued under such Indenture individually, any of the following: (i) default in the payment of the principal of or premium, if any, on any of the Securities of such series when due and payable, at maturity, upon redemption or acceleration or otherwise; (ii) default in the payment of an installment of interest on any of the Securities of such series when the same becomes due and payable and any such default continues for a period of 30 days or more; (iii) default in the performance or observance of any other term, covenant or agreement contained in the Securities of such series or the relevant Indenture for the benefit of the holders of Securities of such series (other than a default specified in (i) or (ii) above) for a period of 60 days after the applicable Issuer or the Guarantor, in the case of the Kelsey-Hayes Securities, receives written notice of such failure from the Trustee under such Indenture or the holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; (iv) default under one or more evidences of Indebtedness of the applicable Issuer, the Guarantor, in the case of the Kelsey-Hayes Securities, or any Material Subsidiary of the Guarantor, in the case of the Kelsey-Hayes Securities, or any Material Subsidiary of the applicable Issuer in a principal amount of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), and either (a) such Indebtedness is already due and payable in full or (b) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness and such acceleration is not annulled within 30 days after due notice; (v) one or more judgments for the payment of money of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), shall be entered against the applicable Issuer, the Guarantor, in the case of the Kelsey-Hayes Securities, or any Material Subsidiary of the Guarantor, in the case of the Kelsey-Hayes Securities, or any Material Subsidiary of the applicable Issuer and shall not be discharged or fully bonded and there shall have been a period of 60 days after the date on which any period for appeal has expired and during which a stay of enforcement of such judgment, order or decree shall not be in effect; and (vi) certain events of bankruptcy, insolvency or reorganization relating to the applicable Issuer, the Guarantor, in the case of the Kelsey-Hayes Securities, or any Material Subsidiary of the Guarantor, in the case of the Kelsey-Hayes Securities, or any Material Subsidiary of the applicable Issuer. Each Indenture provides that if an Event of Default specified therein (other than an Event of Default specified in clause (vi) of the preceding paragraph with respect to the applicable Issuer or the Guarantor) shall have occurred and be continuing with respect to any series of the Securities issued thereunder, the Trustee under such Indenture or the holders of at least 25% in aggregate principal amount of the outstanding Securities of such series may declare immediately due and payable the unpaid principal amount of the Securities of such series (or, if any of the Securities are original issue discount Securities, such portion of the principal amount of the Securities of such series as may be specified in the terms thereof) and accrued interest, if any, to the date of payment of the Securities of such series. If an Event of Default specified in clause (vi) of the preceding paragraph with respect to the applicable Issuer or the Guarantor occurs with respect to any series of Securities, the amount specified in the previous sentence of this paragraph shall become immediately due and payable without any declaration or other act on the part of the Trustee under the relevant Indenture or any holder of such Securities. After a declaration of acceleration under the Indenture in respect of a series of Securities, but before a judgment or decree for payment of the money due has been obtained by the Trustee under such Indenture, the holders of a majority in aggregate outstanding principal amount of such series of Securities, by written notice to the applicable Issuer and such Trustee, may rescind such declaration if (a) the applicable Issuer has paid or deposited with such Trustee a sum sufficient to pay (i) all sums paid or advanced by such Trustee under such Indenture and the reasonable compensation, expenses, disbursements and advances of such Trustee, its agent and counsel, (ii) all overdue interest, if any, on such series of Securities (iii) the principal of and premium, if any, on such series of Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by such series of Securities, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by such series of Securities which has become due otherwise than by such declaration of acceleration; (b) the rescission would not conflict 16 with any judgment or decree of a court of competent jurisdiction; and (c) all Events of Default with respect to such series of Securities, other than the non-payment of principal of, premium, if any, and interest on such series of securities that have become due solely by such declaration of acceleration, have been cured or waived. The holders of not less than a majority in aggregate outstanding principal amount of a series of Securities may on behalf of all holders of such series of Securities waive any existing Defaults or Events of Default with respect to such series under the relevant Indenture, except a default in the payment of the principal of, premium, if any, or interest on any Security of such series, or in respect of a covenant or provision which under the relevant Indenture cannot be modified or amended without the consent of the holder of each outstanding Security of such series affected thereby. Holders of Securities of any series may not enforce the provisions of the Indenture or the Securities except as provided in the applicable Indenture. Subject to certain provisions concerning the rights of the Trustee under the relevant Indenture, the holders of a majority in aggregate outstanding principal amount of any series of Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to such Trustee, or exercising any trust or power conferred on such Trustee under such Indenture, in respect of such series. Except in the case of a Default or an Event of Default in payment of principal of, premium, if any, or interest, if any, on any series of Securities, the Trustee under the relevant Indenture may withhold the notice to the holders of such series if a committee of its trust officers in good faith determines that withholding the notice is in the interest of such holders. Kelsey-Hayes and the Guarantor, in the case of the K-H Indentures, and Varity, in the case of the Varity Indentures, are required to furnish to the Trustee under each Indenture annual statements as to the performance by Kelsey- Hayes and Varity of their respective obligations under such Indentures and as to any default in such performance. Kelsey-Hayes and the Guarantor, in the case of the K-H Indentures, and Varity, in the case of the Varity Indentures, are also required to notify the Trustee under each Indenture within ten days of any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to any series of Securities issued under such Indenture. DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE Unless otherwise indicated in a Prospectus Supplement, the applicable Issuer may, at its option and at any time after complying with the conditions specified in the applicable Indenture, terminate its obligations with respect to any series of outstanding Securities ("defeasance"). Such defeasance means that the applicable Issuer shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Securities of such series, except for (i) the rights of holders of such series of outstanding Securities to receive payment in respect of the principal of, premium, if any, and interest on such Securities when such payments are due, (ii) the applicable Issuer's obligations to issue temporary Securities of such series, register the transfer or exchange of any Securities of such series, replace mutilated, destroyed, lost or stolen Securities of such series and maintain an office or agency for payments in respect of the Securities of such series, (iii) the rights, powers, trusts, duties and immunities of the Trustee under the relevant Indenture and (iv) the defeasance provisions of such Indenture. In addition, unless otherwise indicated in a Prospectus Supplement, the applicable Issuer may, at its option and at any time after complying with the conditions specified in the applicable Indenture, elect to terminate its obligations with respect to certain covenants that are set forth in either Indenture or in a Prospectus Supplement, and any omission to comply with such obligation shall not constitute a Default or an Event of Default with respect to such series of Securities ("covenant defeasance"). In order to exercise either defeasance or covenant defeasance with respect to any series of Securities (i) the applicable Issuer must irrevocably deposit with the Trustee under the relevant Indenture, in trust, for the benefit of the holders of Securities of such series cash, Government Obligations (as defined in such Indenture), or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Securities of such series to redemption or maturity; (ii) the applicable Issuer shall have 17 delivered to such Trustee an opinion of counsel to the effect that the holders of the outstanding Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to federal income tax on the same amounts, and in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred (in the case of defeasance, such opinion must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable federal income tax laws); (iii) no Default or Event of Default with respect to such series shall have occurred and be continuing on the date of such deposit; (iv) such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the applicable Issuer is a party or by which it is bound; and (v) the applicable Issuer shall have delivered to such Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent under such Indenture to either defeasance or covenant defeasance, as the case may be, have been complied with. SATISFACTION AND DISCHARGE Unless otherwise indicated in a Prospectus Supplement, the provisions of the Indenture applicable to any series of Securities will be discharged and will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Securities of such series, as expressly provided for in the Indenture or a supplemental indenture) as to all outstanding Securities of such series when (i) either (a) all the Securities of such series theretofore authenticated and delivered (except lost, stolen or destroyed Securities which have been replaced or paid and Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the applicable Issuer and thereafter repaid to the applicable Issuer or discharged from such trust) have been delivered to the Trustee under such Indenture for cancellation or (b) all Securities of such series not theretofore delivered to such Trustee for cancellation have become due and payable and the applicable Issuer has irrevocably deposited or caused to be deposited with such Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Securities of such series not theretofore delivered to such Trustee for cancellation, for principal of, premium, if any, and interest on the Securities of such series to the date of deposit together with irrevocable instructions from the applicable Issuer directing such Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) no Default or Event of Default with respect to the applicable Indenture or the Securities of such series shall have occurred and be continuing on the date of such deposit or shall occur as a result thereof and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the applicable Issuer is a party or by which it is bound; (iii) the applicable Issuer has paid all other sums payable under such Indenture by the applicable Issuer; and (iv) the applicable Issuer has delivered to such Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under such Indenture relating to the satisfaction and discharge of such Indenture applicable to Securities of such series have been complied with. AMENDMENTS AND WAIVERS From time to time, the applicable Issuer, when authorized by a resolution of its Board of Directors, and the Trustee under the applicable Indenture may, without the consent of the holders of any outstanding Securities thereunder, amend, waive or supplement such Indenture or the Securities thereunder for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, qualifying, or maintaining the qualification of, such Indenture under the Trust Indenture Act or making any change that does not adversely affect the rights of any holder of Securities thereunder. Other amendments and modifications of the applicable Indenture as it relates to any series of Securities may be made by the applicable Issuer and the relevant Trustee with the consent of the holders of not less than a majority of the aggregate outstanding principal amount of the series of Securities thereunder so affected; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding Security thereunder affected thereby, (i) reduce the principal amount or extend the fixed maturity or alter the redemption provisions of any Security thereunder or reduce the principal amount of any outstanding original issue discount Security thereunder that would be due and payable upon declaration of acceleration of maturity 18 thereof; (ii) reduce the percentage in principal amount of outstanding Securities of such series that must consent to an amendment, supplement or waiver or consent to any action under such Indenture or such Security thereunder; (iii) waive a default in payment with respect to any Security thereunder; (iv) reduce the rate or change the time for payment of interest on any Security thereunder; (v) in the case of Subordinated Securities modify or change any provision affecting the subordination of such Subordinated Securities in a manner adverse to the holders of such Securities; (vi) in the case of the K-H Indentures, release the Guarantor from its obligations; or (vii) make such other changes as may require such consent pursuant to any supplemental indenture. THE TRUSTEES Each Indenture provides that, except during the continuance of an Event of Default, the Trustee thereunder will perform only such duties as are specifically set forth in such Indenture. If an Event of Default under such Indenture has occurred and is continuing, the Trustee thereunder will exercise such rights and powers vested in it under such Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. Each Indenture and provisions of the Trust Indenture Act incorporated by reference therein contain limitations on the rights of the Trustee thereunder, should it become a creditor of Kelsey-Hayes or Varity, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. Each Trustee will be permitted to engage in other transactions; provided, however, that if its acquires any conflicting interest (as defined), it must eliminate such conflict or resign. Manufacturers and Traders Trust Company also serves as trustee for Varity's 11 3/8% Senior Notes due 1998. GOVERNING LAW The Indentures, the Securities and the Guarantees will be governed by the laws of the State of New York, without regard to the principles of conflicts of law. PLAN OF DISTRIBUTION Each Issuer may sell Securities in any of the following ways: (1) through underwriters or dealers; (2) directly to one or more purchasers; or (3) through agents. The Prospectus Supplement with respect to the Securities being offered thereby will set forth the terms of the offering of such Securities, including the name or names of any underwriters or agents, the purchase price of such Securities and the proceeds to the Issuer from such sale, any underwriting discounts, commissions and other items constituting underwriters' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers and any securities exchanges on which such Securities may be listed. Any underwriter or agent may be deemed to be an underwriter as that term is defined in the Securities Act of 1933, as amended (the "Act"). If underwriters are used in the sale of Securities, such Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The Securities may be offered to the public either through underwriting syndicates (which may be represented by managing underwriters designated by the Issuer), or directly by one or more underwriters acting alone. The obligations of the underwriters to purchase the Securities offered thereby will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all such Securities if any are purchased. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. The Securities may be sold directly by the applicable Issuer or through agents designated by such Issuer from time to time. The Prospectus Supplement with respect to any Securities sold in this manner will set 19 forth the name of any agent involved in the offer or sale of the Securities as well as any commissions payable by the applicable Issuer to such agent. Unless otherwise indicated in the Prospectus Supplement, any such agent is acting on a best efforts basis for the period of its appointment. If dealers are utilized in the sale of any Securities, the applicable Issuer will sell the Securities to the dealers, as principal. Any dealer may then resell the Securities to the public at varying prices to be determined by the dealer at the time of resale. The name of any dealer and the terms of the transaction will be set forth in the Prospectus Supplement with respect to the Securities being offered thereby. If so indicated in the Prospectus Supplement, the Issuer of the Securities will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase Securities from the applicable Issuer at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of the offered Securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. It has not been determined whether any Securities will be listed on a securities exchange. Underwriters will not be obligated to make a market in any Securities. The Company cannot predict the activity of trading in, or liquidity of, any Securities. Agents, underwriters and dealers may be entitled, under agreements entered into with Kelsey-Hayes and/or Varity, to indemnification by Kelsey-Hayes and/or Varity against certain civil liabilities, including liabilities under the Act or to contribution with respect to payments which the agents, underwriters or dealers may be required to make in respect thereof. Agents, underwriters and dealers may be customers of, engage in transactions with, or perform services for Kelsey-Hayes, Perkins and/or Varity in the ordinary course of business. LEGAL MATTERS Certain legal matters with respect to the Securities and the Guarantees will be passed upon for Kelsey-Hayes and Varity by Cahill Gordon & Reindel (a partnership including a professional corporation), 80 Pine Street, New York, New York 10005 and for the underwriters by Andrews & Kurth L.L.P., 425 Lexington Avenue, New York, New York 10017. EXPERTS The consolidated financial statements and financial statement schedules of Varity and its subsidiaries as of January 31, 1994, and January 31, 1993, and for each of the years in the three year period ended January 31, 1994, are incorporated herein by reference to Varity's Annual Report on Form 10-K for the fiscal year ended January 31, 1994, in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated herein by reference, and upon the authority of said firm as experts in accounting and auditing. 20 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION* The following table sets forth an itemized statement of all estimated expenses to be paid in connection with the issuance and distribution of the securities being registered: Securities and Exchange Commission Registration Fee.......... $ 34,482.76 Accounting Fees and Expenses................................. 185,000.00 Legal Fees and Expenses...................................... 250,000.00 Printing and Engraving Expenses.............................. 300,000.00 Blue Sky Fees and Expenses................................... 15,000.00 Trustees' Fees and Expenses.................................. 6,000.00 Miscellaneous................................................ 14,517.24 ----------- Total...................................................... $805,000.00 ===========
- -------- * Except for the Securities and Exchange Commission registration fee, all expenses are estimated. ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS Kelsey-Hayes and Varity Each of Kelsey-Hayes and Varity, both Delaware corporations, is empowered by Section 145 of the Delaware General Corporation Law, subject to the procedures and limitations stated therein, to indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in the defense of any threatened, pending or completed action, suit or proceeding in which such person is made a party by reason of his or her being or having been a director or officer of Kelsey-Hayes or Varity, as the case may be. The statute provides that such indemnification is not exclusive of other rights or indemnification to which a person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Certificate of Incorporation and Bylaws of each of Kelsey-Hayes and Varity provide that Kelsey-Hayes and Varity, respectively, shall indemnify its directors and officers to the full extent permitted by the Delaware General Corporation Law. II-1 ITEM 16. EXHIBITS (a) Exhibits. The following Exhibits are filed as part of this Registration Statement: 1.1 Form of Kelsey-Hayes Standard Underwriting Agreement Provisions for Debt Securities. 1.2 Form of Varity Standard Underwriting Agreement Provisions for Debt Securities. 1.3 Form of Kelsey-Hayes Agency Agreement. 1.4 Form of Varity Agency Agreement. 4.1 Form of Senior Indenture relating to Kelsey-Hayes Senior Debt Securities. 4.2 Form of Subordinated Indenture relating to Kelsey-Hayes Subordinated Debt Securities. 4.3 Form of Senior Indenture relating to Varity Senior Debt Securities. 4.4 Form of Subordinated Indenture relating to Varity Subordinated Debt Securities. 5.1 Opinion of Cahill Gordon & Reindel, special counsel to Kelsey-Hayes. 5.2 Opinion of Cahill Gordon & Reindel, special counsel to Varity. 12 Calculation of Ratio of Earnings to Fixed Charges for Varity. 23.1 Consent of KPMG Peat Marwick LLP. 23.2 Consent of Cahill Gordon & Reindel (included in Exhibits 5.1 and 5.2). 24.1 Power of Attorney relating to Kelsey-Hayes (included on page II-4). 24.3 Power of Attorney relating to Varity (included on page II-5). 25.1 Form T-1 of Manufacturers and Traders Trust Company, as Trustee under the Kelsey-Hayes Senior Indenture. 25.2 Form T-1 of Manufacturers and Traders Trust Company, as Trustee under the Kelsey-Hayes Subordinated Indenture. 25.3 Form T-1 of Manufacturers and Traders Trust Company, as Trustee under the Varity Senior Indenture. 25.4 Form T-1 of Manufacturers and Traders Trust Company, as Trustee under the Varity Subordinated Indenture.
II-2 ITEM 17. UNDERTAKINGS (a) The undersigned Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by Varity pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of Varity's annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, KELSEY-HAYES CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN LIVONIA, MICHIGAN, ON JANUARY 20, 1995. Kelsey-Hayes Company /s/ E.J. Gulda By __________________________________ NAME: E.J. Gulda TITLE: President POWER OF ATTORNEY Each person whose signature appears below appoints Neil D. Arnold, Kevin C. Shanahan and Kenneth L. Walker, and each of them, as his attorney-in-fact and agent, with full power of substitution and resubstitution, to sign and file with the Securities and Exchange Commission any amendments to this Registration Statement (including post-effective amendments) and to file with the Securities and Exchange Commission one or more supplements to any prospectus included in any of the foregoing, and generally to do anything else necessary and proper in connection therewith. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE /s/ E.J. Gulda President and January 20, 1995 - --------------------------------- Director (Principal E.J. GULDA Executive Officer) /s/ K.C. Shanahan Vice President, January 20, 1995 - --------------------------------- Finance (Principal K. C. SHANAHAN Financial Officer and Principal Accounting Officer) /s/ J.E. Utley Chairman and January 20, 1995 - --------------------------------- Director J.E. UTLEY II-4 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, VARITY CORPORATION CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN BUFFALO, NEW YORK, ON JANUARY 20, 1995. Varity Corporation /s/ Kenneth L. Walker By___________________________________ NAME: KENNETH L. WALKER TITLE: VICE PRESIDENT, LEGAL POWER OF ATTORNEY Each person whose signature appears below appoints Neil D. Arnold, Kevin C. Shanahan and Kenneth L. Walker, and each of them, as his attorney-in-fact and agent, with full power of substitution and resubstitution, to sign and file with the Securities and Exchange Commission any amendments to this Registration Statement (including post-effective amendments) and to file with the Securities and Exchange Commission one or more supplements to any prospectus included in any of the foregoing, and generally to do anything else necessary and proper in connection therewith. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE /s/ Victor A. Rice Chairman of the January 20, 1995 - --------------------------------- Board, Chief VICTOR A. RICE Executive Officer and Director (Principal Executive Officer) /s/ Neil D. Arnold Senior Vice January 20, 1995 - --------------------------------- President and Chief NEIL D. ARNOLD Financial Officer (Principal Financial Officer) /s/ Kevin C. Shanahan Vice President, January 20, 1995 - --------------------------------- Controller KEVIN C. SHANAHAN (Principal Accounting Officer) /s/ Vince D. Laurenzo Vice Chairman of the January 20, 1995 - --------------------------------- Board and Director VINCE D. LAURENZO /s/ William A. Corbett Director January 20, 1995 - ------------------------------- WILLIAM A. CORBETT II-5 SIGNATURE TITLE DATE /s/ Thomas N. Davidson Director January 20, 1995 - ----------------------------------- THOMAS N. DAVIDSON /s/ Robert M. Gates Director January 20, 1995 - ----------------------------------- ROBERT M. GATES /s/ Luiz F. Kahl Director January 20, 1995 - ----------------------------------- LUIZ F. KAHL /s/ W. Darcy McKeough Director January 20, 1995 - ----------------------------------- W. DARCY MCKEOUGH /s/ Sir Bryan Nicholson Director January 20, 1995 - ----------------------------------- SIR BRYAN NICHOLSON /s/ Warren S. Rustand Director January 20, 1995 - ----------------------------------- WARREN S. RUSTAND /s/ William R. Teschke Director January 20, 1995 - ----------------------------------- WILLIAM R. TESCHKE /s/ The Hon. Robin H. Warrender Director January 20, 1995 - ----------------------------------- THE HON. ROBIN H. WARRENDER /s/ Paul M. F. Cheng Director January 20, 1995 - ----------------------------------- PAUL M. F. CHENG II-6 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 1.1 Form of Kelsey-Hayes Standard Underwriting Agreement Provisions for Debt Securities. 1.2 Form of Varity Standard Underwriting Agreement Provisions for Debt Securities. 1.3 Form of Kelsey-Hayes Agency Agreement. 1.4 Form of Varity Agency Agreement. 4.1 Form of Senior Indenture relating to Kelsey-Hayes Senior Debt Securities. 4.2 Form of Subordinated Indenture relating to Kelsey-Hayes Subordinated Debt Securities. 4.3 Form of Senior Indenture relating to Varity Senior Debt Securities. 4.4 Form of Subordinated Indenture relating to Varity Subordinated Debt Securities. 5.1 Opinion of Cahill Gordon & Reindel, special counsel to Kelsey- Hayes. 5.2 Opinion of Cahill Gordon & Reindel, special counsel to Varity. 12 Calculation of Ratio of Earnings to Fixed Charges for Varity. 23.1 Consent of KPMG Peat Marwick LLP. 23.2 Consent of Cahill Gordon & Reindel (included in Exhibits 5.1 and 5.2). 24.1 Power of Attorney relating to Kelsey-Hayes (included on page II-4). 24.3 Power of Attorney relating to Varity (included on page II-5). 25.1 Form T-1 of Manufacturers and Traders Trust Company, as Trustee under the Kelsey-Hayes Senior Indenture. 25.2 Form T-1 of Manufacturers and Traders Trust Company, as Trustee under the Kelsey-Hayes Subordinated Indenture. 25.3 Form T-1 of Manufacturers and Traders Trust Company, as Trustee under the Varity Senior Indenture. 25.4 Form T-1 of Manufacturers and Traders Trust Company, as Trustee under the Varity Subordinated Indenture.
EX-1.1 2 FORM OF KELSEY-HAYES UNDERWRITING AGREEMENT EXHIBIT 1.1 KELSEY-HAYES COMPANY DEBT SECURITIES Guaranteed as to Payment of Principal and Interest by VARITY CORPORATION STANDARD UNDERWRITING AGREEMENT PROVISIONS ------------------------------------------ Kelsey-Hayes Company, a Delaware corporation (the "Company"), proposes to issue and sell from time to time its debt securities, consisting of (i) unsecured senior debt securities (the "Senior Debt Securities") and (ii) unsecured subordinated debt securities (the "Subordinated Debt Securities" and, together with the Senior Debt Securities, the "Securities"). The Securities are registered under the registration statement referred to in Section 1 hereof. Payment of principal of and interest on the Securities will be guaranteed (the "Guarantee") by Varity Corporation, a Delaware corporation (the "Guarantor"). The Senior Debt Securities will be issued under an indenture (as amended or supplemented, the "Senior Indenture") to be entered into among the Company, the Guarantor and Manufacturers and Traders Trust Company, as trustee (the "Senior Trustee"). The Subordinated Debt Securities will be issued under an indenture (as amended or supplemented, the "Subordinated Indenture" and, together with the Senior Indenture, the "Indentures") among the Company, the Guarantor and Manufacturers and Traders Trust Company, as trustee (the "Subordinated Trustee" and, together with the Senior Trustee, the "Trustees"). The Securities may be issued in one or more series and may have varying designations, denominations, interest rates and payment dates, maturities, redemption provisions, selling prices and other terms. The basic provisions set forth herein are intended to be incorporated by reference in a terms agreement of the type referred to below relating to the designation and series of Securities to be issued and sold by the Company pursuant thereto (the "Offered Securities") to the underwriter or several underwriters named therein (the "Underwriters"). The Terms Agreement, which shall be in the form of -2- Exhibit I hereto relating to the Offered Securities (the "Terms Agreement"), together with the provisions hereof incorporated therein by reference (which provisions shall not become effective until so incorporated by reference), is herein referred to as this "Agreement." If the Underwriters consist only of the firm or firms referred to in the Terms Agreement as Representative or Representatives, then the terms "Underwriters" and "Representatives," as used herein, shall each be deemed to refer to such firm or firms. The obligations of the Underwriters to purchase, and the Company to sell, the Offered Securities are evidenced by the Terms Agreement delivered at the time the Company determines to sell the Offered Securities. The Terms Agreement specifies the firm or firms which will be Underwriters, the amount of the Offered Securities to be purchased by each Underwriter, the purchase price to be paid by the Underwriters for the Offered Securities, the public offering price, if any, of the Offered Securities and any terms of the Offered Securities not otherwise specified in the applicable Indenture (including, but not limited to, designations, denominations, covenants, interest rates and payment dates, maturity, redemption provisions and sinking fund requirements). The Terms Agreement specifies any details of the terms of the offering that should be reflected in a post-effective amendment to the applicable Registration Statement or the Prospectus Supplement (each as hereinafter defined). 1. Registration Statement and Prospectus. The ------------------------------------- Company and the Guarantor have prepared and filed with the Securities and Exchange Commission (the "Commission"), in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a joint registration statement on Form S-3 (the "registration statement"), including a prospectus relating to the Offered Securities and the Guarantees. The term "Registration Statement," as used in this Agreement, means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective, and as thereafter amended by any post-effective amendment at the date of any Terms Agreement. The term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement, as supplemented to reflect the terms of the Offered Securities and the plan of distribution thereof, in the form in which it shall be filed with the Commission pursuant to Rule 424(b). Any reference in this Agreement to the registration statement, the Registration Statement or any -3- Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the registration statement, the Registration Statement or any Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement or any Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means the documents which at the time are incorporated by reference in the registration statement, the Registration Statement, any Prospectus, or any amendment or supplement thereto, but does not include any documents incorporated by reference in the Registration Statement, any Prospectus, or any amendment or supplement thereto subsequent to the Closing Date (as defined in Section 2 hereof). 2. Sale and Delivery to the Underwriters; Closing. ---------------------------------------------- The obligation of the Underwriters to purchase the Offered Securities will be evidenced by a Terms Agreement at the time the Company determines to sell the Securities. The Terms Agreement will incorporate by reference the provisions of this Agreement, except as otherwise provided therein, and will specify (1) the firm or firms which will be Underwriters, (2) the names of any Representatives, (3) the principal amount of Offered Securities to be purchased by each Underwriter and the purchase price to be paid by the Underwriters, (4) the terms of the Offered Securities not already specified in the Indenture, (5) whether any of the Offered Securities may be sold to institutional investors pursuant to Delayed Delivery Contracts (as defined below), (6) the time and date on which delivery of the Offered Securities will be made to the Representatives for the accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price in New York Clearing House funds (such time and date, or such other time and date not later than seven full business days thereafter as the Representatives and the Company agree to as to time and date for payment and delivery, being herein and in the Terms Agreement referred to as the "Closing Date") and (7) the place of delivery and payment. The obligations of the Underwriters to purchase the Offered Securities will be several and not joint. The Offered Securities delivered to the Underwriters on the Closing Date will be in definitive fully registered form, in such -4- denominations and registered in such names as the Representatives may request. Certificates for the Offered Securities shall be registered in such names and in such denominations as the Representatives shall request by written notice, it being understood that a facsimile transmission shall be deemed written notice for such purpose, prior to 1:00 P.M., New York City time, on the third business day preceding the Closing Date. If the Terms Agreement provides for sales of Securities pursuant to Delayed Delivery Contracts, the Company authorizes the Underwriters to solicit offers to purchase Securities pursuant to delayed delivery contracts substantially in the form of Annex I attached hereto ("Delayed Delivery Contracts") with such changes therein as the Company may authorize or approve. Delayed Delivery Contracts are to be with institutional investors, including commercial and savings banks, insurance companies, pension funds, investment companies and educational and charitable institutions. On the Closing Date, the Company will pay, as compensation, to the Representatives for the accounts of the Underwriters, the fee (expressed as a discount) set forth in such Terms Agreement in respect of the principal amount of Securities to be sold pursuant to Delayed Delivery Contracts ("Contract Securities"). The Underwriters will not have any responsibility in respect of the validity or the performance of any Delayed Delivery Contract. If the Company executes and delivers a Delayed Delivery Contract, the Contract Securities will be deducted from the Securities to be purchased by the several Underwriters and the aggregate principal amount of Securities to be purchased by each Underwriter will be reduced pro rata in proportion to the principal amount of Securities set forth opposite each Underwriter's name in such Terms Agreement, except to the extent that the Representatives determine that such reduction shall be otherwise than pro rata and so advise the Company. The Company will advise the Representatives not later than the business day prior to the Closing Date of the principal amount of Contract Securities. 3. Agreements of the Company and the Guarantor. ------------------------------------------- The Company and the Guarantor agree with each Underwriter as follows: (a) If, at the time any Terms Agreement is executed and delivered, it is necessary for a post-effective amendment to the Registration Statement to be declared effective before the offering of the Offered Securities may -5- commence, the Company and the Guarantor will endeavor to cause such post-effective amendment to become effective as soon as possible and will advise the Underwriters promptly and, if requested, will confirm such advice in writing, when the Company or the Guarantor receives notice (written or oral) that such post-effective amendment has become effective. (b) The Company and the Guarantor will advise the Underwriters promptly and, if requested, will confirm such advice in writing: (i) of any request by the Commission for amendment of or a supplement to the Registration Statement or any Prospectus or for additional information; (ii) upon knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Offered Securities for offering or sale in any jurisdiction or of the initiation of any proceeding for such purpose; and (iii) within the period of time referred to in paragraph (e) below, of any change in the Company's or the Guarantor's financial condition, business, prospects, properties, net worth or results of operations, or of the happening of any event, including the filing of any information, documents or reports pursuant to the Exchange Act, that makes any statement made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus (as then amended or supplemented) in order to state a material fact required by the Act to be stated therein or necessary in order to make the statements therein not misleading, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company and the Guarantor, upon knowledge thereof, will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. (c) The Company and the Guarantor will furnish to each of the Representatives and to counsel to the Representatives, without charge (i) one signed copy of the registration statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits to the Registration Statement, and (ii) such number of conformed copies of the -6- Registration Statement as originally filed and of each amendment thereto, but without exhibits, as the Representatives may reasonably request. (d) Neither the Company nor the Guarantor will file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus of which the Representatives shall not previously have been advised or to which the Representatives shall reasonably object in writing after being so advised. (e) If during the period when the Prospectus is required to be delivered under the Act any event shall occur that in the judgment of the Company or the Guarantor or in the opinion of counsel for the Underwriters is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus in order to comply with the Act or any other law, the Company and the Guarantor will forthwith prepare and, subject to the provisions of paragraph (d) above, file with the Commission an appropriate supplement or amendment thereto, and will expeditiously furnish to the Underwriters and dealers a reasonable number of copies thereof. (f) The Company and the Guarantor will cooperate with the Underwriters and with counsel for the Underwriters in connection with the registration or qualification of the Offered Securities for offering and sale by the several Underwriters and by dealers under the securities or Blue Sky laws of such jurisdictions as the Representatives may reasonably designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such registration or qualification; provided that in no event shall the Company or the Guarantor be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. (g) The Company and the Guarantor will make generally available to its security holders a consolidated earnings statement, which need not be audited, covering a -7- twelve-month period commencing after the effective date of the Registration Statement and ending not later than 15 months thereafter, as soon as reasonably practicable after the end of such period, which consolidated earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder. (h) During the period of two years hereafter, the Company will furnish to the Underwriters (i) as soon as available, a copy of each report of the Guarantor (and, if applicable, the Company) mailed to stockholders or filed with the Commission or the New York Stock Exchange, and (ii) from time to time such other information concerning the Company and the Guarantor as the Underwriters may reasonably request. (i) Between the date of any Terms Agreement and the Closing Date specified in such agreement, the Company will not, without the Representatives' prior consent, offer, sell, contract to sell or otherwise dispose of debt securities of the Company having a maturity of more than one year from the date of issue covered by the Registration Statement or another registration statement filed by the Company under the Act, except that the Company may offer, sell, contract to sell or otherwise dispose of obligations of the Company in respect of industrial revenue bonds or similar securities exempt from federal income taxes. (j) The Company will apply the net proceeds from the sale of the Offered Securities hereunder substantially in accordance with the description set forth in the Prospectus. 4. Representations and Warranties of the Company --------------------------------------------- and the Guarantor. The Company and the Guarantor, jointly and - ----------------- severally, represent and warrant to each Underwriter that: (a) The Registration Statement and any post- effective amendment thereto have been declared effective by the Commission and no stop order suspending the effectiveness of such Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission. (b) Each Prospectus included as part of the registration statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to -8- Rule 424 under the Act, complied when so filed in all material respects with the provisions of the Act and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; except that this representation and warranty does not apply to statements in or omissions from such Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with information furnished to the Company or the Guarantor in writing by an Underwriter expressly for use therein. The Commission has not issued any order preventing or suspending the use of any Prospectus. (c) The Company, the Guarantor and the transactions contemplated by this Agreement meet the requirements for using Form S-3 under the Act. The registration statement in the form in which it became effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 424(b) under the Act, complied or will comply in all material respects with the provisions of the Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and will not at any such times contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; except that this representation and warranty does not apply to statements in or omissions from the registration statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company or the Guarantor in writing by an Underwriter expressly for use therein. (d) The Incorporated Documents heretofore filed, when they were filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), conformed in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; any further Incorporated Documents so filed will, when they are filed, conform in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; no such document when it was filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), -9- contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and no such further document, when it is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. (e) Each of the Company and the Guarantor is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the financial condition, business, properties, net worth or results of operations of the Guarantor and its subsidiaries taken as a whole or of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). (f) Each Material Subsidiary (as defined below) is a corporation duly organized, validly existing and in good standing in the jurisdiction of its organization, with full corporate power and authority to own, lease and operate its properties and to conduct its business, except where the failure of a Material Subsidiary to be duly organized and existing or to have full corporate power and authority would not have a Material Adverse Effect; each Material Subsidiary is duly registered, qualified or licensed to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register, be licensed or qualify would not have a Material Adverse Effect; all the outstanding shares of capital stock of each Material Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Guarantor directly, or indirectly through one of its other subsidiaries, free and clear of any lien, adverse claim, security interest, equity, or other encumbrance; and there are no outstanding rights, warrants or options to acquire, or instruments -10- convertible into or exchangeable for, shares of capital stock or other equity interests in any Material Subsidiary. As used herein, the term "Material Subsidiaries" means the following subsidiaries of the Guarantor: Varity Holdings Limited and Perkins Group Limited, each a corporation organized under the laws of the United Kingdom; Dayton Walther Corporation, an Ohio corporation; K-H Corporation, a Delaware corporation; and the Company. (g) The Offered Securities have been duly authorized by the Company and, when executed by the Company and authenticated by the applicable Trustee in accordance with the terms of the applicable Indenture (assuming the due authorization, execution and delivery thereof by the Trustee thereunder), and delivered to and paid for by the Underwriters in accordance with the terms of this Agreement and the Terms Agreement and the applicable Indenture, will constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (h) There are no legal or governmental proceedings pending or, to the knowledge of the Company or the Guarantor, threatened, against the Company, the Guarantor or any of their respective subsidiaries which are reasonably likely to have a Material Adverse Effect, or to which the Company, the Guarantor or any of their respective subsidiaries, or to which any of their respective properties, is subject which are material to the Company and its subsidiaries or the Guarantor and its subsidiaries, in each case taken as a whole, that are required to be described in the Registration Statement or the Prospectus, but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments relating to the Company, the Guarantor or their respective subsidiaries that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement or any Incorporated Document that are not described or filed as required by the Act or the Exchange Act. The descriptions of the terms of any such contracts or documents contained in the -11- Registration Statement, the Prospectus or any Incorporated Documents are correct in all material respects. (i) Neither the Company, the Guarantor nor any of their respective subsidiaries is (i) in violation of its certificate or articles of incorporation or bylaws, or other organizational documents, (ii) in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company, the Guarantor or any of their respective subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company, the Guarantor or any of their respective subsidiaries or any of their respective properties, or (iii) in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any agreement, indenture, lease or instrument to which the Company, the Guarantor or any of their respective subsidiaries is a party or by which any of them or any of their respective properties may be bound, and no condition or state of facts exists, which, with the passage of time or the giving of notice or both, would constitute such a default, except in the case of clauses (i), (ii) and (iii) where any such violation or default, or violations and defaults in the aggregate, would not have a Material Adverse Effect. (j) None of the issuance and sale of the Offered Securities, the execution, delivery or performance of this Agreement, the Terms Agreement, the Indenture relating to the Offered Securities and any Delayed Delivery Contract by the Company or the Guarantor, to the extent each is a party thereto, or the consummation by the Company and the Guarantor of the transactions contemplated hereby and thereby to be consummated by the Company and the Guarantor (i) requires any consent, approval, authorization or other order of or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required for the registration of the Securities and the Guarantee under the Act and the Exchange Act, and compliance with the securities or Blue Sky laws of various jurisdictions, all of which have been or will be effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company, -12- the Guarantor or any of their respective subsidiaries or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any material agreement, indenture, lease or instrument to which the Company, the Guarantor or any of their respective subsidiaries is a party or by which any of them or any of their respective properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company, the Guarantor or any of their respective subsidiaries or any of their respective properties, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, the Guarantor or any of their respective subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of the property or assets of any of them is subject, except in the case of clauses (i) and (ii) where any such conflict, breach, default or violation, or conflicts, breaches, defaults or violations in the aggregate, would not have a Material Adverse Effect. (k) The accountants who have certified or shall certify the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement thereto) were or shall be, for the periods in which they certified or certify such financial statements, independent public accountants as required by the Act. (l) The historical financial statements, together with related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto), present fairly the consolidated financial position, results of operations, cash flows and changes in stockholders' equity of the Guarantor and its subsidiaries on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with United States generally accepted accounting principles (as described in the Prospectus) consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto) are -13- accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Guarantor and its subsidiaries. (m) The execution and delivery of, and the performance by the Company and the Guarantor of their respective obligations under, each of this Agreement, the Terms Agreement, the Indenture relating to the Offered Securities and any Delayed Delivery Contract have been duly and validly authorized, executed and delivered by the Company and the Guarantor, to the extent each is a party thereto, and constitutes the valid and legally binding agreement of the Company and the Guarantor, to the extent each is a party thereto, enforceable against the Company and the Guarantor, to the extent each is a party thereto, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). The Indenture has been duly qualified under the Trust Indenture Act. (n) The Guarantee of the Offered Securities has been duly authorized by the Guarantor and, when the Offered Securities have been executed and authenticated in accordance with the terms of the applicable Indenture and delivered to and duly paid for by the purchasers thereof, the Guarantee will be a valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (o) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement thereto), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), none of the Company, the Guarantor or any of their respective subsidiaries has incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that -14- is material to the Company and its subsidiaries taken as a whole or the Guarantor and its subsidiaries taken as a whole, and there has not been any material change in the capital stock of the Company or the Guarantor, or material increase in the short-term debt or long-term debt of the Company, the Guarantor and any of their respective subsidiaries taken as a whole, or any Material Adverse Effect. (p) Each of the Company, the Guarantor and their respective subsidiaries has good and marketable title to all property (real and personal) described in the Prospectus as being owned by it, free and clear of all liens, claims, security interests or other encumbrances, except such as are described in the Registration Statement and the Prospectus or in a document filed as an exhibit to the Registration Statement and all the property described in the Prospectus as being held under lease by each of the Company, the Guarantor and their respective subsidiaries is held by it under valid, subsisting and enforceable leases, in each case with only such exceptions as in the aggregate would not have a Material Adverse Effect. (q) The Company, the Guarantor and each of their respective subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("Permits") as are necessary to own its respective properties and to conduct its business in the manner described in the Prospectus, except where the failure to have any such Permit would not have a Material Adverse Effect and subject to such qualifications as may be set forth in the Prospectus; the Company, the Guarantor and each of their respective subsidiaries has fulfilled and performed all its material obligations with respect to such Permits and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit, except where such action would not have a Material Adverse Effect and subject in each case to such qualification as may be set forth in the Prospectus; and, except as described in the Prospectus, none of such Permits contains any restriction that is materially burdensome to the Company and its subsidiaries, taken as a whole, or the Guarantor and its subsidiaries, taken as a whole. (r) The Company, the Guarantor and their respective subsidiaries own or possess all patents, trademarks, -15- trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, trade secrets and rights described in the Prospectus as being owned by them or any of them or necessary for the conduct of their respective businesses, except where the lack of such ownership or possession would not have a Material Adverse Effect, and neither the Company nor the Guarantor is aware of any claim to the contrary or any challenge by any other person to the rights of the Company, the Guarantor or any of their respective subsidiaries with respect to the foregoing. 5. Indemnification and Contribution. (a) The -------------------------------- Company and the Guarantor agree, jointly and severally, to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities, judgments and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities, judgments or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information furnished in writing to the Company or the Guarantor by or on behalf of any Underwriter; provided, however, that the indemnification contained in this paragraph (a) with respect to any Prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) on account of any such loss, claim, damage, liability, judgment or expense arising from the sale of the Offered Securities by such Underwriter to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the Act and the regulations thereunder, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in any preliminary prospectus was corrected in the Prospectus. The foregoing indemnity agreement shall be in addition to any liability which the Company and the Guarantor may otherwise have. -16- (b) If any action, suit or proceeding shall be brought against any Underwriter or any person controlling any Underwriter in respect of which indemnity may be sought against the Company or the Guarantor, such Underwriter or such controlling person shall promptly notify the Company and the Guarantor, and the Company and the Guarantor shall assume the defense thereof, including the employment of counsel and payment of all reasonable fees and expenses of such counsel. Any such Underwriter or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the reasonable fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person, rather than the Company or the Guarantor, unless (i) the Company or the Guarantor has agreed in writing to pay such fees and expenses, (ii) the Company or the Guarantor has failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Underwriter or such controlling person and the Company or the Guarantor and such Underwriter or such controlling person shall have been advised by its counsel that representation of such indemnified party and the Company or the Guarantor by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Company and the Guarantor shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Underwriter or such controlling person). It is understood, however, that the Company and the Guarantor shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel, not more than one per jurisdiction) at any time for all such Underwriters and controlling persons, which firm shall be designated in writing by the Underwriters, and that all such fees and expenses shall be reimbursed promptly as they are incurred. Neither the Company nor the Guarantor shall be liable for any settlement of any such action, suit or proceeding effected without either of their written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Company and the Guarantor agree, jointly and severally, to indemnify and hold harmless any Underwriter, to the extent provided in the preceding -17- paragraph, and any such controlling person from and against any loss, claim, damage, liability, judgment or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Underwriter or any person controlling an Underwriter is entitled to employ separate counsel pursuant to the second sentence of this Section 5(b) and shall have requested the Company and the Guarantor in writing to reimburse such Underwriter or such controlling person for fees and expenses of counsel, the Company and the Guarantor agree that they shall be liable, jointly and severally, for any settlement of any proceeding effected by such Underwriter or such controlling person and for which the Company and the Guarantor are liable pursuant to Section 5(a) without its written consent if (i) such settlement is entered into more than ten (10) business days after receipt by the Company and the Guarantor of the aforesaid request or (ii) neither the Company nor the Guarantor shall have reimbursed such Underwriter or such controlling person in accordance with such request prior to the date of such settlement. Neither the Company nor the Guarantor shall, without the prior written consent of such Underwriter or such controlling person, effect any settlement of any pending or threatened proceeding in respect of which any Underwriter or any person controlling an Underwriter is or could have been a party and indemnity could have been sought hereunder by such Underwriter or such controlling person, unless such settlement includes an unconditional release of such Underwriter or such controlling person from all liability on claims that are subject matter of such proceeding. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantor, their respective directors, officers who sign the Registration Statement, and any person who controls either the Company or the Guarantor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Guarantor to each Underwriter, but only with respect to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter through the Representative(s) expressly for use in the Registration Statement, the Prospectus or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Company or the Guarantor, any of their respective directors, officers, or any such controlling person based on the Registration Statement, the Prospectus or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Underwriter pursuant to this paragraph (c), such Underwriter shall -18- have the rights and duties given to the Company or the Guarantor by paragraph (b) above (except that if the Company or the Guarantor shall have assumed the defense thereof such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter), and the Company and the Guarantor, their respective directors, officers, and any such controlling person shall have the rights and duties given to the Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Underwriters may otherwise have. (d) If the indemnification provided for in this Section 5 is unavailable to, or insufficient to hold harmless, an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities, judgments or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, judgments or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor on the one hand and the Underwriters on the other hand from the offering of the Offered Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the Company and the Guarantor on the one hand and the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities, judgments or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantor on the one hand and the Underwriters on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Guarantor bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Guarantor on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantor on the one hand or by the Underwriters on the other hand and the parties' relative -19- intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Guarantor and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by a pro rata allocation (even if the Underwriters 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 party as a result of the losses, claims, damages, liabilities, judgments and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 5, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price of the Offered Securities underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter 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 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 5 are several in proportion to their underwriting obligations and not joint. (f) Any losses, claims, damages, liabilities, judgments or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 5 shall be paid by the indemnifying party to the indemnified party promptly as such losses, claims, damages, liabilities, judgments or expenses are incurred. The indemnity and contribution agreements contained in this Section 5 and the representations and warranties of the Company and the Guarantor set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company or the Guarantor, their respective directors or officers, or any person controlling the Company or the Guarantor, (ii) acceptance of any Offered Securities and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter or any person controlling any Underwriter, or to the Company or the Guarantor, -20- their respective directors or officers, or any person controlling the Company or the Guarantor, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 5. 6. Conditions of Underwriters' Obligations. The --------------------------------------- several obligations of the Underwriters to purchase the Offered Securities hereunder are subject to the following conditions: (a) If, at the time this Agreement is executed and delivered, it is necessary for the registration statement or a post-effective amendment thereto to be declared effective before the offering of the Offered Securities may commence, the registration statement or such post- effective amendment shall have become effective not later than 5:30 P.M., New York City time, on the first business day following the date of the applicable Terms Agreement, or at such later date and time as shall be consented to in writing by the Representatives, and all filings, if any, required by Rule 424 under the Act shall have been timely made; no stop order suspending the effectiveness of the registration statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company, the Guarantor or any Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with. (b) Subsequent to the execution of any applicable Terms Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting the financial condition, business, properties, net worth, or results of operations of the Company and its subsidiaries taken as a whole, or the Guarantor and its subsidiaries taken as a whole, from the date of the latest balance sheet included or incorporated by reference in the Prospectus in each case not contemplated by the Prospectus, which is material and adverse; (ii) any downgrading in, or notice of any proposal to downgrade, the rating of the Company's or the Guarantor's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) or any public announcement that any such organization has under surveillance or review with negative implications the rating of the Company's or the Guarantor's debt securities; (iii) any suspension or -21- limitation of trading in securities generally on or by the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, or any setting of minimum prices for trading on such exchange; (iv) any suspension of trading of any securities of the Company or the Guarantor on any exchange; (v) any banking moratorium declared by Federal or New York authorities; or (vi) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event set forth in (i) through (vi), in the judgment of the Representatives, makes it impractical or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated by the Prospectus. (c) The Underwriters shall have received on the Closing Date, an opinion of Cahill Gordon & Reindel (a partnership including a professional corporation), counsel for the Company and the Guarantor, dated the Closing Date and addressed to the Underwriters, to the effect that: (i) Each of the Company and the Guarantor is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; (ii) Any Delayed Delivery Contract has been duly authorized, executed and delivered by the Company and the Guarantor; (iii) The Indenture relating to the Offered Securities has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and the Guarantor and is a valid and binding agreement of the Company and the Guarantor, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law); -22- (iv) The Offered Securities have been duly authorized and, when executed and authenticated in accordance with the Indenture and delivered to the Underwriters against payment therefor in accordance with the terms of this Agreement, will be valid and binding obligations of the Company, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and will be entitled to the benefits of the Indenture; (v) The Registration Statement and all post- effective amendments, if any, have become effective under the Act and, to the best knowledge of such counsel after reasonable inquiry, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission; and any required filing of the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b); (vi) The Company and the Guarantor have all requisite corporate power and authority to enter into this Agreement, the Terms Agreement, the Indenture relating to the Offered Securities, and any Delayed Delivery Contract to which either of them is a party and to issue and deliver the Offered Securities and the Guarantee, respectively, to the Underwriters; (vii) This Agreement has been duly authorized, executed and delivered by the Company and the Guarantor and is a valid, legal and binding agreement of the Company and the Guarantor, enforceable against the Company and the Guarantor in accordance with its terms, except (A) as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (B) that rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or the public policy underlying such laws; -23- (viii) The Offered Securities and the Indenture conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus; (ix) None of the offer, sale, or delivery of the Offered Securities or the Guarantee, or the execution, delivery or performance of this Agreement, the Indenture relating to the Offered Securities, and any Delayed Delivery Contract, nor compliance by the Company or the Guarantor with all the provisions of this Agreement and the Indenture applicable to it, nor consummation by the Company or the Guarantor of the transactions contemplated hereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate of incorporation or bylaws of the Company or the Guarantor or any indenture or other debt instrument or any other material agreement or lease, known to such counsel, to which the Company or the Guarantor is a party or by which any of them or any of their respective properties is bound or that is an exhibit to the Registration Statement or to any Incorporated Document, which conflict, breach or default would have a Material Adverse Effect, or, except as disclosed in the Registration Statement, will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or the Guarantor under any such indenture, debt instrument, agreement or lease which lien, charge or encumbrance would have a Material Adverse Effect, nor will any such action result in any violation of any existing law, regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws), judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Company or the Guarantor or any of their respective properties, which violation would have a Material Adverse Effect; (x) The Guarantee of the Offered Securities has been duly authorized by the Guarantor and, when the Offered Securities have been executed and authenticated in accordance with the Indenture and delivered to and duly paid for by the Underwriters, the Guarantee will be a valid and binding obligation of the Guarantor as to the Offered Securities, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent -24- transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law); (xi) No consent, approval, authorization or other order of, or registration or filing with, any Delaware, New York State or Federal court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Company or the Guarantor (except as have been obtained or made under the Act and the Exchange Act or such as may be required under state securities or Blue Sky laws governing the purchase and distribution of the Securities) for the valid issuance and sale of the Offered Securities to the Underwriters as contemplated by this Agreement; and (xii) The Registration Statement and the Prospectus and any supplements or amendments thereto (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act; and each of the Incorporated Documents (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein, as to which such counsel need not express any opinion), when they were filed (or, if an amendment with respect to any Incorporated Document was filed, when such amendment was filed) complied as to form in all material respects with the Exchange Act. In addition, such counsel shall state that such counsel participated in conferences with officers and other representatives of the Guarantor and the Company, representatives of the independent public accountants and representatives of the Underwriters at which the contents of the Registration Statement and Prospectus were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and Prospectus (except as otherwise indicated above) on the basis of the foregoing (relying as to materiality to a large extent upon the opinions of officers and representatives of the Guarantor and the Company), no facts have come to the attention of such counsel -25- which lead them to believe that either the Registration Statement or any amendment thereto, at the time the Registration Statement or amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading or that the Prospectus as of its date or any supplement thereto as of its date, or the Registration Statement or the Prospectus and any amendment or supplement thereto as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial and statistical data included in the Registration Statement or the Prospectus). The opinion of such counsel may be limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Federal laws of the United States. In rendering their opinion as aforesaid, such counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company and the Guarantor and public officials. (d) The Underwriters shall have received letters dated the date of the Terms Agreement and the Closing Date from KPMG Peat Marwick LLP, independent certified public accountants, substantially in the forms heretofore approved by the Underwriters. (e) The Underwriters shall have received on the Closing Date, an opinion of Andrews & Kurth L.L.P., counsel for the Underwriters, dated the Closing Date and addressed to the Underwriters, in form and substance satisfactory to the Underwriters. (f) (i) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall be pending or, to the knowledge of the Company or the Guarantor, shall be contemplated by the Commission at the Closing Date; (ii) there shall not have been any material change in the capital stock of the Company or the Guarantor nor any material increase in the short-term or long-term debt of the Company or the Guarantor (other than in the ordinary course of business) from that set forth or contemplated in -26- the Registration Statement or the Prospectus (or any amendment or supplement thereto); (iii) there shall not have been, since the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and the Prospectus (or any amendment or supplement thereto), any material adverse change in the financial condition, business, prospects, properties, net worth or results of operations of the Company and its subsidiaries or the Guarantor and its subsidiaries taken as a whole; and (iv) all the representations and warranties of the Company and the Guarantor contained in this Agreement shall be true and correct on and as of the date of the Terms Agreement and on and as of the Closing Date as if made on and as of the Closing Date, and the Underwriters shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the chief financial officer of each of the Company and the Guarantor (or such other officers as are acceptable to the Underwriters), to the effect set forth in this Section 6(f) and in Section 6(g) hereof. (g) The Company and the Guarantor shall not have failed at or prior to the Closing Date to have performed or complied with any of its agreements herein contained and required to be performed or complied with by them hereunder at or prior to the Closing Date. (h) The Company and the Guarantor shall have furnished or caused to be furnished to the Underwriters such further certificates and documents as the Representatives shall have reasonably requested. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to the Underwriters and their counsel. Any certificate or document signed by any officer of the Company or the Guarantor and delivered to the Underwriters or to counsel for the Underwriters, shall be deemed a representation and warranty by the Company and the Guarantor to each Underwriter as to the statements made therein. Any certificate delivered by the Company and the Guarantor to its counsel for purposes of enabling such counsel to render the opinions referred to in this -27- Section 6 will also be furnished to the Underwriters and counsel for the Underwriters. 7. Expenses. The Company and the Guarantor agree -------- to pay the following costs and expenses and all other costs and expenses incident to the performance by them of their obligations hereunder: (i) the preparation, printing (or reproduction), and filing with the Commission of the registration statement (including financial statements and exhibits thereto), each Prospectus and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the registration statement, the Prospectus, the Incorporated Documents, and all amendments or supplements to any of them, as may be reasonably requested for use in connection with the offering and sale of the Offered Securities, (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Offered Securities, including any stamp taxes in connection with the original issuance and sale of the Offered Securities; (iv) the printing (or reproduction) and delivery of this Agreement, the Indenture, the preliminary and supplemental Blue Sky Memoranda and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Offered Securities; (vi) the registration or qualification of the Offered Securities for offer and sale under the securities or Blue Sky laws of the several states as provided in Section 3(f) hereof (including the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, printing (or reproduction), and delivery of the preliminary and supplemental Blue Sky Memoranda and such registration and qualification); (vii) the filing fees of the Underwriters in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; (viii) the transportation and other expenses incurred by or on behalf of the Guarantor and Company representatives (other than the Underwriters) in connection with presentations to prospective purchasers of the Offered Securities; and (ix) the fees and expenses of the Company's and the Guarantor's accountants and the fees and expenses of counsel (including local and special counsel) for the Company and the Guarantor. 8. Defaulting Underwriters. If any one or more of ----------------------- the Underwriters shall fail or refuse to purchase the Offered Securities which it or they have agreed to purchase under the Terms Agreement, and the aggregate principal amount of Offered Securities which such defaulting Underwriters agreed but failed or refused to purchase is not more than one-tenth of the -28- aggregate principal amount of the Offered Securities, each non- defaulting Underwriter shall be obligated, severally, in the proportion which the aggregate principal amount of Offered Securities set forth opposite its name in the Terms Agreement bears to the aggregate principal amount of Offered Securities set forth opposite the names of all non-defaulting Underwriters, to purchase the Offered Securities that such defaulting Underwriter or Underwriters agreed, but failed or refused, to purchase. If any Underwriter or Underwriters shall fail or refuse to purchase Offered Securities and the aggregate principal amount of Offered Securities with respect to which such default occurs is more than one-tenth of the total principal amount of Offered Securities and arrangements satisfactory to the Representatives and the Company for the purchase of such Offered Securities by one or more non- defaulting Underwriters or other party or parties are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriters or the Company and the Guarantor. In any such case that does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement. The agreements set forth in this Section will not apply if the Terms Agreement specifies that such agreements will not apply. 9. Survival of Certain Representations and --------------------------------------- Obligations. The respective indemnities, agreements, - ----------- representations, warranties and other statements of the Company, the Guarantor or their officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the result thereof, made by or on behalf of any Underwriter, the Company, the Guarantor or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If the Terms Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Underwriters under the Terms Agreement is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 7 and the respective obligations of the Company, the Guarantor -29- and the Underwriters pursuant to Section 5 shall remain in effect. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than the termination of the Terms Agreement pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv), (v), or (vi) of Section 6(b), the Company will reimburse the Underwriters for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Miscellaneous. All notices and other ------------- communications hereunder shall be in writing and shall be deemed to have been given if mailed or transmitted by any standard form of telecommunication. Notices to the Company shall be directed to Kelsey-Hayes Company, 11878 Hubbard Road, Livonia, Michigan 48150, Attention: Corporate Secretary; notices to the Guarantor shall be directed to Varity Corporation, 672 Delaware Avenue, Buffalo, New York 14209, Attention: Corporate Secretary; notices to the Underwriters shall be directed to the Underwriters at the address set forth in the Terms Agreement. 11. Parties. This Agreement and the Terms Agreement ------- shall each inure to the benefit of and be binding upon each Underwriter, the Company and the Guarantor and their respective successors, heirs and legal representatives. Nothing expressed or mentioned in this Agreement or the Terms Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company and the Guarantor and their respective successors, heirs and legal representatives and the controlling persons and officers and directors referred to in Section 5 and their heirs and legal representatives, any legal or equitable right, remedy or claim under, by virtue of or in respect of this Agreement or the Terms Agreement or any provision herein or therein contained. This Agreement and the Terms Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the Underwriters, the Company and the Guarantor and their respective successors, heirs and legal representatives, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Offered Securities from an Underwriter shall be deemed to be a successor or assign by reason merely of such purchase. 12. Applicable Law; Counterparts. This Agreement ---------------------------- shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be -30- performed entirely within the State of New York. This Agreement may be executed in counterparts and the executed counterparts shall together constitute a single instrument. EXHIBIT I KELSEY-HAYES COMPANY DEBT SECURITIES Guaranteed as to Payment of Principal and Interest by VARITY CORPORATION TERMS AGREEMENT --------------- [Date] Kelsey-Hayes Company 11878 Hubbard Road Livonia, Michigan 48150 Varity Corporation 672 Delaware Avenue Buffalo, New York 14209 Attention: [ ] Ladies and Gentlemen: Referring to the Debt Securities of Kelsey-Hayes Company (the "Company") guaranteed as to payment of principal and interest by Varity Corporation (the "Guarantor") covered by the joint Registration Statement on Form S-3 (No. 33- ) (the "Registration Statement") filed by the Company and the Guarantor with the Securities and Exchange Commission, on the basis of the representations, warranties and agreements contained or incorporated by reference in this Agreement, and subject to the terms and conditions herein set forth, the Underwriters named in the list attached hereto agree to purchase, severally and not jointly, and the Company and the Guarantor agree to sell to the Underwriters, $_______ aggregate principal amount of the Company's ___% __________ Due _______ guaranteed by the Guarantor (the "Securities") in the respective principal amounts set forth opposite the names of the Underwriters on the list attached hereto. The price at which the Securities shall be purchased from the Company by the Underwriters shall be ___% of the principal amount thereof. The Closing Date shall be _________, 199_, at ___ A.M., at the offices of ____________________. -2- The Securities will have the following terms: Title: Maturity: Interest Rate: Interest Payment Dates: Additional Terms: All provisions contained in the Kelsey-Hayes Company Standard Underwriting Agreement Provisions ("Standard Provisions"), a copy of which you have previously received, are herein incorporated by reference in their entirety and shall be deemed to be a part of this Terms Agreement to the same extent as if the Standard Provisions had been set forth in full herein [except that the obligations and agreements set forth in Section 8 ("Default of Underwriters") of the Underwriting Agreement shall not apply to the obligations of the Underwriters to purchase the above Securities]. Terms defined in the Standard Provisions are used herein as therein defined. The Securities will be made available for checking and packaging at the office of ________________________ at least 24 hours prior to the Closing Date. We represent that we are authorized to act for the several Underwriters named in Schedule A hereto in connection with this financing and any action under this Agreement by any of us will be binding upon all the Underwriters. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicate hereof, whereupon it will become a binding agreement among the Company, the Guarantor and the several Underwriters in accordance with its terms. Very truly yours, [Names of Representatives] On behalf of themselves and as Representatives of the Several Underwriters By:__________________________ Name: Title: -3- The foregoing Terms Agreement is hereby confirmed as of the date first above written KELSEY-HAYES COMPANY By___________________________ Name: Title: VARITY CORPORATION By___________________________ Name: Title: ANNEX I DELAYED DELIVERY CONTRACT ------------------------- , 199 Kelsey-Hayes Company 11878 Hubbard Road Livonia, Michigan 48150 Varity Corporation 672 Delaware Avenue Buffalo, New York 14209 Attention: [ ] Ladies and Gentlemen: The undersigned hereby agrees to purchase from Kelsey-Hayes Company, a Delaware corporation (the "Company"), and Varity Corporation, a Delaware corporation (the "Guarantor"), and the Company and the Guarantor agree to sell to the undersigned, $ principal amount of the Company's [insert title of securities] (the "Securities") guaranteed as to payment of principal and interest by the Guarantor, offered by the Company's and the Guarantor's Prospectus dated , 1995 and a Prospectus Supplement dated , 199 relating thereto, receipt of copies of which is hereby acknowledged, at % of the principal amount thereof plus accrued interest, if any, from , 199 , and on the further terms and conditions set forth in this Delayed Delivery Contract ("Contract"). The undersigned will purchase from the Company and the Guarantor as of the date hereof, for delivery on the dates set forth below, Securities in the principal amounts set forth below: Delivery Date Principal Amount ------------- ---------------- Each of such delivery dates is hereinafter referred to as a "Delivery Date." -2- Payment for the Securities that the undersigned has agreed to purchase for delivery on each Delivery Date shall be made to the Company or its order by certified or official bank check in New York Clearing House (next day) funds at the office of at 10:00 A.M. on such Delivery Date upon delivery to the undersigned of the Securities to be purchased by the undersigned on such Delivery Date in definitive fully registered form and in such denominations and registered in such names as the undersigned shall designate by written or telegraphic communication addressed to the Company not less than five business days prior to such Delivery Date. It is expressly agreed that the provisions for delayed delivery and payment are for the sole convenience of the undersigned; that the purchase hereunder of Securities is to be regarded in all respects as a purchase as of the date of this Contract subject to the first paragraph hereof with respect to the accrual of interest; that the obligation of the Company and the Guarantor to make delivery of and accept payment for, and the obligation of the undersigned to take delivery of and make payment for, Securities on each Delivery Date shall be subject only to the conditions that (1) investment in the Securities shall not at such Delivery Date be prohibited under the laws of any jurisdiction in the United States to which the undersigned is subject and (2) the Company shall have sold to the Underwriters the principal amount of the Securities less the principal amount thereof covered by this and other similar Contracts. The undersigned represents that its investment in the Securities is not, as of the date hereof, prohibited under the laws of any jurisdiction to which the undersigned is subject and which governs such investment. Promptly after completion of the sale to the Underwriters, the Company will mail or deliver to the undersigned at its address set forth below notice to such effect, accompanied by a copy of the opinion of counsel for the Company delivered to the Underwriters in connection therewith. This Contract will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, but will not be assignable by either party hereto without the written consent of the other. It is understood that the acceptance of any such Contract is in the Company's and the Guarantor's sole discretion and, without limiting the foregoing, need not be on a first-come, first-served basis. If this Contract is acceptable to the Company and the Guarantor, it is requested that the Company -3- and the Guarantor sign the form of acceptance below and mail or deliver one of the counterparts hereof to the undersigned at its address set forth below. This will become a binding contract between the Company, the Guarantor and the undersigned when such counterpart is so mailed or delivered. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York. Very truly yours, ___________________________ (NAME OF PURCHASER) By_________________________ Name: Title: ___________________________ ___________________________ (Address of Purchaser) Accepted, as of the above date KELSEY-HAYES COMPANY By____________________________ Name: Title: VARITY CORPORATION By____________________________ Name: Title: EX-1.2 3 FORM OF VARITY UNDERWRITING AGREEMENT EXHIBIT 1.2 VARITY CORPORATION DEBT SECURITIES STANDARD UNDERWRITING AGREEMENT PROVISIONS ------------------------------------------ Varity Corporation, a Delaware corporation (the "Company"), proposes to issue and sell from time to time its debt securities, consisting of (i) unsecured senior debt securities (the "Senior Debt Securities") and (ii) unsecured subordinated debt securities (the "Subordinated Debt Securities" and, together with the Senior Debt Securities, the "Securities"). The Securities are registered under the registration statement referred to in Section 1 hereof. The Senior Debt Securities will be issued under an indenture (as amended or supplemented, the "Senior Indenture") to be entered into between the Company and Manufacturers and Traders Trust Company, a New York banking corporation, as trustee (the "Senior Trustee"). The Subordinated Debt Securities will be issued under an indenture (as amended or supplemented, the "Subordinated Indenture" and, together with the Senior Indenture, the "Indentures") between the Company and Manufacturers and Traders Trust Company, a New York banking corporation, as trustee (the "Subordinated Trustee" and, together with the Senior Trustee, the "Trustees"). The Securities may be issued in one or more series and may have varying designations, denominations, interest rates and payment dates, maturities, redemption provisions, selling prices and other terms. The basic provisions set forth herein are intended to be incorporated by reference in a terms agreement of the type referred to below relating to the designation and series of Securities to be issued and sold by the Company pursuant thereto (the "Offered Securities") to the underwriter or several underwriters named therein (the "Underwriters"). The Terms Agreement, which shall be in the form of Exhibit I hereto relating to the Offered Securities (the "Terms Agree- ment"), together with the provisions hereof incorporated therein by reference (which provisions shall not become effective until so incorporated by reference), is herein referred to as this "Agreement." If the Underwriters consist only of the firm or firms referred to in the Terms Agreement as Representative or Representatives, then the terms "Underwriters" and -2- "Representatives," as used herein, shall each be deemed to refer to such firm or firms. The obligations of the Underwriters to purchase, and the Company to sell, the Offered Securities are evidenced by the Terms Agreement delivered at the time the Company determines to sell the Offered Securities. The Terms Agreement specifies the firm or firms which will be Underwriters, the amount of the Offered Securities to be purchased by each Underwriter, the purchase price to be paid by the Underwriters for the Offered Securities, the public offering price, if any, of the Offered Securities and any terms of the Offered Securities not otherwise specified in the applicable Indenture (including, but not limited to, designations, denominations, covenants, interest rates and payment dates, maturity, redemption provisions and sinking fund requirements). The Terms Agreement specifies any details of the terms of the offering that should be reflected in a post-effective amendment to the applicable Registration Statement or the Prospectus Supplement (each as hereinafter defined). 1. Registration Statement and Prospectus. The ------------------------------------- Company and Kelsey-Hayes Company, a subsidiary of the Company, have prepared and filed with the Securities and Exchange Commission (the "Commission"), in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a joint registration statement on Form S-3 (the "registration statement"), including a prospectus relating to the Offered Securities. The term "Registration Statement," as used in this Agreement, means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective, and as thereafter amended by any post-effective amendment at the date of any Terms Agreement. The term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement, as supplemented to reflect the terms of the Offered Securities and the plan of distribution thereof, in the form in which it shall be filed with the Commission pursuant to Rule 424(b). Any reference in this Agreement to the registration statement, the Registration Statement or any Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the registration statement, the Registration Statement or any Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement or any Prospectus shall be deemed to -3- refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means the documents which at the time are incorporated by reference in the registration statement, the Registration Statement, any Prospectus, or any amendment or supplement thereto, but does not include any documents incorporated by reference in the Registration Statement, any Prospectus, or any amendment or supplement thereto subsequent to the Closing Date (as defined in Section 2 hereof). 2. Sale and Delivery to the Underwriters; Closing. ---------------------------------------------- The obligation of the Underwriters to purchase the Offered Securities will be evidenced by a Terms Agreement at the time the Company determines to sell the Securities. The Terms Agreement will incorporate by reference the provisions of this Agreement, except as otherwise provided therein, and will specify (1) the firm or firms which will be Underwriters, (2) the names of any Representatives, (3) the principal amount of Offered Securities to be purchased by each Underwriter and the purchase price to be paid by the Underwriters, (4) the terms of the Offered Securities not already specified in the Indenture, (5) whether any of the Offered Securities may be sold to institutional investors pursuant to Delayed Delivery Contracts (as defined below), (6) the time and date on which delivery of the Offered Securities will be made to the Representatives for the accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price in New York Clearing House funds (such time and date, or such other time and date not later than seven full business days thereafter as the Representatives and the Company agree to as to time and date for payment and delivery, being herein and in the Terms Agreement referred to as the "Closing Date") and (7) the place of delivery and payment. The obligations of the Underwriters to purchase the Offered Securities will be several and not joint. The Offered Securities delivered to the Underwriters on the Closing Date will be in definitive fully registered form, in such denominations and registered in such names as the Representatives may request. Certificates for the Offered Securities shall be registered in such names and in such denominations as the Representatives shall request by written notice, it being understood -4- that a facsimile transmission shall be deemed written notice for such purpose, prior to 1:00 P.M., New York City time, on the third business day preceding the Closing Date. If the Terms Agreement provides for sales of Securities pursuant to Delayed Delivery Contracts, the Company authorizes the Underwriters to solicit offers to purchase Securities pursuant to delayed delivery contracts substantially in the form of Annex I attached hereto ("Delayed Delivery Contracts") with such changes therein as the Company may authorize or approve. Delayed Delivery Contracts are to be with institutional investors, including commercial and savings banks, insurance companies, pension funds, investment companies and educational and charitable institutions. On the Closing Date, the Company will pay, as compensation, to the Representatives for the accounts of the Underwriters, the fee (expressed as a discount) set forth in such Terms Agreement in respect of the principal amount of Securities to be sold pursuant to Delayed Delivery Contracts ("Contract Securities"). The Underwriters will not have any responsibility in respect of the validity or the performance of any Delayed Delivery Contract. If the Company executes and delivers a Delayed Delivery Contract, the Contract Securities will be deducted from the Securities to be purchased by the several Underwriters and the aggregate principal amount of Securities to be purchased by each Underwriter will be reduced pro rata in proportion to the principal amount of Securities set forth opposite each Underwriter's name in such Terms Agreement, except to the extent that the Representatives determine that such reduction shall be otherwise than pro rata and so advise the Company. The Company will advise the Representatives not later than the business day prior to the Closing Date of the principal amount of Contract Securities. 3. Agreements of the Company. The Company agrees ------------------------- with each Underwriter as follows: (a) If, at the time any Terms Agreement is executed and delivered, it is necessary for a post-effective amendment to the Registration Statement to be declared effective before the offering of the Offered Securities may commence, the Company will endeavor to cause such post-effective amendment to become effective as soon as possible and will advise the Underwriters promptly and, if requested, will confirm such advice in writing, when the Company receives notice (written or oral) that such post-effective amendment has become effective. -5- (b) The Company will advise the Underwriters promptly and, if requested, will confirm such advice in writing: (i) of any request by the Commission for amendment of or a supplement to the Registration Statement or any Prospectus or for additional information; (ii) upon knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Offered Securities for offering or sale in any jurisdiction or of the initiation of any proceeding for such purpose; and (iii) within the period of time referred to in paragraph (e) below, of any change in the Company's financial condition, business, prospects, properties, net worth or results of operations, or of the happening of any event, including the filing of any information, documents or reports pursuant to the Exchange Act, that makes any statement made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus (as then amended or supplemented) in order to state a material fact required by the Act to be stated therein or necessary in order to make the statements therein not misleading, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company, upon knowledge thereof, will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. (c) The Company will furnish to each of the Representatives and to counsel to the Representatives, without charge (i) one signed copy of the registration statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits to the Registration Statement, and (ii) such number of conformed copies of the Registration Statement as originally filed and of each amendment thereto, but without exhibits, as the Representatives may reasonably request. (d) The Company will not file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus of which the Representatives shall not previously have been advised or to which the -6- Representatives shall reasonably object in writing after being so advised. (e) If during the period when the Prospectus is required to be delivered under the Act any event shall occur that in the judgment of the Company or in the opinion of counsel for the Underwriters is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus in order to comply with the Act or any other law, the Company will forthwith prepare and, subject to the provisions of paragraph (d) above, file with the Commission an appropriate supplement or amendment thereto, and will expeditiously furnish to the Underwriters and dealers a reasonable number of copies thereof. (f) The Company will cooperate with the Underwriters and with counsel for the Underwriters in connection with the registration or qualification of the Offered Securities for offering and sale by the several Underwriters and by dealers under the securities or Blue Sky laws of such jurisdictions as the Representatives may reasonably designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such registration or qualification; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. (g) The Company will make generally available to its security holders a consolidated earnings statement, which need not be audited, covering a twelve-month period commencing after the effective date of the Registration Statement and ending not later than 15 months thereafter, as soon as reasonably practicable after the end of such period, which consolidated earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder. (h) During the period of two years hereafter, the Company will furnish to the Underwriters (i) as soon as -7- available, a copy of each report of the Company mailed to stockholders or filed with the Commission or the New York Stock Exchange, and (ii) from time to time such other information concerning the Company as the Underwriters may reasonably request. (i) Between the date of any Terms Agreement and the Closing Date specified in such agreement, the Company will not, without the Representatives' prior consent, offer, sell, contract to sell or otherwise dispose of debt securities of the Company having a maturity of more than one year from the date of issue covered by the Registration Statement or another registration statement filed by the Company under the Act, except that the Company may offer, sell, contract to sell or otherwise dispose of obligations of the Company in respect of industrial revenue bonds or similar securities exempt from federal income taxes. (j) The Company will apply the net proceeds from the sale of the Offered Securities hereunder substantially in accordance with the description set forth in the Prospectus. 4. Representations and Warranties of the Company. --------------------------------------------- The Company represents and warrants to each Underwriter that: (a) The Registration Statement and any post- effective amendment thereto have been declared effective by the Commission and no stop order suspending the effectiveness of such Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission. (b) Each Prospectus included as part of the registration statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the provisions of the Act and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; except that this representation and warranty does not apply to statements in or omissions from such Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with information furnished to the Company in writing by an Underwriter expressly for use -8- therein. The Commission has not issued any order preventing or suspending the use of any Prospectus. (c) The Company and the transactions contemplated by this Agreement meet the requirements for using Form S-3 under the Act. The registration statement in the form in which it became effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 424(b) under the Act, complied or will comply in all material respects with the provisions of the Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and will not at any such times contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; except that this representation and warranty does not apply to statements in or omissions from the registration statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by an Underwriter expressly for use therein. (d) The Incorporated Documents heretofore filed, when they were filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), conformed in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; any further Incorporated Documents so filed will, when they are filed, conform in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; no such document when it was filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and no such further document, when it is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. (e) The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct -9- its business, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the financial condition, business, properties, net worth or results of operations of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). (f) Each Material Subsidiary (as defined below) is a corporation duly organized, validly existing and in good standing in the jurisdiction of its organization, with full corporate power and authority to own, lease and operate its properties and to conduct its business, except where the failure of a Material Subsidiary to be duly organized and existing or to have full corporate power and authority would not have a Material Adverse Effect; each Material Subsidiary is duly registered, qualified or licensed to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register, be licensed or qualify would not have a Material Adverse Effect; all the outstanding shares of capital stock of each Material Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Company directly, or indirectly through one of its other subsidiaries, free and clear of any lien, adverse claim, security interest, equity, or other encumbrance; and there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, shares of capital stock or other equity interests in any Material Subsidiary. As used herein, the term "Material Subsidiaries" means the following subsidiaries of the Company: Varity Holdings Limited and Perkins Group Limited, each a corporation organized under the laws of the United Kingdom; Dayton Walther Corporation, an Ohio corporation; K-H Corporation, a Delaware corporation; and Kelsey-Hayes Company, a Delaware corporation. (g) The Offered Securities have been duly authorized by the Company and, when executed by the Company and authenticated by the applicable Trustee in accordance with the terms of the applicable Indenture (assuming the due authorization, execution and delivery thereof by the -10- Trustee thereunder), and delivered to and paid for by the Underwriters in accordance with the terms of this Agreement and the Terms Agreement and the applicable Indenture, will constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (h) There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened, against the Company or any of its subsidiaries which are reasonably likely to have a Material Adverse Effect, or to which the Company or any of its subsidiaries, or to which any of their respective properties, is subject which are material to the Company and its subsidiaries, taken as a whole, that are required to be described in the Registration Statement or the Prospectus, but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments relating to the Company or its subsidiaries that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement or any Incorporated Document that are not described or filed as required by the Act or the Exchange Act. The descriptions of the terms of any such contracts or documents contained in the Registration Statement, the Prospectus or any Incorporated Documents are correct in all material respects. (i) Neither the Company nor any of its subsidiaries is (i) in violation of its certificate or articles of incorporation or bylaws, or other organizational documents, (ii) in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of its subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, or (iii) in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any agreement, indenture, lease or instrument to which the Company or any of its subsidiaries is a party or by which -11- any of them or any of their respective properties may be bound, and no condition or state of facts exists, which, with the passage of time or the giving of notice or both, would constitute such a default, except in the case of clauses (i), (ii) and (iii) where any such violation or default, or violations and defaults in the aggregate, would not have a Material Adverse Effect. (j) None of the issuance and sale of the Offered Securities, the execution, delivery or performance of this Agreement, the Terms Agreement, the Indenture relating to the Offered Securities and any Delayed Delivery Contract by the Company, or the consummation by the Company of the transactions contemplated hereby and thereby to be consummated by the Company (i) requires any consent, approval, authorization or other order of or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required for the registration of the Securities under the Act and the Exchange Act, and compliance with the securities or Blue Sky laws of various jurisdictions, all of which have been or will be effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company or any of its subsidiaries or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any material agreement, indenture, lease or instrument to which the Company or any of its subsidiaries is a party or by which any of them or any of their respective properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company or any of its subsidiaries or any of their respective properties, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of the property or assets of any of them is subject, except in the case of clauses (i) and (ii) where any such conflict, breach, default or violation, or conflicts, breaches, defaults or violations in the aggregate, would not have a Material Adverse Effect. -12- (k) The accountants who have certified or shall certify the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement thereto) were or shall be, for the periods in which they certified or certify such financial statements, independent public accountants as required by the Act. (l) The historical financial statements, together with related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto), present fairly the consolidated financial position, results of operations, cash flows and changes in stockholders' equity of the Company and its subsidiaries on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with United States generally accepted accounting principles (as described in the Prospectus) consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto) are accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company and its subsidiaries. (m) The execution and delivery of, and the performance by the Company of its obligations under, each of this Agreement, the Terms Agreement, the Indenture relating to the Offered Securities and any Delayed Delivery Contract have been duly and validly authorized, executed and delivered by the Company and constitutes the valid and legally binding agreement of the Company enforceable against the Company, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). The Indenture has been duly qualified under the Trust Indenture Act. -13- (n) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement thereto), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), neither the Company nor any of its subsidiaries has incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Company and its subsidiaries taken as a whole, and there has not been any material change in the capital stock of the Company, or material increase in the short-term debt or long-term debt of the Company and any of its subsidiaries taken as a whole, or any Material Adverse Effect. (o) The Company and each of its subsidiaries has good and marketable title to all property (real and personal) described in the Prospectus as being owned by it, free and clear of all liens, claims, security interests or other encumbrances, except such as are described in the Registration Statement and the Prospectus or in a document filed as an exhibit to the Registration Statement and all the property described in the Prospectus as being held under lease by each of the Company and its subsidiaries is held by it under valid, subsisting and enforceable leases, in each case with only such exceptions as in the aggregate would not have a Material Adverse Effect. (p) The Company and each of its subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("Permits") as are necessary to own its respective properties and to conduct its business in the manner described in the Prospectus, except where the failure to have any such Permit would not have a Material Adverse Effect and subject to such qualifications as may be set forth in the Prospectus; the Company and each of its subsidiaries has fulfilled and performed all its material obligations with respect to such Permits and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit, except where such action would not have a Material Adverse Effect and subject in each case to such qualification as may be set forth in the Prospectus; and, except as described in the Prospectus, none of such Permits contains any -14- restriction that is materially burdensome to the Company and its subsidiaries, taken as a whole. (q) The Company and its subsidiaries own or possess all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, trade secrets and rights described in the Prospectus as being owned by them or any of them or necessary for the conduct of their respective businesses, except where the lack of such ownership or possession would not have a Material Adverse Effect, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company or any of its subsidiaries with respect to the foregoing. 5. Indemnification and Contribution. (a) The -------------------------------- Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities, judgments and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities, judgments or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information furnished in writing to the Company by or on behalf of any Underwriter; provided, however, that the indemnification contained in this paragraph (a) with respect to any Prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) on account of any such loss, claim, damage, liability, judgment or expense arising from the sale of the Offered Securities by such Underwriter to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the Act and the regulations thereunder, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in any preliminary prospectus was corrected in the Prospectus. -15- The foregoing indemnity agreement shall be in addition to any liability which the Company may otherwise have. (b) If any action, suit or proceeding shall be brought against any Underwriter or any person controlling any Underwriter in respect of which indemnity may be sought against the Company, such Underwriter or such controlling person shall promptly notify the Company, and the Company shall assume the defense thereof, including the employment of counsel and payment of all reasonable fees and expenses of such counsel. Any such Underwriter or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the reasonable fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person, rather than the Company, unless (i) the Company has agreed in writing to pay such fees and expenses, (ii) the Company has failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Underwriter or such controlling person and the Company and such Underwriter or such controlling person shall have been advised by its counsel that representation of such indemnified party and the Company by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Company shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Underwriter or such controlling person). It is understood, however, that the Company shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel, not more than one per jurisdiction) at any time for all such Underwriters and controlling persons, which firm shall be designated in writing by the Underwriters, and that all such fees and expenses shall be reimbursed promptly as they are incurred. The Company shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Company agrees to indemnify and hold harmless any Underwriter, to the extent provided in the preceding paragraph, and any such controlling person from and against any loss, claim, damage, -16- liability, judgment or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Underwriter or any person controlling an Underwriter is entitled to employ separate counsel pursuant to the second sentence of this Section 5(b) and shall have requested the Company in writing to reimburse such Underwriter or such controlling person for fees and expenses of counsel, the Company agrees that it shall be liable for any settlement of any proceeding effected by such Underwriter or such controlling person and for which the Company is liable pursuant to Section 5(a) without its written consent if (i) such settlement is entered into more than ten (10) business days after receipt by the Company of the aforesaid request or (ii) the Company shall not have reimbursed such Underwriter or such controlling person in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of such Underwriter or such controlling person, effect any settlement of any pending or threatened proceeding in respect of which any Underwriter or any person controlling an Underwriter is or could have been a party and indemnity could have been sought hereunder by such Underwriter or such controlling person, unless such settlement includes an unconditional release of such Underwriter or such controlling person from all liability on claims that are subject matter of such proceeding. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, officers who sign the Registration Statement, and any person who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with respect to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter through the Representative(s) expressly for use in the Registration Statement, the Prospectus or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Company, any of its directors, officers, or any such controlling person based on the Registration Statement, the Prospectus or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Underwriter pursuant to this paragraph (c), such Underwriter shall have the rights and duties given to the Company by paragraph (b) above (except that if the Company shall have assumed the defense thereof such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter), and the -17- Company, its directors, officers, and any such controlling person shall have the rights and duties given to the Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Underwriters may otherwise have. (d) If the indemnification provided for in this Section 5 is unavailable to, or insufficient to hold harmless, an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities, judgments or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, judgments or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Offered Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the Company on the one hand and the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities, judgments or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company on the one hand and the Underwriters on the other hand 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 on the one hand or by the Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by a pro rata allocation (even if the Underwriters 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 -18- paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities, judgments and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 5, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price of the Offered Securities underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter 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 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 5 are several in proportion to their underwriting obligations and not joint. (f) Any losses, claims, damages, liabilities, judgments or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 5 shall be paid by the indemnifying party to the indemnified party promptly as such losses, claims, damages, liabilities, judgments or expenses are incurred. The indemnity and contribution agreements contained in this Section 5 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, its directors or officers, or any person controlling the Company, (ii) acceptance of any Offered Securities and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter or any person controlling any Underwriter, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 5. 6. Conditions of Underwriters' Obligations. The --------------------------------------- several obligations of the Underwriters to purchase the Offered Securities hereunder are subject to the following conditions: (a) If, at the time this Agreement is executed and delivered, it is necessary for the registration statement -19- or a post-effective amendment thereto to be declared effective before the offering of the Offered Securities may commence, the registration statement or such post- effective amendment shall have become effective not later than 5:30 P.M., New York City time, on the first business day following the date of the applicable Terms Agreement, or at such later date and time as shall be consented to in writing by the Representatives, and all filings, if any, required by Rule 424 under the Act shall have been timely made; no stop order suspending the effectiveness of the registration statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company or any Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with. (b) Subsequent to the execution of any applicable Terms Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting the financial condition, business, properties, net worth, or results of operations of the Company and its subsidiaries taken as a whole, from the date of the latest balance sheet included or incorporated by reference in the Prospectus in each case not contemplated by the Prospectus, which is material and adverse; (ii) any downgrading in, or notice of any proposal to downgrade, the rating of the Company's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) or any public announcement that any such organization has under surveillance or review with negative implications the rating of the Company's debt securities; (iii) any suspension or limitation of trading in securities generally on or by the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, or any setting of minimum prices for trading on such exchange; (iv) any suspension of trading of any securities of the Company on any exchange; (v) any banking moratorium declared by Federal or New York authorities; or (vi) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event set forth in (i) through (vi), in the judgment of the -20- Representatives, makes it impractical or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated by the Prospectus. (c) The Underwriters shall have received on the Closing Date, an opinion of Cahill Gordon & Reindel (a partnership including a professional corporation), counsel for the Company, dated the Closing Date and addressed to the Underwriters, to the effect that: (i) The Company is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; (ii) Any Delayed Delivery Contract has been duly authorized, executed and delivered by the Company; (iii) The Indenture relating to the Offered Securities has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law); (iv) The Offered Securities have been duly authorized and, when executed and authenticated in accordance with the Indenture and delivered to the Underwriters against payment therefor in accordance with the terms of this Agreement, will be valid and binding obligations of the Company, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and will be entitled to the benefits of the Indenture; -21- (v) The Registration Statement and all post- effective amendments, if any, have become effective under the Act and, to the best knowledge of such counsel after reasonable inquiry, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission; and any required filing of the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b); (vi) The Company has all requisite corporate power and authority to enter into this Agreement, the Terms Agreement, the Indenture relating to the Offered Securities, and any Delayed Delivery Contract to which it is a party and to issue and deliver the Offered Securities to the Underwriters; (vii) This Agreement has been duly authorized, executed and delivered by the Company and is a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (A) as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (B) that rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or the public policy underlying such laws; (viii) The Offered Securities and the Indenture conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus; (ix) None of the offer, sale, or delivery of the Offered Securities, or the execution, delivery or performance of this Agreement, the Indenture relating to the Offered Securities, and any Delayed Delivery Contract, nor compliance by the Company with all the provisions of this Agreement and the Indenture applicable to it, nor consummation by the Company of the transactions contemplated hereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate of -22- incorporation or bylaws of the Company or any indenture or other debt instrument or any other material agreement or lease, known to such counsel, to which the Company is a party or by which any of them or any of their respective properties is bound or that is an exhibit to the Registration Statement or to any Incorporated Document, which conflict, breach or default would have a Material Adverse Effect, or, except as disclosed in the Registration Statement, will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company under any such indenture, debt instrument, agreement or lease which lien, charge or encumbrance would have a Material Adverse Effect, nor will any such action result in any violation of any existing law, regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws), judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Company or any of its properties, which violation would have a Material Adverse Effect; (x) No consent, approval, authorization or other order of, or registration or filing with, any Delaware, New York State or Federal court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Company (except as have been obtained or made under the Act and the Exchange Act or such as may be required under state securities or Blue Sky laws governing the purchase and distribution of the Securities) for the valid issuance and sale of the Offered Securities to the Underwriters as contemplated by this Agreement; and (xi) The Registration Statement and the Prospectus and any supplements or amendments thereto (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act; and each of the Incorporated Documents (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein, as to which such counsel need not express any opinion), when they were filed (or, if an amendment with respect to any Incorporated Document was -23- filed, when such amendment was filed) complied as to form in all material respects with the Exchange Act. In addition, such counsel shall state that such counsel participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants and representatives of the Underwriters at which the contents of the Registration Statement and Prospectus were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and Prospectus (except as otherwise indicated above) on the basis of the foregoing (relying as to materiality to a large extent upon the opinions of officers and representatives of the Company), no facts have come to the attention of such counsel which lead them to believe that either the Registration Statement or any amendment thereto, at the time the Registration Statement or amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading or that the Prospectus as of its date or any supplement thereto as of its date, or the Registration Statement or the Prospectus and any amendment or supplement thereto as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial and statistical data included in the Registration Statement or the Prospectus). The opinion of such counsel may be limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Federal laws of the United States. In rendering their opinion as aforesaid, such counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company and public officials. (d) The Underwriters shall have received letters dated the date of the Terms Agreement and the Closing Date from KPMG Peat Marwick LLP, independent certified public accountants, substantially in the forms heretofore approved by the Underwriters. -24- (e) The Underwriters shall have received on the Closing Date, an opinion of Andrews & Kurth L.L.P., counsel for the Underwriters, dated the Closing Date and addressed to the Underwriters, in form and substance satisfactory to the Underwriters. (f) (i) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall be pending or, to the knowledge of the Company, shall be contemplated by the Commission at the Closing Date; (ii) there shall not have been any material change in the capital stock of the Company nor any material increase in the short-term or long-term debt of the Company (other than in the ordinary course of business) from that set forth or contemplated in the Registration Statement or the Prospectus (or any amendment or supplement thereto); (iii) there shall not have been, since the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and the Prospectus (or any amendment or supplement thereto), any material adverse change in the financial condition, business, prospects, properties, net worth or results of operations of the Company and its subsidiaries taken as a whole; and (iv) all the representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the date of the Terms Agreement and on and as of the Closing Date as if made on and as of the Closing Date, and the Underwriters shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the chief financial officer of the Company (or such other officers as are acceptable to the Underwriters), to the effect set forth in this Section 6(f) and in Section 6(g) hereof. (g) The Company shall not have failed at or prior to the Closing Date to have performed or complied with any of its agreements herein contained and required to be performed or complied with by them hereunder at or prior to the Closing Date. (h) The Company shall have furnished or caused to be furnished to the Underwriters such further certificates and documents as the Underwriters shall have reasonably requested. -25- All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to the Underwriters and their counsel. Any certificate or document signed by any officer of the Company and delivered to the Underwriters or to counsel for the Underwriters, shall be deemed a representation and warranty by the Company to each Underwriter as to the statements made therein. Any certificate delivered by the Company to its counsel for purposes of enabling such counsel to render the opinions referred to in this Section 6 will also be furnished to the Underwriters and counsel for the Underwriters. 7. Expenses. The Company agrees to pay the -------- following costs and expenses and all other costs and expenses incident to the performance by it of its obligations hereunder: (i) the preparation, printing (or reproduction), and filing with the Commission of the registration statement (including financial statements and exhibits thereto), each Prospectus and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the registration statement, the Prospectus, the Incorporated Documents, and all amendments or supplements to any of them, as may be reasonably requested for use in connection with the offering and sale of the Offered Securities, (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Offered Securities, including any stamp taxes in connection with the original issuance and sale of the Offered Securities; (iv) the printing (or reproduction) and delivery of this Agreement, the Indenture, the preliminary and supplemental Blue Sky Memoranda and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Offered Securities; (vi) the registration or qualification of the Offered Securities for offer and sale under the securities or Blue Sky laws of the several states as provided in Section 3(f) hereof (including the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, printing (or reproduction), and delivery of the preliminary and supplemental Blue Sky Memoranda and such registration and qualification); (vii) the filing fees of the Underwriters in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; (viii) the transportation and other expenses incurred by or on behalf of the Company -26- representatives (other than the Underwriters) in connection with presentations to prospective purchasers of the Offered Securities; and (ix) the fees and expenses of the Company's accountants and the fees and expenses of counsel (including local and special counsel) for the Company. 8. Defaulting Underwriters. If any one or more of ----------------------- the Underwriters shall fail or refuse to purchase the Offered Securities which it or they have agreed to purchase under the Terms Agreement, and the aggregate principal amount of Offered Securities which such defaulting Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate principal amount of the Offered Securities, each non- defaulting Underwriter shall be obligated, severally, in the proportion which the aggregate principal amount of Offered Securities set forth opposite its name in the Terms Agreement bears to the aggregate principal amount of Offered Securities set forth opposite the names of all non-defaulting Underwriters, to purchase the Offered Securities that such defaulting Underwriter or Underwriters agreed, but failed or refused, to purchase. If any Underwriter or Underwriters shall fail or refuse to purchase Offered Securities and the aggregate principal amount of Offered Securities with respect to which such default occurs is more than one-tenth of the total principal amount of Offered Securities and arrangements satisfactory to the Representatives and the Company for the purchase of such Offered Securities by one or more non- defaulting Underwriters or other party or parties are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriters or the Company. In any such case that does not result in termination of this Agreement, either the Underwriters or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement. The agreements set forth in this Section will not apply if the Terms Agreement specifies that such agreements will not apply. 9. Survival of Certain Representations and --------------------------------------- Obligations. The respective indemnities, agreements, - ----------- representations, warranties and other statements of the Company or its -27- officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the result thereof, made by or on behalf of any Underwriter, the Company, or any of its representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If the Terms Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Underwriters under the Terms Agreement is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 7 and the respective obligations of the Company and the Underwriters pursuant to Section 5 shall remain in effect. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than the termination of the Terms Agreement pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv), (v), or (vi) of Section 6(b), the Company will reimburse the Under- writers for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Miscellaneous. All notices and other ------------- communications hereunder shall be in writing and shall be deemed to have been given if mailed or transmitted by any standard form of telecommunication. Notices to the Company shall be directed to Varity Corporation, 672 Delaware Avenue, Buffalo, New York 14209, Attention: Corporate Secretary; notices to the Underwriters shall be directed to the Underwriters at the address set forth in the Terms Agreement. 11. Parties. This Agreement and the Terms Agreement ------- shall each inure to the benefit of and be binding upon each Underwriter, the Company and their respective successors, heirs and legal representatives. Nothing expressed or mentioned in this Agreement or the Terms Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company and their respective successors, heirs and legal representatives and the controlling persons and officers and directors referred to in Section 5 and their heirs and legal representatives, any legal or equitable right, remedy or claim under, by virtue of or in respect of this Agreement or the Terms Agreement or any provision herein or therein contained. This Agreement and the Terms Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the Underwriters, the Company and their respective successors, heirs and legal -28- representatives, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Offered Securities from an Underwriter shall be deemed to be a successor or assign by reason merely of such purchase. 12. Applicable Law; Counterparts. This Agreement ---------------------------- shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York. This Agreement may be executed in counterparts and the executed counterparts shall together constitute a single instrument. EXHIBIT I VARITY CORPORATION DEBT SECURITIES TERMS AGREEMENT --------------- [Date] Varity Corporation 672 Delaware Avenue Buffalo, New York 14209 Attention: [ ] Ladies and Gentlemen: Referring to the Debt Securities of Varity Corporation (the "Company") covered by the joint Registration Statement on Form S-3 (No. 33- ) (the "Registration Statement") filed by the Company and Kelsey-Hayes Company, a subsidiary of the Company, with the Securities and Exchange Commission, on the basis of the representations, warranties and agreements contained or incorporated by reference in this Agreement, and subject to the terms and conditions herein set forth, the Underwriters named in the list attached hereto agree to purchase, severally and not jointly, and the Company agrees to sell to the Underwriters, $_______ aggregate principal amount of the Company's ___% __________ Due _______ (the "Securities") in the respective principal amounts set forth opposite the names of the Underwriters on the list attached hereto. The price at which the Securities shall be purchased from the Company by the Underwriters shall be ___% of the principal amount thereof. The Closing Date shall be _________, 199_, at ___ A.M., at the offices of ____________________. The Securities will have the following terms: Title: Maturity: Interest Rate: Interest Payment Dates: Additional Terms: All provisions contained in the Varity Corporation Standard Underwriting Agreement Provisions ("Standard Provisions"), a copy of which you have previously received, are -2- herein incorporated by reference in their entirety and shall be deemed to be a part of this Terms Agreement to the same extent as if the Standard Provisions had been set forth in full herein [except that the obligations and agreements set forth in Section 8 ("Default of Underwriters") of the Underwriting Agreement shall not apply to the obligations of the Underwriters to purchase the above Securities]. Terms defined in the Standard Provisions are used herein as therein defined. The Securities will be made available for checking and packaging at the office of ________________________ at least 24 hours prior to the Closing Date. We represent that we are authorized to act for the several Underwriters named in Schedule A hereto in connection with this financing and any action under this Agreement by any of us will be binding upon all the Underwriters. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicate hereof, whereupon it will become a binding agreement among the Company and the several Underwriters in accordance with its terms. Very truly yours, [Names of Representatives] On behalf of themselves and as Representatives of the Several Underwriters By:__________________________ Name: Title: The foregoing Terms Agreement is hereby confirmed as of the date first above written VARITY CORPORATION By__________________________ Name: Title: ANNEX I DELAYED DELIVERY CONTRACT ------------------------- , 199 Varity Corporation 672 Delaware Avenue Buffalo, New York 14209 Attention: [ ] Ladies and Gentlemen: The undersigned hereby agrees to purchase from Varity Corporation, a Delaware corporation (the "Company"), and the Company agrees to sell to the undersigned, $ principal amount of the Company's [insert title of securities] (the "Securities") offered by the Company's Prospectus dated , 1995 and a Prospectus Supplement dated , 199 relating thereto, receipt of copies of which is hereby acknowledged, at % of the principal amount thereof plus accrued interest, if any, from , 199 , and on the further terms and conditions set forth in this Delayed Delivery Contract ("Contract"). The undersigned will purchase from the Company as of the date hereof, for delivery on the dates set forth below, Securities in the principal amounts set forth below: Delivery Date Principal Amount ------------- ---------------- Each of such delivery dates is hereinafter referred to as a "Delivery Date." Payment for the Securities that the undersigned has agreed to purchase for delivery on each Delivery Date shall be made to the Company or its order by certified or official bank check in New York Clearing House (next day) funds at the office of at 10:00 A.M. on such Delivery Date upon delivery to the undersigned of the Securities to be purchased by the undersigned on such Delivery Date in definitive fully registered form and in such denominations -2- and registered in such names as the undersigned shall designate by written or telegraphic communication addressed to the Company not less than five business days prior to such Delivery Date. It is expressly agreed that the provisions for delayed delivery and payment are for the sole convenience of the undersigned; that the purchase hereunder of Securities is to be regarded in all respects as a purchase as of the date of this Contract subject to the first paragraph hereof with respect to the accrual of interest; that the obligation of the Company to make delivery of and accept payment for, and the obligation of the undersigned to take delivery of and make payment for, Securities on each Delivery Date shall be subject only to the conditions that (1) investment in the Securities shall not at such Delivery Date be prohibited under the laws of any jurisdiction in the United States to which the undersigned is subject and (2) the Company shall have sold to the Underwriters the principal amount of the Securities less the principal amount thereof covered by this and other similar Contracts. The undersigned represents that its investment in the Securities is not, as of the date hereof, prohibited under the laws of any jurisdiction to which the undersigned is subject and which governs such investment. Promptly after completion of the sale to the Underwriters, the Company will mail or deliver to the undersigned at its address set forth below notice to such effect, accompanied by a copy of the opinion of counsel for the Company delivered to the Underwriters in connection therewith. This Contract will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, but will not be assignable by either party hereto without the written consent of the other. It is understood that the acceptance of any such Contract is in the Company's sole discretion and, without limiting the foregoing, need not be on a first-come, first- served basis. If this Contract is acceptable to the Company, it is requested that the Company sign the form of acceptance below and mail or deliver one of the counterparts hereof to the undersigned at its address set forth below. This will become a binding contract between the Company and the undersigned when such counterpart is so mailed or delivered. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable -3- to contracts made and to be performed entirely within the State of New York. Very truly yours, ___________________________ (NAME OF PURCHASER) By_________________________ Name: Title: ___________________________ ___________________________ (Address of Purchaser) Accepted, as of the above date VARITY CORPORATION By____________________________ Name: Title: EX-1.3 4 FORM OF KELSEY-HAYES AGENCY AGREEMENT EXHIBIT 1.3 KELSEY-HAYES COMPANY MEDIUM-TERM NOTES Guaranteed as to Payment of Principal and Interest by VARITY CORPORATION AGENCY AGREEMENT ---------------- __________, 199_ [Names and Addresses of Agents] Dear Sirs: Kelsey-Hayes Company, a Delaware corporation (the "Company"), confirms its agreement with [Name of Agents] (each an "Agent" and collectively, the "Agents") with respect to the issue and sale from time to time by the Company of up to $________ aggregate principal amount of its Medium-Term Notes (the "Notes"). The Notes are registered under the registration statement referred to in Section 1 hereof. Payment of principal of and interest on the Notes will be guaranteed (the "Guarantee") by Varity Corporation, a Delaware corporation (the "Guarantor"). The Notes will be issued as a series under an indenture (as amended or supplemented, the "Indenture"), dated as of ______________, as supplemented from time to time, among the Company, the Guarantor and Manufacturers and Traders Trust Company, as trustee (the "Trustee"). The Notes shall have the designations, denominations, interest rates, payment dates, maturities, redemption provisions, selling prices and other terms set forth in the Prospectus referred to in Section 1 as it may be supplemented from time to time. The Notes will be issued, and the terms thereof established, from time to time by the Company in accordance with the Indenture, the Notes and the Procedures (as defined in Section 2(d) hereof). 1. Registration Statement and Prospectus. The ------------------------------------- Company and the Guarantor have prepared and filed with the Securities and Exchange Commission (the "Commission"), in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a joint registration statement on Form S-3 (the "registration statement"), including a prospectus -2- relating to the Notes and the Guarantees. The term "Registration Statement," as used in this Agreement, means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective, and as thereafter amended by any post-effective amendment at the date hereof. The term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement, as supplemented to reflect the terms of the Notes and the plan of distribution thereof, in the form in which it shall be filed with the Commission pursuant to Rule 424(b). Any reference in this Agreement to the registration statement, the Registration Statement or any Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the registration statement, the Registration Statement or any Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement or any Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means the documents which at the time are incorporated by reference in the registration statement, the Registration Statement, any Prospectus, or any amendment or supplement thereto. Any reference herein to any amendment or supplement to the Registration Statement or Prospectus shall be deemed to include any documents incorporated by reference in the Registration Statement, any Prospectus, or any amendment or supplement thereto subsequent to the date hereof. 2. Appointment as Agents; Solicitations as Agents; ----------------------------------------------- Purchases as Principal. (a) Appointment of Agents. Subject to - ---------------------- --------------------- the terms and conditions stated herein and subject to the reservation by the Company of the right to sell Notes directly on its own behalf, without the consent of the Agents, the Company hereby (i) appoints the Agents as the agents for the purpose of soliciting purchases of the Notes from the Company by others and (ii) agrees that whenever the Company determines to sell Notes directly to an Agent as principal for resale to others, it will enter into a Terms Agreement (hereafter defined) relating to such sale in accordance with the provisions hereof. (b) Solicitations as Agents. On the basis of the ----------------------- representations and warranties herein contained, but subject to -3- the terms and conditions herein set forth, each Agent, upon receipt of instructions from the Company, agrees, as an agent of the Company, to use its best efforts consistent with industry practice to solicit offers to purchase the Notes upon the terms and conditions set forth herein and in the Prospectus. The Company reserves the right, in its sole discretion, to suspend solicitation of purchases of the Notes through one or more of the Agents, commencing at any time for any period of time or permanently. Upon receipt of instructions from the Company, the Agents will forthwith suspend solicitation of purchases of Notes from the Company until such time as the Company has advised the Agents that such solicitation may be resumed. The Company agrees to pay each Agent a commission, in the form of a discount, equal to the applicable percentage of the price to the public of each Note sold by the Company as a result of a solicitation made by such Agent as set forth in Exhibit A hereto. It is understood that no commission will be payable with respect to any offer to purchase Notes accepted by the Company in the event that the Company tenders such Note and delivery of such Note is not accepted by the purchaser or the purchaser fails to make timely payment and the sale is not consummated as a result of such failure. The purchase price, interest rate, maturity date and other terms of the Notes shall be agreed upon by the Company and the applicable Agent and set forth in a pricing supplement to the Prospectus to be prepared following each acceptance by the Company of an offer for the purchase of Notes. Except as may be otherwise provided in such supplement to the Prospectus, the Notes will be issued in denominations of U.S. $10,000 or any amount in excess thereof which is an integral multiple of U.S. $1,000. All Notes sold through an Agent as agent will be sold at 100% of their principal amount unless otherwise agreed to by the Company and such Agent. Each Agent will communicate to the Company, orally or in writing, each offer to purchase Notes, other than those offers rejected by such Agent. Each Agent shall have the right, in its discretion reasonably exercised, to reject any proposed purchase of Notes, in whole or in part, and any such rejection shall not be deemed a breach of such Agent's agreement contained herein. The Company may accept or reject any proposed purchase of the Notes, in whole or in part. -4- In soliciting purchases of the Notes on behalf of the Company, each Agent shall act solely as agent for the Company and not as principal. Each Agent shall make reasonable efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Notes has been solicited by such Agent and accepted by the Company; provided that such -------- Agent shall not have any liability to the Company in the event that any such purchase is not consummated for any reason. The Agents shall not have any obligation to purchase Notes from the Company as principal, but an Agent may agree from time to time to purchase Notes as principal. Any such purchase of Notes by an Agent as principal shall be made pursuant to a Terms Agreement in accordance with the provisions of Section 2(c) hereof. (c) Purchases as Principal. Each sale of Notes to ---------------------- an Agent as principal shall be made in accordance with the terms contained herein and pursuant to a separate agreement which will provide for the sale of such Notes to, and the purchase and reoffering thereof by, such Agent. Each such separate agreement (which may be an oral agreement and confirmed in writing as described below between the applicable Agent and the Company) is herein referred to as a "Terms Agreement". Unless the context otherwise requires, each reference contained herein to "this Agreement" shall be deemed to include any applicable Terms Agreement between the Company and the applicable Agent. Each such Terms Agreement whether oral (and confirmed in writing, which may be by facsimile transmission) or in writing, shall be with respect to such information (as applicable) as is specified in Exhibit B hereto. An Agent's commitment to purchase Notes as principal pursuant to any Terms Agreement shall be deemed to have been made on the basis of the representations and warranties of the Company and the Guarantor herein contained and shall be subject to the terms and conditions herein set forth. Each Terms Agreement shall specify the principal amount of Notes to be purchased by the applicable Agent pursuant thereto, the price to be paid to the Company for such Notes, the time and place of delivery of and payment for such Notes, any provisions relating to rights of, and default by purchasers acting together with the Agent in the reoffering of the Notes, and such other provisions (including further terms of the Notes) as may be mutually agreed upon. The Agent may utilize a selling or dealer group in connection with the resale of the Notes purchased. Such Terms Agreement shall also specify the requirements for the opinions of counsel, officers' certificate, comfort letter and stand-off agreement pursuant to Sections 9(b), 9(c), 9(d) and 3(i), respectively, hereof. -5- (d) Administrative Procedures. The Notes will be ------------------------- issued and the terms thereof established, in accordance with the Indenture and the Medium-Term Note Administrative Procedures attached hereto as Exhibit C (the "Procedures"). The Procedures may only be amended by written agreement of the Company and each Agent, after notice to the Trustee. 3. Agreements of the Company and the Guarantor. ------------------------------------------- The Company and the Guarantor agree with each Agent as follows: (a) The Company and the Guarantor will advise the Agents promptly and, if requested, will confirm such advice in writing: (i) of the filing and effectiveness of any amendment to the Registration Statement (other than by virtue of the Company's filing of any report to be filed under the Exchange Act), (ii) of the transmittal to the Commission for filing of any supplement to the Prospectus, (iii) of any request by the Commission for amendment of or a supplement to the Registration Statement or any Prospectus or for additional information; (iv) upon knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Offered Securities for offering or sale in any jurisdiction or of the initiation of any proceeding for such purpose; and (v) within the period of time referred to in paragraph (e) below, of the happening of any event, including the filing of any information, documents or reports pursuant to the Exchange Act, that makes any statement made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus (as then amended or supplemented) in order to state a material fact required by the Act to be stated therein or necessary in order to make the statements therein not misleading, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company and the Guarantor, upon knowledge thereof, will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. (b) Except as otherwise provided in Section 3(k) hereof, neither the Company nor the Guarantor will file -6- any amendment to the Registration Statement or supplement to the Prospectus unless the Company or the Guarantor, as the case may be, has furnished the Agents with a copy for their review prior to filing and given each Agent a reasonable opportunity to comment on any such proposed amendment or supplement; provided that the foregoing -------- requirement shall not apply to periodic or current reports filed under the Exchange Act, copies of which filings the Company or the Guarantor will cause to be delivered to each Agent promptly after being mailed or otherwise forwarded for filing with the Commission; provided, further, that the -------- ------- Company need only provide the opportunity to comment on a pricing supplement to the particular Agent or Agents which, in the judgment of the Company, is/are involved in the solicitation or purchase which leads to the filing of such supplement. (c) The Company and the Guarantor will furnish to each Agent and to counsel to the Agents, without charge (i) one signed copy of the registration statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits to the Registration Statement, and (ii) such number of conformed copies of the Registration Statement as originally filed and of each amendment thereto, but without exhibits, as the Agents may reasonably request. The Company will furnish to the Agents as many copies of the Prospectus (as amended or supplemented) (other than an amendment or supplement which relates exclusively to an offering of debt securities under the Registration Statement other than the Notes) as the Agents shall reasonably request so long as the Agents are required to deliver a Prospectus in connection with sales and solicitations of offers to purchase the Notes. (d) The Company will prepare, with respect to any Notes to be sold through or to the Agents pursuant to this Agreement, a pricing supplement with respect to such Notes in a form previously approved by the Agents and will file such supplement pursuant to Rule 424(b) under the Act within the time period prescribed. (e) Except as otherwise provided in Section 3(k) hereof, if during the term of this Agreement any event shall occur that in the judgment of the Company or the Guarantor or in the opinion of counsel for the Agents is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth therein in -7- order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus in order to comply with the Act or any other law, the Company shall give immediate notice to the Agents to cease the solicitation of offers to purchase the Notes in their capacity as Agents and to cease sales of any Notes an Agent may then own as principal pursuant to a Terms Agreement, and the Company and the Guarantor will forthwith prepare and, subject to the provisions of paragraph (d) above, file with the Commission an appropriate supplement or amendment thereto, and will expeditiously furnish to the Agents a reasonable number of copies thereof. (f) The Company and the Guarantor will cooperate with the Agents and with counsel for the Agents in connection with the registration or qualification of the Notes for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Agents may reasonably designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such registration or qualification; provided that in no event shall the Company or the Guarantor be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. (g) The Company and the Guarantor will make generally available to its security holders a consolidated earnings statement, which need not be audited, covering a twelve-month period commencing after the effective date of the Registration Statement and ending not later than 15 months thereafter, as soon as reasonably practicable after the end of such period, which consolidated earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder. (h) The Company and the Guarantor, during the period when the Prospectus is required to be delivered under the Act, will file promptly all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and will furnish each of the Agents with copies of such documents. Except as otherwise provided in Section 3(k) hereof, on or prior to the date on -8- which there shall be released to the general public interim financial statement information related to the Company or the Guarantor with respect to the first three fiscal quarters of any fiscal year or preliminary financial statement information with respect to any fiscal year, the Company and the Guarantor shall furnish such information to the Agents. (i) If required by the terms of any Terms Agreement, between the date of any Terms Agreement and the related Settlement Date (as defined below) specified in such agreement, the Company will not, without the applicable Agent's prior consent, offer, sell, contract to sell or otherwise dispose of debt securities of the Company having a maturity of more than one year from the date of issue covered by the Registration Statement or another registration statement filed by the Company under the Act (other than the Notes being offered pursuant to such Terms Agreement), except that the Company may offer, sell, contract to sell or otherwise dispose of obligations of the Company in respect of industrial revenue bonds or similar securities exempt from federal income taxes. (j) The Company will apply the net proceeds from the sale of the Notes substantially in accordance with the description set forth in the Prospectus. (k) Neither the Company nor the Guarantor shall be required to comply with the provisions of subsections (a), (b), (c), (e) or (h) of this Section or the provisions of Section 9 hereof during any period from the time (i) the Agents shall have received written notification from the Company or the Guarantor to suspend solicitations of purchasers of the Notes in their capacity as agents and (ii) the earlier of the date on which no Agent shall then hold Notes as principal purchased pursuant to a Terms Agreement and the date which is fifteen days (nine months with respect to subsections (e) and (h) of this Section) from the date on which the Agents shall have received written notice from the Company or the Guarantor to suspend solicitations of purchases of the Notes, to the time the Company shall determine that solicitation of purchases of the Notes should be resumed or shall subsequently enter into a new Terms Agreement with the Agents. 4. Representations and Warranties of the Company --------------------------------------------- and the Guarantor. The Company and the Guarantor, jointly and - ----------------- -9- severally, represent and warrant to each Agent as of the date hereof, as of the date of each acceptance by the Company of an offer for the purchase of Notes (whether through the Agents as agents or to one or more of the Agents as principal), as of the date of each delivery of Notes (whether through the Agents as agents or to one or more of the Agents as principal) (the date of each such delivery to one or more Agents as principal being hereafter referred to as a "Settlement Date"), and as of any time that the Registration Statement or the Prospectus shall be amended or supplemented (it being understood that such representations and warranties shall be deemed to relate to the Registration Statement and the Prospectus, each as amended or supplemented as of each such date) that: (a) The Registration Statement and any post- effective amendment thereto have been declared effective by the Commission and no stop order suspending the effectiveness of such Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission. (b) Each Prospectus included as part of the registration statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the provisions of the Act and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; except that this representation and warranty does not apply to statements in or omissions from such Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with information furnished to the Company or the Guarantor in writing by an Agent expressly for use therein. The Commission has not issued any order preventing or suspending the use of any Prospectus. (c) The Company, the Guarantor and the transactions contemplated by this Agreement meet the requirements for using Form S-3 under the Act. The registration statement in the form in which it became effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 424(b) under the Act, complied or will comply in all material respects with the provisions of the -10- Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and will not at any such times contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; except that this representation and warranty does not apply to statements in or omissions from the registration statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company or the Guarantor in writing by an Agent expressly for use therein. (d) The Incorporated Documents heretofore filed, when they were filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), conformed in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; any further Incorporated Documents so filed will, when they are filed, conform in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; no such document when it was filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and no such further document, when it is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. (e) Each of the Company and the Guarantor is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the financial condition, business, properties, net worth or results of operations of the Guarantor and its subsidiaries taken as a whole or of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). -11- (f) Each Material Subsidiary (as defined below) is a corporation duly organized, validly existing and in good standing in the jurisdiction of its organization, with full corporate power and authority to own, lease and operate its properties and to conduct its business, except where the failure of a Material Subsidiary to be duly organized and existing or to have full corporate power and authority would not have a Material Adverse Effect; each Material Subsidiary is duly registered, qualified or licensed to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register, be licensed or qualify would not have a Material Adverse Effect; all the outstanding shares of capital stock of each Material Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Guarantor directly, or indirectly through one of its other subsidiaries, free and clear of any lien, adverse claim, security interest, equity, or other encumbrance; and there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, shares of capital stock or other equity interests in any Material Subsidiary. As used herein, the term "Material Subsidiaries" means the following subsidiaries of the Guarantor: Varity Holdings Limited and Perkins Group Limited, each a corporation organized under the laws of the United Kingdom; Dayton Walther Corporation, an Ohio corporation; K-H Corporation, a Delaware corporation; and the Company. (g) When the Notes are issued and delivered pursuant to this Agreement, such Notes will have been duly authorized by the Company and, when executed by the Company and authenticated by the applicable Trustee in accordance with the terms of the applicable Indenture (assuming the due authorization, execution and delivery thereof by the Trustee thereunder), and delivered to and paid for by the purchasers thereof, will be entitled to the benefits of the Indenture and will constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). -12- (h) There are no legal or governmental proceedings pending or, to the knowledge of the Company or the Guarantor, threatened, against the Company, the Guarantor or any of their respective subsidiaries which are reasonably likely to have a Material Adverse Effect, or to which the Company, the Guarantor or any of their respective subsidiaries, or to which any of their respective properties, is subject which are material to the Company and its subsidiaries or the Guarantor and its subsidiaries, in each case taken as a whole, that are required to be described in the Registration Statement or the Prospectus, but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments relating to the Company, the Guarantor or their respective subsidiaries that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement or any Incorporated Document that are not described or filed as required by the Act or the Exchange Act. The descriptions of the terms of any such contracts or documents contained in the Registration Statement, the Prospectus or any Incorporated Documents are correct in all material respects. (i) Neither the Company, the Guarantor nor any of their respective subsidiaries is (i) in violation of its certificate or articles of incorporation or bylaws, or other organizational documents, (ii) in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company, the Guarantor or any of their respective subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company, the Guarantor or any of their respective subsidiaries or any of their respective properties, or (iii) in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any agreement, indenture, lease or instrument to which the Company, the Guarantor or any of their respective subsidiaries is a party or by which any of them or any of their respective properties may be bound, and no condition or state of facts exists, which, with the passage of time or the giving of notice or both, would constitute such a default, except in the case of clauses (i), (ii) and (iii) where any such violation or default, or violations and defaults in the aggregate, would not have a Material Adverse Effect. -13- (j) None of the issuance and sale of the Notes, the execution, delivery or performance of this Agreement, any Terms Agreement and the Indenture relating to the Notes by the Company or the Guarantor, to the extent each is a party thereto, or the consummation by the Company and the Guarantor of the transactions contemplated hereby and thereby to be consummated by the Company and the Guarantor (i) requires any consent, approval, authorization or other order of or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required for the registration of the Securities and the Guarantee under the Act and the Exchange Act, and compliance with the securities or Blue Sky laws of various jurisdictions, all of which have been or will be effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company, the Guarantor or any of their respective subsidiaries or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any material agreement, indenture, lease or instrument to which the Company, the Guarantor or any of their respective subsidiaries is a party or by which any of them or any of their respective properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company, the Guarantor or any of their respective subsidiaries or any of their respective properties, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, the Guarantor or any of their respective subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of the property or assets of any of them is subject, except in the case of clauses (i) and (ii) where any such conflict, breach, default or violation, or conflicts, breaches, defaults or violations in the aggregate, would not have a Material Adverse Effect. (k) The accountants who have certified or shall certify the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement thereto) were or shall be, for the periods in which they certified or certify such -14- financial statements, independent public accountants as required by the Act. (l) The historical financial statements, together with related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto), present fairly the consolidated financial position, results of operations, cash flows and changes in stockholders' equity of the Guarantor and its subsidiaries on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with United States generally accepted accounting principles (as described in the Prospectus) consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto) are accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Guarantor and its subsidiaries. (m) The execution and delivery of, and the performance by the Company and the Guarantor of their respective obligations under, each of this Agreement, any Terms Agreement and the Indenture have been duly and validly authorized, executed and delivered by the Company and the Guarantor, to the extent each is a party thereto, and constitutes the valid and legally binding agreement of the Company and the Guarantor, to the extent each is a party thereto, enforceable against the Company and the Guarantor, to the extent each is a party thereto, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). The Indenture has been duly qualified under the Trust Indenture Act. (n) The Guarantee of the Notes has been duly authorized by the Guarantor and, when the Notes have been executed and authenticated in accordance with the terms of the Indenture and delivered to and duly paid for by the purchasers thereof, the Guarantee will be a valid and -15- binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies gener- ally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (o) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement thereto), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), none of the Company, the Guarantor or any of their respective subsidiaries has incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Company and its subsidiaries taken as a whole or the Guarantor and its subsidiaries taken as a whole, and there has not been any material change in the capital stock of the Company or the Guarantor, or material increase in the short-term debt or long-term debt of the Company, the Guarantor and any of their respective subsidiaries taken as a whole, or any Material Adverse Effect. (p) Each of the Company, the Guarantor and their respective subsidiaries has good and marketable title to all property (real and personal) described in the Prospectus as being owned by it, free and clear of all liens, claims, security interests or other encumbrances, except such as are described in the Registration Statement and the Prospectus or in a document filed as an exhibit to the Registration Statement and all the property described in the Prospectus as being held under lease by each of the Company, the Guarantor and their respective subsidiaries is held by it under valid, subsisting and enforceable leases, in each case with only such exceptions as in the aggregate would not have a Material Adverse Effect. (q) The Company, the Guarantor and each of their respective subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("Permits") as are necessary to own its respective properties and to conduct its business in the manner described in the Prospectus, except where the failure to have any such Permit would not have a Material -16- Adverse Effect and subject to such qualifications as may be set forth in the Prospectus; the Company, the Guarantor and each of their respective subsidiaries has fulfilled and performed all its material obligations with respect to such Permits and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit, except where such action would not have a Material Adverse Effect and subject in each case to such qualification as may be set forth in the Prospectus; and, except as described in the Prospectus, none of such Permits contains any restriction that is materially burdensome to the Company and its subsidiaries, taken as a whole, or the Guarantor and its subsidiaries, taken as a whole. (r) The Company, the Guarantor and their respective subsidiaries own or possess all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, trade secrets and rights described in the Prospectus as being owned by them or any of them or necessary for the conduct of their respective businesses, except where the lack of such ownership or possession would not have a Material Adverse Effect, and neither the Company nor the Guarantor is aware of any claim to the contrary or any challenge by any other person to the rights of the Company, the Guarantor or any of their respective subsidiaries with respect to the foregoing. 5. Indemnification and Contribution. (a) The -------------------------------- Company and the Guarantor agree, jointly and severally, to indemnify and hold harmless each Agent and each person, if any, who controls any Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities, judgments and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities, judgments or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in -17- conformity with the information furnished in writing to the Company or the Guarantor by or on behalf of any Agent; provided, however, that the indemnification contained in this paragraph (a) with respect to any Prospectus shall not inure to the benefit of any Agent (or to the benefit of any person controlling such Agent) on account of any such loss, claim, damage, liability, judgment or expense arising from the sale of the Notes by such Agent to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the Act and the regulations thereunder, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in any preliminary prospectus was corrected in the Prospectus. The foregoing indemnity agreement shall be in addition to any liability which the Company and the Guarantor may otherwise have. (b) If any action, suit or proceeding shall be brought against any Agent or any person controlling any Agent in respect of which indemnity may be sought against the Company or the Guarantor, such Agent or such controlling person shall promptly notify the Company and the Guarantor, and the Company and the Guarantor shall assume the defense thereof, including the employment of counsel and payment of all reasonable fees and expenses of such counsel. Any such Agent or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the reasonable fees and expenses of such counsel shall be at the expense of such Agent or such controlling person, rather than the Company or the Guarantor, unless (i) the Company or the Guarantor has agreed in writing to pay such fees and expenses, (ii) the Company or the Guarantor has failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Agent or such controlling person and the Company or the Guarantor and such Agent or such controlling person shall have been advised by its counsel that representation of such indemnified party and the Company or the Guarantor by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Company and the Guarantor shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Agent or such controlling person). It is understood, however, that the Company and the Guarantor shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related -18- actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel, not more than one per jurisdiction) at any time for all such Agents and controlling persons, which firm shall be designated in writing by the Agents, and that all such fees and expenses shall be reimbursed promptly as they are incurred. Neither the Company nor the Guarantor shall be liable for any settlement of any such action, suit or proceeding effected without either of their written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Company and the Guarantor agree, jointly and severally, to indemnify and hold harmless any Agent, to the extent provided in the preceding paragraph, and any such controlling person from and against any loss, claim, damage, liability, judgment or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Agent or any person controlling an Agent is entitled to employ separate counsel pursuant to the second sentence of this Section 5(b) and shall have requested the Company and the Guarantor in writing to reimburse such Agent or such controlling person for fees and expenses of counsel, the Company and the Guarantor agree that they shall be liable, jointly and severally, for any settlement of any proceeding effected by such Agent or such controlling person and for which the Company and the Guarantor are liable pursuant to Section 5(a) without its written consent if (i) such settlement is entered into more than ten (10) business days after receipt by the Company and the Guarantor of the aforesaid request or (ii) neither the Company nor the Guarantor shall have reimbursed such Agent or such controlling person in accordance with such request prior to the date of such settlement. Neither the Company nor the Guarantor shall, without the prior written consent of such Agent or such controlling person, effect any settlement of any pending or threatened proceeding in respect of which any Agent or any person controlling an Agent is or could have been a party and indemnity could have been sought hereunder by such Agent or such controlling person, unless such settlement includes an unconditional release of such Agent or such controlling person from all liability on claims that are subject matter of such proceeding. (c) Each Agent agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantor, their respective directors, officers who sign the Registration Statement, and any person who controls either the Company or -19- the Guarantor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Guarantor to each Agent, but only with respect to information relating to such Agent furnished in writing by or on behalf of such Agent expressly for use in the Registration Statement, the Prospectus or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Company or the Guarantor, any of their respective directors, officers, or any such controlling person based on the Registration Statement, the Prospectus or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Agent pursuant to this paragraph (c), such Agent shall have the rights and duties given to the Company or the Guarantor by paragraph (b) above (except that if the Company or the Guarantor shall have assumed the defense thereof such Agent shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Agent), and the Company and the Guarantor, their respective directors, officers, and any such controlling person shall have the rights and duties given to the Agents by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Agents may otherwise have. (d) If the indemnification provided for in this Section 5 is unavailable to, or insufficient to hold harmless, an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities, judgments or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, judgments or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor on the one hand and the Agents on the other hand from the offering of the Notes, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the Company and the Guarantor on the one hand and the Agents on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities, judgments or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantor on the one hand and the Agents on the other hand shall be deemed to be in the same proportion as -20- the total net proceeds from the offering (before deducting expenses) received by the Company and the Guarantor bear to the total underwriting discounts and commissions received by the Agents, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Guarantor on the one hand and the Agents on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantor on the one hand or by the Agents on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Guarantor and the Agents agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by a pro rata allocation (even if the Agents 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 party as a result of the losses, claims, damages, liabilities, judgments and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 5, no Agent shall be required to contribute any amount in excess of the amount by which the total price of the Notes sold by it and distributed to the public exceeds the amount of any damages which such Agent 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 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (f) Any losses, claims, damages, liabilities, judgments or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 5 shall be paid by the indemnifying party to the indemnified party promptly as such losses, claims, damages, liabilities, judgments or expenses are incurred. The indemnity and contribution agreements contained in this Section 5 and the representations and warranties of the Company and the Guarantor set forth in -21- this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Agent or any person controlling any Agent, the Company or the Guarantor, their respective directors or officers, or any person controlling the Company or the Guarantor, (ii) acceptance of any Notes and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Agent or any person controlling any Agent, or to the Company or the Guarantor, their respective directors or officers, or any person controlling the Company or the Guarantor, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 5. 6. Conditions of Obligations. The obligations of ------------------------- the Agents to solicit offers to purchase the Notes as agent of the Company, and each Agent's obligation to purchase Notes as principal pursuant to any Terms Agreement, will be subject to the accuracy of the representations and warranties of the Company and the Guarantor contained herein on the date hereof, and to the accuracy of the statements of the Company's and the Guarantor's officers made in any certificate, to the extent contemplated in such certificate, to the performance by the Company and the Guarantor of their respective obligations hereunder and to the following additional conditions: (a) All filings, if any, required by Rule 424 under the Act shall have been timely made; no stop order suspending the effectiveness of the registration statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company, the Guarantor or any Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with. (b) Subsequent to the execution of any applicable Terms Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting the financial condition, business, properties, net worth, or results of operations of the Company and its subsidiaries taken as a whole, or the Guarantor and its subsidiaries taken as a whole, from the date of the latest balance sheet included or incorporated by reference in the Prospectus in each case not contemplated by the Prospectus, which is material and adverse; (ii) any downgrading in, or notice of any proposal to downgrade, -22- the rating of the Company's or the Guarantor's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) or any public announcement that any such organization has under surveillance or review with negative implications the rating of the Company's or the Guarantor's debt securities; (iii) any suspension or limitation of trading in securities generally on or by the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, or any setting of minimum prices for trading on such exchange; (iv) any suspension of trading of any securities of the Company or the Guarantor on any exchange; (v) any banking moratorium declared by Federal or New York authorities; or (vi) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event set forth in (i) through (vi), in the judgment of the Agents, makes it impractical or inadvisable to proceed with the solicitation of purchases of the Notes. (c) The Agents shall have received on the date hereof, an opinion of Cahill Gordon & Reindel (a partnership including a professional corporation), counsel for the Company and the Guarantor, dated the date hereof and addressed to the Agents, to the effect that: (i) Each of the Company and the Guarantor is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; (ii) The Indenture relating to the Notes has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and the Guarantor and is a valid and binding agreement of the Company and the Guarantor, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law); -23- (iii) The Notes have been duly authorized and, when executed and authenticated in accordance with the Indenture and delivered to the purchasers thereof against payment therefor in accordance with the terms of this Agreement, will be valid and binding obligations of the Company, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and will be entitled to the benefits of the Indenture; (iv) The Registration Statement and all post- effective amendments, if any, have become effective under the Act and, to the best knowledge of such counsel after reasonable inquiry, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission; and any required filing of the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b); (v) The Company and the Guarantor have all requisite corporate power and authority to enter into this Agreement, any Terms Agreement and the Indenture relating to the Notes to which either of them is a party and to issue and deliver the Notes and the Guarantee, respectively, to the purchasers thereof; (vi) This Agreement has been duly authorized, executed and delivered by the Company and the Guarantor and is a valid, legal and binding agreement of the Company and the Guarantor, enforceable against the Company and the Guarantor in accordance with its terms, except (A) as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (B) that rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or the public policy underlying such laws; -24- (vii) The Notes and the Indenture conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus; (viii) None of the offer, sale, or delivery of the Notes or the Guarantee, or the execution, delivery or performance of this Agreement and the Indenture relating to the Notes, nor compliance by the Company or the Guarantor with all the provisions of this Agreement and the Indenture applicable to it, nor consummation by the Company or the Guarantor of the transactions contemplated hereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate of incorporation or bylaws of the Company or the Guarantor or any indenture or other debt instrument or any other material agreement or lease to which the Company or the Guarantor is a party or by which any of them or any of their respective properties is bound that is an exhibit to the Registration Statement or to any Incorporated Document, which conflict, breach or default would have a Material Adverse Effect, or, except as disclosed in the Registration Statement, will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or the Guarantor under any such indenture, debt instrument, agreement or lease which lien, charge or encumbrance would have a Material Adverse Effect, nor will any such action result in any violation of any existing law, regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws), judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Company or the Guarantor or any of their respective properties, which violation would have a Material Adverse Effect; (ix) The Guarantee of the Notes has been duly authorized by the Guarantor and, when the Notes have been executed and authenticated in accordance with the Indenture and delivered to and duly paid for by the purchasers thereof, the Guarantee will be a valid and binding obligation of the Guarantor as to the Notes, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general -25- equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law); (x) No consent, approval, authorization or other order of, or registration or filing with, any Delaware, New York State or Federal court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Company or the Guarantor (except as have been obtained or made under the Act and the Exchange Act or such as may be required under state securities or Blue Sky laws governing the purchase and distribution of the Securities) for the valid issuance and sale of the Notes to the purchasers thereof as contemplated by this Agreement; and (xi) The Registration Statement and the Prospectus and any supplements or amendments thereto (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act; and each of the Incorporated Documents (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein, as to which such counsel need not express any opinion), when they were filed (or, if an amendment with respect to any Incorporated Document was filed, when such amendment was filed) complied as to form in all material respects with the Exchange Act. In addition, such counsel shall state that such counsel participated in conferences with officers and other representatives of the Guarantor and the Company, representatives of the independent public accountants and representatives of the Agents at which the contents of the Registration Statement and Prospectus were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and Prospectus (except as otherwise indicated above) on the basis of the foregoing (relying as to materiality to a large extent upon the opinions of officers and representatives of the Guarantor and the Company), no facts have come to the attention of such counsel which lead them to believe that either the Registration Statement or any amendment thereto, at the time the -26- Registration Statement or amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading or that the Prospectus as of its date or any supplement thereto as of its date, or the Registration Statement or the Prospectus and any amendment or supplement thereto as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial and statistical data included in the Registration Statement or the Prospectus). The opinion of such counsel may be limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Federal laws of the United States. In rendering their opinion as aforesaid, such counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company and the Guarantor and public officials. (d) The Agents shall have received letters dated the date hereof from KPMG Peat Marwick LLP, independent certified public accountants, substantially in the forms heretofore approved by the Agents. (e) The Agents shall have received on the date hereof, an opinion of Andrews & Kurth L.L.P., counsel for the Agents, dated the date hereof and addressed to the Agents, in form and substance satisfactory to the Agents. (f) You shall have received a certificate signed by the chief executive officer and the chief financial officer of each of the Company and the Guarantor (or such other officers as are acceptable to you) that: (i) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall be pending or, to the knowledge of the Company or the Guarantor, shall be contemplated by the Commission at the date hereof; (ii) there shall not have been, since the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and the -27- Prospectus (or any amendment or supplement thereto), any material adverse change in the financial condition, business, prospects, properties, net worth or results of operations of the Company and its subsidiaries or the Guarantor and its subsidiaries taken as a whole; (iii) all the representations and warranties of the Company and the Guarantor contained in this Agreement shall be true and correct on and as of the date hereof; and (iv) the Company and the Guarantor have performed or complied with its agreements herein contained and required to be performed or complied with by them hereunder at or prior to the date of such certificate. (g) The Company and the Guarantor shall have furnished or caused to be furnished to you such further certificates and documents as you shall have reasonably requested. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to the Agents and their counsel. Any certificate or document signed by any officer of the Company or the Guarantor and delivered to you or to counsel for the Agents, shall be deemed a representation and warranty by the Company and the Guarantor to each Agent as to the statements made therein. Any certificate delivered by the Company and the Guarantor to its counsel for purposes of enabling such counsel to render the opinions referred to in this Section 6 will also be furnished to you and counsel for the Agents. 7. Expenses. The Company and the Guarantor agree -------- to pay the following costs and expenses and all other costs and expenses incident to the performance by them of their obligations hereunder: (i) the preparation, printing (or reproduction), and filing with the Commission of the registration statement (including financial statements and exhibits thereto), each Prospectus and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the registration statement, the Prospectus, the Incorporated Documents, and all amendments or supplements to any of them, as may be reasonably requested for use in connection with the offering and sale of the Notes, (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Notes, including -28- any stamp taxes in connection with the original issuance and sale of the Notes; (iv) the printing (or reproduction) and delivery of this Agreement, the Indenture, the preliminary and supplemental Blue Sky Memoranda and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Notes; (vi) the registration or qualification of the Notes for offer and sale under the securities or Blue Sky laws of the several states as provided in Section 3(f) hereof (including the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, printing (or reproduction), and delivery of the preliminary and supplemental Blue Sky Memoranda and such registration and qualification); (vii) the filing fees of the Underwriters in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; and (viii) the fees and expenses of the Company's and the Guarantor's accountants and the fees and expenses of counsel (including local and special counsel) for the Company and the Guarantor. 8. Delivery of and Payment for Notes Sold through ---------------------------------------------- the Agents. Delivery of Notes sold through an Agent as agent - ---------- shall be made by the Company to such Agent for the account of any purchaser only against payment therefor in immediately available funds. In the event that a purchaser shall fail either to accept delivery of or to make payment for a Note on the date fixed for settlement, the applicable Agent shall promptly notify the Company and deliver the Note to the Company and, if such Agent has theretofore paid the Company for such Note, the Company will promptly return such funds to such Agent. If such failure occurred for any reason other than default by the applicable Agent in the performance of its obligations hereunder, the Company will reimburse such Agent on an equitable basis for its loss of the use of the funds for the period such funds were credited to the Company's account. 9. Additional Covenants of the Company and the ------------------------------------------- Guarantor. The Company and the Guarantor covenant and agree - --------- with the Agents that: (a) Reaffirmation of Representations and Warranties. ----------------------------------------------- Each acceptance by the Company of an offer for the purchase of Notes, and each delivery of Notes to an Agent pursuant to a Terms Agreement, shall be deemed to be an affirmation that the representations and warranties of the Company and the Guarantor contained in this Agreement and, to the extent therein provided, in any certificate theretofore delivered to the Agents pursuant hereto are true and -29- correct at the time of such acceptance or sale, as the case may be, and an undertaking that such representations and warranties will be true and correct at the time of delivery to the purchaser or his agent, or to the Agents, of the Notes relating to such acceptance or sale, as the case may be, as though made at and as of each such time (and it is understood that such representations and warranties shall relate to the Registration Statement and Prospectus as amended and supplemented to each such time). (b) Subsequent Delivery of Certificates. Subject to ----------------------------------- the provisions of Section 3(k) hereof, each time that (1) the Registration Statement or the Prospectus shall be amended or supplemented (other than by the filing of an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q and any Current Report on Form 8-K or an amendment or supplement providing solely for a change in the interest rate of Notes (excluding any change in the formulas by which such interest rates may be determined) or similar changes, and other than by an amendment or supplement which relates exclusively to an offering of debt securities other than the Notes), or (2) there is filed with the Commission any document incorporated by reference into the Prospectus (other than any Current Report on Form 8-K, except upon the reasonable request of the Agents therefor), or (3) (if required pursuant to the terms of a Terms Agreement) the Company sells Notes to an Agent pursuant to a Terms Agreement, the Company and the Guarantor shall furnish or cause to be furnished to the Agents forthwith a certificate dated the date of filing with the Commission of such supplement or document, the date of effectiveness of such amendment or the applicable Settlement Date, as the case may be, in form and substance satisfactory to the Agents to the effect that the statements contained in the certificate referred to in Section 6(f) hereof which were last furnished to the Agents are true and correct at the time of such amendment, supplement, filing or sale, as the case may be, as though made at and as of such time (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such time) or, in lieu of such certificate, a certificate of the same tenor as the certificate referred to in said Section 6(f), modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such certificate. -30- (c) Subsequent Delivery of Legal Opinions. Subject ------------------------------------- to the provisions of Section 3(k) hereof, each time that (1) the Registration Statement or the Prospectus shall be amended or supplemented (other than by an amendment or supplement providing solely for a change in the interest rates of the Notes (excluding any change in the formulas by which such interest rates may be determined) or similar changes or solely for the inclusion of additional financial information, other than by an amendment by the filing of a Quarterly Report on Form 10-Q and any Current Report on Form 8-K (except in the circumstances hereinafter described) and other than by an amendment or supplement which relates exclusively to an offering of debt securities other than the Notes) or (2) there is filed with the Commission the Company's Annual Report on Form 10-K and such Annual Report is incorporated by reference into the Prospectus or (3) (if required pursuant to the terms of a Terms Agreement) the Company sells Notes to an Agent pursuant to a Terms Agreement, the Company shall furnish or cause to be furnished forthwith to the Agents the written opinion of Cahill Gordon & Reindel, special counsel for the Company and the Guarantor or other counsel satisfactory to the Agents (which shall be deemed to include the General Counsel of the Guarantor, unless otherwise specified by the Agents), and, only when required pursuant to an applicable Terms Agreement pursuant to clause (3) above, the written opinion of counsel for the Agents, in each case dated the date of filing with the Commission of such supplement or document, the date of effectiveness of such amendment or the applicable Settlement Date, as the case may be, in form and substance satisfactory to the Agents, of the same tenor as the opinions referred to in Section 6(c) hereof, but modified, as necessary, to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such opinions or, in lieu of such opinions, counsel last furnishing such opinions to the Agents shall each furnish the Agents with a letter to the effect that the Agents may rely on such last opinion to the same extent as though it was dated the date of such letter authorizing reliance (except that statements in such last opinion shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such letter authorizing reliance). If one or more of the Agents reasonably determine that the information included in a filing by the Company in a Quarterly Report filed on Form 10-Q or a Current Report filed on Form 8-K is of such importance that legal opinion should be delivered to the Agents in -31- conjunction therewith, such Agent or Agents shall notify the Company promptly upon such determination (and in any event not later than 30 days after such filing) and the Company will thereupon furnish or cause to be furnished the opinions described above. (d) Subsequent Delivery of Comfort Letters. Subject -------------------------------------- to the provisions of Section 3(k) hereof, each time that the Registration Statement or the Prospectus shall be amended or supplemented (other than by incorporation by reference) to include additional financial information or there is filed with the Commission any document incorporated by reference into the Prospectus which contains additional financial information or (if required pursuant to the terms of a Terms Agreement) the Company sells Notes to an Agent pursuant to a Terms Agreement, the Company and the Guarantor shall cause KPMG Peat Marwick LLP or their successors forthwith to furnish the Agents a letter, dated the date of filing with the Commission of such supplement or document, the date of effectiveness of such amendment, or the applicable Settlement Date, as the case may be, in form and substance satisfactory to the Agents, of the same tenor as the the letter referred to in Section 6(d) hereof but modified to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter; provided, however, that if the -------- ------- Registration Statement or the Prospectus is amended or supplemented solely to include financial information as of and for a fiscal quarter, KPMG Peat Marwick LLP or their successors may limit the scope of such letter to the unaudited financial statements included in such amendment or supplement unless any other information included therein of an accounting, financial or statistical nature is of such a nature that, in the reasonable judgment of the Agents, such letter should cover such other information. 10. Survival of Certain Representations and --------------------------------------- Obligations. The respective indemnities, agreements, - ----------- representations, warranties and other statements of the Company, the Guarantor or their officers and of the several Agents set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the result thereof, made by or on behalf of any Agent, the Company, the Guarantor or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for any of the Notes. -32- 11. Termination. (a) Termination of this ----------- ------------------- Agreement. This Agreement (excluding any Terms Agreement) may - --------- be terminated for any reason, at any time by either the Company with respect to one or more Agents, the Guarantor or an Agent, as to itself, upon the giving of 30 days' written notice of such termination to the other parties hereto. (b) General. In the event of any such termination, ------- neither party will have any liability to the other party hereto, except that (i) each Agent shall be entitled to any commission with respect to Notes sold by the Company as a result of a solicitation made by such Agent and earned in accordance with the third paragraph of Section 2(b) hereof, (ii) if at the time of termination (a) an Agent shall own any Notes purchased pursuant to a Terms Agreement with the intention of reselling them or (b) an offer to purchase any of the Notes has been accepted by the Company but the time of delivery to the purchaser or his agent of the Note or Notes relating thereto has not occurred, the covenants set forth in Sections 3 and 9 hereof shall remain in effect until such Notes are so resold or delivered, as the case may be, and (iii) the covenant set forth in Section 3(g) hereof, the provisions of Section 6 hereof, the indemnity and contribution agreements set forth in Section 5 hereof, and the provisions of Section 10 and 13 hereof shall remain in effect. 12. Notices. All notices and other communications ------- hereunder shall be in writing and shall be deemed to have been given if mailed or transmitted by any standard form of telecommunication. Notices to the Company shall be directed to Kelsey-Hayes Company, 11878 Hubbard Road, Livonia, Michigan 48150, Attention: Corporate Secretary; notices to the Guarantor shall be directed to Varity Corporation, 672 Delaware Avenue, Buffalo, New York 14209, Attention: Corporate Secretary; notices to the Agents shall be directed to: [ ]. 13. Parties. This Agreement shall inure to the ------- benefit of and be binding upon each Agent, the Company and the Guarantor and their respective successors, heirs and legal representatives. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Agents, the Company and the Guarantor and their respective successors, heirs and legal representatives and the controlling persons and officers and directors referred to in Section 5 and their heirs and legal representatives, any legal or equitable right, remedy or claim under, by virtue of or in respect of this Agreement or any provision -33- herein or therein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Agents, the Company and the Guarantor and their respective successors, heirs and legal representatives, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Notes shall be deemed to be a successor or assign by reason merely of such purchase. 14. Applicable Law; Counterparts. This Agreement ---------------------------- shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York. This Agreement may be executed in counterparts and the executed counterparts shall together constitute a single instrument. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicate hereof. Very truly yours, KELSEY-HAYES COMPANY By:__________________________ Name: Title: VARITY CORPORATION By:__________________________ Name: Title: The foregoing Agreement is hereby confirmed as of the date first above written [NAME OF AGENT] By__________________________ Name: Title: Exhibit A to Agency Agreement [Agent's Commission Schedule] Exhibit B to Agency Agreement Terms to be agreed to by the Company, the Guarantor and the Agents in a Terms Agreement. Exhibit C to Agency Agreement Exhibit C to the Agency Agreement will be added at the time the Agency Agreement is signed and will consist of Administrative Procedures agreed on by the Company, the Guarantor and the Agents. EX-1.4 5 FORM OF VARITY AGENCY AGREEMENT EXHIBIT 1.4 VARITY CORPORATION MEDIUM-TERM NOTES AGENCY AGREEMENT ---------------- __________, 199_ [Names and Addresses of Agents] Dear Sirs: Varity Corporation, a Delaware corporation (the "Company"), confirms its agreement with [Name of Agents] (each an "Agent" and collectively, the "Agents") with respect to the issue and sale from time to time by the Company of up to $________ aggregate principal amount of its Medium-Term Notes (the "Notes"). The Notes are registered under the registration statement referred to in Section 1 hereof. The Notes will be issued as a series under an indenture (as amended or supplemented, the "Indenture"), dated as of ______________, as supplemented from time to time, between the Company and Manufacturers and Traders Trust Company, as trustee (the "Trustee"). The Notes shall have the designations, denominations, interest rates, payment dates, maturities, redemption provisions, selling prices and other terms set forth in the Prospectus referred to in Section 1 as it may be supplemented from time to time. The Notes will be issued, and the terms thereof established, from time to time by the Company in accordance with the Indenture, the Notes and the Procedures (as defined in Section 2(d) hereof). 1. Registration Statement and Prospectus. The ------------------------------------- Company and Kelsey-Hayes Company, a subsidiary of the Company, have prepared and filed with the Securities and Exchange Commission (the "Commission"), in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a joint registration statement on Form S-3 (the "registration statement"), including a prospectus relating to the Notes. The term "Registration Statement," as used in this Agreement, means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective, and as thereafter amended by any post-effective amendment at the date hereof. The term "Prospectus" as used in this Agreement means the prospectus in the -2- form included in the Registration Statement, as supplemented to reflect the terms of the Notes and the plan of distribution thereof, in the form in which it shall be filed with the Commission pursuant to Rule 424(b). Any reference in this Agreement to the registration statement, the Registration Statement or any Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the registration statement, the Registration Statement or any Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement or any Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means the documents which at the time are incorporated by reference in the registration statement, the Registration Statement, any Prospectus, or any amendment or supplement thereto. Any reference herein to any amendment or supplement to the Registration Statement or Prospectus shall be deemed to include any documents incorporated by reference in the Registration Statement, any Prospectus, or any amendment or supplement thereto subsequent to the date hereof. 2. Appointment as Agents; Solicitations as Agents; ----------------------------------------------- Purchases as Principal. (a) Appointment of Agents. Subject - ---------------------- --------------------- to the terms and conditions stated herein and subject to the reservation by the Company of the right to sell Notes directly on its own behalf, without the consent of the Agents, the Company hereby (i) appoints the Agents as the agents for the purpose of soliciting purchases of the Notes from the Company by others and (ii) agrees that whenever the Company determines to sell Notes directly to an Agent as principal for resale to others, it will enter into a Terms Agreement (hereafter defined) relating to such sale in accordance with the provisions hereof. (b) Solicitations as Agents. On the basis of the ----------------------- representations and warranties herein contained, but subject to the terms and conditions herein set forth, each Agent, upon receipt of instructions from the Company, agrees, as an agent of the Company, to use its best efforts consistent with industry practice to solicit offers to purchase the Notes upon the terms and conditions set forth herein and in the Prospectus. -3- The Company reserves the right, in its sole discretion, to suspend solicitation of purchases of the Notes through one or more of the Agents, commencing at any time for any period of time or permanently. Upon receipt of instructions from the Company, the Agents will forthwith suspend solicitation of purchases of Notes from the Company until such time as the Company has advised the Agents that such solicitation may be resumed. The Company agrees to pay each Agent a commission, in the form of a discount, equal to the applicable percentage of the price to the public of each Note sold by the Company as a result of a solicitation made by such Agent as set forth in Exhibit A hereto. It is understood that no commission will be payable with respect to any offer to purchase Notes accepted by the Company in the event that the Company tenders such Note and delivery of such Note is not accepted by the purchaser or the purchaser fails to make timely payment and the sale is not consummated as a result of such failure. The purchase price, interest rate, maturity date and other terms of the Notes shall be agreed upon by the Company and the applicable Agent and set forth in a pricing supplement to the Prospectus to be prepared following each acceptance by the Company of an offer for the purchase of Notes. Except as may be otherwise provided in such supplement to the Prospectus, the Notes will be issued in denominations of U.S. $10,000 or any amount in excess thereof which is an integral multiple of U.S. $1,000. All Notes sold through an Agent as agent will be sold at 100% of their principal amount unless otherwise agreed to by the Company and such Agent. Each Agent will communicate to the Company, orally or in writing, each offer to purchase Notes, other than those offers rejected by such Agent. Each Agent shall have the right, in its discretion reasonably exercised, to reject any proposed purchase of Notes, in whole or in part, and any such rejection shall not be deemed a breach of such Agent's agreement contained herein. The Company may accept or reject any proposed purchase of the Notes, in whole or in part. In soliciting purchases of the Notes on behalf of the Company, each Agent shall act solely as Agent for the Company and not as principal. Each Agent shall make reasonable efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Notes has been solicited by such Agent and accepted by the Company; provided that such Agent -------- -4- shall not have any liability to the Company in the event that any such purchase is not consummated for any reason. The Agents shall not have any obligation to purchase Notes from the Company as principal, but an Agent may agree from time to time to purchase Notes as principal. Any such purchase of Notes by an Agent as principal shall be made pursuant to a Terms Agreement in accordance with the provisions of Section 2(c) hereof. (c) Purchases as Principal. Each sale of Notes to ---------------------- an Agent as principal shall be made in accordance with the terms contained herein and pursuant to a separate agreement which will provide for the sale of such Notes to, and the purchase and reoffering thereof by, such Agent. Each such separate agreement (which may be an oral agreement and confirmed in writing as described below between the applicable Agent and the Company) is herein referred to as a "Terms Agreement". Unless the context otherwise requires, each reference contained herein to "this Agreement" shall be deemed to include any applicable Terms Agreement between the Company and the applicable Agent. Each such Terms Agreement whether oral (and confirmed in writing, which may be by facsimile transmission) or in writing, shall be with respect to such information (as applicable) as is specified in Exhibit B hereto. An Agent's commitment to purchase Notes as principal pursuant to any Terms Agreement shall be deemed to have been made on the basis of the representations and warranties of the Company herein contained and shall be subject to the terms and conditions herein set forth. Each Terms Agreement shall specify the principal amount of Notes to be purchased by the applicable Agent pursuant thereto, the price to be paid to the Company for such Notes, the time and place of delivery of and payment for such Notes, any provisions relating to rights of, and default by purchasers acting together with the Agent in the reoffering of the Notes, and such other provisions (including further terms of the Notes) as may be mutually agreed upon. The Agent may utilize a selling or dealer group in connection with the resale of the Notes purchased. Such Terms Agreement shall also specify the requirements for the opinions of counsel, officers' certificate, comfort letter and stand-off agreement pursuant to Sections 9(b), 9(c), 9(d) and 3(i), respectively, hereof. (d) Administrative Procedures. The Notes will be ------------------------- issued and the terms thereof established, in accordance with the Indenture and the Medium-Term Note Administrative Procedures attached hereto as Exhibit C (the "Procedures"). The Procedures may only be amended by written agreement of the Company and each Agent, after notice to the Trustee. -5- 3. Agreements of the Company. The Company agrees ------------------------- with each Agent as follows: (a) The Company will advise the Agents promptly and, if requested, will confirm such advice in writing: (i) of the filing and effectiveness of any amendment to the Registration Statement (other than by virtue of the Company's filing of any report to be filed under the Exchange Act), (ii) of the transmittal to the Commission for filing of any supplement to the Prospectus, (iii) of any request by the Commission for amendment of or a supplement to the Registration Statement or any Prospectus or for additional information; (iv) upon knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Offered Securities for offering or sale in any jurisdiction or of the initiation of any proceeding for such purpose; and (v) within the period of time referred to in paragraph (e) below, of the happening of any event, including the filing of any information, documents or reports pursuant to the Exchange Act, that makes any statement made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus (as then amended or supplemented) in order to state a material fact required by the Act to be stated therein or necessary in order to make the statements therein not misleading, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company, upon knowledge thereof, will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. (b) Except as otherwise provided in Section 3(k) hereof, the Company will not file any amendment to the Registration Statement or supplement to the Prospectus unless the Company has furnished the Agents with a copy for their review prior to filing and given each Agent a reasonable opportunity to comment on any such proposed amendment or supplement; provided that the foregoing -------- requirement shall not apply to periodic or current reports filed under the Exchange Act, copies of which filings the Company will cause to be delivered to each Agent promptly after being mailed or otherwise forwarded for filing with the Commission; -6- provided, further, that the Company need only provide the -------- ------- opportunity to comment on a pricing supplement to the particular Agent or Agents which, in the judgment of the Company, is/are involved in the solicitation or purchase which leads to the filing of such supplement. (c) The Company will furnish to each Agent and to counsel to the Agents, without charge (i) one signed copy of the registration statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits to the Registration Statement, and (ii) such number of conformed copies of the Registration Statement as originally filed and of each amendment thereto, but without exhibits, as the Agents may reasonably request. The Company will furnish to the Agents as many copies of the Prospectus (as amended or supplemented) (other than an amendment or supplement which relates exclusively to an offering of debt securities under the Registration Statement other than the Notes) as the Agents shall reasonably request so long as the Agents are required to deliver a Prospectus in connection with sales and solicitations of offers to purchase the Notes. (d) The Company will prepare, with respect to any Notes to be sold through or to the Agents pursuant to this Agreement, a pricing supplement with respect to such Notes in a form previously approved by the Agents and will file such supplement pursuant to Rule 424(b) under the Act within the time period prescribed. (e) Except as otherwise provided in Section 3(k) hereof, if during the term of this Agreement any event shall occur that in the judgment of the Company or in the opinion of counsel for the Agents is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus in order to comply with the Act or any other law, the Company shall give immediate notice to the Agents to cease the solicitation of offers to purchase the Notes in their capacity as Agents and to cease sales of any Notes an Agent may then own as principal pursuant to a Terms Agreement, and the Company will forthwith prepare and, subject to the provisions of paragraph (d) above, file with the Commission an appropriate supplement or amendment thereto, and will -7- expeditiously furnish to the Agents a reasonable number of copies thereof. (f) The Company will cooperate with the Agents and with counsel for the Agents in connection with the registration or qualification of the Notes for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Agents may reasonably designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such registration or qualification; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. (g) The Company will make generally available to its security holders a consolidated earnings statement, which need not be audited, covering a twelve-month period commencing after the effective date of the Registration Statement and ending not later than 15 months thereafter, as soon as reasonably practicable after the end of such period, which consolidated earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder. (h) The Company, during the period when the Prospectus is required to be delivered under the Act, will file promptly all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and will furnish each of the Agents with copies of such documents. Except as otherwise provided in Section 3(k) hereof, on or prior to the date on which there shall be released to the general public interim financial statement information related to the Company with respect to the first three fiscal quarters of any fiscal year or preliminary financial statement information with respect to any fiscal year, the Company shall furnish such information to the Agents. (i) If required by the terms of any Terms Agreement, between the date of any Terms Agreement and the related Settlement Date (as defined below) specified in such agreement, the Company will not, without the applicable Agent's prior consent, offer, sell, contract to sell or -8- otherwise dispose of debt securities of the Company having a maturity of more than one year from the date of issue covered by the Registration Statement or another registration statement filed by the Company under the Act (other than the Notes being offered pursuant to such Terms Agreement), except that the Company may offer, sell, contract to sell or otherwise dispose of obligations of the Company in respect of industrial revenue bonds or similar securities exempt from federal income taxes. (j) The Company will apply the net proceeds from the sale of the Notes substantially in accordance with the description set forth in the Prospectus. (k) The Company shall not be required to comply with the provisions of subsections (a), (b), (c), (e) or (h) of this Section or the provisions of Section 9 hereof during any period from the time (i) the Agents shall have received written notification from the Company to suspend solicitations of purchasers of the Notes in their capacity as agents and (ii) the earlier of the date on which no Agent shall then hold Notes as principal purchased pursuant to a Terms Agreement and the date which is fifteen days (nine months with respect to subsections (e) and (h) of this Section) from the date on which the Agents shall have received written notice from the Company to suspend solicitations of purchases of the Notes, to the time the Company shall determine that solicitation of purchases of the Notes should be resumed or shall subsequently enter into a new Terms Agreement with the Agents. 4. Representations and Warranties of the Company. --------------------------------------------- The Company represents and warrants to each Agent as of the date hereof, as of the date of each acceptance by the Company of an offer for the purchase of Notes (whether through the Agents as agents or to one or more of the Agents as principal), as of the date of each delivery of Notes (whether through the Agents as agents or to one or more of the Agents as principal) (the date of each such delivery to one or more Agents as principal being hereafter referred to as a "Settlement Date"), and as of any time that the Registration Statement or the Prospectus shall be amended or supplemented (it being understood that such representations and warranties shall be deemed to relate to the Registration Statement and the Prospectus, each as amended or supplemented as of each such date) that: -9- (a) The Registration Statement and any post- effective amendment thereto have been declared effective by the Commission and no stop order suspending the effectiveness of such Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission. (b) Each Prospectus included as part of the registration statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the provisions of the Act and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; except that this representation and warranty does not apply to statements in or omissions from such Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with information furnished to the Company in writing by an Agent expressly for use therein. The Commission has not issued any order preventing or suspending the use of any Prospectus. (c) The Company and the transactions contemplated by this Agreement meet the requirements for using Form S-3 under the Act. The registration statement in the form in which it became effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 424(b) under the Act, complied or will comply in all material respects with the provisions of the Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and will not at any such times contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; except that this representation and warranty does not apply to statements in or omissions from the registration statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by an Agent expressly for use therein. (d) The Incorporated Documents heretofore filed, when they were filed (or, if any amendment with respect to any such document was filed, when such amendment was -10- filed), conformed in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; any further Incorporated Documents so filed will, when they are filed, conform in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; no such document when it was filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and no such further document, when it is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. (e) The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the financial condition, business, properties, net worth or results of operations of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). (f) Each Material Subsidiary (as defined below) is a corporation duly organized, validly existing and in good standing in the jurisdiction of its organization, with full corporate power and authority to own, lease and operate its properties and to conduct its business, except where the failure of a Material Subsidiary to be duly organized and existing or to have full corporate power and authority would not have a Material Adverse Effect; each Material Subsidiary is duly registered, qualified or licensed to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register, be licensed or qualify would not have a Material Adverse Effect; all the outstanding shares of capital stock of each Material Subsidiary have been duly -11- authorized and validly issued, are fully paid and nonassessable, and are owned by the Company directly, or indirectly through one of its other subsidiaries, free and clear of any lien, adverse claim, security interest, equity, or other encumbrance; and there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, shares of capital stock or other equity interests in any Material Subsidiary. As used herein, the term "Material Subsidiaries" means the following subsidiaries of the Company: Varity Holdings Limited and Perkins Group Limited, each a corporation organized under the laws of the United Kingdom; Dayton Walther Corporation, an Ohio corporation; K-H Corporation, a Delaware corporation; and Kelsey-Hayes Company, a Delaware corporation. (g) When the Notes are issued and delivered pursuant to this Agreement, such Notes will have been duly authorized by the Company and, when executed by the Company and authenticated by the applicable Trustee in accordance with the terms of the applicable Indenture (assuming the due authorization, execution and delivery thereof by the Trustee thereunder), and delivered to and paid for by the purchasers thereof, will be entitled to the benefits of the Indenture and will constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (h) There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened, against the Company or any of its subsidiaries which are reasonably likely to have a Material Adverse Effect, or to which the Company or any of its subsidiaries, or to which any of their respective properties, is subject which are material to the Company and its subsidiaries taken as a whole, that are required to be described in the Registration Statement or the Prospectus, but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments relating to the Company or its subsidiaries that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement or any -12- Incorporated Document that are not described or filed as required by the Act or the Exchange Act. The descriptions of the terms of any such contracts or documents contained in the Registration Statement, the Prospectus or any Incorporated Documents are correct in all material respects. (i) Neither the Company nor any of its subsidiaries is (i) in violation of its certificate or articles of incorporation or bylaws, or other organizational documents, (ii) in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of its subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, or (iii) in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any agreement, indenture, lease or instrument to which the Company or any of its subsidiaries is a party or by which any of them or any of their respective properties may be bound, and no condition or state of facts exists, which, with the passage of time or the giving of notice or both, would constitute such a default, except in the case of clauses (i), (ii) and (iii) where any such violation or default, or violations and defaults in the aggregate, would not have a Material Adverse Effect. (j) None of the issuance and sale of the Notes, the execution, delivery or performance of this Agreement, any Terms Agreement and the Indenture relating to the Notes by the Company or the consummation by the Company of the transactions contemplated hereby and thereby to be consummated by the Company (i) requires any consent, approval, authorization or other order of or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required for the registration of the Securities under the Act and the Exchange Act, and compliance with the securities or Blue Sky laws of various jurisdictions, all of which have been or will be effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company or any of its subsidiaries or (ii) conflicts or will -13- conflict with or constitutes or will constitute a breach of, or a default under, any material agreement, indenture, lease or instrument to which the Company or any of its subsidiaries is a party or by which any of them or any of their respective properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company or any of its subsidiaries or any of their respective properties, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of the property or assets of any of them is subject, except in the case of clauses (i) and (ii) where any such conflict, breach, default or violation, or conflicts, breaches, defaults or violations in the aggregate, would not have a Material Adverse Effect. (k) The accountants who have certified or shall certify the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement thereto) were or shall be, for the periods in which they certified or certify such financial statements, independent public accountants as required by the Act. (l) The historical financial statements, together with related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto), present fairly the consolidated financial position, results of operations, cash flows and changes in stockholders' equity of the Company and its subsidiaries on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with United States generally accepted accounting principles (as described in the Prospectus) consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto) are accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company and its subsidiaries. -14- (m) The execution and delivery of, and the performance by the Company of its obligations under, each of this Agreement, any Terms Agreement and the Indenture have been duly and validly authorized, executed and delivered by the Company and constitutes the valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies gener- ally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). The Indenture has been duly qualified under the Trust Indenture Act. (n) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement thereto), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), neither the Company nor any of its subsidiaries has incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Company and its subsidiaries taken as a whole, and there has not been any material change in the capital stock of the Company, or material increase in the short-term debt or long-term debt of the Company and any of its subsidiaries taken as a whole, or any Material Adverse Effect. (o) Each of the Company and its subsidiaries has good and marketable title to all property (real and personal) described in the Prospectus as being owned by it, free and clear of all liens, claims, security interests or other encumbrances, except such as are described in the Registration Statement and the Prospectus or in a document filed as an exhibit to the Registration Statement and all the property described in the Prospectus as being held under lease by each of the Company and its subsidiaries is held by it under valid, subsisting and enforceable leases, in each case with only such exceptions as in the aggregate would not have a Material Adverse Effect. (p) The Company and each of its subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("Permits") as are necessary to own its respective properties and to conduct -15- its business in the manner described in the Prospectus, except where the failure to have any such Permit would not have a Material Adverse Effect and subject to such qualifications as may be set forth in the Prospectus; the Company and each of its subsidiaries has fulfilled and performed all its material obligations with respect to such Permits and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit, except where such action would not have a Material Adverse Effect and subject in each case to such qualification as may be set forth in the Prospectus; and, except as described in the Prospectus, none of such Permits contains any restriction that is materially burdensome to the Company and its subsidiaries, taken as a whole. (q) The Company and its subsidiaries own or possess all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, trade secrets and rights described in the Prospectus as being owned by them or any of them or necessary for the conduct of their respective businesses, except where the lack of such ownership or possession would not have a Material Adverse Effect, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company or any of its subsidiaries with respect to the foregoing. 5. Indemnification and Contribution. (a) The -------------------------------- Company agrees to indemnify and hold harmless each Agent and each person, if any, who controls any Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities, judgments and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities, judgments or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity -16- with the information furnished in writing to the Company by or on behalf of any Agent; provided, however, that the indemnification contained in this paragraph (a) with respect to any Prospectus shall not inure to the benefit of any Agent (or to the benefit of any person controlling such Agent) on account of any such loss, claim, damage, liability, judgment or expense arising from the sale of the Notes by such Agent to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the Act and the regulations thereunder, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in any preliminary prospectus was corrected in the Prospectus. The foregoing indemnity agreement shall be in addition to any liability which the Company may otherwise have. (b) If any action, suit or proceeding shall be brought against any Agent or any person controlling any Agent in respect of which indemnity may be sought against the Company, such Agent or such controlling person shall promptly notify the Company, and the Company shall assume the defense thereof, including the employment of counsel and payment of all reasonable fees and expenses of such counsel. Any such Agent or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the reasonable fees and expenses of such counsel shall be at the expense of such Agent or such controlling person, rather than the Company, unless (i) the Company has agreed in writing to pay such fees and expenses, (ii) the Company has failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Agent or such controlling person and the Company and such Agent or such controlling person shall have been advised by its counsel that representation of such indemnified party and the Company by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Company shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Agent or such controlling person). It is understood, however, that the Company shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel, -17- not more than one per jurisdiction) at any time for all such Agents and controlling persons, which firm shall be designated in writing by the Agents, and that all such fees and expenses shall be reimbursed promptly as they are incurred. The Company shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Company agrees to indemnify and hold harmless any Agent, to the extent provided in the preceding paragraph, and any such controlling person from and against any loss, claim, damage, liability, judgment or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Agent or any person controlling an Agent is entitled to employ separate counsel pursuant to the second sentence of this Section 5(b) and shall have requested the Company in writing to reimburse such Agent or such controlling person for fees and expenses of counsel, the Company agrees that it shall be liable for any settlement of any proceeding effected by such Agent or such controlling person and for which the Company is liable pursuant to Section 5(a) without its written consent if (i) such settlement is entered into more than ten (10) business days after receipt by the Company of the aforesaid request or (ii) the Company shall not have reimbursed such Agent or such controlling person in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of such Agent or such controlling person, effect any settlement of any pending or threatened proceeding in respect of which any Agent or any person controlling an Agent is or could have been a party and indemnity could have been sought hereunder by such Agent or such controlling person, unless such settlement includes an unconditional release of such Agent or such controlling person from all liability on claims that are subject matter of such proceeding. (c) Each Agent agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, officers who sign the Registration Statement, and any person who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Agent, but only with respect to information relating to such Agent furnished in writing by or on behalf of such Agent expressly for use in the Registration Statement, the Prospectus or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Company, any of its directors, officers, or any such controlling person based on the -18- Registration Statement, the Prospectus or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Agent pursuant to this paragraph (c), such Agent shall have the rights and duties given to the Company by paragraph (b) above (except that if the Company shall have assumed the defense thereof such Agent shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Agent), and the Company, its directors, officers, and any such controlling person shall have the rights and duties given to the Agents by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Agents may otherwise have. (d) If the indemnification provided for in this Section 5 is unavailable to, or insufficient to hold harmless, an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities, judgments or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, judgments or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Agents on the other hand from the offering of the Notes, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the Company on the one hand and the Agents on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities, judgments or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Agents on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Agents, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company on the one hand and the Agents on the other hand 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 on the one hand or by the Agents on the other hand and the parties' relative intent, knowledge, access -19- to information and opportunity to correct or prevent such statement or omission. (e) The Company and the Agents agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by a pro rata allocation (even if the Agents 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 party as a result of the losses, claims, damages, liabilities, judgments and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 5, no Agent shall be required to contribute any amount in excess of the amount by which the total price of the Notes sold by it and distributed to the public exceeds the amount of any damages which such Agent 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 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (f) Any losses, claims, damages, liabilities, judgments or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 5 shall be paid by the indemnifying party to the indemnified party promptly as such losses, claims, damages, liabilities, judgments or expenses are incurred. The indemnity and contribution agreements contained in this Section 5 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Agent or any person controlling any Agent, the Company, its directors or officers, or any person controlling the Company, (ii) acceptance of any Notes and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Agent or any person controlling any Agent, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 5. -20- 6. Conditions of Obligations. The obligations of ------------------------- the Agents to solicit offers to purchase the Notes as agent of the Company, and each Agent's obligation to purchase Notes as principal pursuant to any Terms Agreement, will be subject to the accuracy of the representations and warranties of the Company contained herein on the date hereof, and to the accuracy of the statements of the Company's officers made in any certificate, to the extent contemplated in such certificate, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) All filings, if any, required by Rule 424 under the Act shall have been timely made; no stop order suspending the effectiveness of the registration statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company or any Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with. (b) Subsequent to the execution of any applicable Terms Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting the financial condition, business, properties, net worth, or results of operations of the Company and its subsidiaries taken as a whole from the date of the latest balance sheet included or incorporated by reference in the Prospectus in each case not contemplated by the Prospectus, which is material and adverse; (ii) any downgrading in, or notice of any proposal to downgrade, the rating of the Company's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) or any public announcement that any such organization has under surveillance or review with negative implications the rating of the Company's debt securities; (iii) any suspension or limitation of trading in securities generally on or by the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, or any setting of minimum prices for trading on such exchange; (iv) any suspension of trading of any securities of the Company on any exchange; (v) any banking moratorium declared by Federal or New York authorities; or (vi) the outbreak or escalation of hostilities involving the United States or the -21- declaration by the United States of a national emergency or war, if the effect of any such event set forth in (i) through (vi), in the judgment of the Agents, makes it impractical or inadvisable to proceed with the solicitation of purchases of the Notes. (c) The Agents shall have received on the date hereof, an opinion of Cahill Gordon & Reindel (a partnership including a professional corporation), counsel for the Company, dated the date hereof and addressed to the Agents, to the effect that: (i) The Company is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; (ii) The Indenture relating to the Notes has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law); (iii) The Notes have been duly authorized and, when executed and authenticated in accordance with the Indenture and delivered to the purchasers thereof against payment therefor in accordance with the terms of this Agreement, will be valid and binding obligations of the Company, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and will be entitled to the benefits of the Indenture; (iv) The Registration Statement and all post- effective amendments, if any, have become effective under the Act and, to the best knowledge of such -22- counsel after reasonable inquiry, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission; and any required filing of the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b); (v) The Company has all requisite corporate power and authority to enter into this Agreement, any Terms Agreement and the Indenture relating to the Notes and to issue and deliver the Notes to the purchasers thereof; (vi) This Agreement has been duly authorized, executed and delivered by the Company and is a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (A) as limited by bankruptcy, insolvency, reorganization, fraudulent transfer and similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (B) that rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or the public policy underlying such laws; (vii) The Notes and the Indenture conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus; (viii) None of the offer, sale, or delivery of the Notes, or the execution, delivery or performance of this Agreement and the Indenture relating to the Notes, nor compliance by the Company with all the provisions of this Agreement and the Indenture applicable to it, nor consummation by the Company of the transactions contemplated hereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate of incorporation or bylaws of the Company or any indenture or other debt instrument or any other material agreement or lease to which the Company is a party or by which the Company or any of its properties is bound that is an exhibit to the Registration -23- Statement or to any Incorporated Document, which conflict, breach or default would have a Material Adverse Effect, or, except as disclosed in the Registration Statement, will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company under any such indenture, debt instrument, agreement or lease which lien, charge or encumbrance would have a Material Adverse Effect, nor will any such action result in any violation of any existing law, regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws), judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Company or any of its properties, which violation would have a Material Adverse Effect; (ix) No consent, approval, authorization or other order of, or registration or filing with, any Delaware, New York State or Federal court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Company (except as have been obtained or made under the Act and the Exchange Act or such as may be required under state securities or Blue Sky laws governing the purchase and distribution of the Securities) for the valid issuance and sale of the Notes to the purchasers thereof as contemplated by this Agreement; and (x) The Registration Statement and the Prospectus and any supplements or amendments thereto (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act; and each of the Incorporated Documents (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein, as to which such counsel need not express any opinion), when they were filed (or, if an amendment with respect to any Incorporated Document was filed, when such amendment was filed) complied as to form in all material respects with the Exchange Act. -24- In addition, such counsel shall state that such counsel participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants and representatives of the Agents at which the contents of the Registration Statement and Prospectus were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and Prospectus (except as otherwise indicated above) on the basis of the foregoing (relying as to materiality to a large extent upon the opinions of officers and representatives of the Company), no facts have come to the attention of such counsel which lead them to believe that either the Registration Statement or any amendment thereto, at the time the Registration Statement or amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading or that the Prospectus as of its date or any supplement thereto as of its date, or the Registration Statement or the Prospectus and any amendment or supplement thereto as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial and statistical data included in the Registration Statement or the Prospectus). The opinion of such counsel may be limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Federal laws of the United States. In rendering their opinion as aforesaid, such counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company and public officials. (d) The Agents shall have received letters dated the date hereof from KPMG Peat Marwick LLP, independent certified public accountants, substantially in the forms heretofore approved by the Agents. (e) The Agents shall have received on the date hereof, an opinion of Andrews & Kurth L.L.P., counsel for -25- the Agents, dated the date hereof and addressed to the Agents, in form and substance satisfactory to the Agents. (f) You shall have received a certificate signed by the chief executive officer and the chief financial officer of the Company (or such other officers as are acceptable to you) that: (i) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall be pending or, to the knowledge of the Company, shall be contemplated by the Commission at the date hereof; (ii) there shall not have been, since the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and the Prospectus (or any amendment or supplement thereto), any material adverse change in the financial condition, business, prospects, properties, net worth or results of operations of the Company and its subsidiaries taken as a whole; (iii) all the representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the date hereof; and (iv) the Company has performed or complied with its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the date of such certificate. (g) The Company shall have furnished or caused to be furnished to you such further certificates and documents as you shall have reasonably requested. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to the Agents and their counsel. Any certificate or document signed by any officer of the Company and delivered to you or to counsel for the Agents, shall be deemed a representation and warranty by the Company to each Agent as to the statements made therein. Any certificate delivered by the Company to its counsel for purposes of enabling such counsel to render the opinions referred to in this Section 6 will also be furnished to you and counsel for the Agents. 7. Expenses. The Company agrees to pay the -------- following costs and expenses and all other costs and expenses -26- incident to the performance by them of their obligations hereunder: (i) the preparation, printing (or reproduction), and filing with the Commission of the registration statement (including financial statements and exhibits thereto), each Prospectus and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the registration statement, the Prospectus, the Incorporated Documents, and all amendments or supplements to any of them, as may be reasonably requested for use in connection with the offering and sale of the Notes, (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Notes, including any stamp taxes in connection with the original issuance and sale of the Notes; (iv) the printing (or reproduction) and delivery of this Agreement, the Indenture, the preliminary and supplemental Blue Sky Memoranda and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Notes; (vi) the registration or qualification of the Notes for offer and sale under the securities or Blue Sky laws of the several states as provided in Section 3(f) hereof (including the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, printing (or reproduction), and delivery of the preliminary and supplemental Blue Sky Memoranda and such registration and qualification); (vii) the filing fees of the Underwriters in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; and (viii) the fees and expenses of the Company's accountants and the fees and expenses of counsel (including local and special counsel) for the Company. 8. Delivery of and Payment for Notes Sold through ---------------------------------------------- the Agents. Delivery of Notes sold through an Agent as agent - ---------- shall be made by the Company to such Agent for the account of any purchaser only against payment therefor in immediately available funds. In the event that a purchaser shall fail either to accept delivery of or to make payment for a Note on the date fixed for settlement, the applicable Agent shall promptly notify the Company and deliver the Note to the Company and, if such Agent has theretofore paid the Company for such Note, the Company will promptly return such funds to such Agent. If such failure occurred for any reason other than default by the applicable Agent in the performance of its obligations hereunder, the Company will reimburse such Agent on an equitable basis for its loss of the use of the funds for the period such funds were credited to the Company's account. -27- 9. Additional Covenants of the Company. The ----------------------------------- Company covenants and agrees with the Agents that: (a) Reaffirmation of Representations and Warranties. ----------------------------------------------- Each acceptance by the Company of an offer for the purchase of Notes, and each delivery of Notes to an Agent pursuant to a Terms Agreement, shall be deemed to be an affirmation that the representations and warranties of the Company contained in this Agreement and, to the extent therein provided, in any certificate theretofore delivered to the Agents pursuant hereto are true and correct at the time of such acceptance or sale, as the case may be, and an undertaking that such representations and warranties will be true and correct at the time of delivery to the purchaser or his agent, or to the Agents, of the Notes relating to such acceptance or sale, as the case may be, as though made at and as of each such time (and it is understood that such representations and warranties shall relate to the Registration Statement and Prospectus as amended and supplemented to each such time). (b) Subsequent Delivery of Certificates. Subject to ----------------------------------- the provisions of Section 3(k) hereof, each time that (1) the Registration Statement or the Prospectus shall be amended or supplemented (other than by the filing of an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q and any Current Report on Form 8-K or an amendment or supplement providing solely for a change in the interest rate of Notes (excluding any change in the formulas by which such interest rates may be determined) or similar changes, and other than by an amendment or supplement which relates exclusively to an offering of debt securities other than the Notes), or (2) there is filed with the Commission any document incorporated by reference into the Prospectus (other than any Current Report on Form 8-K, except upon the reasonable request of the Agents therefor), or (3) (if required pursuant to the terms of a Terms Agreement) the Company sells Notes to an Agent pursuant to a Terms Agreement, the Company shall furnish or cause to be furnished to the Agents forthwith a certificate dated the date of filing with the Commission of such supplement or document, the date of effectiveness of such amendment or the Applicable Settlement date, as the case may be, in form and substance satisfactory to the Agents to the effect that the statements contained in the certificate referred to in Section 6(f) hereof which were last furnished to the Agents are true and correct at the time of -28- such amendment, supplement, filing or sale, as the case may be, as though made at and as of such time (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such time) or, in lieu of such certificate, a certificate of the same tenor as the certificate referred to in said Section 6(f), modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such certificate. (c) Subsequent Delivery of Legal Opinions. Subject ------------------------------------- to the provisions of Section 3(k) hereof, each time that (1) the Registration Statement or the Prospectus shall be amended or supplemented (other than by an amendment or supplement providing solely for a change in the interest rates of the Notes (excluding any change in the formulas by which such interest rates may be determined) or similar changes or solely for the inclusion of additional financial information, other than by an amendment by the filing of a Quarterly Report on Form 10-Q and any Current Report on Form 8-K (except in the circumstances hereinafter described) and other than by an amendment or supplement which relates exclusively to an offering of debt securities other than the Notes) or (2) there is filed with the Commission the Company's Annual Report on Form 10-K and such Annual Report is incorporated by reference into the Prospectus or (3) (if required pursuant to the terms of a Terms Agreement) the Company sells Notes to an Agent pursuant to a Terms Agreement, the Company shall furnish or cause to be furnished forthwith to the Agents the written opinion of Cahill Gordon & Reindel, special counsel for the Company, or other counsel satisfactory to the Agents (which shall be deemed to include the General Counsel of the Company, unless otherwise specified by the Agents), and, only when required pursuant to an applicable Terms Agreement pursuant to clause (3) above, the written opinion of counsel for the Agents, in each case dated the date of filing with the Commission of such supplement or document, the date of effectiveness of such amendment or the applicable Settlement Date, as the case may be, in form and substance satisfactory to the Agents, of the same tenor as the opinions referred to in Section 6(c) hereof, but modified, as necessary, to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such opinions or, in lieu of such opinions, counsel last furnishing such opinions to -29- the Agents shall each furnish the Agents with a letter to the effect that the Agents may rely on such last opinion to the same extent as though it was dated the date of such letter authorizing reliance (except that statements in such last opinion shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such letter authorizing reliance). If one or more of the Agents reasonably determine that the information included in a filing by the Company in a Quarterly Report filed on Form 10-Q or a Current Report filed on Form 8-K is of such importance that legal opinion should be delivered to the Agents in conjunction therewith, such Agent or Agents shall notify the Company promptly upon such determination (and in any event not later than 30 days after such filing) and the Company will thereupon furnish or cause to be furnished the opinions described above. (d) Subsequent Delivery of Comfort Letters. Subject -------------------------------------- to the provisions of Section 3(k) hereof, each time that the Registration Statement or the Prospectus shall be amended or supplemented (other than by incorporation by reference) to include additional financial information or there is filed with the Commission any document incorporated by reference into the Prospectus which contains additional financial information or (if required pursuant to the terms of a Terms Agreement) the Company sells Notes to an Agent pursuant to a Terms Agreement, the Company shall cause KPMG Peat Marwick LLP or their successors forthwith to furnish the Agents a letter, dated the date of filing with the Commission of such supplement or document, the date of effectiveness of such amendment, or the applicable Settlement Date, as the case may be, in form and substance satisfactory to the Agents, of the same tenor as the the letter referred to in Section 6(d) hereof but modified to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter; provided, however, that if the Registration -------- ------- Statement or the Prospectus is amended or supplemented solely to include financial information as of and for a fiscal quarter, KPMG Peat Marwick LLP or their successors may limit the scope of such letter to the unaudited financial statements included in such amendment or supplement unless any other information included therein of an accounting, financial or statistical nature is of such a nature that, in the reasonable judgment of the Agents, such letter should cover such other information. -30- 10. Survival of Certain Representations and --------------------------------------- Obligations. The respective indemnities, agreements, - ----------- representations, warranties and other statements of the Company or its officers and of the several Agents set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the result thereof, made by or on behalf of any Agent, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for any of the Notes. 11. Termination. (a) Termination of this ----------- ------------------- Agreement. This Agreement (excluding any Terms Agreement) may - --------- be terminated for any reason, at any time by either the Company with respect to one or more Agents or an Agent, as to itself, upon the giving of 30 days' written notice of such termination to the other parties hereto. (b) General. In the event of any such termination, ------- neither party will have any liability to the other party hereto, except that (i) each Agent shall be entitled to any commission with respect to Notes sold by the Company as a result of a solicitation made by such Agent and earned in accordance with the third paragraph of Section 2(b) hereof, (ii) if at the time of termination (a) an Agent shall own any Notes purchased pursuant to a Terms Agreement with the intention of reselling them or (b) an offer to purchase any of the Notes has been accepted by the Company but the time of delivery to the purchaser or his agent of the Note or Notes relating thereto has not occurred, the covenants set forth in Sections 3 and 9 hereof shall remain in effect until such Notes are so resold or delivered, as the case may be, and (iii) the covenant set forth in Section 3(g) hereof, the provisions of Section 6 hereof, the indemnity and contribution agreements set forth in Section 5 hereof, and the provisions of Section 10 and 13 hereof shall remain in effect. 12. Notices. All notices and other communications ------- hereunder shall be in writing and shall be deemed to have been given if mailed or transmitted by any standard form of telecommunication. Notices to the Company shall be directed to Varity Corporation, 672 Delaware Avenue, Buffalo, New York 14209, Attention: Corporate Secretary; notices to the Agents shall be directed to: [ ]. 13. Parties. This Agreement shall inure to the ------- benefit of and be binding upon each Agent, the Company and -31- their respective successors, heirs and legal representatives. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Agents, the Company and their respective successors, heirs and legal representatives and the controlling persons and officers and directors referred to in Section 5 and their heirs and legal representatives, any legal or equitable right, remedy or claim under, by virtue of or in respect of this Agreement or any provision herein or therein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Agents, the Company and their respective successors, heirs and legal representatives, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Notes shall be deemed to be a successor or assign by reason merely of such purchase. 14. Applicable Law; Counterparts. This Agreement ---------------------------- shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York. This Agreement may be executed in counterparts and the executed counterparts shall together constitute a single instrument. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicate hereof. Very truly yours, VARITY CORPORATION By:__________________________ Name: Title: -32- The foregoing Agreement is hereby confirmed as of the date first above written [NAME OF AGENT] By______________________________ Name: Title: Exhibit A to Agency Agreement [Agent's Commission Schedule] Exhibit B to Agency Agreement Terms to be agreed to by the Company and the Agents in a Terms Agreement. Exhibit C to Agency Agreement Exhibit C to the Agency Agreement will be added at the time the Agency Agreement is signed and will consist of Administrative Procedures agreed on by the Company and the Agents. EX-4.1 6 FORM OF SENIOR INDENTURE RELATING TO KELSEY-HAYES EXHIBIT 4.1 _______________________________________________________________ _______________________________________________________________ ____________________ KELSEY-HAYES COMPANY, as Issuer, and VARITY CORPORATION, as Guarantor, and MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee ____________________ INDENTURE Dated as of , 1995 ____________________ Senior Debt Securities _______________________________________________________________ _______________________________________________________________ Reconciliation and tie between Trust Indenture Act of 1939 and Indenture dated as of , 1995 Trust Indenture Indenture Act Section Section - --------------- --------- (S) 310(a)(1) ........................................ 7.11 (a)(2) ........................................ 7.11 (a)(3) ........................................ N.A. (a)(4) ........................................ N.A. (a)(5) ........................................ 7.11 (b) ........................................ 7.11; 11.2 (c) ........................................ N.A. (S) 311(a) ........................................ 7.12 (b) ........................................ 7.12 (c) ........................................ N.A. (S) 312(a) ........................................ 2.6 (b) ........................................ 11.3 (c) ........................................ 11.3 (S) 313(a) ........................................ 7.7 (b) ........................................ 7.7 (c) ........................................ 7.7; 11.2 (d) ........................................ 7.7 (S) 314(a) ........................................ 4.4; 4.5; 11.2 (b) ........................................ N.A. (c)(1) ........................................ 11.4 (c)(2) ........................................ 11.4 (c)(3) ........................................ N.A. (d) ........................................ N.A. (e) ........................................ 11.5 (f) ........................................ N.A. (S) 315(a) ........................................ 7.1(b) (b) ........................................ 7.5; 11.2 (c) ........................................ 7.1(a) (d) ........................................ 7.1(c) (e) ........................................ 6.11 (S) 316(a) (last sentence) ........................................ 2.9 (a)(1)(A) ........................................ 6.5 (a)(1)(B) ........................................ 6.4 (a)(2) ........................................ N.A. (b) ........................................ 6.7 (c) ........................................ N.A. (S) 317(a)(1) ........................................ 6.8 (a)(2) ........................................ 6.9 (b) ........................................ 2.5 (S) 318(a) ........................................ 11.1 (b) ........................................ N.A. (c) ........................................ 11.1 - ---------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. -i- TABLE OF CONTENTS ----------------- Page ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions..................................... 1 Section 1.2. Incorporation by Reference of Trust Indenture Act................................. 9 Section 1.3. Rules of Construction........................... 10 ARTICLE 2 THE SECURITIES Section 2.1. Forms Generally................................. 10 Section 2.2. Title, Terms and Denominations.................. 11 Section 2.3. Execution, Authentication, Delivery and Dating.................................... 15 Section 2.4. Registrar and Paying Agent...................... 17 Section 2.5. Paying Agent To Hold Money in Trust............. 17 Section 2.6. Securityholder Lists............................ 18 Section 2.7. Transfer and Exchange........................... 18 Section 2.8. Replacement Securities.......................... 19 Section 2.9. Outstanding Securities; Determination of Holders' Action.............. 20 Section 2.10. Temporary Securities............................ 20 Section 2.11. Cancellation.................................... 21 Section 2.12. Payment of Interest; Defaulted Interest...................................... 21 Section 2.13. CUSIP Number.................................... 22 Section 2.14. Deposit of Moneys............................... 22 Section 2.15. Persons Deemed Owners........................... 22 Section 2.16. Computation of Interest......................... 23 Section 2.17. Global Securities............................... 23 ARTICLE 3 REDEMPTION OF SECURITIES Section 3.1. Notices to the Trustee.......................... 24 Section 3.2. Selection of Securities To Be Redeemed...................................... 24 Section 3.3. Notice of Redemption............................ 25 Section 3.4. Effect of Notice of Redemption.................. 26 Section 3.5. Deposit of Redemption Price..................... 26 Section 3.6. Securities Redeemed or Purchased in Part.......................................... 27 -ii- Page ---- ARTICLE 4 COVENANTS Section 4.1. Payment of Securities........................... 27 Section 4.2. Maintenance of Office or Agency................. 28 Section 4.3. Corporate Existence............................. 28 Section 4.4. Compliance Certificate.......................... 29 Section 4.5. SEC Reports..................................... 30 Section 4.6. Waiver of Stay, Extension or Usury Laws.......................................... 31 Section 4.7. Limitation on Liens............................. 31 Section 4.8. Limitation on Sale and Lease-Back Transactions.................................. 32 ARTICLE 5 SUCCESSOR CORPORATION Section 5.1. When Company and Guarantor May Merge, etc.................................... 33 Section 5.2. Successor Substituted........................... 34 ARTICLE 6 REMEDIES Section 6.1. Events of Default............................... 35 Section 6.2. Acceleration.................................... 37 Section 6.3. Other Remedies.................................. 39 Section 6.4. Waiver of Past Defaults......................... 39 Section 6.5. Control by Majority............................. 39 Section 6.6. Limitation on Suits............................. 40 Section 6.7. Right of Holders To Receive Payment............. 41 Section 6.8. Collection Suit by Trustee...................... 41 Section 6.9. Trustee May File Proofs of Claim................ 41 Section 6.10. Priorities...................................... 42 Section 6.11. Undertaking for Costs........................... 42 Section 6.12. Restoration of Rights and Remedies.............. 43 ARTICLE 7 TRUSTEE Section 7.1. Duties.......................................... 43 Section 7.2. Rights of Trustee............................... 44 Section 7.3. Individual Rights of Trustee.................... 46 Section 7.4. Trustee's Disclaimer............................ 46 -iii- Page ---- Section 7.5. Notice of Default............................... 46 Section 7.6. Money Held in Trust............................. 46 Section 7.7. Reports by Trustee to Holders................... 47 Section 7.8. Compensation and Indemnity...................... 47 Section 7.9. Replacement of Trustee.......................... 48 Section 7.10. Successor Trustee by Merger, etc................ 50 Section 7.11. Eligibility; Disqualification................... 51 Section 7.12. Preferential Collection of Claims Against Company............................... 51 ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE Section 8.1. Termination of the Company's and the Guarantor's Obligations....................... 51 Section 8.2. Legal Defeasance and Covenant Defeasance.................................... 53 Section 8.3 Application of Trust Money...................... 57 Section 8.4. Repayment to Company............................ 57 Section 8.5. Reinstatement................................... 58 ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1. Without Consent of Holders...................... 58 Section 9.2. With Consent of Holders......................... 59 Section 9.3. Compliance with Trust Indenture Act............. 61 Section 9.4. Revocation and Effect of Consents............... 61 Section 9.5. Notation on or Exchange of Securities.................................... 62 Section 9.6. Trustee May Sign Amendments, etc................ 63 ARTICLE 10 GUARANTEE Section 10.1. Unconditional Guarantee ........................ 63 Section 10.2. Execution of Guarantee ......................... 64 -iv- Page ---- ARTICLE 11 MISCELLANEOUS Section 11.1. Trust Indenture Act of 1939..................... 65 Section 11.2. Notices......................................... 65 Section 11.3. Communication by Holders with Other Holders....................................... 67 Section 11.4. Certificate and Opinion as to Conditions Precedent.......................... 67 Section 11.5. Statements Required in Certificate or Opinion.................................... 67 Section 11.6. Rules by Trustee, Paying Agent, Registrar..................................... 68 Section 11.7. Governing Law................................... 68 Section 11.8. No Interpretation of Other Agreements.................................... 68 Section 11.9. No Recourse Against Others...................... 68 Section 11.10. Successors...................................... 68 Section 11.11. Duplicate Originals............................. 69 Section 11.12. Separability.................................... 69 Section 11.13. Table of Contents, Headings, etc................ 69 Section 11.14. Benefits of Indenture........................... 69 SIGNATURES......................................................... 70 -v- INDENTURE, dated as of , 1995, among KELSEY-HAYES COMPANY, a Delaware corporation (the "Company"), VARITY CORPORATION, a Delaware corporation (the "Guarantor"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation, as trustee (the "Trustee"). For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders of the Securities or of any series thereof, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. ----------- "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. "Agent" means any Registrar or Paying Agent of the Securities. "Attributable Debt" when used in connection with a Sale and Lease-Back Transaction involving a Principal Property shall mean, at the time of determination, the lesser of: (a) the fair value of such property (as determined in good faith by the Board of Directors of the Company); or (b) the present value of the total net amount of rent required to be paid under such lease during the remaining term thereof (including any renewal term or period for which such lease has been extended), discounted at the rate of interest set forth or implicit in the terms of such lease or, if not practicable to determine such rate, the weighted average interest rate per annum borne by the Securities of each series outstanding pursuant to this Indenture compounded semi-annually. For purposes of the fore- going definition, rent shall not include amounts required to be paid by the lessee, whether or not designated as rent or additional rent, on account of or contingent upon maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall be the lesser of the net amount determined assuming termination upon the first date such lease may be terminated (in which case the net amount shall also include the amount of the penalty, but no -2- rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the net amount determined assuming no such termination. "Bankruptcy Law" means Title 11 of the United States Code or any similar federal, state or foreign law for the relief of debtors. "Board of Directors" means the board of directors of the Company or the Guarantor, as the case may be, or any duly authorized committee of either such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors of the Company or the Guarantor as the context requires and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York, State of New York, or the city in which the Trustee has its Corporate Trust Office, are authorized or obligated by law, regulation or executive order to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Company" means the party named as such in this Indenture until a successor replaces it (or any previous successor) pursuant to this Indenture, and thereafter means such successor. -3- "Company Request" or "Company Order" means a written request or order signed in the name of the Company by any one of its Chairman of the Board, its Vice-Chairman, its President or a Vice President, and by any one of its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the corporate trust office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which on the date hereof is One M & T Plaza, Buffalo, New York 14240, Attention: Corporate Trust Department. "Covenant Defeasance" shall have the meaning set forth in Section 8.2. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Discount Security" means any Security which provides for an amount less than the principal thereof to be due and payable upon a declaration of acceleration of the Stated Maturities thereof pursuant to Section 6.2. "Event of Default" has the meaning set forth in Section 6.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "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 of America, as in effect on the date hereof. "Guarantee" means the guarantee of the Guarantor set forth in Article Ten hereof. -4- "Guarantor" means Varity Corporation, a Delaware corporation, and, subject to Article Ten, its successors and assigns. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, with respect to any Person, without duplication, (i) all obligations for borrowed money, (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations, (iv) all obligations 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 accrued expenses arising in the ordinary course of business), (v) all fixed unconditional obligations issued or contracted for as payment in consideration of the purchase by such Person of the stock or substantially all the assets of another Person or a merger or consolidation, (vi) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction which secure Indebtedness of a Person other than the issuer of the letter of credit or the accepting bank, (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons guaranteed by such Person to the extent of the guarantee; and (viii) all obligations of the type referred to in clauses (i) through (vii) of other Persons 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 value of such property or asset at the time the Lien is created or the amount of the obligation so secured. "Indenture" means this Indenture, as amended, modified or supplemented from time to time, in accordance herewith, and includes, with respect to a particular series of Securities, the terms of such series of Securities established or contemplated by Section 2.2(a). "Interest Payment Date", for any series of Securities, has the meaning provided in the form of such Securities set forth in the supplemental indenture, Board Resolution, or Officers' Certificate under which such Securities are issued. "Issue Date" means, with respect to any particular series of Securities, the original date of issuance of such series; provided that, in the case of a series subject to a -------- Periodic Offering, the Issue Date shall be the original issue -5- date or dates established pursuant to the proviso of the third paragraph of Section 2.3. "Legal Defeasance" shall have the meaning set forth in Section 8.2. "Lien" means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind. A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Material Subsidiary" means, at any particular time, any Subsidiary of any Person that (a) accounted for more than 10% of the consolidated revenues of such Person and its Subsidiaries on a consolidated basis for the most recently completed fiscal year of such Person or (b) was the owner of more than 10% of the consolidated assets of such Person and its Subsidiaries on a consolidated basis as at the end of such fiscal year, all as shown on the consolidated financial statements of such Person and its Subsidiaries for such fiscal year. "Maturity Date" means, with respect to any Security, the date on which any principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise. "Nonrecourse Obligation" means Indebtedness or other obligations substantially related to (i) the acquisition of assets not previously owned by the Company or any Restricted Subsidiary or (ii) the financing of a project involving the development or expansion of properties of the Company or any Restricted Subsidiary, as to which the obligee with respect to such Indebtedness or obligation has no recourse to the Company or any Restricted Subsidiary or any assets of the Company or any Restricted Subsidiary other than the assets which were acquired with the proceeds of such transaction or the project financed with the proceeds of such transaction (and the proceeds thereof). "Officer" means the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the -6- Chief Operating Officer, the Treasurer, the Secretary or the Controller of the Company or the Guarantor, as the case may be. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of the Company and delivered to the Trustee. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. Subject to any express provision hereof, the counsel may be an employee of or counsel to the Company or the Guarantor. "Paying Agent" has the meaning set forth in Section 2.4, except that, for the purposes of Articles Three and Eight, the Paying Agent shall not be: (i) the Company or the Guarantor, (ii) a Subsidiary of the Company or the Guarantor or (iii) any of the Company's or Guarantor's respective Affiliates. "Periodic Offering" means an offering of Securities of a series from time to time the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the Stated Maturity or Stated Maturities thereof, the original Issue Date or Dates thereof, the redemption provisions, if any, and any other terms specified as contemplated by Section 2.2(a) with respect thereto, are to be determined by the Company, or one or more of the Company's agents or employees designated in an Officers' Certificate, upon the issuance of such Securities. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "principal" means, with respect to any debt security, the principal of the security plus, with respect to the Securities only, the premium, if any, on the Security. "Principal Property" shall mean the land, land improvements, buildings and fixtures (to the extent they constitute real property interests) (including any leasehold interest therein) constituting the principal corporate office, any manufacturing plant or any manufacturing facility (whether now owned or hereafter acquired) which: (a) is owned by the Company or any of its Subsidiaries; (b) is located within any -7- of the present 50 States of the United States of America (or the District of Columbia); (c) has not been determined in good faith by the Board of Directors of the Company not to be materially important to the total business conducted by the Company and its Subsidiaries taken as a whole; and (d) has a book value on the date as of which the determination is being made in excess of 1% of consolidated total assets of the Company as most recently determined on or prior to such date. "Redemption Date" means, with respect to any Security to be redeemed, the date fixed by the Company or the Guarantor, as the case may be, for such redemption pursuant to this Indenture and the Securities. "Redemption Price" means, with respect to any Security to be redeemed, the price fixed for such redemption pursuant to the terms of this Indenture and the Securities. "Registrar" shall have the meaning set forth in Section 2.4. "Regular Record Date", for any series of Securities, has the meaning provided in the form of such Securities set forth in the supplemental indenture, Board Resolution or Officers' Certificate under which such Securities are issued. "Restricted Subsidiary" shall mean any Subsidiary of the Company which owns any Principal Property. "Sale and Lease-Back Transaction" shall mean any sale or transfer by the Company or one of its Restricted Subsidiaries of any Principal Property that is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof, if such sale or transfer is made with the intent of leasing, or as part of an arrangement involving the lease of, such Principal Property to the Company or one of its Restricted Subsidiaries. "SEC" 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. -8- "Securities" means the securities that are issued under this Indenture, as amended or supplemented from time to time pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Stated Maturity" means, when used with respect to any Security of a particular series or any installment of principal thereon, the date specified in such Security of such series as the fixed date on which any principal of such Security of such series is due and payable, and when used with respect to any other Indebtedness, means any date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness is due and payable. "Subsidiary" means, with respect to any Person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof and (ii) any other Person (other than a corporation), including, without limitation, a joint venture, in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions). "Surviving Entity" shall have the meaning set forth in Section 5.1. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces such party (or any previous successor) in accordance with the provisions of this Indenture, and thereafter means such successor. "Trust Officer" means the Chairman of the Board, the President or any other officer of the Trustee assigned by the Trustee to administer its corporate trust matters and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. -9- "U.S. Government Obligations" shall have the meaning set forth in Section 8.2. "Vice President" shall include Senior Vice President or a Vice President with any other prefix. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). Section 1.2. Incorporation by Reference of Trust Indenture Act. ----------------------------------- Whenever this Indenture refers to a provision of the TIA, the 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: "Commission" means the SEC; "indenture securities" means the Securities; "indenture security holder" means a Securityholder or Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company, the Guarantor or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. Section 1.3. Rules of Construction. --------------------- For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: -10- (a) a term has the meaning assigned to it; (b) words in the singular include the plural, and words in the plural include the singular; (c) "or" is not exclusive; (d) provisions apply to successive events and transactions; (e) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (f) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (g) all references to $ or dollars refer to the lawful currency of the United States of America. ARTICLE 2 THE SECURITIES Section 2.1. Forms Generally. --------------- The Securities of each series shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions (as set forth in a Board Resolution or, to the extent established pursuant to rather than set forth in a Board Resolution, an Officers' Certificate of the Company detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any applicable law or with the rules of any securities exchange or as may, consistently herewith, be determined by the Officers executing such Securities, as evidenced by their execution thereof. The Securities shall be issuable only in registered form without coupons. The indenture supplemental hereto or the Board Resolution or Officers' Certificate establishing the form of security of any series shall be delivered to the Trustee concurrently with or -11- prior to the delivery of the Company Order contemplated by Section 2.3 for the authentication and delivery of such Securities. The definitive Securities and Guarantees endorsed thereon shall be printed, typewritten, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the Officers executing such Securities and Guarantees, as evidenced by their execution of such Securities and Guarantees. Each Security and Guarantee shall be dated the date of its authentication. The Guarantees to be endorsed on the Securities of each series shall be in substantially the form set forth in Section 10.1 in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any law or with any rules made pursuant thereto or with any rules of any securities exchange or to conform to general usage or as may, consistently herewith, be determined by the Officers executing such Guarantees, as evidenced by their execution of such Guarantees. Section 2.2. Title, Terms and Denominations. ------------------------------ (a) The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture shall be unlimited. The Securities may be issued in one or more series. There shall be established and, subject to Section 2.3, set forth, or determined in the manner provided, in one or more indentures supplemental hereto or in or pursuant to a Board Resolution (as set forth in such Board Resolution or, to the extent established pursuant to rather then set forth in such Board Resolution, an Officers' Certificate detailing such establishment): (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities -12- authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 2.7, 2.8, 2.10, 3.6 or 9.5 and except for any Securities which, pursuant to Section 2.3, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on any Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal of the Securities of the series is payable or the method of determination thereof; (5) the rate or rates at which the Securities of the series shall bear interest (which in no event shall be greater than the then applicable legal rate therefor), if any, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Securities on any Interest Payment Date and/or the method by which such rate or rates or Regular Record Date or Dates shall be determined; (6) the place or places where, subject to the provisions of Section 4.2, the principal of and any interest on Securities of the series shall be payable, any Securities of the series may be surrendered for regis- tration of transfer, Securities of the series may be surrendered for exchange and notices and demands to or upon the Company in respect of the Securities of the series and this Indenture may be served; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof, the conditions, if any, giving rise to such obligation, and the period or periods within which, the price or prices at which and the terms and conditions -13- upon which Securities of the series shall be redeemed or purchased, in whole or in part, and any provisions for the remarketing of such Securities; (9) the denominations in which any Securities of the series shall be issuable, if other than denominations of $1,000 and any integral multiple thereof; (10) if the amount of payments of principal of and any interest on the Securities of the series is to be determined with reference to an index, formula or other method, the manner in which such amounts shall be determined and the calculation agent, if any, with respect thereto; (11) if other than the principal amount thereof, the portion of the principal amount of any Securities of the series which shall be payable upon declaration of acceleration of the Stated Maturity thereof pursuant to Section 6.2; (12) if other than as defined in Section 1.1, the meaning of "Business Day" when used with respect to any Securities of the series; (13) if the Securities of the series may be issued or delivered (whether upon original issuance or upon exchange of a temporary Security of such series or otherwise), or any installment of principal of or any interest is payable, only upon receipt of certain certificates or other documents or satisfaction of other conditions in addition to those specified in this Indenture, the form and terms of such certificates, documents or conditions; (14) the forms of the Securities; (15) whether the Securities of the series shall be issued in whole or in part in the form of a global Security or Securities and, in such case, the depositary for such global Security or Securities; (16) any provision for defeasance or discharge of the Securities of the series, if different from those set forth herein; (17) any listing of the Securities of a series on a securities exchange; -14- (18) the price or prices at which the Securities of a series will be issued; and (19) any other terms of the series not inconsistent with the provisions hereof, but which may include covenants, Events of Default, definitions and other provisions in lieu of or in addition to those set forth in this Indenture as of the date hereof and amendments to or other changes in any of the covenants, Events of Default, definitions and other provisions set forth in this Indenture as of the date hereof. All Securities of any one series shall be substan- tially identical except as to denomination, the rate or rates of interest, if any, the Stated Maturities, the date from which interest, if any, shall accrue and except as may otherwise be provided in or pursuant to the Board Resolutions or Officers' Certificates referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened for issuances of additional Securities of such series or for the establishment of additional terms with respect to the Securities of such series, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolutions, such Officers' Certificates or in any such indenture supplemental hereto. (b) Unless otherwise provided as contemplated by Section 2.2(a) which respect to any series of Securities, any Securities of a series shall be issuable in denominations of $1,000 and any integral multiple thereof. (c) The Securities of any one series shall rank pari ---- passu in right of payment with the Securities of any other - ----- series. Section 2.3. Execution, Authentication, Delivery and Dating. ------------------------- Two Officers shall sign, or one Officer shall sign and one Officer shall attest to (provided that in either case, one such Officer must be the Chairman of the Board, President, a Vice President, Treasurer or Secretary) the Securities for the Company by manual or facsimile signatures. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the -15- Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, executed by the Company and having endorsed thereon the Guarantees executed by the Guarantor, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities; provided, however, -------- ------- that, with respect to Securities of a series subject to a Periodic Offering, (a) such Company Order may be delivered by the Company to the Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (b) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to a Company Order or pursuant to such procedures acceptable to the Trustee as may be specified from time to time by a Company Order, (c) the rate or rates of interest, if any, the Stated Maturity or Maturities, the original Issue Date or Dates, the redemption provisions, if any, and any other terms of Securities of such series shall be determined by Company Order or pursuant to such procedures and (d) if provided for in such procedures, such Company Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Company, or the Company's duly authorized agent or agents designated in an Officers' Certificate, which oral instructions shall be confirmed promptly in writing. The Trustee shall be entitled to rely on such oral instructions, whether or not confirmed in writing. Each Security shall be dated the date of its authentication. The Trustee may appoint an authenticating agent 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 -16- Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company, the Guarantor or an Affiliate. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee's Certificate of Authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. _____________________________, as Trustee By: _______________________ Authorized Officer Notwithstanding the foregoing, if any Security of any series shall have been duly authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 2.11 together with a written statement (which need not comply with Section 11.4 or 11.5 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 2.4. Registrar and Paying Agent. -------------------------- The Company shall maintain, with respect to each series of Securities, an office or agency in the Borough of Manhattan, The City of New York, State of New York where such Securities may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency where such Securities may be presented for payment (the "Paying Agent") and an office or agency where notices and demands to or upon the Company in respect of such Securities and this Indenture -17- may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. Except as otherwise expressly provided in this Indenture, the Company, the Guarantor or any Affiliate of the Company or the Guarantor may act as Paying Agent. The Company and the Guarantor shall enter into an appropriate agency agreement, with respect to each series of Securities, with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar, Paying Agent or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.8. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Securities. Section 2.5. Paying Agent To Hold Money in Trust. ----------------------------------- Each Paying Agent shall hold in trust for the benefit of Securityholders of a particular series or the Trustee all money held by the Paying Agent for the payment of principal of, or interest on, the Securities of such series (whether such money has been distributed to it by the Company, the Guarantor or any other obligor on such Securities), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on such Securities) in making any such payment. If the Company or the Guarantor or a Subsidiary of the Company or Guarantor acts as Paying Agent, the money shall be segregated and held as a separate trust fund. The Company at any time may require a Paying Agent to distribute all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any payment Default with respect to such Securities, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds distributed. Upon doing so, the Paying Agent (other than an obligor under the Securities) shall have no further liability for the money so paid over to the Trustee. Upon -18- any bankruptcy or reorganization proceeding involving the Company or the Guarantor, the Trustee shall act as Paying Agent for the Securities. Section 2.6. Securityholder Lists. -------------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders of each series of Securities and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least ten Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders of such series of Securities, which list may be conclusively relied upon by the Trustee. Section 2.7. Transfer and Exchange. --------------------- When Securities of any series are presented to the Registrar 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, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that such 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, duly executed by the Holder thereof or his attorney-in-fact 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 request and the Guarantor shall endorse the Guarantee thereon. No service charge shall be made for any registration of transfer or exchange, but the Company or the Guarantor 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 similar governmental charge payable upon exchanges or transfers pursuant to Section 2.3, 2.8, 2.11, 3.6 or 8.5). At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series of any authorized denomination or denominations, of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. -19- Whenever any Securities are so surrendered for exchange, the Company shall execute, the Guarantor shall endorse the Guarantee on, and the Trustee or a duly appointed authenticating agent shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. The 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 or (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part. Section 2.8. Replacement Securities. ---------------------- If a mutilated Security of any series is surrendered to the Trustee or if the Holder of a Security of any series claims that such Security has been lost, destroyed or wrongfully taken, the Company shall issue, the Guarantor shall endorse the Guarantee on, and the Trustee shall authenticate, a replacement Security if the Trustee's requirements are met. If required by the Trustee, the Guarantor or the Company, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of the Trustee, the Company and the Guarantor, to protect the Company, the Trustee, the Guarantor or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such Holder for its 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 and the Guarantor. Section 2.9. Outstanding Securities; Determination of Holders' Action. -------------------------------- Securities of any series outstanding at any time are all Securities of such series that have been authenticated by the Trustee, except those cancelled by it, those delivered to -20- it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or any of its Affiliates holds the Security; provided, however, that in determining whether the -------- ------- Holders of the required principal amount of Securities of any series have concurred in any direction, waiver or consent, Securities of such series owned by the Company or other obligor on the Securities of such series or an Affiliate of the Company or such other obligor shall be disregarded, except that for the sole purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be disregarded. If a Security is replaced pursuant to Section 2.8 (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 2.8. If on a Redemption Date or a Maturity Date the Paying Agent (other than the Company or an Affiliate of the Company) holds cash or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Securities payable on that date, and is not prohibited from paying such cash or U.S. Government Obligations to the Holders of such Securities pursuant to the terms of this Indenture, then on and after that date such Securities cease to be outstanding and interest on them shall cease to accrue. Section 2.10. Temporary Securities. -------------------- Until definitive Securities of any series are prepared and ready for delivery, the Company may prepare, the Guarantor may endorse its Guarantee on and the Trustee shall authenticate temporary Securities. 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, the Guarantor shall endorse its Guarantee on, and the Trustee shall authenticate, definitive Securities in exchange for temporary Securities. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities. -21- Section 2.11. Cancellation. ------------ The Company or the Guarantor 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 (other than the Company, the Guarantor or an Affiliate of the Company or the Guarantor), 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. Subject to Section 2.8, 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 the Guarantor shall acquire any of the Securities, such acquisition shall not operate as a payment, 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. Payment of Interest; Defaulted Interest. -------------------- Unless otherwise provided as contemplated by Section 2.2(a) with respect to any series of Securities, 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 (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. If the Company defaults on a payment of interest on any series of Securities, it shall pay the defaulted interest, plus (to the extent permitted by law) any interest payable on the defaulted interest, in accordance with the terms hereof, to the Persons who are Securityholders of such series on a subsequent special record date, which date shall be at least five Business Days prior to the payment date. The Company shall fix such special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before such special record date, the Company shall mail to each Securityholder of such series a notice that states the special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. Section 2.13. CUSIP Number. ------------ -22- The Company in issuing any series of Securities may use a "CUSIP" number (if then generally in use), and if so, the Trustee may use the CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided, however, 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 such Securities, and that reliance may be placed only on the other identification numbers printed on such Securities. The Company will promptly notify the Trustee of any change in the CUSIP number. Section 2.14. Deposit of Moneys. ----------------- On or before each Interest Payment Date and Maturity Date, the Company shall deposit with the Trustee or Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders of the applicable series of Securities on such Interest Payment Date or Maturity Date, as the case may be. Section 2.15. Persons Deemed Owners. --------------------- Prior to due presentment of a Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (except as otherwise specified as contemplated by Section 2.2(a) and Section 2.12) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Company, the Guarantor, the Trustee nor any agent of the Company, the Guarantor or the Trustee shall be affected by notice to the contrary. Section 2.16. Computation of Interest. ----------------------- Except as otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) for Securities of any series, (i) interest, if any, on any Securities which bear interest at a fixed rate shall be computed on the basis of a 360-day year of twelve 30 day months and (ii) interest on any Securities which bear interest at a variable or floating rate shall be computed on the basis of the actual number of days in an interest period -23- divided by the number of days in the year for which such interest is calculated. Section 2.17. Global Securities. ----------------- The Company may issue, if a Board Resolution or Officers' Certificate so provides, some or all of the Securities of a series in temporary or permanent global form. A global Security may be in registered form or in uncertificated form. A global Security shall represent that amount of Securities of a series as specified in the global Security or as endorsed thereon from time to time. At the Company's request, the Registrar shall endorse a global Security to reflect the amount of any increase or decrease in the Securities represented thereby. The Company may issue a global Security only to a depository designated by the Company. A depository may transfer a global Security only as a whole to its nominee or to a successor depository. The Company may establish, among other things, the manner of paying principal and interest on a global Security and whether and upon what terms a beneficial owner of an interest in a global Security may exchange such interest for definitive Securities. The Company, an Affiliate, the Trustee and any Agent shall not be responsible for any acts or omissions of a depository, for any depository records of beneficial ownership interests or for any transactions between the depository and beneficial owners. ARTICLE 3 REDEMPTION OF SECURITIES Section 3.1. Notices to the Trustee. ---------------------- Securities of any series which are redeemable before their maturity shall be redeemable in accordance with their terms and (except as otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) for Securities of any series) in accordance with this Article. -24- If the Company elects to redeem Securities of a series which are redeemable, it shall notify the Trustee in an Officers' Certificate of the Redemption Date and principal amount of Securities of such series to be redeemed. If the Company wishes to reduce the principal amount of a series of Securities to be redeemed, it shall so notify the Trustee of the amount of the reduction and the basis for it. If the Company wishes to credit, and is entitled to credit, against any such redemption Securities of such series it has not previously delivered to the Trustee for cancellation, it shall deliver such Securities with such notice. The Company shall give each notice provided for in this Section 3.1 at least 45 days, but not more than 60 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). Section 3.2. Selection of Securities To Be Redeemed. ----------------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, if less than all the Securities of any series are to be redeemed, the particular Securities of such series or portions thereof to be redeemed shall be selected from the outstanding Securities not previously called for redemption either (x) pro rata, by lot or by such other method as the Trustee considers to be fair and appropriate or (y) in such manner as complies with the requirements of the principal national securities exchange, if any, on which the Securities of such series being redeemed are listed. The amounts to be redeemed shall be equal to $1,000 or any integral multiple thereof, except that if all of the Securities of a series of a Holder are to be redeemed, the entire amount of Securities of such series held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. The Trustee shall select Securities to be redeemed from the Securities of the applicable series outstanding and not previously called for redemption and shall promptly notify the Company and the Registrar in writing of the Securities of any series selected for redemption and, in the case of any Securities of any series selected for partial redemption, the principal amount thereof to be redeemed. -25- For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section 3.3. Notice of Redemption. -------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, notice of redemption shall be given by first-class or certified mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder appearing in the security register maintained by the Registrar. All notices of redemption shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price and the amount of accrued interest, if any, to be paid; (c) 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 upon surrender to the Paying Agent of the Securities redeemed; (d) if any Security is to be redeemed in part, the portion of the principal amount (equal to $1,000 or any integral multiple thereof) of such Security to be redeemed and that on or after the Redemption Date, upon surrender for cancellation of such Security to the Paying Agent, a new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the Securityholder; (e) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and the name and address of the Paying Agent; -26- (f) the CUSIP number, if any, relating to such Securities; and (g) whether Securities are being redeemed pursuant to the mandatory redemption or the optional redemption provisions of the Securities. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company. Section 3.4. Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Paying Agent, such Securities called for redemption shall be paid at the Redemption Price plus accrued interest to the Redemption Date, but interest installments whose maturity is on or prior to such Redemption Date will be payable on the relevant Interest Payment Dates to the Holders of record at the close of business on the relevant record dates referred to in the Securities. Section 3.5. Deposit of Redemption Price. --------------------------- On or prior to any Redemption Date, the Company shall deposit with the Paying Agent an amount of money in immediately available funds sufficient to pay the Redemption Price of, and accrued and unpaid interest on, all the Securities or portions thereof which are to be redeemed on that date, other than Securities or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price, 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. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and, to the extent lawful, accrued interest thereon shall, until paid, bear interest from the Redemption Date at the rate provided in the Securities, unless otherwise specified as contemplated by -27- Section 2.2(a) with respect to the Securities of such series or in such Securities. Section 3.6. Securities Redeemed or Purchased in Part. ----------------------------------- Upon surrender to the Paying Agent of a Security which is to be redeemed in part, the Company shall execute, the Guarantor shall endorse the Guarantee on and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the unredeemed portion of the principal of the Security so surrendered that is not redeemed. ARTICLE 4 COVENANTS Section 4.1. Payment of Securities. --------------------- The Company shall pay the principal of and interest on each series of Securities on the dates and in the manner provided in such Securities or pursuant to this Indenture. An installment of principal or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company, the Guarantor, a Subsidiary of the Company or the Guarantor or any Affiliate of any thereof) holds for the benefit of the Holders on that date money deposited and designated for and sufficient to pay the installment and is not prohibited from paying such money to the Holders of the Securities pursuant to the terms of this Indenture. Unless otherwise specified as contemplated by Section 2.2(a) with respect to any series of Securities, the Company will pay interest (including post-petition interest in any proceeding under any applicable Bankruptcy Law) on overdue principal at the rate and in the manner provided in the Securities; it shall pay interest (including post-petition interest in any proceeding under any applicable Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate and in the same manner, to the extent lawful. -28- Section 4.2. Maintenance of Office or Agency. ------------------------------- The Company and the Guarantor will maintain in the Borough of Manhattan, The City of New York, State of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange, an office or agency where the Securities may be presented for payment and an office or agency where notices and demands to or upon the Company and the Guarantor in respect of the Securities and this Indenture may be served. The Company and the Guarantor will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company or the Guarantor 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 as set forth in Section 11.2. The Company and the Guarantor may also from time to time designate one or more other offices or agencies where Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such -------- ------- designation or rescission shall in any manner relieve the Company or the Guarantor of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, State of New York, for such purposes. The Company and the Guarantor will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company and the Guarantor hereby initially designate the Corporate Trust Office of the Trustee as such office of the Company and the Guarantor. Section 4.3. Corporate Existence. ------------------- Subject to Article Five, the Company and the Guarantor will each do or cause to be done all things necessary to, and will cause each of its Material Subsidiaries to, preserve and keep in full force and effect its respective corporate existence, rights (charter and statutory), licenses and/or franchises; provided, however, that the Company or the -------- ------- Guarantor or any of their respective Subsidiaries shall not be required to preserve any such existence, rights, licenses or franchises if (x) the Company or the Guarantor, as the case may be, shall reasonably determine that the preservation thereof is no longer desirable in the conduct of the business of it and its Subsidiaries taken as a whole or (y) the loss thereof is -29- not materially adverse to either the Company or the Guarantor, as the case may be, and its respective Subsidiaries taken as a whole or to the ability of the Company or the Guarantor to otherwise satisfy its obligations hereunder. Section 4.4. Compliance Certificate. ---------------------- (a) The Company and the Guarantor shall deliver to the Trustee, within 120 days after the end of each of their respective fiscal years, an Officers' Certificate stating that a review of the activities of the Company or the Guarantor, as the case may be, and their respective Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether the Company or the Guarantor, as the case may be, has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company or the Guarantor, as the case may be, has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge and what action the Company or the Guarantor, as the case may be, is taking or proposes to take with respect thereto) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest on the Securities of any series are prohibited or, if such event has occurred, a description of the event and what action the Company or the Guarantor, as the case may be, is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.5 below shall be accompanied by a written statement of the Guarantor's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements nothing has come to their attention that would lead them to believe that the Guarantor or the Company has violated any provisions of Articles 4 or 5 of this Indenture 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 -30- indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company and the Guarantor will deliver to the Trustee as soon as possible, and in any event within 10 days after they become aware or should reasonably have become aware of the occurrence of any Default or Event of Default in respect of any series of Securities, an Officers' Certificate specifying such Default or Event of Default and what action the Company or the Guarantor is taking or proposes to take with respect thereto. Section 4.5. SEC Reports. ----------- The Guarantor and the Company shall file with the Trustee, within 15 days after it files them with the SEC, copies of the quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Guarantor or the Company, as the case may be, is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Guarantor also shall comply with the other provisions of TIA (S) 314(a). If the Guarantor is not subject to the requirements of such Section 13 or 15(d), the Guarantor shall file with the Trustee, within 15 days after it would have been required to file the same with the SEC, financial statements, including any notes thereto (and with respect to annual reports, an auditors' report by a firm of established national reputation), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which the Guarantor would have been required to include in such annual reports, information, documents or other reports if the Guarantor had been subject to the requirements of such Section 13 or 15(d). In addition, the Guarantor shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders generally to be filed with the Trustee and mailed, no later than the date such materials are mailed or made available to the Guarantor's stockholders, to the Holders at their addresses as set forth in the register of Securities maintained by the Registrar. Section 4.6. Waiver of Stay, Extension or Usury Laws. ------------------------- Each of the Company and the Guarantor covenants (to the extent that it may lawfully do so) that it will not at any -31- time insist upon, or 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 which would prohibit or forgive the Company or the Guarantor from paying all or any portion of the principal of or interest on Securities of any series 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) each of the Company and the Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.7. Limitations on Liens. -------------------- The Company covenants that it will not issue, incur, create, assume or guarantee, and will not permit any Restricted Subsidiary to issue, incur, create, assume or guarantee, any Indebtedness secured by a Lien upon any Principal Property of the Company or such Restricted Subsidiary or upon any shares of stock or Indebtedness of any Restricted Subsidiary held by the Company (whether such Principal Property, shares or Indebtedness are now existing or owed or hereafter created or acquired) without in any such case effectively providing concurrently with the issuance, incurrence, creation, assumption or guaranty of any such secured Indebtedness, or the grant of a Lien with respect to any such Indebtedness of any Restricted Subsidiary, that the Securities (together with, if the Company shall so determine, any other Indebtedness of or guarantee by the Company or such Restricted Subsidiary) shall be secured by a mortgage ranking equally and ratably with (or, at the option of the Company, prior to), and for so long as such other Indebtedness is so secured, such secured debt. The foregoing restriction, however, will not apply to: (a) Liens on property, shares of stock or Indebtedness or other assets of any corporation existing at the time such corporation becomes a Restricted Subsidiary; provided that such Liens are not -------- incurred in anticipation of such corporation becoming a Restricted Subsidiary; (b) Liens on property, shares of stock or Indebtedness existing at the time of acquisition thereof by the Company or a Restricted Subsidiary or Liens on property, shares of stock or Indebtedness to secure any Indebtedness for borrowed money incurred prior to, at the time of, or within 270 days after, the latest of the acquisition thereof, or, in the case of property, the completion of construction, the completion of improvements or the -32- commencement of substantial commercial operation of such property, for the purpose of financing all or any part of the purchase price thereof, such construction or the making of such improvements; (c) Liens to secure Indebtedness owing to the Company or the Guarantor or to a Restricted Subsidiary; (d) Liens existing at the date of the initial issuance of the Securities of such series; (e) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to the Company or a Restricted Subsidiary; provided -------- that such Lien was not incurred in anticipation of such merger or consolidation or sale, lease or other disposition; (f) Liens created in connection with a project financed with, and created to secure, a Nonrecourse Obligation; or (g) extensions, renewals or replacements of any Liens permitted by any of the foregoing clauses (a) through (f); provided, however, that any Liens -------- ------- permitted by any of the foregoing clauses (a) through (f) shall not extend to or cover any property of the Company or such Restricted Subsidiary, as the case may be, other than the property specified in such clauses and improvements thereto. Section 4.8. Limitations on Sale and Lease-Back Transactions. ---------------------------------- The Company covenants that it will not, nor will it permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction with respect to any Principal Property, other than any such transaction involving a lease for a term of not more than three years or any such transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, unless: (a) the Company or such Restricted Subsidiary would be entitled to incur Indebtedness secured by a mortgage on the Principal Property involved in such transaction at least equal in amount to the Attributable Debt with respect to such Sale and Lease-Back Transaction, without equally and ratably securing the Securities, pursuant to Section 4.7; or (b) the Company shall apply an amount equal to the greater of the net proceeds of such sale or the Attributable Debt with respect to such Sale and Lease-Back Transaction within 180 days of such sale to either (or a combination of) the retirement (other than any mandatory retirement, mandatory prepayment or sinking fund payment or by payment at maturity) of Indebtedness of the Company or a Restricted Subsidiary that matures more than twelve months after the creation of such Indebtedness or the purchase, construction or development of other comparable property. -33- ARTICLE 5 SUCCESSOR CORPORATION Section 5.1. When Company and Guarantor May Merge, etc. ------------------------------------- (a) Neither the Company nor the Guarantor will, in a single transaction or a series of transactions, consolidate with or merge with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any other Person or Persons, or permit any of their respective Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company or the Guarantor and their respective Subsidiaries, taken as a whole, to any other Person or Persons, unless: (1) either (A) if the transaction or series of transactions is a merger or consolidation, the Company or the Guarantor, as the case may be, shall be the Person surviving such merger or consolidation or (B) the Person formed by such consolidation or into which the Company, the Guarantor or such Subsidiary, as the case may be, is merged or to which the properties and assets of the Company, the Guarantor or such Subsidiary, substantially as an entirety, are transferred (any such surviving Person or transferee Person being the "Surviving Entity") shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and (x) in the case of the Company, such corporation shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the Company's obligation for the due and punctual payment of the principal of and interest, if any, on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and (y) in the case of the Guarantor, such corporation shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the Guarantor's obligation for the due and punctual payment of the Guarantee and the performance of every covenant of this Indenture on the part of the Guarantor to -34- be performed or observed; provided, however, that this -------- ------- subsection (1) need not be complied with in the case of the Guarantor's consolidation with or merger into the Company; (2) immediately after giving effect to such transaction or series of transactions on a pro forma basis --- ----- (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing with respect to Securities of any series; and (3) the Company or the Guarantor, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each in form and substance reasonably satisfactory to the Trustee, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition and, if a supplemental indenture is required in connection with such transaction or series of transactions, such supplemental indenture comply with this Indenture and that all conditions precedent herein provided for relating to such transaction or series of transactions have been complied with. Section 5.2. Successor Substituted. --------------------- Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company or the Guarantor, as the case may be, in accordance with Section 5.1(a) hereof, the successor Person or Persons formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Guarantor, as the case may be, under this Indenture and the Securities with the same effect as if such successor had been named as the Company or the Guarantor, as the case may be, herein; and thereafter the Company or the Guarantor, as the case may be, shall be discharged from all obligations and covenants under this Indenture and the Securities. -35- ARTICLE 6 REMEDIES Section 6.1. Events of Default. ----------------- An "Event of Default" means with respect to each series of Securities, individually, any of the following events: (a) default by the Company or the Guarantor in the payment of the principal of any Security of such series when the same becomes due and payable upon Stated Maturity, acceleration or otherwise; or (b) default by the Company or the Guarantor in the payment of an installment of interest on any Security of such series when the same becomes due and payable, and any such Default continues for a period of 30 days; or (c) default by the Company or the Guarantor in the performance or observance of any term, covenant or agreement contained in this Indenture or the Securities (other than Defaults specified in clause (a) or (b) above), and such Default continues for a period of 60 days after written notice of such Default (which notice shall specify the Default, demand that it be remedied and state that it is a "Notice of Default") requiring the Company or the Guarantor, as the case may be, to remedy the same shall have been given (i) to the Company or the Guarantor by the Trustee or (ii) to the Company or the Guarantor and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; or (d) default or defaults under one or more agreements, instruments, mortgages, bonds, debentures or other evidences of Indebtedness, whether now existing or hereinafter created, under which the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor then has outstanding Indebtedness in excess of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), and either (i) such Indebtedness is already due and payable in full or (ii) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness unless such acceleration is cured, -36- waived, rescinded or annulled within 30 days after written notice thereof shall been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; or (e) one or more judgments, orders or decrees of any court or regulatory or administrative agency of competent jurisdiction for the payment of money in excess of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), shall be entered against the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor, as the case may be, and shall not be discharged or fully bonded and there shall have been a period of 60 days after the date on which any period for appeal has expired and during which a stay of enforcement of such judgment, order or decree shall not be in effect; or (f) the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor pursuant to or under or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors; or (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor in an involuntary case or proceeding, (ii) appoints a Custodian of the Company, the Guarantor or any Material Subsidiary of the Company -37- or the Guarantor or for all or substantially all of its properties, or (iii) orders the liquidation of the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor, and in each case the order or decree remains unstayed and in effect for 60 days. The Trustee shall not be charged with knowledge of any Default or Event of Default (other than, if the Trustee is acting as Paying Agent, those set forth in Section 6.1(a), (b) or, to the extent relating to Section 4.1, (c)) unless written notice thereof shall have been given to a Trust Officer at the Corporate Trust Office of the Trustee by the Company, the Paying Agent, any Holder, any holder of Senior Indebtedness or any of their respective agents. Section 6.2. Acceleration. ------------ If an Event of Default with respect to any series of Securities (other than an Event of Default specified in Section 6.1(f) or (g) with respect to the Company or the Guarantor) occurs and is continuing, the Trustee by written notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding, by written notice to the Company and the Trustee, may declare the unpaid principal of (or, if any of the Securities of that series are Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) and accrued interest on all the Securities of such series to be due and payable immediately. If an Event of Default specified in Section 6.1(f) or (g) with respect to the Company or the Guarantor occurs and is continuing, then the principal of and accrued interest on all the Securities shall ipso facto become and be immediately due and payable without - ---- ----- any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration in respect of a series of Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee, Holders of a majority in aggregate principal amount of such series of Securities outstanding, by written notice to the Company and the Trustee, may, on behalf -38- of all Holders of such series of Securities, rescind and annul such declaration and its consequences if: (a) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section 7.8 and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Securities of such series, (iii) the principal of such series of Securities which has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by such series of Securities, and (iv) interest upon overdue principal and, to the extent that payment of such interest is lawful, overdue interest at the rate borne by such series of Securities which has become due otherwise than by such declaration of acceleration; (b) such rescission or annulment would not conflict with any judgment or decree of a court of competent jurisdiction; and (c) all Events of Default with respect to such series of Securities, other than the non-payment of principal of and interest on such series of Securities which has become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.4. No such rescission shall affect any subsequent Default or Event of Default with respect to such series of Securities or impair any right consequent thereon. Section 6.3. Other Remedies. -------------- If an Event of Default with respect to a series of Securities occurs and is continuing, the Trustee may in its discretion pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on such Securities or to enforce the performance of any provision of such Securities or this Indenture. -39- All rights of action and claims under this Indenture or the Securities of any series may be enforced by the Trustee even if it does not possess any of the Securities of such series 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 with respect to a series of Securities 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 6.4. Waiver of Past Defaults. ----------------------- Subject to the provisions of Sections 6.2, 6.7 and 9.2, the Holders of not less than a majority in aggregate principal amount of the outstanding Securities of any series by notice to the Trustee may, on behalf of the Holders of all the Securities of such series, waive any existing Default or Event of Default, with respect to such series, and its consequences. When a Default or Event of Default with respect to a series of Securities is so waived, it shall be deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 6.5. Control by Majority. ------------------- The Holders of at least a majority in aggregate principal amount of the then outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, however, that the Trustee may refuse to -------- ------- follow any direction (a) that conflicts with any rule of law or this Indenture, (b) that the Trustee determines may be unduly prejudicial to the rights of another Securityholder of such series, or (c) that may expose the Trustee to Personal liability unless the Trustee has indemnification satisfactory to it in its sole discretion against any loss or expense caused by its following such direction; and provided, further, that -------- ------- the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. -40- Section 6.6. Limitation on Suits. ------------------- No Holder of any Securities of any series shall have any right to pursue any remedy with respect to this Indenture or such Securities unless: (a) the Holder gives written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (b) the Holders of at least 25% in principal amount of the then outstanding Securities of that series make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer and, if requested, provide to the Trustee reasonable indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, provision of indemnity; and (e) during such 60-day period the Holders of a majority in aggregate principal amount of the then outstanding Securities of that series do not give the Trustee a direction which is inconsistent with the request. The foregoing limitations shall not apply to a suit instituted by a Holder of Securities of a series for the enforcement of the payment of principal of or accrued interest on such Securities held by such Holder on or after the respective due dates set forth in such Securities. A Securityholder of a series may not use this Indenture to prejudice the rights of any other Securityholder of such series or to obtain priority or preference over such other Securityholder. Section 6.7. Right of Holders To Receive Payment. ----------------------------------- Notwithstanding any other provision in this Indenture, the right of any Holder of a Security to receive payment of the principal of and interest on such 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 the Stated Maturity or Interest Payment Date, as the case may -41- be, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder. Section 6.8. Collection Suit by Trustee. -------------------------- If an Event of Default specified in clause (a) or (b) of Section 6.1 with respect to Securities of any series occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust in favor of the Holders against the Company, the Guarantor or any other obligor on the Securities of such series for the whole amount of principal of 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 of such series and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.9. Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company or the Guarantor (or any other obligor upon the Securities), their creditors or their 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 Holder 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 Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.8. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder 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 Holder in any such proceeding. -42- Section 6.10. Priorities. ---------- If the Trustee collects any money pursuant to this Article Six, it shall pay out such money in the following order: First: to the Trustee for amounts due under Section 7.8; Second: to Holders for interest accrued, if any, on the Securities of the applicable series, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; Third: to Holders for principal owing under the Securities of the applicable series, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities of the applicable series for principal; and Fourth: the balance, if any, to whomsoever may be lawfully entitled thereto. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may in its discretion require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to any suit by the Trustee, any suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than 10% in aggregate principal amount of the outstanding Securities of any series. Section 6.12. Restoration of Rights and Remedies. ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or -43- any Security and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE 7 TRUSTEE Section 7.1. Duties. ------ (a) In case an Event of Default has occurred and is continuing, with respect to Securities of any series, the Trustee shall exercise, with respect to Securities of such series, such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default, with respect to the Securities of any series: (1) the Trustee need perform, with respect to Securities of such series, only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may, with respect to Securities of such series, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own -44- 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 7.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (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 6.5. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1. (f) The Trustee shall not be liable for interest on, or be required to invest, any assets received by it except as the Trustee may agree with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. Section 7.2. Rights of Trustee. ----------------- Subject to Section 7.1 hereof and the provisions of TIA (S) 315: (a) The Trustee may rely, and shall be protected from 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 consult with counsel and may require an Officers' -45- Certificate or an Opinion of Counsel, which shall conform to Sections 11.4 and 11.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture other than any liabilities arising out of its own negligence. (e) The Trustee may consult with counsel of its own choosing and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture 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 costs, expenses and liabilities which may be incurred therein or thereby. Section 7.3. Individual Rights of Trustee. ---------------------------- The Trustee, any Paying Agent, Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 7.11 and 7.12 and TIA (S)(S) 310 and 311, may otherwise deal with the Company and its Subsidiaries with the same rights it would have if it were not the Trustee, Paying Agent, Registrar or such other agent. -46- Section 7.4. Trustee's Disclaimer. -------------------- The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement in the Securities other than the Trustee's certificate of authentication. Section 7.5. Notice of Default. ----------------- If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder of the affected series notice of the Default or Event of Default within 30 days thereafter; provided, however, that, except in the case of a Default in the - -------- ------- payment of the principal of or interest on any Security or in the payment of any sinking fund installment, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee of the board of directors or a committee of the directors of the Trustee and/or Trust Officers in good faith determines that the withholding of such notice is in the interest of the Holders. Section 7.6. Money Held in Trust. ------------------- All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required herein or by law. The Trustee shall not be under any liability for interest on any moneys received by it hereunder. Section 7.7. Reports by Trustee to Holders. ----------------------------- Within 60 days after May 15 of each year beginning with the May 15 following the date of this Indenture, the Trustee shall, to the extent that any of the events described in TIA (S) 313(a) has occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such May 15 that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c). A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed with the SEC -47- and each securities exchange, if any, on which the Securities are listed. The Company shall notify the Trustee in writing if the Securities become listed on any securities exchange or automatic quotation system. Section 7.8. Compensation and Indemnity. -------------------------- The Company covenants and agrees to pay the Trustee from time to time reasonable compensation for its services. 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 incurred or made by it. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability incurred by it arising out of or in connection with the administration of this trust and its rights or duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.8, the Trustee shall have a Lien prior to the Securities on all assets held or collected by the Trustee, in its capacity as Trustee, except assets held in trust for the benefit of the Holders of particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 6.1(f) or (g) with respect to the Company or the Guarantor, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. -48- The Company's obligations under this Section 7.8 and any Lien arising hereunder shall survive the resignation or removal of any trustee, the discharge of the Company's obligations pursuant to Article Eight and/or the termination of this Indenture. Section 7.9. Replacement of Trustee. ---------------------- The Trustee may resign with respect to any series of Securities issued hereunder by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities of any series may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee with the Company's consent. The Company may remove the Trustee with respect to any series of Securities if: (a) the Trustee fails to comply with Section 7.11; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a receiver or other public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason with respect to the Securities of one or more series, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee, with respect to the Securities of such series. The Trustee shall be entitled to payment of its fees and reimbursement of its expenses while acting as Trustee, and to the extent such amounts remain unpaid, the Trustee that has resigned or has been removed shall retain the Lien afforded by Section 7.8. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Securities of any series may appoint a successor Trustee to replace the successor Trustee appointed by the Company with respect to the Securities of that series. In the case of the appointment hereunder of a successor Trustee with respect to all Securities, a successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as -49- Trustee to the successor Trustee, subject to the Lien provided in Section 7.8, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees as co-Trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, subject, nevertheless, to its Lien, if any, provided for in Section 7.8. -50- If a successor Trustee with respect to the Securities of one or more series does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities of such series may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.11, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any provisions of this Section 7.9 shall become effective upon acceptance of appointment by the successor trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.9, the Company's obligations under Section 7.8 shall continue for the benefit of the retiring Trustee. Section 7.10. Successor Trustee by Merger, etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall, if such resulting, surviving or transferee corporation or national banking association is otherwise eligible hereunder, be the successor Trustee. Section 7.11. Eligibility; Disqualification. ----------------------------- There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(5) and which shall have a combined capital and surplus of at least $100,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be -51- eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinabove specified in this Article. The Trustee shall comply with TIA (S) 310(b). Section 7.12. Preferential Collection of Claims Against Company. --------------------------------- The Trustee shall comply with TIA (S) 311(a) excluding any creditor relationship listed in TIA (S) 311(b). If the present or any future Trustee shall resign or be removed, it shall be subject to TIA (S) 311(a) to the extent provided therein. ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE Section 8.1. Termination of the Company's and the Guarantor's Obligations. ------------------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, the Company may terminate its obligations and the obligations of the Guarantor under this Indenture with respect to any series of Securities, except those obligations referred to in the penultimate paragraph of this Section 8.1, if all Securities of such series previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment money has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company, as provided in Section 8.4) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if: (a) either (i) pursuant to Article Three, the Company shall have given notice to the Trustee and mailed a notice to each Securityholder of such series of the redemption of all of the Securities of such series under arrangements satisfactory to the Trustee for the giving of such notice or (ii) all Securities of such series have otherwise become due and payable hereunder; (b) the Company shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an -52- irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Securityholders of such series for that purpose, money in such amount as is sufficient without consideration of reinvestment of such interest, to pay principal of and interest on the outstanding Securities of such series to maturity or redemption; provided that the Trustee shall have been -------- irrevocably instructed to apply such money to the payment of said principal and interest with respect to such Securities; (c) no Default or Event of Default with respect to this Indenture applicable to such series or the Securities of such series shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or the Guarantor is a party or by which it is bound; (d) the Company and the Guarantor shall have paid all other sums payable by it hereunder; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for the termination of the Company's obligations under such Securities and this Indenture applicable to such Securities have been complied with. Such Opinion of Counsel shall also state that such satisfaction and discharge does not result in a default under any agreement or instrument then known to such counsel that binds or affects the Company. Notwithstanding the foregoing paragraph, the Company's and, to the extent applicable, the Guarantor's obligations in Sections 2.6, 2.7, 2.8, 2.9, 4.1, 4.2, 7.8, 8.4, 8.5, 10.1 and 10.2 shall survive until the Securities of such series are no longer outstanding pursuant to the last paragraph of Section 2.9. After the Securities are no longer outstanding, the Company's and, to the extent applicable, the Guarantor's obligations in Sections 7.8, 8.4 and 8.5 shall survive. After such delivery or irrevocable deposit the Trustee upon request shall acknowledge in writing the discharge of the Company's and the Guarantor's obligations under the Securities of such series and this Indenture applicable to such Securities except for those surviving obligations specified above. -53- Section 8.2. Legal Defeasance and Covenant Defeasance. -------------------- (a) Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, the Company may, at its option by Board Resolution or by an Officers' Certificate, at any time, with respect to the Securities of any series, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding Securities of such series 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), each of the Company and the Guarantor shall be deemed to have been released and discharged from its obligations with respect to the outstanding Securities of such series 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 of such series, which shall thereafter be deemed to be "outstanding" only for the purposes of paragraph (e) below and the other Sections of and matters under this Indenture applicable to such Securities referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Securities and this Indenture applicable to such Securities insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Securities of such series to receive solely from the trust fund described in paragraph (d) below and as more fully set forth in such paragraph payments in respect of the principal of and interest on such Securities when such payments are due, (ii) the Company's and, to the extent applicable, the Guarantor's obligations with respect to such Securities under Sections 2.7, 2.8 and 4.2 and, with respect to the Trustee, under Section 7.8, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv) this Section 8.2 and Section 8.5. Subject to compliance with this Section 8.2, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) below with respect to Securities of any series. -54- (c) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (c), the Company and, to the extent applicable, the Guarantor shall be released and discharged from its obligations under any covenant contained in Article 5 and in Section 4.3, except as to the corporate existence of the Company and the Guarantor and in Sections 4.4 through 4.8 and in certain other sections with respect to the outstanding Securities of such series identified in any supplemental indenture pursuant to Section 2.2(a) on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and such 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 such outstanding Securities, the Company and, to the extent applicable, the Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1(c) with respect to such series of Securities, but, except as specified above, the remainder of this Indenture applicable to such Securities 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 of such series: (i) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.11 who shall agree to comply with the provisions of this Section 8.2 applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities of such series, (x) money in an amount or (y) direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which guarantee or obligation the full faith and credit of the United States is pledged ("U.S. Government Obligations") maturing as to -55- principal and interest in such amounts of money and at such times as are sufficient without consideration of any reinvestment of such interest, to pay principal of and interest on the outstanding Securities of such series not later than one day before the due date of any payment, or (z) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge principal of and interest on the outstanding Securities of such series on the Maturity Date or otherwise in accordance with the terms of this Indenture and of the Securities of such series; provided, -------- however, that the Trustee (or other qualifying trustee) ------- shall have received an irrevocable written order from the Company instructing the Trustee (or other qualifying trustee) to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities of such series; (ii) no Default or Event of Default with respect to such series of Securities shall have occurred and be continuing on the date of such deposit; (iii) such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound; (iv) in the case of an election under paragraph (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (v) in the case of an election under paragraph (c) above, the Company shall have delivered to the Trustee an -56- Opinion of Counsel to the effect that the Holders of the outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (vi) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance under paragraph (b) above or the Covenant Defeasance under paragraph (c) above, as the case may be, have been complied with; and (vii) the Company shall have delivered to the Trustee an amount sufficient to cover its fees and expenses as Trustee under this Indenture through the term of the Securities to be defeased, or made adequate provision therefor to the satisfaction of the Trustee. (e) All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee; collectively for purposes of this paragraph (e), the "Trustee") pursuant to paragraph (d) above in respect of the outstanding Securities of such series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture applicable to such Securities, to the payment, either directly or through any Paying Agent (other than the Company or any Affiliate of the Company) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to paragraph (d) above or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities of such series. Anything in this Section 8.2 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request, in writing, of the Company any -57- money or U.S. Government Obligations held by it as provided in paragraph (d) above which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.3. Application of Trust Money. -------------------------- The Trustee or a trustee satisfactory to the Trustee, the Company and the Guarantor shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Sections 8.1 and 8.2, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Securities of such series. Section 8.4. Repayment to Company. -------------------- Subject to Sections 7.8, 8.1 and 8.2, the Trustee shall promptly pay to the Company, upon receipt by the Trustee of an Officers' Certificate, any excess money, determined in accordance with Section 8.2, held by it at any time. The Trustee and the Paying Agent shall pay to the Company, 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 or principal or interest that remains unclaimed for two years after payment to the Securityholders of such series 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 Securityholder of such series entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to money must look solely to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. -58- Section 8.5. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations to any payment in respect of Securities of any series 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 the Guarantor's obligations under this Indenture and the Securities of such series 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 Guarantor has made any - ------- payment of principal of or interest on any Securities of such series because of the reinstatement of its obligations, the Company or the Guarantor, as the case may be, shall be subrogated to the rights of the Holders of Securities of such series to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1. Without Consent of Holders. -------------------------- The Company, the Guarantor and the Trustee may amend, waive or supplement this Indenture or the Securities of any series without notice to or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to evidence the succession of another Person to the Company or the Guarantor, and the assumption by any such successor of the obligations of the Company or the Guarantor herein and in the Securities of any series in accordance with Article Five; (c) to provide for uncertificated Securities in addition to certificated Securities; (d) to comply with any requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; -59- (e) to make any change that would provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder; or (f) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.2(a), respectively. Upon the request of the Company accompanied by a resolution of its Board of Directors, and in the case of an amendment to Article 10 hereof adversely affecting the Guarantor, the Guarantor's Board of Directors, authorizing the execution of any such supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company and, as the case may be, the Guarantor, in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects its own rights, duties, protections or immunities under this Indenture or otherwise. Section 9.2. With Consent of Holders. ----------------------- Subject to Section 6.4, the Company, the Guarantor and the Trustee may amend or supplement this Indenture or the Securities of any series or any supplemental indenture relating to any series of Securities with the written consent of the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected then outstanding, and the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected then outstanding by written notice to the Trustee may waive future compliance by the Company and the Guarantor with any provision of this Indenture, such Securities or any supplemental indenture relating to such Securities. Upon the request of the Company, accompanied by a resolution of its Board of Directors, and in the case of an amendment to Article 10 hereof adversely affecting the Guarantor, the Guarantor's Board of Directors, authorizing the execution of any supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Securityholders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company, -60- and, as the case may be, the Guarantor in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties, protections or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. Notwithstanding the provisions of this Section 9.2, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.4, may not: (a) reduce the percentage in aggregate outstanding principal amount of Securities of any series the Holders of which must consent to an amendment, supplement or waiver of any provision of this Indenture, the Securities of such series or any supplemental indenture; (b) reduce the rate or change the time for payment of interest on any Security of any series or change the method or formula for calculating interest; (c) reduce the principal amount outstanding of or extend the fixed maturity of any Security of any series or alter the redemption provisions with respect thereto or reduce the amount of the principal of any outstanding Discount Securities that would be due and payable upon declaration of acceleration of maturity thereof; (d) waive a default in the payment of the principal of or interest on, or redemption or an offer to purchase required hereunder with respect to, any Security of any series; (e) make the principal of or interest on any Security of any series payable in money or in a manner other than that stated in the Security; (f) modify this Section 9.2 or Section 6.4 or Section 6.7; (g) impair the right to institute suit for the enforcement of any payment on or with respect to the Securities of any series; (h) make such other changes as may require the consent of each Holder so affected pursuant to any supplemental indenture; or -61- (i) release the Guarantor from its obligations under the Guarantee or this Indenture or make any other change to Article 10 that adversely affects the legal rights of Holders of the Securities. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders of each Security affected thereby, with a copy to the Trustee, 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 supplemental indenture. Section 9.3. Compliance with Trust Indenture Act. ----------------------------------- Every amendment of or supplement to this Indenture or the Securities shall comply with the TIA as then in effect. Section 9.4. Revocation and Effect of Consents. --------------------------------- Until an amendment, supplement or waiver becomes effective with respect to a series of Securities, a consent to it by a Holder of a Security of such series is a continuing consent by such Holder and every subsequent Holder of that Security or portion of that Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security prior to such amendment, supplement or waiver becoming effective as to the Securities of such series. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. Notwithstanding the above, nothing in this paragraph shall impair the right of any Holder under (S) 316(b) of the TIA. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the second and third sentences of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated -62- proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. Such consent shall be effective only for actions taken within 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder of such series unless it makes a change described in any of clauses (a) through (i) of Section 9.2; if it makes such a change, the amendment, supplement or waiver shall bind every subsequent Holder of a Security of such series or portion of a Security that evidences the same debt as the consenting Holder's Security. Section 9.5. Notation on or Exchange of Securities. ------------------------------------- If an amendment, supplement or waiver changes the terms of a Security of any series, the Trustee shall (in accordance with the specific direction of the Company) request the Holder of such Security to deliver it to the Trustee. The Trustee shall (in accordance with the specific direction of the Company) place an appropriate notation on such 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 such Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.6. Trustee May Sign Amendments, etc. -------------------------------- The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article Nine if the amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, supplement or waiver, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver is authorized or permitted by this Indenture, that it is not inconsistent herewith and that it will be valid and binding upon the Company in accordance with its terms. -63- ARTICLE 10 GUARANTEE Section 10.1. Unconditional Guarantee. ----------------------- The Guarantor hereby unconditionally and irrevocably guarantees to each Holder of a Security of each series authenticated and delivered by the Trustee the due and punctual payment of the principal of (including any amount in respect of original issue discount), and interest, if any (together with any additional amounts payable pursuant to the terms of such Security), on such Security and the due and punctual payment of the sinking fund payments, if any, and analogous obligations, if any, provided for pursuant to the terms of such Security, when and as the same shall become due and payable, whether at maturity or upon redemption or upon declaration of acceleration or otherwise according to the terms of such Security and of this Indenture. In case of default by the Company in the payment of any such principal (including any amount in respect of original issue discount), interest (together with any additional amounts payable pursuant to the terms of such Security), sinking fund payment, or analogous obligation, the Guarantor agrees duly and punctually to pay the same. The Guarantor hereby agrees that its obligations hereunder shall be absolute and unconditional irrespective of any extension of the time for payment of any such Security, any modification of any such Security, any invalidity, irregularity or unenforceability of any such Security or this Indenture, any failure to enforce the same or any waiver, modification or indulgence granted to the Company with respect thereto by the Holder of such Security or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a demand or proceeding first against the Company, protest or notice with respect to any such Security or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this guarantee will not be discharged as to any such Security except by payment in full of the principal of (including any amount payable in respect of original issue discount) and interest, if any (together with any additional amounts payable pursuant to the terms of such Security), thereon. Until the principal of and interest on the Securities and all other amounts payable by the Company or the Guarantor -64- under this Indenture shall have been paid in full, the Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to exercise its rights to be subrogated to the rights of the payee against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof; at any time thereafter, the Guarantor shall be free to exercise any of such rights. The guarantee set forth in this Section shall not be valid or become obligatory for any purpose with respect to a Security of any series until the certificate of authentication on such Security shall have been signed by the Trustee. Section 10.2. Execution of Guarantee. ---------------------- To evidence its guarantee specified in Section 10.1 to the Holders of Securities of any series, the Guarantor hereby agrees to execute the Guarantee in substantially the form above recited to be endorsed on each Security of such series authenticated and delivered by the Trustee. Such Guarantee shall be executed on behalf of the Guarantor by both (a) its Chairman or its Vice Chairman or its President or any Vice President and (b) its Treasurer or any Assistant Treasurer or its Secretary or any Assistant Secretary, 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 Guarantee on behalf of the Guarantor. The seal of the Guarantor may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Guarantees. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Guarantee that has been duly authenticated and delivered by the Trustee. Such signatures may be the manual or facsimile signatures of such officers and may be imprinted or otherwise reproduced on the Guarantees. In case any officer of the Guarantor who shall have signed any of the Guarantees shall cease to be an officer before the Securities on which such Guarantees are endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Company, such Securities nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Guarantees had not ceased to be such officer, and any Guarantees may be signed on behalf of -65- the Guarantor by such Persons as, at the actual date of the execution of such Guarantees, shall be the proper officers of the Guarantor, although at the date of such Securities or of the execution of this Indenture any such Person was not such an officer. ARTICLE 11 MISCELLANEOUS Section 11.1. Trust Indenture Act of 1939. --------------------------- This Indenture is subject to the provisions of the TIA that are required to be a part of this Indenture, and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. Section 11.2. Notices. ------- Any notice or communication shall be sufficiently given if in writing and delivered in Person or mailed by first class mail, postage prepaid, addressed as follows: If to the Company, to: KELSEY-HAYES COMPANY 11878 Hubbard Road Livonia, Michigan 48150 Attention: Treasurer If to the Guarantor, to: VARITY CORPORATION 672 Delaware Avenue Buffalo, New York 14209 Attention: Treasurer -66- If to the Trustee, to: MANUFACTURERS AND TRADERS TRUST COMPANY One M&T Plaza Buffalo, New York 14240 Attention: Corporate Trust Department The parties hereto by notice to the other parties may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed, postage prepaid, to a Holder, including any notice delivered in connection with TIA (S) 310(b), TIA (S) 313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed by first class mail to such Holder at the address of such Holder as it appears on the Securities register maintained by the Registrar and shall be sufficiently given to such Holder if so mailed within the time prescribed. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, if a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. Section 11.3. Communication by Holders with Other Holders. ----------------------------- Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Guarantor, the Trustee, the Registrar and any other Person shall have the protection of TIA (S) 312(c). Section 11.4. Certificate and Opinion as to Conditions Precedent. ----------------------------- Upon any request or application by the Company or the Guarantor to the Trustee to take any action under this Indenture, the Company or the Guarantor shall furnish to the Trustee: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, -67- 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 11.5. Statements Required in Certificate or Opinion. ---------------------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the Person making such certificate or rendering such 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 opinion as to whether or not such covenant or condition has been compiled with; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been compiled 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 11.6. Rules by Trustee, Paying Agent, Registrar. ------------------------------ The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions. Section 11.7. Governing Law. ------------- This Indenture, the Securities and the Guarantee shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law. -68- Section 11.8. No Interpretation of Other Agreements. -------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 11.9. No Recourse Against Others. -------------------------- A director, officer, employee, shareholder or Affiliate, as such, of the Company or the Guarantor shall not have any liability for any obligations of the Company or the Guarantor under the Securities, the Guarantee or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. Section 11.10. Successors. ---------- All agreements of the Company and the Guarantor in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 11.11. Duplicate Originals. ------------------- The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all such executed copies together represent the same agreement. Section 11.12. Separability. ------------ In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefor against any party hereto. Section 11.13. Table of Contents, Headings, etc. -------------------------------- The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. -69- Section 11.14. Benefits of Indenture. --------------------- Nothing in this Indenture, in the Securities or in the Guarantee, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. -70- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. KELSEY-HAYES COMPANY, as Issuer By:_________________________________ Name: Title: VARITY CORPORATION, as Guarantor By:_________________________________ Name: Title: MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee By:_________________________________ Name: Title: EX-4.2 7 FORM OF SUBORDINATED INDENTURE RELATING TO KELSEY-HAYES EXHIBIT 4.2 _______________________________________________________________ _______________________________________________________________ ____________________ KELSEY-HAYES COMPANY, as Issuer, and VARITY CORPORATION, as Guarantor, and MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee ____________________ INDENTURE Dated as of , 1995 ____________________ Subordinated Debt Securities _______________________________________________________________ _______________________________________________________________ Reconciliation and tie between Trust Indenture Act of 1939 and Indenture dated as of , 1995 Trust Indenture Indenture Act Section Section - --------------- --------- (S) 310(a)(1) ........................................ 7.11 (a)(2) ........................................ 7.11 (a)(3) ........................................ N.A. (a)(4) ........................................ N.A. (a)(5) ........................................ 7.11 (b) ........................................ 7.11; 12.2 (c) ........................................ N.A. (S) 311(a) ........................................ 7.12 (b) ........................................ 7.12 (c) ........................................ N.A. (S) 312(a) ........................................ 2.6 (b) ........................................ 12.3 (c) ........................................ 12.3 (S) 313(a) ........................................ 7.7 (b) ........................................ 7.7 (c) ........................................ 7.7; 12.2 (d) ........................................ 7.7 (S) 314(a) ........................................ 4.4; 4.5; 12.2 (b) ........................................ N.A. (c)(1) ........................................ 12.4 (c)(2) ........................................ 12.4 (c)(3) ........................................ N.A. (d) ........................................ N.A. (e) ........................................ 12.5 (f) ........................................ N.A. (S) 315(a) ........................................ 7.1(b) (b) ........................................ 7.5; 12.2 (c) ........................................ 7.1(a) (d) ........................................ 7.1(c) (e) ........................................ 6.11 (S) 316(a) (last sentence) ........................................ 2.9 (a)(1)(A) ........................................ 6.5 (a)(1)(B) ........................................ 6.4 (a)(2) ........................................ N.A. (b) ........................................ 6.7 (c) ........................................ N.A. (S) 317(a)(1) ........................................ 6.8 (a)(2) ........................................ 6.9 (b) ........................................ 2.5 (S) 318(a) ........................................ 12.1 (b) ........................................ N.A. (c) ........................................ 12.1 __________ Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. -i- TABLE OF CONTENTS ----------------- Page ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions..................................... 1 Section 1.2. Incorporation by Reference of Trust Indenture Act................................. 9 Section 1.3. Rules of Construction........................... 10 ARTICLE 2 THE SECURITIES Section 2.1. Forms Generally................................. 11 Section 2.2. Title, Terms and Denominations.................. 12 Section 2.3. Execution, Authentication, Delivery and Dating.................................... 15 Section 2.4. Registrar and Paying Agent...................... 17 Section 2.5. Paying Agent To Hold Money in Trust............. 18 Section 2.6. Securityholder Lists............................ 18 Section 2.7. Transfer and Exchange........................... 19 Section 2.8. Replacement Securities.......................... 20 Section 2.9. Outstanding Securities; Determination of Holders' Action.............. 20 Section 2.10. Temporary Securities............................ 21 Section 2.11. Cancellation.................................... 21 Section 2.12. Payment of Interest; Defaulted Interest...................................... 22 Section 2.13. CUSIP Number.................................... 22 Section 2.14. Deposit of Moneys............................... 22 Section 2.15. Persons Deemed Owners........................... 23 Section 2.16. Computation of Interest......................... 23 Section 2.17. Global Securities............................... 23 ARTICLE 3 REDEMPTION OF SECURITIES Section 3.1. Notices to the Trustee.......................... 24 Section 3.2. Selection of Securities To Be Redeemed...................................... 25 Section 3.3. Notice of Redemption............................ 25 Section 3.4. Effect of Notice of Redemption.................. 27 Section 3.5. Deposit of Redemption Price..................... 27 Section 3.6. Securities Redeemed or Purchased in Part.......................................... 27 -ii- Page ---- ARTICLE 4 COVENANTS Section 4.1. Payment of Securities........................... 28 Section 4.2. Maintenance of Office or Agency................. 28 Section 4.3. Corporate Existence............................. 29 Section 4.4. Compliance Certificate.......................... 29 Section 4.5. SEC Reports..................................... 31 Section 4.6. Waiver of Stay, Extension or Usury Laws.......................................... 31 Section 4.7. Limitation on Liens............................. 32 Section 4.8. Limitations on Sale and Lease-Back Transactions.................................. 33 ARTICLE 5 SUCCESSOR CORPORATION Section 5.1. When Company and Guarantor May Merge, etc.................................... 33 Section 5.2. Successor Substituted........................... 35 ARTICLE 6 REMEDIES Section 6.1. Events of Default............................... 35 Section 6.2. Acceleration.................................... 38 Section 6.3. Other Remedies.................................. 39 Section 6.4. Waiver of Past Defaults......................... 40 Section 6.5. Control by Majority............................. 40 Section 6.6. Limitation on Suits............................. 40 Section 6.7. Right of Holders To Receive Payment............. 41 Section 6.8. Collection Suit by Trustee...................... 41 Section 6.9. Trustee May File Proofs of Claim................ 42 Section 6.10. Priorities...................................... 42 Section 6.11. Undertaking for Costs........................... 43 Section 6.12. Restoration of Rights and Remedies.............. 43 ARTICLE 7 TRUSTEE Section 7.1. Duties.......................................... 44 Section 7.2. Rights of Trustee............................... 45 Section 7.3. Individual Rights of Trustee.................... 46 Section 7.4. Trustee's Disclaimer............................ 46 -iii- Page ---- Section 7.5. Notice of Default............................... 47 Section 7.6. Money Held in Trust............................. 47 Section 7.7. Reports by Trustee to Holders................... 47 Section 7.8. Compensation and Indemnity...................... 47 Section 7.9. Replacement of Trustee.......................... 48 Section 7.10. Successor Trustee by Merger, etc................ 51 Section 7.11. Eligibility; Disqualification................... 51 Section 7.12. Preferential Collection of Claims Against Company............................... 52 ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE Section 8.1. Termination of the Company's and the Guarantor's Obligations....................... 52 Section 8.2. Legal Defeasance and Covenant Defeasance.................................... 54 Section 8.3 Application of Trust Money...................... 58 Section 8.4. Repayment to Company............................ 58 Section 8.5. Reinstatement................................... 59 ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1. Without Consent of Holders...................... 59 Section 9.2. With Consent of Holders......................... 60 Section 9.3. Compliance with Trust Indenture Act............. 62 Section 9.4. Revocation and Effect of Consents............... 62 Section 9.5. Notation on or Exchange of Securities.................................... 63 Section 9.6. Trustee May Sign Amendments, etc................ 63 ARTICLE 10 GUARANTEE Section 10.1. Unconditional Guarantee ........................ 64 Section 10.2. Execution of Guarantee ......................... 65 ARTICLE 11 SUBORDINATION Section 11.1. Agreement to Subordinate........................ 66 Section 11.2. Liquidation; Dissolution; Bankruptcy............ 66 Section 11.3. Default on Senior Debt.......................... 67 -iv- Page ---- Section 11.4. Acceleration of Securities...................... 68 Section 11.5. When Distribution Must Be Paid Over............. 68 Section 11.6. Notice by Company............................... 69 Section 11.7. Subrogation..................................... 69 Section 11.8. Relative Rights................................. 69 Section 11.9. Subordination May Not Be Impaired by Company....................................... 70 Section 11.10. Distribution or Notice to Representative................................ 70 Section 11.11. Rights of Trustee and Paying Agent.............. 70 Section 11.12. Authorization to Effect Subordination................................. 71 ARTICLE 12 MISCELLANEOUS Section 12.1. Trust Indenture Act of 1939..................... 71 Section 12.2. Notices......................................... 72 Section 12.3. Communication by Holders with Other Holders....................................... 73 Section 12.4. Certificate and Opinion as to Conditions Precedent.......................... 73 Section 12.5. Statements Required in Certificate or Opinion.................................... 73 Section 12.6. Rules by Trustee, Paying Agent, Registrar..................................... 74 Section 12.7. Governing Law................................... 74 Section 12.8. No Interpretation of Other Agreements.................................... 74 Section 12.9. No Recourse Against Others...................... 74 Section 12.10. Successors...................................... 74 Section 12.11. Duplicate Originals............................. 75 Section 12.12. Separability.................................... 75 Section 12.13. Table of Contents, Headings, etc................ 75 Section 12.14. Benefits of Indenture........................... 75 SIGNATURES......................................................... 76 -v- INDENTURE, dated as of , 1995, among KELSEY-HAYES COMPANY, a Delaware corporation (the "Company"), VARITY CORPORATION, a Delaware corporation (the "Guarantor"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation, as trustee (the "Trustee"). For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders of the Securities or of any series thereof, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. ----------- "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. "Agent" means any Registrar or Paying Agent of the Securities. "Attributable Debt" when used in connection with a Sale and Lease-Back Transaction involving a Principal Property shall mean, at the time of determination, the lesser of: (a) the fair value of such property (as determined in good faith by the Board of Directors of the Company); or (b) the present value of the total net amount of rent required to be paid under such lease during the remaining term thereof (including any renewal term or period for which such lease has been extended), discounted at the rate of interest set forth or implicit in the terms of such lease or, if not practicable to determine such rate, the weighted average interest rate per annum borne by the Securities of each series outstanding pursuant to this Indenture compounded semi-annually. For purposes of the fore- going definition, rent shall not include amounts required to be paid by the lessee, whether or not designated as rent or additional rent, on account of or contingent upon maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall be the lesser of the net amount determined assuming termination upon the first date such lease may be terminated (in which case the net amount shall also include the amount of the penalty, but no -2- rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the net amount determined assuming no such termination. "Bankruptcy Law" means Title 11 of the United States Code or any similar federal, state or foreign law for the relief of debtors. "Board of Directors" means the board of directors of the Company or the Guarantor, as the case may be, or any duly authorized committee of either such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors of the Company or the Guarantor as the context requires and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York, State of New York, or the city in which the Trustee has its Corporate Trust Office, are authorized or obligated by law, regulation or executive order to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Company" means the party named as such in this Indenture until a successor replaces it (or any previous successor) pursuant to this Indenture, and thereafter means such successor. -3- "Company Request" or "Company Order" means a written request or order signed in the name of the Company by any one of its Chairman of the Board, its Vice-Chairman, its President or a Vice President, and by any one of its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the corporate trust office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which on the date hereof is One M & T Plaza, Buffalo, New York 14240, Attention: Corporate Trust Department. "Covenant Defeasance" shall have the meaning set forth in Section 8.2. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Discount Security" means any Security which provides for an amount less than the principal thereof to be due and payable upon a declaration of acceleration of the Stated Maturities thereof pursuant to Section 6.2. "Event of Default" has the meaning set forth in Section 6.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "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 of America, as in effect on the date hereof. "Guarantee" means the guarantee of the Guarantor set forth in Article Ten hereof. -4- "Guarantor" means Varity Corporation, a Delaware corporation, and, subject to Article Ten, its successors and assigns. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, with respect to any Person, without duplication, (i) all obligations for borrowed money, (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations, (iv) all obligations 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 accrued expenses arising in the ordinary course of business), (v) all fixed unconditional obligations issued or contracted for as payment in consideration of the purchase by such Person of the stock or substantially all the assets of another Person or a merger or consolidation, (vi) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction which secure Indebtedness of a Person other than the issuer of the letter of credit or the accepting bank, (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons guaranteed by such Person to the extent of the guarantee; and (viii) all obligations of the type referred to in clauses (i) through (vii) of other Persons 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 value of such property or asset at the time the Lien is created or the amount of the obligation so secured. "Indenture" means this Indenture, as amended, modified or supplemented from time to time, in accordance herewith, and includes, with respect to a particular series of Securities, the terms of such series of Securities established or contemplated by Section 2.2(a). "Interest Payment Date", for any series of Securities, has the meaning provided in the form of such Securities set forth in the supplemental indenture, Board Resolution, or Officers' Certificate under which such Securities are issued. "Issue Date" means, with respect to any particular series of Securities, the original date of issuance of such series; provided that, in the case of a series subject to a -------- Periodic Offering, the Issue Date shall be the original issue -5- date or dates established pursuant to the proviso of the third paragraph of Section 2.3. "Legal Defeasance" shall have the meaning set forth in Section 8.2. "Lien" means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind. A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Material Subsidiary" means, at any particular time, any Subsidiary of any Person that (a) accounted for more than 10% of the consolidated revenues of such Person and its Subsidiaries on a consolidated basis for the most recently completed fiscal year of such Person or (b) was the owner of more than 10% of the consolidated assets of such Person and its Subsidiaries on a consolidated basis as at the end of such fiscal year, all as shown on the consolidated financial statements of such Person and its Subsidiaries for such fiscal year. "Maturity Date" means, with respect to any Security, the date on which any principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise. "Nonrecourse Obligation" means Indebtedness or other obligations substantially related to (i) the acquisition of assets not previously owned by the Company or any Restricted Subsidiary or (ii) the financing of a project involving the development or expansion of properties of the Company or any Restricted Subsidiary, as to which the obligee with respect to such Indebtedness or obligation has no recourse to the Company or any Restricted Subsidiary or any assets of the Company or any Restricted Subsidiary other than the assets which were acquired with the proceeds of such transaction or the project financed with the proceeds of such transaction (and the proceeds thereof). "Officer" means the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the -6- Chief Operating Officer, the Treasurer, the Secretary or the Controller of the Company or the Guarantor, as the case may be. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of the Company and delivered to the Trustee. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. Subject to any express provision hereof, the counsel may be an employee of or counsel to the Company or the Guarantor. "Paying Agent" has the meaning set forth in Section 2.4, except that, for the purposes of Articles Three and Eight, the Paying Agent shall not be: (i) the Company or the Guarantor, (ii) a Subsidiary of the Company or the Guarantor or (iii) any of the Company's or Guarantor's respective Affiliates. "Periodic Offering" means an offering of Securities of a series from time to time the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the Stated Maturity or Stated Maturities thereof, the original Issue Date or Dates thereof, the redemption provisions, if any, and any other terms specified as contemplated by Section 2.2(a) with respect thereto, are to be determined by the Company, or one or more of the Company's agents or employees designated in an Officers' Certificate, upon the issuance of such Securities. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "principal" means, with respect to any debt security, the principal of the security plus, with respect to the Securities only, the premium, if any, on the Security. "Principal Property" shall mean the land, land improvements, buildings and fixtures (to the extent they constitute real property interests) (including any leasehold interest therein) constituting the principal corporate office, any manufacturing plant or any manufacturing facility (whether now owned or hereafter acquired) which: (a) is owned by the Company or any of its Subsidiaries; (b) is located within any -7- of the present 50 States of the United States of America (or the District of Columbia); (c) has not been determined in good faith by the Board of Directors of the Company not to be materially important to the total business conducted by the Company and its Subsidiaries taken as a whole; and (d) has a book value on the date as of which the determination is being made in excess of 1% of consolidated total assets of the Company as most recently determined on or prior to such date. "Redemption Date" means, with respect to any Security to be redeemed, the date fixed by the Company or the Guarantor, as the case may be, for such redemption pursuant to this Indenture and the Securities. "Redemption Price" means, with respect to any Security to be redeemed, the price fixed for such redemption pursuant to the terms of this Indenture and the Securities. "Registrar" shall have the meaning set forth in Section 2.4. "Regular Record Date", for any series of Securities, has the meaning provided in the form of such Securities set forth in the supplemental indenture, Board Resolution or Officers' Certificate under which such Securities are issued. "Representative" means the trustee or other agent or representative for any Senior Indebtedness. "Restricted Subsidiary" shall mean any Subsidiary of the Company which owns any Principal Property. "Sale and Lease-Back Transaction" shall mean any sale or transfer by the Company or one of its Restricted Subsidiaries of any Principal Property that is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof, if such sale or transfer is made with the intent of leasing, or as part of an arrangement involving the lease of, such Principal Property to the Company or one of its Restricted Subsidiaries. "SEC" 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. -8- "Securities" means the securities that are issued under this Indenture, as amended or supplemented from time to time pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Indebtedness" means all Indebtedness of the Company and all renewals, extensions or refundings thereof. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness shall not include (i) any Indebtedness of the Company to any of its Subsidiaries, or (ii) any Indebtedness created or evidenced pursuant to an instrument that expressly provides that such Indebtedness is not superior in right of payment to the Securities. "Stated Maturity" means, when used with respect to any Security of a particular series or any installment of principal thereon, the date specified in such Security of such series as the fixed date on which any principal of such Security of such series is due and payable, and when used with respect to any other Indebtedness, means any date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness is due and payable. "Subsidiary" means, with respect to any Person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof and (ii) any other Person (other than a corporation), including, without limitation, a joint venture, in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions). "Surviving Entity" shall have the meaning set forth in Section 5.1. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces such party (or any -9- previous successor) in accordance with the provisions of this Indenture, and thereafter means such successor. "Trust Officer" means the Chairman of the Board, the President or any other officer of the Trustee assigned by the Trustee to administer its corporate trust matters and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "U.S. Government Obligations" shall have the meaning set forth in Section 8.2. "Vice President" shall include Senior Vice President or a Vice President with any other prefix. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). Section 1.2. Incorporation by Reference of Trust Indenture Act. ----------------------------------- Whenever this Indenture refers to a provision of the TIA, the 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: "Commission" means the SEC; "indenture securities" means the Securities; "indenture security holder" means a Securityholder or Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company, the Guarantor or any other obligor on the Securities. -10- All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. Section 1.3. Rules of Construction. --------------------- For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) words in the singular include the plural, and words in the plural include the singular; (c) "or" is not exclusive; (d) provisions apply to successive events and transactions; (e) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (f) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (g) all references to $ or dollars refer to the lawful currency of the United States of America. ARTICLE 2 THE SECURITIES Section 2.1. Forms Generally. --------------- The Securities of each series shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions (as set forth in a Board Resolution or, to the extent established pursuant to rather than set forth in a Board Resolution, an Officers' Certificate of the Company detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions -11- and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any applicable law or with the rules of any securities exchange or as may, consistently herewith, be determined by the Officers executing such Securities, as evidenced by their execution thereof. The Securities shall be issuable only in registered form without coupons. The indenture supplemental hereto or the Board Resolution or Officers' Certificate establishing the form of security of any series shall be delivered to the Trustee concurrently with or prior to the delivery of the Company Order contemplated by Section 2.3 for the authentication and delivery of such Securities. The definitive Securities and Guarantees endorsed thereon shall be printed, typewritten, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the Officers executing such Securities and Guarantees, as evidenced by their execution of such Securities and Guarantees. Each Security and Guarantee shall be dated the date of its authentication. The Guarantees to be endorsed on the Securities of each series shall be in substantially the form set forth in Section 10.1 in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any law or with any rules made pursuant thereto or with any rules of any securities exchange or to conform to general usage or as may, consistently herewith, be determined by the Officers executing such Guarantees, as evidenced by their execution of such Guarantees. Section 2.2. Title, Terms and Denominations. ------------------------------ (a) The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture shall be unlimited. The Securities may be issued in one or more series. There shall be established and, subject to Section 2.3, set forth, or determined in the manner provided, in one or more indentures supplemental hereto or in or pursuant to a Board Resolution (as set forth in such Board Resolution -12- or, to the extent established pursuant to rather then set forth in such Board Resolution, an Officers' Certificate detailing such establishment): (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 2.7, 2.8, 2.10, 3.6 or 9.5 and except for any Securities which, pursuant to Section 2.3, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on any Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal of the Securities of the series is payable or the method of determination thereof; (5) the rate or rates at which the Securities of the series shall bear interest (which in no event shall be greater than the then applicable legal rate therefor), if any, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Securities on any Interest Payment Date and/or the method by which such rate or rates or Regular Record Date or Dates shall be determined; (6) the place or places where, subject to the provisions of Section 4.2, the principal of and any interest on Securities of the series shall be payable, any Securities of the series may be surrendered for regis- tration of transfer, Securities of the series may be surrendered for exchange and notices and demands to or upon the Company in respect of the Securities of the series and this Indenture may be served; -13- (7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof, the conditions, if any, giving rise to such obligation, and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, and any provisions for the remarketing of such Securities; (9) the denominations in which any Securities of the series shall be issuable, if other than denominations of $1,000 and any integral multiple thereof; (10) if the amount of payments of principal of and any interest on the Securities of the series is to be determined with reference to an index, formula or other method, the manner in which such amounts shall be determined and the calculation agent, if any, with respect thereto; (11) if other than the principal amount thereof, the portion of the principal amount of any Securities of the series which shall be payable upon declaration of acceleration of the Stated Maturity thereof pursuant to Section 6.2; (12) if other than as defined in Section 1.1, the meaning of "Business Day" when used with respect to any Securities of the series; (13) if the Securities of the series may be issued or delivered (whether upon original issuance or upon exchange of a temporary Security of such series or otherwise), or any installment of principal of or any interest is payable, only upon receipt of certain certificates or other documents or satisfaction of other conditions in addition to those specified in this Indenture, the form and terms of such certificates, documents or conditions; (14) the forms of the Securities; -14- (15) whether the Securities of the series shall be issued in whole or in part in the form of a global Security or Securities and, in such case, the depositary for such global Security or Securities; (16) any provision for defeasance or discharge of the Securities of the series, if different from those set forth herein; (17) any listing of the Securities of a series on a securities exchange; (18) the price or prices at which the Securities of a series will be issued; and (19) any other terms of the series not inconsistent with the provisions hereof, but which may include covenants, Events of Default, definitions and other provisions in lieu of or in addition to those set forth in this Indenture as of the date hereof and amendments to or other changes in any of the covenants, Events of Default, definitions and other provisions set forth in this Indenture as of the date hereof. All Securities of any one series shall be substan- tially identical except as to denomination, the rate or rates of interest, if any, the Stated Maturities, the date from which interest, if any, shall accrue and except as may otherwise be provided in or pursuant to the Board Resolutions or Officers' Certificates referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened for issuances of additional Securities of such series or for the establishment of additional terms with respect to the Securities of such series, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolutions, such Officers' Certificates or in any such indenture supplemental hereto. (b) Unless otherwise provided as contemplated by Section 2.2(a) with respect to any series of Securities, any Securities of a series shall be issuable in denominations of $1,000 and any integral multiple thereof. (c) The Securities of any one series shall rank pari ---- passu in right of payment with the Securities of any other - ----- series. -15- Section 2.3. Execution, Authentication, Delivery and Dating. ------------------------- Two Officers shall sign, or one Officer shall sign and one Officer shall attest to (provided that in either case, one such Officer must be the Chairman of the Board, President, a Vice President, Treasurer or Secretary) the Securities for the Company by manual or facsimile signatures. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, executed by the Company and having endorsed thereon the Guarantees executed by the Guarantor, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities; provided, however, -------- ------- that, with respect to Securities of a series subject to a Periodic Offering, (a) such Company Order may be delivered by the Company to the Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (b) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to a Company Order or pursuant to such procedures acceptable to the Trustee as may be specified from time to time by a Company Order, (c) the rate or rates of interest, if any, the Stated Maturity or Maturities, the original Issue Date or Dates, the redemption provisions, if any, and any other terms of Securities of such series shall be determined by Company Order or pursuant to such procedures and (d) if provided for in such procedures, such Company Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Company, or the Company's duly authorized agent or agents designated in an Officers' Certificate, which oral instructions shall be confirmed promptly in writing. The -16- Trustee shall be entitled to rely on such oral instructions, whether or not confirmed in writing. Each Security shall be dated the date of its authentication. The Trustee may appoint an authenticating agent 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, the Guarantor or an Affiliate. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee's Certificate of Authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. _____________________________, as Trustee By: _______________________ Authorized Officer Notwithstanding the foregoing, if any Security of any series shall have been duly authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 2.11 together with a written statement (which need not comply with Section 12.4 or 12.5 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. -17- Section 2.4. Registrar and Paying Agent. -------------------------- The Company shall maintain, with respect to each series of Securities, an office or agency in the Borough of Manhattan, The City of New York, State of New York where such Securities may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency where such Securities may be presented for payment (the "Paying Agent") and an office or agency where notices and demands to or upon the Company in respect of such Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. Except as otherwise expressly provided in this Indenture, the Company, the Guarantor or any Affiliate of the Company or the Guarantor may act as Paying Agent. The Company and the Guarantor shall enter into an appropriate agency agreement, with respect to each series of Securities, with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar, Paying Agent or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.8. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Securities. Section 2.5. Paying Agent To Hold Money in Trust. ----------------------------------- Each Paying Agent shall hold in trust for the benefit of Securityholders of a particular series or the Trustee all money held by the Paying Agent for the payment of principal of, or interest on, the Securities of such series (whether such money has been distributed to it by the Company, the Guarantor or any other obligor on such Securities), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on such Securities) in making any such payment. If the Company or the Guarantor or a Subsidiary of the Company or Guarantor acts as Paying Agent, the money -18- shall be segregated and held as a separate trust fund. The Company at any time may require a Paying Agent to distribute all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any payment Default with respect to such Securities, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds distributed. Upon doing so, the Paying Agent (other than an obligor under the Securities) shall have no further liability for the money so paid over to the Trustee. Upon any bankruptcy or reorganization proceeding involving the Company or the Guarantor, the Trustee shall act as Paying Agent for the Securities. Section 2.6. Securityholder Lists. -------------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders of each series of Securities and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least ten Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders of such series of Securities, which list may be conclusively relied upon by the Trustee. Section 2.7. Transfer and Exchange. --------------------- When Securities of any series are presented to the Registrar 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, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that such 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, duly executed by the Holder thereof or his attorney-in-fact 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 request and the Guarantor shall endorse the Guarantee thereon. No service charge shall be made for any registration of transfer or exchange, but the Company or the Guarantor may require payment of a sum sufficient to cover any transfer -19- tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Section 2.3, 2.8, 2.11, 3.6 or 8.5). At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series of any authorized denomination or denominations, of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, the Guarantor shall endorse the Guarantee on, and the Trustee or a duly appointed authenticating agent shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. The 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 or (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part. Section 2.8. Replacement Securities. ---------------------- If a mutilated Security of any series is surrendered to the Trustee or if the Holder of a Security of any series claims that such Security has been lost, destroyed or wrongfully taken, the Company shall issue, the Guarantor shall endorse the Guarantee on, and the Trustee shall authenticate, a replacement Security if the Trustee's requirements are met. If required by the Trustee, the Guarantor or the Company, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of the Trustee, the Company and the Guarantor, to protect the Company, the Trustee, the Guarantor or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such Holder for -20- its 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 and the Guarantor. Section 2.9. Outstanding Securities; Determination of Holders' Action. -------------------------------- Securities of any series outstanding at any time are all Securities of such series that have been authenticated by the Trustee, except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or any of its Affiliates holds the Security; provided, however, that in determining whether the -------- ------- Holders of the required principal amount of Securities of any series have concurred in any direction, waiver or consent, Securities of such series owned by the Company or other obligor on the Securities of such series or an Affiliate of the Company or such other obligor shall be disregarded, except that for the sole purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be disregarded. If a Security is replaced pursuant to Section 2.8 (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 2.8. If on a Redemption Date or a Maturity Date the Paying Agent (other than the Company or an Affiliate of the Company) holds cash or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Securities payable on that date, and is not prohibited from paying such cash or U.S. Government Obligations to the Holders of such Securities pursuant to the terms of this Indenture, then on and after that date such Securities cease to be outstanding and interest on them shall cease to accrue. Section 2.10. Temporary Securities. -------------------- Until definitive Securities of any series are prepared and ready for delivery, the Company may prepare, the -21- Guarantor may endorse its Guarantee on and the Trustee shall authenticate temporary Securities. 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, the Guarantor shall endorse its Guarantee on, and the Trustee shall authenticate, definitive Securities in exchange for temporary Securities. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities. Section 2.11. Cancellation. ------------ The Company or the Guarantor 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 (other than the Company, the Guarantor or an Affiliate of the Company or the Guarantor), 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. Subject to Section 2.8, 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 the Guarantor shall acquire any of the Securities, such acquisition shall not operate as a payment, 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. Payment of Interest; Defaulted Interest. -------------------- Unless otherwise provided as contemplated by Section 2.2(a) with respect to any series of Securities, 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 (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. If the Company defaults on a payment of interest on any series of Securities, it shall pay the defaulted interest, plus (to the extent permitted by law) any interest payable on the defaulted interest, in accordance with the terms hereof, to the Persons who are Securityholders of such series on a -22- subsequent special record date, which date shall be at least five Business Days prior to the payment date. The Company shall fix such special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before such special record date, the Company shall mail to each Securityholder of such series a notice that states the special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. Section 2.13. CUSIP Number. ------------ The Company in issuing any series of Securities may use a "CUSIP" number (if then generally in use), and if so, the Trustee may use the CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided, however, 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 such Securities, and that reliance may be placed only on the other identification numbers printed on such Securities. The Company will promptly notify the Trustee of any change in the CUSIP number. Section 2.14. Deposit of Moneys. ----------------- On or before each Interest Payment Date and Maturity Date, the Company shall deposit with the Trustee or Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders of the applicable series of Securities on such Interest Payment Date or Maturity Date, as the case may be. Section 2.15. Persons Deemed Owners. --------------------- Prior to due presentment of a Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (except as otherwise specified as contemplated by Section 2.2(a) and Section 2.12) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Company, the Guarantor, the Trustee nor any agent of the Company, the -23- Guarantor or the Trustee shall be affected by notice to the contrary. Section 2.16. Computation of Interest. ----------------------- Except as otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) for Securities of any series, (i) interest, if any, on any Securities which bear interest at a fixed rate shall be computed on the basis of a 360-day year of twelve 30 day months and (ii) interest on any Securities which bear interest at a variable or floating rate shall be computed on the basis of the actual number of days in an interest period divided by the number of days in the year for which such interest is calculated. Section 2.17. Global Securities. ----------------- The Company may issue, if a Board Resolution or Officers' Certificate so provides, some or all of the Securities of a series in temporary or permanent global form. A global Security may be in registered form or in uncertificated form. A global Security shall represent that amount of Securities of a series as specified in the global Security or as endorsed thereon from time to time. At the Company's request, the Registrar shall endorse a global Security to reflect the amount of any increase or decrease in the Securities represented thereby. The Company may issue a global Security only to a depository designated by the Company. A depository may transfer a global Security only as a whole to its nominee or to a successor depository. The Company may establish, among other things, the manner of paying principal and interest on a global Security and whether and upon what terms a beneficial owner of an interest in a global Security may exchange such interest for definitive Securities. The Company, an Affiliate, the Trustee and any Agent shall not be responsible for any acts or omissions of a depository, for any depository records of beneficial ownership interests or for any transactions between the depository and beneficial owners. -24- ARTICLE 3 REDEMPTION OF SECURITIES Section 3.1. Notices to the Trustee. ---------------------- Securities of any series which are redeemable before their maturity shall be redeemable in accordance with their terms and (except as otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) for Securities of any series) in accordance with this Article. If the Company elects to redeem Securities of a series which are redeemable, it shall notify the Trustee in an Officers' Certificate of the Redemption Date and principal amount of Securities of such series to be redeemed. If the Company wishes to reduce the principal amount of a series of Securities to be redeemed, it shall so notify the Trustee of the amount of the reduction and the basis for it. If the Company wishes to credit, and is entitled to credit, against any such redemption Securities of such series it has not previously delivered to the Trustee for cancellation, it shall deliver such Securities with such notice. The Company shall give each notice provided for in this Section 3.1 at least 45 days, but not more than 60 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). Section 3.2. Selection of Securities To Be Redeemed. ----------------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, if less than all the Securities of any series are to be redeemed, the particular Securities of such series or portions thereof to be redeemed shall be selected from the outstanding Securities not previously called for redemption either (x) pro rata, by lot or by such other method as the Trustee considers to be fair and appropriate or (y) in such manner as complies with the requirements of the principal national securities exchange, if any, on which the Securities of such series being redeemed are listed. The amounts to be redeemed shall be equal to $1,000 or any integral multiple thereof, except that if all of the -25- Securities of a series of a Holder are to be redeemed, the entire amount of Securities of such series held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. The Trustee shall select Securities to be redeemed from the Securities of the applicable series outstanding and not previously called for redemption and shall promptly notify the Company and the Registrar in writing of the Securities of any series selected for redemption and, in the case of any Securities of any series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section 3.3. Notice of Redemption. -------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, notice of redemption shall be given by first-class or certified mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder appearing in the security register maintained by the Registrar. All notices of redemption shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price and the amount of accrued interest, if any, to be paid; (c) 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 upon surrender to the Paying Agent of the Securities redeemed; -26- (d) if any Security is to be redeemed in part, the portion of the principal amount (equal to $1,000 or any integral multiple thereof) of such Security to be redeemed and that on or after the Redemption Date, upon surrender for cancellation of such Security to the Paying Agent, a new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the Securityholder; (e) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and the name and address of the Paying Agent; (f) the CUSIP number, if any, relating to such Securities; and (g) whether Securities are being redeemed pursuant to the mandatory redemption or the optional redemption provisions of the Securities. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company. Section 3.4. Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Paying Agent, such Securities called for redemption shall be paid at the Redemption Price plus accrued interest to the Redemption Date, but interest installments whose maturity is on or prior to such Redemption Date will be payable on the relevant Interest Payment Dates to the Holders of record at the close of business on the relevant record dates referred to in the Securities. Section 3.5. Deposit of Redemption Price. --------------------------- On or prior to any Redemption Date, the Company shall deposit with the Paying Agent an amount of money in immediately available funds sufficient to pay the Redemption Price of, and accrued and unpaid interest on, all the Securities or portions thereof which are to be redeemed on that date, other than Securities or portions thereof called for redemption on that date -27- which have been delivered by the Company to the Trustee for cancellation. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price, 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. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and, to the extent lawful, accrued interest thereon shall, until paid, bear interest from the Redemption Date at the rate provided in the Securities, unless otherwise specified as contemplated by Section 2.2(a) with respect to the Securities of such series or in such Securities. Section 3.6. Securities Redeemed or Purchased in Part. ----------------------------------- Upon surrender to the Paying Agent of a Security which is to be redeemed in part, the Company shall execute, the Guarantor shall endorse the Guarantee on and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the unredeemed portion of the principal of the Security so surrendered that is not redeemed. ARTICLE 4 COVENANTS Section 4.1. Payment of Securities. --------------------- The Company shall pay the principal of and interest on each series of Securities on the dates and in the manner provided in such Securities or pursuant to this Indenture. An installment of principal or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company, the Guarantor, a Subsidiary of the Company or the Guarantor or any Affiliate of any thereof) holds for the benefit of the Holders on that date money deposited and designated for and sufficient to pay the installment and is not prohibited from paying such money to the Holders of the Securities pursuant to the terms of this Indenture. -28- Unless otherwise specified as contemplated by Section 2.2(a) with respect to any series of Securities, the Company will pay interest (including post-petition interest in any proceeding under any applicable Bankruptcy Law) on overdue principal at the rate and in the manner provided in the Securities; it shall pay interest (including post-petition interest in any proceeding under any applicable Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate and in the same manner, to the extent lawful. Section 4.2. Maintenance of Office or Agency. ------------------------------- The Company and the Guarantor will maintain in the Borough of Manhattan, The City of New York, State of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange, an office or agency where the Securities may be presented for payment and an office or agency where notices and demands to or upon the Company and the Guarantor in respect of the Securities and this Indenture may be served. The Company and the Guarantor will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company or the Guarantor 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 as set forth in Section 12.2. The Company and the Guarantor may also from time to time designate one or more other offices or agencies where Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such -------- ------- designation or rescission shall in any manner relieve the Company or the Guarantor of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, State of New York, for such purposes. The Company and the Guarantor will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company and the Guarantor hereby initially designate the Corporate Trust Office of the Trustee as such office of the Company and the Guarantor. -29- Section 4.3. Corporate Existence. ------------------- Subject to Article Five, the Company and the Guarantor will each do or cause to be done all things necessary to, and will cause each of its Material Subsidiaries to, preserve and keep in full force and effect its respective corporate existence, rights (charter and statutory), licenses and/or franchises; provided, however, that the Company or the -------- ------- Guarantor or any of their respective Subsidiaries shall not be required to preserve any such existence, rights, licenses or franchises if (x) the Company or the Guarantor, as the case may be, shall reasonably determine that the preservation thereof is no longer desirable in the conduct of the business of it and its Subsidiaries taken as a whole or (y) the loss thereof is not materially adverse to either the Company or the Guarantor, as the case may be, and its respective Subsidiaries taken as a whole or to the ability of the Company or the Guarantor to otherwise satisfy its obligations hereunder. Section 4.4. Compliance Certificate. ---------------------- (a) The Company and the Guarantor shall deliver to the Trustee, within 120 days after the end of each of their respective fiscal years, an Officers' Certificate stating that a review of the activities of the Company or the Guarantor, as the case may be, and their respective Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether the Company or the Guarantor, as the case may be, has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company or the Guarantor, as the case may be, has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge and what action the Company or the Guarantor, as the case may be, is taking or proposes to take with respect thereto) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest on the Securities of any series are prohibited or, if such event has occurred, a description of the event and what action the Company or the Guarantor, as the case may be, is taking or proposes to take with respect thereto. -30- (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.5 below shall be accompanied by a written statement of the Guarantor's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements nothing has come to their attention that would lead them to believe that the Guarantor or the Company has violated any provisions of Articles 4 or 5 of this Indenture 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 and the Guarantor will deliver to the Trustee as soon as possible, and in any event within 10 days after they become aware or should reasonably have become aware of the occurrence of any Default or Event of Default in respect of any series of Securities, an Officers' Certificate specifying such Default or Event of Default and what action the Company or the Guarantor is taking or proposes to take with respect thereto. Section 4.5. SEC Reports. ----------- The Guarantor and the Company shall file with the Trustee, within 15 days after it files them with the SEC, copies of the quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Guarantor or the Company, as the case may be, is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Guarantor also shall comply with the other provisions of TIA (S) 314(a). If the Guarantor is not subject to the requirements of such Section 13 or 15(d), the Guarantor shall file with the Trustee, within 15 days after it would have been required to file the same with the SEC, financial statements, including any notes thereto (and with respect to annual reports, an auditors' report by a firm of established national reputation), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which the Guarantor would have been required to include in such annual reports, information, documents or other reports if the Guarantor had been subject to the requirements of such Section 13 or 15(d). In addition, the -31- Guarantor shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders generally to be filed with the Trustee and mailed, no later than the date such materials are mailed or made available to the Guarantor's stockholders, to the Holders at their addresses as set forth in the register of Securities maintained by the Registrar. Section 4.6. Waiver of Stay, Extension or Usury Laws. ------------------------- Each of the Company and the Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or 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 which would prohibit or forgive the Company or the Guarantor from paying all or any portion of the principal of or interest on Securities of any series 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) each of the Company and the Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.7. Limitations on Liens. -------------------- The Company covenants that it will not issue, incur, create, assume or guarantee, and will not permit any Restricted Subsidiary to issue, incur, create, assume or guarantee, any Indebtedness secured by a Lien upon any Principal Property of the Company or such Restricted Subsidiary or upon any shares of stock or Indebtedness of any Restricted Subsidiary held by the Company (whether such Principal Property, shares or Indebtedness are now existing or owed or hereafter created or acquired) without in any such case effectively providing concurrently with the issuance, incurrence, creation, assumption or guaranty of any such secured Indebtedness, or the grant of a Lien with respect to any such Indebtedness of any Restricted Subsidiary, that the Securities (together with, if the Company shall so determine, any other Indebtedness of or guarantee by the Company or such Restricted Subsidiary) shall be secured by a mortgage ranking equally and ratably with (or, at the option of the Company, prior to), and for so long as such other Indebtedness -32- is so secured, such secured debt. The foregoing restriction, however, will not apply to: (a) Liens on property, shares of stock or Indebtedness or other assets of any corporation existing at the time such corporation becomes a Restricted Subsidiary; provided that such Liens are not incurred in anticipation of such - -------- corporation becoming a Restricted Subsidiary; (b) Liens on property, shares of stock or Indebtedness existing at the time of acquisition thereof by the Company or a Restricted Subsidiary or Liens on property, shares of stock or Indebtedness to secure any Indebtedness for borrowed money incurred prior to, at the time of, or within 270 days after, the latest of the acquisition thereof, or, in the case of property, the completion of construction, the completion of improvements or the commencement of substantial commercial operation of such property, for the purpose of financing all or any part of the purchase price thereof, such construction or the making of such improvements; (c) Liens to secure Indebtedness owing to the Company or the Guarantor or to a Restricted Subsidiary; (d) Liens existing at the date of the initial issuance of the Securities of such series; (e) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to the Company or a Restricted Subsidiary; provided that such Lien was not incurred -------- in anticipation of such merger or consolidation or sale, lease or other disposition; (f) Liens created in connection with a project financed with, and created to secure, a Nonrecourse Obligation; or (g) extensions, renewals or replacements of any Liens permitted by any of the foregoing clauses (a) through (f); provided, however, that any Liens permitted by any of the - -------- ------- foregoing clauses (a) through (f) shall not extend to or cover any property of the Company or such Restricted Subsidiary, as the case may be, other than the property specified in such clauses and improvements thereto. Section 4.8. Limitations on Sale and Lease-Back Transactions. ---------------------------------- The Company covenants that it will not, nor will it permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction with respect to any Principal Property, other than any such transaction involving a lease for a term of not more than three years or any such transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, unless: (a) the Company or such Restricted Subsidiary would be entitled to incur Indebtedness secured by a -33- mortgage on the Principal Property involved in such transaction at least equal in amount to the Attributable Debt with respect to such Sale and Lease-Back Transaction, without equally and ratably securing the Securities, pursuant to Section 4.7; or (b) the Company shall apply an amount equal to the greater of the net proceeds of such sale or the Attributable Debt with respect to such Sale and Lease-Back Transaction within 180 days of such sale to either (or a combination of) the retirement (other than any mandatory retirement, mandatory prepayment or sinking fund payment or by payment at maturity) of Indebtedness of the Company or a Restricted Subsidiary that matures more than twelve months after the creation of such Indebtedness or the purchase, construction or development of other comparable property. ARTICLE 5 SUCCESSOR CORPORATION Section 5.1. When Company and Guarantor May Merge, etc. ------------------------------------ (a) Neither the Company nor the Guarantor will, in a single transaction or a series of transactions, consolidate with or merge with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any other Person or Persons, or permit any of their respective Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company or the Guarantor and their respective Subsidiaries, taken as a whole, to any other Person or Persons, unless: (1) either (A) if the transaction or series of transactions is a merger or consolidation, the Company or the Guarantor, as the case may be, shall be the Person surviving such merger or consolidation or (B) the Person formed by such consolidation or into which the Company, the Guarantor or such Subsidiary, as the case may be, is merged or to which the properties and assets of the Company, the Guarantor or such Subsidiary, substantially as an entirety, are transferred (any such surviving Person or transferee Person being the "Surviving Entity") shall be a -34- corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and (x) in the case of the Company, such corporation shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the Company's obligation for the due and punctual payment of the principal of and interest, if any, on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and (y) in the case of the Guarantor, such corporation shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the Guarantor's obligation for the due and punctual payment of the Guarantee and the performance of every covenant of this Indenture on the part of the Guarantor to be performed or observed; provided, however, -------- ------- that this subsection (1) need not be complied with in the case of the Guarantor's consolidation with or merger into the Company; (2) immediately after giving effect to such transaction or series of transactions on a pro forma basis --- ----- (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing with respect to Securities of any series; and (3) the Company or the Guarantor, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each in form and substance reasonably satisfactory to the Trustee, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition and, if a supplemental indenture is required in connection with such transaction or series of transactions, such supplemental indenture comply with this Indenture and that all conditions precedent herein provided for relating to such transaction or series of transactions have been complied with. Section 5.2. Successor Substituted. --------------------- Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the -35- Company or the Guarantor, as the case may be, in accordance with Section 5.1(a) hereof, the successor Person or Persons formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Guarantor, as the case may be, under this Indenture and the Securities with the same effect as if such successor had been named as the Company or the Guarantor, as the case may be, herein; and thereafter the Company or the Guarantor, as the case may be, shall be discharged from all obligations and covenants under this Indenture and the Securities. ARTICLE 6 REMEDIES Section 6.1. Events of Default. ----------------- An "Event of Default" means with respect to each series of Securities, individually, any of the following events: (a) default by the Company or the Guarantor in the payment of the principal of any Security of such series when the same becomes due and payable upon Stated Maturity, acceleration or otherwise, whether or not such payment is prohibited by Article 11; or (b) default by the Company or the Guarantor in the payment of an installment of interest on any Security of such series when the same becomes due and payable, and any such Default continues for a period of 30 days, whether or not such payment is prohibited by Article 11; or (c) default by the Company or the Guarantor in the performance or observance of any term, covenant or agreement contained in this Indenture or the Securities (other than Defaults specified in clause (a) or (b) above), and such Default continues for a period of 60 days after written notice of such Default (which notice shall specify the Default, demand that it be remedied and state that it is a "Notice of Default") requiring the Company or the Guarantor, as the case may be, to remedy the same shall have been given (i) to the Company or the Guarantor by the Trustee or (ii) to the Company or the Guarantor and the -36- Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; or (d) default or defaults under one or more agreements, instruments, mortgages, bonds, debentures or other evidences of Indebtedness, whether now existing or hereinafter created, under which the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor then has outstanding Indebtedness in excess of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), and either (i) such Indebtedness is already due and payable in full or (ii) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness unless such acceleration is cured, waived, rescinded or annulled within 30 days after written notice thereof shall been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; or (e) one or more judgments, orders or decrees of any court or regulatory or administrative agency of competent jurisdiction for the payment of money in excess of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), shall be entered against the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor, as the case may be, and shall not be discharged or fully bonded and there shall have been a period of 60 days after the date on which any period for appeal has expired and during which a stay of enforcement of such judgment, order or decree shall not be in effect; or (f) the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor pursuant to or under or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; -37- (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors; or (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor in an involuntary case or proceeding, (ii) appoints a Custodian of the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor or for all or substantially all of its properties, or (iii) orders the liquidation of the Company, the Guarantor or any Material Subsidiary of the Company or the Guarantor, and in each case the order or decree remains unstayed and in effect for 60 days. The Trustee shall not be charged with knowledge of any Default or Event of Default (other than, if the Trustee is acting as Paying Agent, those set forth in Section 6.1(a), (b) or, to the extent relating to Section 4.1, (c)) unless written notice thereof shall have been given to a Trust Officer at the Corporate Trust Office of the Trustee by the Company, the Paying Agent, any Holder, any holder of Senior Indebtedness or any of their respective agents. Section 6.2. Acceleration. ------------ If an Event of Default with respect to any series of Securities (other than an Event of Default specified in Section 6.1(f) or (g) with respect to the Company or the Guarantor) occurs and is continuing, the Trustee by written notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding, by written notice to the Company and the Trustee, may declare the unpaid principal of (or, if any of the Securities of that series are Discount Securities, such portion of the principal -38- amount of such Securities as may be specified in the terms thereof) and accrued interest on all the Securities of such series to be due and payable immediately. If an Event of Default specified in Section 6.1(f) or (g) with respect to the Company or the Guarantor occurs and is continuing, then the principal of and accrued interest on all the Securities shall ipso facto become and be immediately due and payable without - ---- ----- any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration in respect of a series of Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee, Holders of a majority in aggregate principal amount of such series of Securities outstanding, by written notice to the Company and the Trustee, may, on behalf of all Holders of such series of Securities, rescind and annul such declaration and its consequences if: (a) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section 7.8 and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Securities of such series, (iii) the principal of such series of Securities which has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by such series of Securities, and (iv) interest upon overdue principal and, to the extent that payment of such interest is lawful, overdue interest at the rate borne by such series of Securities which has become due otherwise than by such declaration of acceleration; (b) such rescission or annulment would not conflict with any judgment or decree of a court of competent jurisdiction; and (c) all Events of Default with respect to such series of Securities, other than the non-payment of -39- principal of and interest on such series of Securities which has become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.4. No such rescission shall affect any subsequent Default or Event of Default with respect to such series of Securities or impair any right consequent thereon. Section 6.3. Other Remedies. -------------- If an Event of Default with respect to a series of Securities occurs and is continuing, the Trustee may in its discretion pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on such Securities or to enforce the performance of any provision of such Securities or this Indenture. All rights of action and claims under this Indenture or the Securities of any series may be enforced by the Trustee even if it does not possess any of the Securities of such series 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 with respect to a series of Securities 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 6.4. Waiver of Past Defaults. ----------------------- Subject to the provisions of Sections 6.2, 6.7 and 9.2, the Holders of not less than a majority in aggregate principal amount of the outstanding Securities of any series by notice to the Trustee may, on behalf of the Holders of all the Securities of such series, waive any existing Default or Event of Default, with respect to such series, and its consequences. When a Default or Event of Default with respect to a series of Securities is so waived, it shall be deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. -40- Section 6.5. Control by Majority. ------------------- The Holders of at least a majority in aggregate principal amount of the then outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, however, that the Trustee may refuse to -------- ------- follow any direction (a) that conflicts with any rule of law or this Indenture, (b) that the Trustee determines may be unduly prejudicial to the rights of another Securityholder of such series, or (c) that may expose the Trustee to Personal liability unless the Trustee has indemnification satisfactory to it in its sole discretion against any loss or expense caused by its following such direction; and provided, further, that -------- ------- the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Section 6.6. Limitation on Suits. ------------------- No Holder of any Securities of any series shall have any right to pursue any remedy with respect to this Indenture or such Securities unless: (a) the Holder gives written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (b) the Holders of at least 25% in principal amount of the then outstanding Securities of that series make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer and, if requested, provide to the Trustee reasonable indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, provision of indemnity; and (e) during such 60-day period the Holders of a majority in aggregate principal amount of the then outstanding Securities of that series do not give the Trustee a direction which is inconsistent with the request. The foregoing limitations shall not apply to a suit instituted by a Holder of Securities of a series for the -41- enforcement of the payment of principal of or accrued interest on such Securities held by such Holder on or after the respective due dates set forth in such Securities. A Securityholder of a series may not use this Indenture to prejudice the rights of any other Securityholder of such series or to obtain priority or preference over such other Securityholder. Section 6.7. Right of Holders To Receive Payment. ----------------------------------- Notwithstanding any other provision in this Indenture, the right of any Holder of a Security to receive payment of the principal of and interest on such 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 the Stated Maturity or Interest Payment Date, as the case may be, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder. Section 6.8. Collection Suit by Trustee. -------------------------- If an Event of Default specified in clause (a) or (b) of Section 6.1 with respect to Securities of any series occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust in favor of the Holders against the Company, the Guarantor or any other obligor on the Securities of such series for the whole amount of principal of 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 of such series and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.9. Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company or the Guarantor (or any other obligor upon the Securities), their creditors or their property and shall be entitled and empowered -42- 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 Holder 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 Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.8. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder 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 Holder in any such proceeding. Section 6.10. Priorities. ---------- If the Trustee collects any money pursuant to this Article Six, it shall pay out such money in the following order: First: to the Trustee for amounts due under Section 7.8; Second: to Holders for interest accrued, if any, on the Securities of the applicable series, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; Third: to Holders for principal owing under the Securities of the applicable series, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities of the applicable series for principal; and Fourth: the balance, if any, to whomsoever may be lawfully entitled thereto. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for -43- any action taken or omitted by it as Trustee, a court may in its discretion require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to any suit by the Trustee, any suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than 10% in aggregate principal amount of the outstanding Securities of any series. Section 6.12. Restoration of Rights and Remedies. ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Security and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE 7 TRUSTEE Section 7.1. Duties. ------ (a) In case an Event of Default has occurred and is continuing, with respect to Securities of any series, the Trustee shall exercise, with respect to Securities of such series, such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default, with respect to the Securities of any series: (1) the Trustee need perform, with respect to Securities of such series, only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and -44- (2) in the absence of bad faith on its part, the Trustee may, with respect to Securities of such series, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (c) No provision of this Indenture shall be construed to relieve the Trustee 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 7.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (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 6.5. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1. (f) The Trustee shall not be liable for interest on, or be required to invest, any assets received by it except as the Trustee may agree with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. -45- Section 7.2. Rights of Trustee. ----------------- Subject to Section 7.1 hereof and the provisions of TIA (S) 315: (a) The Trustee may rely, and shall be protected from 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 consult with counsel and may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Sections 12.4 and 12.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture other than any liabilities arising out of its own negligence. (e) The Trustee may consult with counsel of its own choosing and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, -46- unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. Section 7.3. Individual Rights of Trustee. ---------------------------- The Trustee, any Paying Agent, Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 7.11 and 7.12 and TIA (S)(S) 310 and 311, may otherwise deal with the Company and its Subsidiaries with the same rights it would have if it were not the Trustee, Paying Agent, Registrar or such other agent. Section 7.4. Trustee's Disclaimer. -------------------- The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement in the Securities other than the Trustee's certificate of authentication. Section 7.5. Notice of Default. ----------------- If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder of the affected series notice of the Default or Event of Default within 30 days thereafter; provided, however, that, except in the case of a Default in the - -------- ------- payment of the principal of or interest on any Security or in the payment of any sinking fund installment, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee of the board of directors or a committee of the directors of the Trustee and/or Trust Officers in good faith determines that the withholding of such notice is in the interest of the Holders. Section 7.6. Money Held in Trust. ------------------- All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required herein or by -47- law. The Trustee shall not be under any liability for interest on any moneys received by it hereunder. Section 7.7. Reports by Trustee to Holders. ----------------------------- Within 60 days after May 15 of each year beginning with the May 15 following the date of this Indenture, the Trustee shall, to the extent that any of the events described in TIA (S) 313(a) has occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such May 15 that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c). A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company shall notify the Trustee in writing if the Securities become listed on any securities exchange or automatic quotation system. Section 7.8. Compensation and Indemnity. -------------------------- The Company covenants and agrees to pay the Trustee from time to time reasonable compensation for its services. 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 incurred or made by it. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability incurred by it arising out of or in connection with the administration of this trust and its rights or duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against -48- any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.8, the Trustee shall have a Lien prior to the Securities on all assets held or collected by the Trustee, in its capacity as Trustee, except assets held in trust for the benefit of the Holders of particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 6.1(f) or (g) with respect to the Company or the Guarantor, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The Company's obligations under this Section 7.8 and any Lien arising hereunder shall survive the resignation or removal of any trustee, the discharge of the Company's obligations pursuant to Article Eight and/or the termination of this Indenture. Section 7.9. Replacement of Trustee. ---------------------- The Trustee may resign with respect to any series of Securities issued hereunder by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities of any series may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee with the Company's consent. The Company may remove the Trustee with respect to any series of Securities if: (a) the Trustee fails to comply with Section 7.11; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a receiver or other public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason with respect to the Securities of one or more series, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee, with respect to the Securities of such series. -49- The Trustee shall be entitled to payment of its fees and reimbursement of its expenses while acting as Trustee, and to the extent such amounts remain unpaid, the Trustee that has resigned or has been removed shall retain the Lien afforded by Section 7.8. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Securities of any series may appoint a successor Trustee to replace the successor Trustee appointed by the Company with respect to the Securities of that series. In the case of the appointment hereunder of a successor Trustee with respect to all Securities, a successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.8, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees as co-Trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder -50- administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, subject, nevertheless, to its Lien, if any, provided for in Section 7.8. If a successor Trustee with respect to the Securities of one or more series does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities of such series may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.11, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any provisions of this Section 7.9 shall become effective upon acceptance of appointment by the successor trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.9, the Company's obligations under Section 7.8 shall continue for the benefit of the retiring Trustee. Section 7.10. Successor Trustee by Merger, etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall, if such resulting, surviving or transferee corporation or -51- national banking association is otherwise eligible hereunder, be the successor Trustee. Section 7.11. Eligibility; Disqualification. ----------------------------- There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(5) and which shall have a combined capital and surplus of at least $100,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinabove specified in this Article. The Trustee shall comply with TIA (S) 310(b). Section 7.12. Preferential Collection of Claims Against Company. --------------------------------- The Trustee shall comply with TIA (S) 311(a) excluding any creditor relationship listed in TIA (S) 311(b). If the present or any future Trustee shall resign or be removed, it shall be subject to TIA (S) 311(a) to the extent provided therein. ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE Section 8.1. Termination of the Company's and the Guarantor's Obligations. ------------------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, the Company may terminate its obligations and the obligations of the Guarantor under this Indenture with respect to any series of Securities, except those obligations referred to in the penultimate paragraph of this Section 8.1, if all Securities of such series previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment money has theretofore been deposited with the Trustee or the Paying Agent in trust or -52- segregated and held in trust by the Company and thereafter repaid to the Company, as provided in Section 8.4) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if: (a) either (i) pursuant to Article Three, the Company shall have given notice to the Trustee and mailed a notice to each Securityholder of such series of the redemption of all of the Securities of such series under arrangements satisfactory to the Trustee for the giving of such notice or (ii) all Securities of such series have otherwise become due and payable hereunder; (b) the Company shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Securityholders of such series for that purpose, money in such amount as is sufficient without consideration of reinvestment of such interest, to pay principal of and interest on the outstanding Securities of such series to maturity or redemption; provided that the Trustee shall have been -------- irrevocably instructed to apply such money to the payment of said principal and interest with respect to such Securities and; provided, further, that the provisions of -------- ------- Article 11 permit payments with respect to the securities at the time of deposit; (c) no Default or Event of Default with respect to this Indenture applicable to such series or the Securities of such series shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or the Guarantor is a party or by which it is bound; (d) the Company and the Guarantor shall have paid all other sums payable by it hereunder; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for the termination of the Company's obligations under such Securities and this Indenture applicable to such Securities have been complied with. Such Opinion of Counsel shall -53- also state that such satisfaction and discharge does not result in a default under any agreement or instrument then known to such counsel that binds or affects the Company. Notwithstanding the foregoing paragraph, the Company's and, to the extent applicable, the Guarantor's obligations in Sections 2.6, 2.7, 2.8, 2.9, 4.1, 4.2, 7.8, 8.4, 8.5, 10.1 and 10.2 shall survive until the Securities of such series are no longer outstanding pursuant to the last paragraph of Section 2.9. After the Securities are no longer outstanding, the Company's and, to the extent applicable, the Guarantor's obligations in Sections 7.8, 8.4 and 8.5 shall survive. After such delivery or irrevocable deposit the Trustee upon request shall acknowledge in writing the discharge of the Company's and the Guarantor's obligations under the Securities of such series and this Indenture applicable to such Securities except for those surviving obligations specified above. Section 8.2. Legal Defeasance and Covenant Defeasance. -------------------- (a) Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, the Company may, at its option by Board Resolution or by an Officers' Certificate, at any time, with respect to the Securities of any series, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding Securities of such series 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), each of the Company and the Guarantor shall be deemed to have been released and discharged from its obligations with respect to the outstanding Securities of such series 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 of such series, which shall thereafter be deemed to be "outstanding" only for the purposes of paragraph (e) below and the other Sections of and matters under this Indenture applicable to such Securities referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Securities and this Indenture applicable to such Securities insofar as -54- such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), and Holders of such Securities and any amounts deposited under paragraph (d) below shall cease to be subject to any obligations to, or the rights of, any holder of Senior Indebtedness under Article 11 or otherwise, except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Securities of such series to receive solely from the trust fund described in paragraph (d) below and as more fully set forth in such paragraph payments in respect of the principal of and interest on such Securities when such payments are due, (ii) the Company's and, to the extent applicable, the Guarantor's obligations with respect to such Securities under Sections 2.7, 2.8 and 4.2 and, with respect to the Trustee, under Section 7.8, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv) this Section 8.2 and Section 8.5. Subject to compliance with this Section 8.2, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) below with respect to Securities of any series. (c) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (c), the Company and, to the extent applicable, the Guarantor shall be released and discharged from its obligations under any covenant contained in Article 5 and in Section 4.3, except as to the corporate existence of the Company and the Guarantor and in Sections 4.4 through 4.8 and in certain other sections with respect to the outstanding Securities of such series identified in any supplemental indenture pursuant to Section 2.2(a) on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and such 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 such outstanding Securities, the Company and, to the extent applicable, the Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under -55- Section 6.1(c) with respect to such series of Securities, but, except as specified above, the remainder of this Indenture applicable to such Securities 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 of such series: (i) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.11 who shall agree to comply with the provisions of this Section 8.2 applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities of such series, (x) money in an amount or (y) direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which guarantee or obligation the full faith and credit of the United States is pledged ("U.S. Government Obligations") maturing as to principal and interest in such amounts of money and at such times as are sufficient without consideration of any reinvestment of such interest, to pay principal of and interest on the outstanding Securities of such series not later than one day before the due date of any payment, or (z) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge principal of and interest on the outstanding Securities of such series on the Maturity Date or otherwise in accordance with the terms of this Indenture and of the Securities of such series; provided, -------- however, that the Trustee (or other qualifying trustee) ------- shall have received an irrevocable written order from the Company instructing the Trustee (or other qualifying trustee) to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities of such series and; provided further, that -------- ------- the provisions of Article 11 permit payments with respect to the Securities at the time of deposit; -56- (ii) no Default or Event of Default with respect to such series of Securities shall have occurred and be continuing on the date of such deposit; (iii) such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound; (iv) in the case of an election under paragraph (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (v) in the case of an election under paragraph (c) above, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (vi) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance under paragraph (b) above or the Covenant Defeasance under paragraph (c) above, as the case may be, have been complied with; and (vii) the Company shall have delivered to the Trustee an amount sufficient to cover its fees and expenses as Trustee under this Indenture through the term of the Securities to be defeased, or made adequate provision therefor to the satisfaction of the Trustee. -57- (e) All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee; collectively for purposes of this paragraph (e), the "Trustee") pursuant to paragraph (d) above in respect of the outstanding Securities of such series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture applicable to such Securities, to the payment, either directly or through any Paying Agent (other than the Company or any Affiliate of the Company) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to paragraph (d) above or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities of such series. Anything in this Section 8.2 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request, in writing, of the Company any money or U.S. Government Obligations held by it as provided in paragraph (d) above which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.3. Application of Trust Money. -------------------------- The Trustee or a trustee satisfactory to the Trustee, the Company and the Guarantor shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Sections 8.1 and 8.2, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Securities of such series. -58- Section 8.4. Repayment to Company. -------------------- Subject to Sections 7.8, 8.1 and 8.2, the Trustee shall promptly pay to the Company, upon receipt by the Trustee of an Officers' Certificate, any excess money, determined in accordance with Section 8.2, held by it at any time. The Trustee and the Paying Agent shall pay to the Company, 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 or principal or interest that remains unclaimed for two years after payment to the Securityholders of such series 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 Securityholder of such series entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to money must look solely to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. Section 8.5. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations to any payment in respect of Securities of any series 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 the Guarantor's obligations under this Indenture and the Securities of such series 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 Guarantor has made any - ------- payment of principal of or interest on any Securities of such series because of the reinstatement of its obligations, the Company or the Guarantor, as the case may be, shall be subrogated to the rights of the Holders of Securities of such series to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. -59- ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1. Without Consent of Holders. -------------------------- The Company, the Guarantor and the Trustee may amend, waive or supplement this Indenture or the Securities of any series without notice to or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to evidence the succession of another Person to the Company or the Guarantor, and the assumption by any such successor of the obligations of the Company or the Guarantor herein and in the Securities of any series in accordance with Article Five; (c) to provide for uncertificated Securities in addition to certificated Securities; (d) to comply with any requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (e) to make any change that would provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder; or (f) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.2(a), respectively. Upon the request of the Company accompanied by a resolution of its Board of Directors, and in the case of an amendment to Article 10 hereof adversely affecting the Guarantor, the Guarantor's Board of Directors, authorizing the execution of any such supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company and, as the case may be, the Guarantor, in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects its -60- own rights, duties, protections or immunities under this Indenture or otherwise. Section 9.2. With Consent of Holders. ----------------------- Subject to Section 6.4, the Company, the Guarantor and the Trustee may amend or supplement this Indenture or the Securities of any series or any supplemental indenture relating to any series of Securities with the written consent of the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected then outstanding, and the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected then outstanding by written notice to the Trustee may waive future compliance by the Company and the Guarantor with any provision of this Indenture, such Securities or any supplemental indenture relating to such Securities. Upon the request of the Company, accompanied by a resolution of its Board of Directors, and in the case of an amendment to Article 10 hereof adversely affecting the Guarantor, the Guarantor's Board of Directors, authorizing the execution of any supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Securityholders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company, and, as the case may be, the Guarantor in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties, protections or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. Notwithstanding the provisions of this Section 9.2, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.4, may not: (a) reduce the percentage in aggregate outstanding principal amount of Securities of any series the Holders of which must consent to an amendment, supplement or waiver of any provision of this Indenture, the Securities of such series or any supplemental indenture; (b) reduce the rate or change the time for payment of interest on any Security of any series or change the method or formula for calculating interest; -61- (c) reduce the principal amount outstanding of or extend the fixed maturity of any Security of any series or alter the redemption provisions with respect thereto or reduce the amount of the principal of any outstanding Discount Securities that would be due and payable upon declaration of acceleration of maturity thereof; (d) waive a default in the payment of the principal of or interest on, or redemption or an offer to purchase required hereunder with respect to, any Security of any series; (e) make the principal of or interest on any Security of any series payable in money or in a manner other than that stated in the Security; (f) modify this Section 9.2 or Section 6.4 or Section 6.7; (g) modify or change any provision of this Indenture affecting the subordination of the Securities of any series in a manner adverse to such Holders; (h) impair the right to institute suit for the enforcement of any payment on or with respect to the Securities of any series; (i) make such other changes as may require the consent of each Holder so affected pursuant to any supplemental indenture; or (j) release the Guarantor from its obligations under the Guarantee or this Indenture or make any other change to Article 10 that adversely affects the legal rights of Holders of the Securities. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders of each Security affected thereby, with a copy to the Trustee, a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or -62- any defect therein, shall not, however, in any way impair or affect the validity of any supplemental indenture. Section 9.3. Compliance with Trust Indenture Act. ----------------------------------- Every amendment of or supplement to this Indenture or the Securities shall comply with the TIA as then in effect. Section 9.4. Revocation and Effect of Consents. --------------------------------- Until an amendment, supplement or waiver becomes effective with respect to a series of Securities, a consent to it by a Holder of a Security of such series is a continuing consent by such Holder and every subsequent Holder of that Security or portion of that Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security prior to such amendment, supplement or waiver becoming effective as to the Securities of such series. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. Notwithstanding the above, nothing in this paragraph shall impair the right of any Holder under (S) 316(b) of the TIA. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the second and third sentences of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. Such consent shall be effective only for actions taken within 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder of such series unless it makes a change described in any of clauses (a) through (j) of Section 9.2; if it makes such a change, the amendment, supplement or waiver shall bind every subsequent Holder of a Security of such series or portion of a Security that evidences the same debt as the consenting Holder's Security. -63- Section 9.5. Notation on or Exchange of Securities. ------------------------------------- If an amendment, supplement or waiver changes the terms of a Security of any series, the Trustee shall (in accordance with the specific direction of the Company) request the Holder of such Security to deliver it to the Trustee. The Trustee shall (in accordance with the specific direction of the Company) place an appropriate notation on such 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 such Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.6. Trustee May Sign Amendments, etc. -------------------------------- The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article Nine if the amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, supplement or waiver, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver is authorized or permitted by this Indenture, that it is not inconsistent herewith and that it will be valid and binding upon the Company in accordance with its terms. ARTICLE 10 GUARANTEE Section 10.1. Unconditional Guarantee. ----------------------- The Guarantor hereby unconditionally and irrevocably guarantees to each Holder of a Security of each series authenticated and delivered by the Trustee the due and punctual payment of the principal of (including any amount in respect of original issue discount), and interest, if any (together with any additional amounts payable pursuant to the terms of such Security), on such Security and the due and punctual payment of the sinking fund payments, if any, and analogous obligations, if any, provided for pursuant to the terms of such Security, when and as the same shall become due and payable, whether at -64- maturity or upon redemption or upon declaration of acceleration or otherwise according to the terms of such Security and of this Indenture. In case of default by the Company in the payment of any such principal (including any amount in respect of original issue discount), interest (together with any additional amounts payable pursuant to the terms of such Security), sinking fund payment, or analogous obligation, the Guarantor agrees duly and punctually to pay the same. The Guarantor hereby agrees that its obligations hereunder shall be absolute and unconditional irrespective of any extension of the time for payment of any such Security, any modification of any such Security, any invalidity, irregularity or unenforceability of any such Security or this Indenture, any failure to enforce the same or any waiver, modification or indulgence granted to the Company with respect thereto by the Holder of such Security or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a demand or proceeding first against the Company, protest or notice with respect to any such Security or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this guarantee will not be discharged as to any such Security except by payment in full of the principal of (including any amount payable in respect of original issue discount) and interest, if any (together with any additional amounts payable pursuant to the terms of such Security), thereon. Until the principal of and interest on the Securities and all other amounts payable by the Company or the Guarantor under this Indenture shall have been paid in full, the Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to exercise its rights to be subrogated to the rights of the payee against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof; at any time thereafter, the Guarantor shall be free to exercise any of such rights. The guarantee set forth in this Section shall not be valid or become obligatory for any purpose with respect to a Security of any series until the certificate of authentication on such Security shall have been signed by the Trustee. -65- Section 10.2. Execution of Guarantee. ---------------------- To evidence its guarantee specified in Section 10.1 to the Holders of Securities of any series, the Guarantor hereby agrees to execute the Guarantee in substantially the form above recited to be endorsed on each Security of such series authenticated and delivered by the Trustee. Such Guarantee shall be executed on behalf of the Guarantor by both (a) its Chairman or its Vice Chairman or its President or any Vice President and (b) its Treasurer or any Assistant Treasurer or its Secretary or any Assistant Secretary, 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 Guarantee on behalf of the Guarantor. The seal of the Guarantor may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Guarantees. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Guarantee that has been duly authenticated and delivered by the Trustee. Such signatures may be the manual or facsimile signatures of such officers and may be imprinted or otherwise reproduced on the Guarantees. In case any officer of the Guarantor who shall have signed any of the Guarantees shall cease to be an officer before the Securities on which such Guarantees are endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Company, such Securities nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Guarantees had not ceased to be such officer, and any Guarantees may be signed on behalf of the Guarantor by such Persons as, at the actual date of the execution of such Guarantees, shall be the proper officers of the Guarantor, although at the date of such Securities or of the execution of this Indenture any such Person was not such an officer. ARTICLE 11 SUBORDINATION Section 11.1. Agreement to Subordinate. ------------------------ The Company, for itself and its successors, agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Security is subordinated in -66- right of payment, to the extent and in the manner provided in this Article 11, to the prior payment in full of all Senior Indebtedness, and that the subordination is for the benefit of the holders of Senior Indebtedness. This Article 11 shall constitute a continuing offer to all Persons who become holders of, or continue to hold Senior Indebtedness, and such provisions are made for the benefit of the holders of the Senior Indebtedness, and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Section 11.2. Liquidation; Dissolution; Bankruptcy. ------------------------------------ Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property or in an assignment for the benefit of creditors or any marshalling of the assets and liabilities of the Company: (1) holders of Senior Indebtedness shall be entitled to receive payment in full of all obligations with respect to the Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness, whether or not such interest is an allowable claim in any such proceeding) before Securityholders shall be entitled to receive any payment of any obligations with respect to the Securities; and (2) until all obligations with respect to Senior Indebtedness (as provided in subsection (1) above) are paid in full, any distribution to which Securityholders would be entitled but for this Article shall be made to holders of Senior Indebtedness, as their interests may appear, except that Securityholders may receive securities that are subordinated to at least the same extent as the Securities to Senior Indebtedness. Section 11.3. Default on Senior Debt. ---------------------- The Company may not make any payment or distribution to the Trustee or any Securityholder in respect of obligations with respect to the Securities and may not acquire from the Trustee or any Securityholders any Securities for cash or property (other than Indebtedness which is subordinated to at least -67- the same extent as the Securities to Senior Indebtedness), until all obligations with respect to the Senior Indebtedness have been paid in full if: (i) there occurs and is continuing a default in the payment of any obligations with respect to the Senior Indebtedness at the final scheduled maturity thereof or that permits holders of such Senior Indebtedness to accelerate its maturity or the maturity of which has been accelerated; or (ii) there occurs and is continuing an event of default, other than a payment default, on any Senior Indebtedness that permits holders of Senior Indebtedness to accelerate its maturity, and such event of default is the subject of judicial proceedings or the Company receives a notice of the default from a Person who may give it pursuant to Section 11.11 hereof. If the Company receives any such notice, a subsequent notice received within 360 days thereafter relating to Senior Indebtedness shall not be effective for purposes of this Section. The Company may resume payments on and distributions in respect of the Securities and may acquire them when (1) the default is cured or waived or has ceased to exist or such notice has been rescinded or annulled, or (2) in the case of an event of default referred to in Section 11.3(ii) hereof, 179 days pass after the Trustee receives written notice of such default and the holders of Senior Indebtedness as to which such default relates have not declared such Senior Indebtedness to be immediately due and payable, if this Article otherwise permits the payment or acquisition at the time of such payment or acquisition. Section 11.4. Acceleration of Securities. -------------------------- If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. -68- Section 11.5. When Distribution Must Be Paid Over. ---------------------- In the event that a distribution is made to the Trustee or any Securityholder at a time when such distribution is prohibited by Section 11.2 or 11.3 hereof, the Trustee or such Securityholder who receives the distribution shall hold it in trust for the benefit of, and, upon written request, pay it over to, the holders of Senior Indebtedness as their interests may appear, for application to the payment of all obligations with respect to Senior Indebtedness remaining unpaid to the extent necessary to pay such obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Securityholders or the Company or any other Person money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 11, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 11.6. Notice by Company. ----------------- The Company shall promptly notify the Trustee and any Paying Agent of any facts known to the Company that would cause a payment of any obligations with respect to the Securities to violate this Article 11, but failure to give such notice shall not affect the subordination of the Securities to the Senior Indebtedness provided in this Article 11. Section 11.7. Subrogation. ----------- After all Senior Indebtedness is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Securityholders have been applied to the payment of Senior -69- Indebtedness. A distribution made under this Article 11 to holders of Senior Indebtedness which otherwise would have been made to Securityholders shall not, as between the Company and Securityholders, be deemed a payment by the Company to or on account of the Senior Indebtedness. Section 11.8. Relative Rights. --------------- This Article 11 defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; (2) affect the relative rights of Securityholders and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (3) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Securityholders. If the Company fails because of this Article to pay principal of or interest on a Security on the due date, the failure is still a Default or Event of Default. Section 11.9. Subordination May Not Be Impaired by Company. ------------------------ No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. Section 11.10. Distribution or Notice to Representative. ---------------------- Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. -70- Upon any payment or distribution of assets of the Company referred to in this Article 11, the Trustee and the Securityholders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Securityholders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. Section 11.11. Rights of Trustee and Paying Agent. --------------------- Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, neither the Trustee nor any Paying Agent shall be charged with knowledge of the existence of any facts which would prohibit the making of any payment or distribution by the Trustee or such Paying Agent, and the Trustee or such Paying Agent may continue to make payments on the Securities unless, in the case of the Trustee, and in the case of such Paying Agent as long as the Trustee is such Paying Agent, a Trust Officer shall have received at the Corporate Trust Office of the Trustee, and in the case of a Paying Agent other than the Trustee, it shall have received, in each case at least two Business Days prior to the date of such payment, written notice of facts that would cause the payment of any obligations with respect to the Securities to violate this Article. The Trustee or any Paying Agent, as applicable, shall promptly provide a copy of such notice to the Securityholders. Only the Company, a Representative or a holder of an issue of Senior Indebtedness that has no Representative may give notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.8 hereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not the Trustee subject to TIA (S) 310(b) and 311. Any Agent may do the same with like rights. Section 11.12. Authorization to Effect Subordination. ----------------------- Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such -71- action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee his attorney-in-fact for any and all such purposes. ARTICLE 12 MISCELLANEOUS Section 12.1. Trust Indenture Act of 1939. --------------------------- This Indenture is subject to the provisions of the TIA that are required to be a part of this Indenture, and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. Section 12.2. Notices. ------- Any notice or communication shall be sufficiently given if in writing and delivered in Person or mailed by first class mail, postage prepaid, addressed as follows: If to the Company, to: KELSEY-HAYES COMPANY 11878 Hubbard Road Livonia, Michigan 48150 Attention: Treasurer If to the Guarantor, to: VARITY CORPORATION 672 Delaware Avenue Buffalo, New York 14209 Attention: Treasurer If to the Trustee, to: MANUFACTURERS AND TRADERS TRUST COMPANY One M&T Plaza Buffalo, New York 14240 Attention: Corporate Trust Department -72- The parties hereto by notice to the other parties may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed, postage prepaid, to a Holder, including any notice delivered in connection with TIA (S) 310(b), TIA (S) 313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed by first class mail to such Holder at the address of such Holder as it appears on the Securities register maintained by the Registrar and shall be sufficiently given to such Holder if so mailed within the time prescribed. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, if a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. Section 12.3. Communication by Holders with Other Holders. ----------------------------- Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Guarantor, the Trustee, the Registrar and any other Person shall have the protection of TIA (S) 312(c). Section 12.4. Certificate and Opinion as to Conditions Precedent. ----------------------------- Upon any request or application by the Company or the Guarantor to the Trustee to take any action under this Indenture, the Company or the Guarantor shall furnish to the Trustee: (1) an Officers' Certificate 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. -73- Section 12.5. Statements Required in Certificate or Opinion. ---------------------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the Person making such certificate or rendering such 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 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 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 12.6. Rules by Trustee, Paying Agent, Registrar. ------------------------------- The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions. Section 12.7. Governing Law. ------------- This Indenture, the Securities and the Guarantee shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law. Section 12.8. No Interpretation of Other Agreements. -------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its -74- Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 12.9. No Recourse Against Others. -------------------------- A director, officer, employee, shareholder or Affiliate, as such, of the Company or the Guarantor shall not have any liability for any obligations of the Company or the Guarantor under the Securities, the Guarantee or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. Section 12.10. Successors. ---------- All agreements of the Company and the Guarantor in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 12.11. Duplicate Originals. ------------------- The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all such executed copies together represent the same agreement. Section 12.12. Separability. ------------ In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefor against any party hereto. Section 12.13. Table of Contents, Headings, etc. -------------------------------- The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. Section 12.14. Benefits of Indenture. --------------------- Nothing in this Indenture, in the Securities or in the Guarantee, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, -75- and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. -76- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. KELSEY-HAYES COMPANY, as Issuer By:________________________________ Name: Title: VARITY CORPORATION, as Guarantor By:________________________________ Name: Title: MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee By:________________________________ Name: Title: EX-4.3 8 FORM OF SENIOR INDENTURE RELATING TO VARITY SENIOR DEBT EXHIBIT 4.3 _______________________________________________________________ _______________________________________________________________ ____________________ VARITY CORPORATION, as Issuer, and MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee ____________________ INDENTURE Dated as of , 1995 ____________________ Senior Debt Securities _______________________________________________________________ _______________________________________________________________ Reconciliation and tie between Trust Indenture Act of 1939 and Indenture dated as of , 1995 Trust Indenture Indenture Act Section Section - --------------- --------- (S) 310(a)(1) ........................................ 7.11 (a)(2) ........................................ 7.11 (a)(3) ........................................ N.A. (a)(4) ........................................ N.A. (a)(5) ........................................ 7.11 (b) ........................................ 7.11; 10.2 (c) ........................................ N.A. (S) 311(a) ........................................ 7.12 (b) ........................................ 7.12 (c) ........................................ N.A. (S) 312(a) ........................................ 2.6 (b) ........................................ 10.3 (c) ........................................ 10.3 (S) 313(a) ........................................ 7.7 (b) ........................................ 7.7 (c) ........................................ 7.7; 10.2 (d) ........................................ 7.7 (S) 314(a) ........................................ 4.4; 4.5; 10.2 (b) ........................................ N.A. (c)(1) ........................................ 10.4 (c)(2) ........................................ 10.4 (c)(3) ........................................ N.A. (d) ........................................ N.A. (e) ........................................ 10.5 (f) ........................................ N.A. (S) 315(a) ........................................ 7.1(b) (b) ........................................ 7.5; 10.2 (c) ........................................ 7.1(a) (d) ........................................ 7.1(c) (e) ........................................ 6.11 (S) 316(a) (last sentence) ........................................ 2.9 (a)(1)(A) ........................................ 6.5 (a)(1)(B) ........................................ 6.4 (a)(2) ........................................ N.A. (b) ........................................ 6.7 (c) ........................................ N.A. (S) 317(a)(1) ........................................ 6.8 (a)(2) ........................................ 6.9 (b) ........................................ 2.5 (S) 318(a) ........................................ 10.1 (b) ........................................ N.A. (c) ........................................ 10.1 - ---------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. -i- TABLE OF CONTENTS ----------------- Page ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions..................................... 1 Section 1.2. Incorporation by Reference of Trust Indenture Act................................. 9 Section 1.3. Rules of Construction........................... 9 ARTICLE 2 THE SECURITIES Section 2.1. Forms Generally................................. 10 Section 2.2. Title, Terms and Denominations.................. 11 Section 2.3. Execution, Authentication, Delivery and Dating.................................... 14 Section 2.4. Registrar and Paying Agent...................... 16 Section 2.5. Paying Agent To Hold Money in Trust............. 17 Section 2.6. Securityholder Lists............................ 17 Section 2.7. Transfer and Exchange........................... 18 Section 2.8. Replacement Securities.......................... 19 Section 2.9. Outstanding Securities; Determination of Holders' Action.............. 19 Section 2.10. Temporary Securities............................ 20 Section 2.11. Cancellation.................................... 20 Section 2.12. Payment of Interest; Defaulted Interest...................................... 21 Section 2.13. CUSIP Number.................................... 21 Section 2.14. Deposit of Moneys............................... 21 Section 2.15. Persons Deemed Owners........................... 22 Section 2.16. Computation of Interest......................... 22 Section 2.17. Global Securities............................... 22 ARTICLE 3 REDEMPTION OF SECURITIES Section 3.1. Notices to the Trustee.......................... 23 Section 3.2. Selection of Securities To Be Redeemed...................................... 24 Section 3.3. Notice of Redemption............................ 24 Section 3.4. Effect of Notice of Redemption.................. 25 Section 3.5. Deposit of Redemption Price..................... 26 Section 3.6. Securities Redeemed or Purchased in Part.......................................... 26 -ii- Page ---- ARTICLE 4 COVENANTS Section 4.1. Payment of Securities........................... 27 Section 4.2. Maintenance of Office or Agency................. 27 Section 4.3. Corporate Existence............................. 28 Section 4.4. Compliance Certificate.......................... 28 Section 4.5. SEC Reports..................................... 29 Section 4.6. Waiver of Stay, Extension or Usury Laws.......................................... 30 Section 4.7. Limitation on Liens............................. 30 Section 4.8. Limitation on Sale and Lease-Back Transactions.................................. 31 ARTICLE 5 SUCCESSOR CORPORATION Section 5.1. When Company May Merge, etc..................... 32 Section 5.2. Successor Substituted........................... 33 ARTICLE 6 REMEDIES Section 6.1. Events of Default............................... 34 Section 6.2. Acceleration.................................... 36 Section 6.3. Other Remedies.................................. 37 Section 6.4. Waiver of Past Defaults......................... 38 Section 6.5. Control by Majority............................. 38 Section 6.6. Limitation on Suits............................. 38 Section 6.7. Right of Holders To Receive Payment............. 39 Section 6.8. Collection Suit by Trustee...................... 39 Section 6.9. Trustee May File Proofs of Claim................ 40 Section 6.10. Priorities...................................... 40 Section 6.11. Undertaking for Costs........................... 41 Section 6.12. Restoration of Rights and Remedies.............. 41 ARTICLE 7 TRUSTEE Section 7.1. Duties.......................................... 42 Section 7.2. Rights of Trustee............................... 43 Section 7.3. Individual Rights of Trustee.................... 44 Section 7.4. Trustee's Disclaimer............................ 44 Section 7.5. Notice of Default............................... 45 -iii- Page ---- Section 7.6. Money Held in Trust............................. 45 Section 7.7. Reports by Trustee to Holders................... 45 Section 7.8. Compensation and Indemnity...................... 45 Section 7.9. Replacement of Trustee.......................... 46 Section 7.10. Successor Trustee by Merger, etc................ 49 Section 7.11. Eligibility; Disqualification................... 49 Section 7.12. Preferential Collection of Claims Against Company............................... 50 ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE Section 8.1. Termination of the Company's Obligations................................... 50 Section 8.2. Legal Defeasance and Covenant Defeasance.................................... 52 Section 8.3 Application of Trust Money...................... 56 Section 8.4. Repayment to Company............................ 56 Section 8.5. Reinstatement................................... 56 ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1. Without Consent of Holders...................... 57 Section 9.2. With Consent of Holders......................... 58 Section 9.3. Compliance with Trust Indenture Act............. 60 Section 9.4. Revocation and Effect of Consents............... 60 Section 9.5. Notation on or Exchange of Securities.................................... 61 Section 9.6. Trustee May Sign Amendments, etc................ 61 ARTICLE 10 MISCELLANEOUS Section 10.1. Trust Indenture Act of 1939..................... 61 Section 10.2. Notices......................................... 62 Section 10.3. Communication by Holders with Other Holders....................................... 62 Section 10.4. Certificate and Opinion as to Conditions Precedent.......................... 63 Section 10.5. Statements Required in Certificate or Opinion.................................... 63 Section 10.6. Rules by Trustee, Paying Agent, Registrar..................................... 64 Section 10.7. Governing Law................................... 64 -iv- Page ---- Section 10.8. No Interpretation of Other Agreements.................................... 64 Section 10.9. No Recourse Against Others...................... 64 Section 10.10. Successors...................................... 64 Section 10.11. Duplicate Originals............................. 64 Section 10.12. Separability.................................... 64 Section 10.13. Table of Contents, Headings, etc................ 65 Section 10.14. Benefits of Indenture........................... 65 SIGNATURES......................................................... 66 -v- INDENTURE, dated as of , 1995, between VARITY CORPORATION, a Delaware corporation (the "Company"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation, as trustee (the "Trustee"). For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders of the Securities or of any series thereof, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. ----------- "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. "Agent" means any Registrar or Paying Agent of the Securities. "Attributable Debt" when used in connection with a Sale and Lease-Back Transaction involving a Principal Property shall mean, at the time of determination, the lesser of: (a) the fair value of such property (as determined in good faith by the Board of Directors of the Company); or (b) the present value of the total net amount of rent required to be paid under such lease during the remaining term thereof (including any renewal term or period for which such lease has been extended), discounted at the rate of interest set forth or implicit in the terms of such lease or, if not practicable to determine such rate, the weighted average interest rate per annum borne by the Securities of each series outstanding pursuant to this Indenture compounded semi-annually. For purposes of the fore- going definition, rent shall not include amounts required to be paid by the lessee, whether or not designated as rent or additional rent, on account of or contingent upon maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall be the lesser of the net amount determined assuming termination upon the first date such lease may be terminated (in which case the net amount shall also include the amount of the penalty, but no rent shall be considered as required to be paid under such -2- lease subsequent to the first date upon which it may be so terminated) or the net amount determined assuming no such termination. "Bankruptcy Law" means Title 11 of the United States Code or any similar federal, state or foreign law for the relief of debtors. "Board of Directors" means the board of directors of the Company or any duly authorized committee of such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York, State of New York, or the city in which the Trustee has its Corporate Trust Office, are authorized or obligated by law, regulation or executive order to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Company" means the party named as such in this Indenture until a successor replaces it (or any previous successor) pursuant to this Indenture, and thereafter means such successor. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by any one -3- of its Chairman of the Board, its Vice-Chairman, its President or a Vice President, and by any one of its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the corporate trust office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which on the date hereof is One M & T Plaza, Buffalo, N.Y. 14240, Attention: Corporate Trust Department. "Covenant Defeasance" shall have the meaning set forth in Section 8.2. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Discount Security" means any Security which provides for an amount less than the principal thereof to be due and payable upon a declaration of acceleration of the Stated Maturities thereof pursuant to Section 6.2. "Event of Default" has the meaning set forth in Section 6.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "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 of America, as in effect on the date hereof. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, with respect to any Person, without duplication, (i) all obligations for borrowed money, (ii) all obligations evidenced by bonds, debentures, notes or -4- other similar instruments, (iii) all Capitalized Lease Obligations, (iv) all obligations 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 accrued expenses arising in the ordinary course of business), (v) all fixed unconditional obligations issued or contracted for as payment in consideration of the purchase by such Person of the stock or substantially all the assets of another Person or a merger or consolidation, (vi) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction which secure Indebtedness of a Person other than the issuer of the letter of credit or the accepting bank, (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons guaranteed by such Person to the extent of the guarantee; and (viii) all obligations of the type referred to in clauses (i) through (vii) of other Persons 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 value of such property or asset at the time the Lien is created or the amount of the obligation so secured. "Indenture" means this Indenture, as amended, modified or supplemented from time to time, in accordance herewith, and includes, with respect to a particular series of Securities, the terms of such series of Securities established or contemplated by Section 2.2(a). "Interest Payment Date", for any series of Securities, has the meaning provided in the form of such Securities set forth in the supplemental indenture, Board Resolution, or Officers' Certificate under which such Securities are issued. "Issue Date" means, with respect to any particular series of Securities, the original date of issuance of such series; provided that, in the case of a series subject to a -------- Periodic Offering, the Issue Date shall be the original issue date or dates established pursuant to the proviso of the third paragraph of Section 2.3. "Legal Defeasance" shall have the meaning set forth in Section 8.2. "Lien" means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind. -5- A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Material Subsidiary" means, at any particular time, any Subsidiary of any Person that (a) accounted for more than 10% of the consolidated revenues of such Person and its Subsidiaries on a consolidated basis for the most recently completed fiscal year of such Person or (b) was the owner of more than 10% of the consolidated assets of such Person and its Subsidiaries on a consolidated basis as at the end of such fiscal year, all as shown on the consolidated financial statements of such Person and its Subsidiaries for such fiscal year. "Maturity Date" means, with respect to any Security, the date on which any principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise. "Nonrecourse Obligation" means Indebtedness or other obligations substantially related to (i) the acquisition of assets not previously owned by the Company or any Restricted Subsidiary or (ii) the financing of a project involving the development or expansion of properties of the Company or any Restricted Subsidiary, as to which the obligee with respect to such Indebtedness or obligation has no recourse to the Company or any Restricted Subsidiary or any assets of the Company or any Restricted Subsidiary other than the assets which were acquired with the proceeds of such transaction or the project financed with the proceeds of such transaction (and the proceeds thereof). "Officer" means the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Chief Operating Officer, the Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of the Company and delivered to the Trustee. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. -6- Subject to any express provision hereof, the counsel may be an employee of or counsel to the Company. "Paying Agent" has the meaning set forth in Section 2.4, except that, for the purposes of Articles Three and Eight, the Paying Agent shall not be: (i) the Company, (ii) a Subsidiary of the Company or (iii) any of the Company's respective Affiliates. "Periodic Offering" means an offering of Securities of a series from time to time the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the Stated Maturity or Stated Maturities thereof, the original Issue Date or Dates thereof, the redemption provisions, if any, and any other terms specified as contemplated by Section 2.2(a) with respect thereto, are to be determined by the Company, or one or more of the Company's agents or employees designated in an Officers' Certificate, upon the issuance of such Securities. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "principal" means, with respect to any debt security, the principal of the security plus, with respect to the Securities only, the premium, if any, on the Security. "Principal Property" shall mean the land, land improvements, buildings and fixtures (to the extent they constitute real property interests) (including any leasehold interest therein) constituting the principal corporate office, any manufacturing plant or any manufacturing facility (whether now owned or hereafter acquired) which: (a) is owned by the Company or any of its Subsidiaries; (b) is located within any of the present 50 States of the United States of America (or the District of Columbia); (c) has not been determined in good faith by the Board of Directors of the Company not to be materially important to the total business conducted by the Company and its Subsidiaries taken as a whole; and (d) has a book value on the date as of which the determination is being made in excess of .5% of consolidated total assets of the Company as most recently determined on or prior to such date. -7- "Redemption Date" means, with respect to any Security to be redeemed, the date fixed by the Company for such redemption pursuant to this Indenture and the Securities. "Redemption Price" means, with respect to any Security to be redeemed, the price fixed for such redemption pursuant to the terms of this Indenture and the Securities. "Registrar" shall have the meaning set forth in Section 2.4. "Regular Record Date", for any series of Securities, has the meaning provided in the form of such Securities set forth in the supplemental indenture, Board Resolution or Officers' Certificate under which such Securities are issued. "Restricted Subsidiary" shall mean any Subsidiary of the Company which owns any Principal Property. "Sale and Lease-Back Transaction" shall mean any sale or transfer by the Company or one of its Restricted Subsidiaries of any Principal Property that is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof, if such sale or transfer is made with the intent of leasing, or as part of an arrangement involving the lease of, such Principal Property to the Company or one of its Restricted Subsidiaries. "SEC" 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. "Securities" means the securities that are issued under this Indenture, as amended or supplemented from time to time pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Stated Maturity" means, when used with respect to any Security of a particular series or any installment of principal thereon, the date specified in such Security of such series as the fixed date on which any principal of such Security of such series is due and payable, and when used with -8- respect to any other Indebtedness, means any date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness is due and payable. "Subsidiary" means, with respect to any Person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof and (ii) any other Person (other than a corporation), including, without limitation, a joint venture, in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions). "Surviving Entity" shall have the meaning set forth in Section 5.1. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces such party (or any previous successor) in accordance with the provisions of this Indenture, and thereafter means such successor. "Trust Officer" means the Chairman of the Board, the President or any other officer of the Trustee assigned by the Trustee to administer its corporate trust matters and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "U.S. Government Obligations" shall have the meaning set forth in Section 8.2. "Vice President" shall include Senior Vice President or a Vice President with any other prefix. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of -9- any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). Section 1.2. Incorporation by Reference of Trust Indenture Act. ----------------------------------- Whenever this Indenture refers to a provision of the TIA, the 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: "Commission" means the SEC; "indenture securities" means the Securities; "indenture security holder" means a Securityholder or Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. Section 1.3. Rules of Construction. --------------------- For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) words in the singular include the plural, and words in the plural include the singular; (c) "or" is not exclusive; (d) provisions apply to successive events and transactions; -10- (e) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (f) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (g) all references to $ or dollars refer to the lawful currency of the United States of America. ARTICLE 2 THE SECURITIES Section 2.1. Forms Generally. --------------- The Securities of each series shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions (as set forth in a Board Resolution or, to the extent established pursuant to rather than set forth in a Board Resolution, an Officers' Certificate of the Company detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any applicable law or with the rules of any securities exchange or as may, consistently herewith, be determined by the Officers executing such Securities, as evidenced by their execution thereof. The Securities shall be issuable only in registered form without coupons. The indenture supplemental hereto or the Board Resolution or Officers' Certificate establishing the form of security of any series shall be delivered to the Trustee concurrently with or prior to the delivery of the Company Order contemplated by Section 2.3 for the authentication and delivery of such Securities. The definitive Securities shall be printed, typewritten, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the Officers executing such -11- Securities, as evidenced by their execution of such Securities. Each Security shall be dated the date of its authentication. Section 2.2. Title, Terms and Denominations. ------------------------------ (a) The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture shall be unlimited. The Securities may be issued in one or more series. There shall be established and, subject to Section 2.3, set forth, or determined in the manner provided, in one or more indentures supplemental hereto or in or pursuant to a Board Resolution (as set forth in such Board Resolution or, to the extent established pursuant to rather then set forth in such Board Resolution, an Officers' Certificate detailing such establishment): (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 2.7, 2.8, 2.10, 3.6 or 9.5 and except for any Securities which, pursuant to Section 2.3, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on any Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal of the Securities of the series is payable or the method of determination thereof; (5) the rate or rates at which the Securities of the series shall bear interest (which in no event shall be greater than the then applicable legal rate therefor), if any, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Securities on any Interest -12- Payment Date and/or the method by which such rate or rates or Regular Record Date or Dates shall be determined; (6) the place or places where, subject to the provisions of Section 4.2, the principal of and any interest on Securities of the series shall be payable, any Securities of the series may be surrendered for regis- tration of transfer, Securities of the series may be surrendered for exchange and notices and demands to or upon the Company in respect of the Securities of the series and this Indenture may be served; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof, the conditions, if any, giving rise to such obligation, and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, and any provisions for the remarketing of such Securities; (9) the denominations in which any Securities of the series shall be issuable, if other than denominations of $1,000 and any integral multiple thereof; (10) if the amount of payments of principal of and any interest on the Securities of the series is to be determined with reference to an index, formula or other method, the manner in which such amounts shall be determined and the calculation agent, if any, with respect thereto; (11) if other than the principal amount thereof, the portion of the principal amount of any Securities of the series which shall be payable upon declaration of acceleration of the Stated Maturity thereof pursuant to Section 6.2; (12) if other than as defined in Section 1.1, the meaning of "Business Day" when used with respect to any Securities of the series; -13- (13) if the Securities of the series may be issued or delivered (whether upon original issuance or upon exchange of a temporary Security of such series or otherwise), or any installment of principal of or any interest is payable, only upon receipt of certain certificates or other documents or satisfaction of other conditions in addition to those specified in this Indenture, the form and terms of such certificates, documents or conditions; (14) the forms of the Securities; (15) whether the Securities of the series shall be issued in whole or in part in the form of a global Security or Securities and, in such case, the depositary for such global Security or Securities; (16) any provision for defeasance or discharge of the Securities of the series, if different from those set forth herein; (17) any listing of the Securities of a series on a securities exchange; (18) the price or prices at which the Securities of a series will be issued; and (19) any other terms of the series not inconsistent with the provisions hereof, but which may include covenants, Events of Default, definitions and other provisions in lieu of or in addition to those set forth in this Indenture as of the date hereof and amendments to or other changes in any of the covenants, Events of Default, definitions and other provisions set forth in this Indenture as of the date hereof. All Securities of any one series shall be substan- tially identical except as to denomination, the rate or rates of interest, if any, the Stated Maturities, the date from which interest, if any, shall accrue and except as may otherwise be provided in or pursuant to the Board Resolutions or Officers' Certificates referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened for issuances of additional Securities of such series or for the establishment of additional terms with respect to the Securities of such series, consistent with the terms of this Indenture, if so provided by -14- or pursuant to such Board Resolutions, such Officers' Certificates or in any such indenture supplemental hereto. (b) Unless otherwise provided as contemplated by Section 2.2(a) with respect to any series of Securities, any Securities of a series shall be issuable in denominations of $1,000 and any integral multiple thereof. (c) The Securities of any one series shall rank pari ---- passu in right of payment with the Securities of any other - ----- series. Section 2.3. Execution, Authentication, Delivery and Dating. ------------------------- Two Officers shall sign, or one Officer shall sign and one Officer shall attest to (provided that in either case, one such Officer must be the Chairman of the Board, President, a Vice President, Treasurer or Secretary) the Securities for the Company by manual or facsimile signatures. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, executed by the Company, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities; provided, however, -------- ------- that, with respect to Securities of a series subject to a Periodic Offering, (a) such Company Order may be delivered by the Company to the Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (b) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to a Company Order or pursuant to such procedures -15- acceptable to the Trustee as may be specified from time to time by a Company Order, (c) the rate or rates of interest, if any, the Stated Maturity or Maturities, the original Issue Date or Dates, the redemption provisions, if any, and any other terms of Securities of such series shall be determined by Company Order or pursuant to such procedures and (d) if provided for in such procedures, such Company Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Company, or the Company's duly authorized agent or agents designated in an Officers' Certificate, which oral instructions shall be confirmed promptly in writing. The Trustee shall be entitled to rely on such oral instructions, whether or not confirmed in writing. Each Security shall be dated the date of its authentication. The Trustee may appoint an authenticating agent 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 or an Affiliate. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee's Certificate of Authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. _____________________________, as Trustee By: _______________________ Authorized Officer -16- Notwithstanding the foregoing, if any Security of any series shall have been duly authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 2.11 together with a written statement (which need not comply with Section 10.4 or 10.5 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 2.4. Registrar and Paying Agent. -------------------------- The Company shall maintain, with respect to each series of Securities, an office or agency in the Borough of Manhattan, The City of New York, State of New York where such Securities may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency where such Securities may be presented for payment (the "Paying Agent") and an office or agency where notices and demands to or upon the Company in respect of such Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. Except as otherwise expressly provided in this Indenture, the Company or any Affiliate of the Company may act as Paying Agent. The Company shall enter into an appropriate agency agreement, with respect to each series of Securities, with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar, Paying Agent or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.8. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Securities. -17- Section 2.5. Paying Agent To Hold Money in Trust. ----------------------------------- Each Paying Agent shall hold in trust for the benefit of Securityholders of a particular series or the Trustee all money held by the Paying Agent for the payment of principal of, or interest on, the Securities of such series (whether such money has been distributed to it by the Company or any other obligor on such Securities), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on such Securities) in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, the money shall be segregated and held as a separate trust fund. The Company at any time may require a Paying Agent to distribute all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any payment Default with respect to such Securities, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds distributed. Upon doing so, the Paying Agent (other than an obligor under the Securities) shall have no further liability for the money so paid over to the Trustee. Upon any bankruptcy or reorganization proceeding involving the Company, the Trustee shall act as Paying Agent for the Securities. Section 2.6. Securityholder Lists. -------------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders of each series of Securities and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least ten Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders of such series of Securities, which list may be conclusively relied upon by the Trustee. Section 2.7. Transfer and Exchange. --------------------- When Securities of any series are presented to the Registrar 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, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; -18- provided, however, that such 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, duly executed by the Holder thereof or his attorney-in-fact 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 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 similar governmental charge payable upon exchanges or transfers pursuant to Section 2.3, 2.8, 2.11, 3.6 or 8.5). At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series of any authorized denomination or denominations, of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee or a duly appointed authenticating agent shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. The 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 or (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part. Section 2.8. Replacement Securities. ---------------------- If a mutilated Security of any series is surrendered to the Trustee or if the Holder of a Security of any series claims that such Security has been lost, destroyed or -19- wrongfully taken, the Company shall issue, and the Trustee shall authenticate, 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 the Trustee and the Company, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such Holder for its 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 2.9. Outstanding Securities; Determination of Holders' Action. -------------------------------- Securities of any series outstanding at any time are all Securities of such series that have been authenticated by the Trustee, except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or any of its Affiliates holds the Security; provided, however, that in determining whether the -------- ------- Holders of the required principal amount of Securities of any series have concurred in any direction, waiver or consent, Securities of such series owned by the Company or other obligor on the Securities of such series or an Affiliate of the Company or such other obligor shall be disregarded, except that for the sole purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be disregarded. If a Security is replaced pursuant to Section 2.8 (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 2.8. If on a Redemption Date or a Maturity Date the Paying Agent (other than the Company or an Affiliate of the Company) holds cash or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Securities payable on that date, and is not prohibited from paying such cash or U.S. Government Obligations to the Holders of such Securities pursuant to the terms of this Indenture, then on and after that date -20- such Securities cease to be outstanding and interest on them shall cease to accrue. Section 2.10. Temporary Securities. -------------------- Until definitive Securities of any series are prepared and ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. 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, definitive Securities in exchange for temporary Securities. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive 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 (other than the Company or an Affiliate of the Company), 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. Subject to Section 2.8, the Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Securities, such acquisition shall not operate as a payment, 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. Payment of Interest; Defaulted Interest. -------------------- Unless otherwise provided as contemplated by Section 2.2(a) with respect to any series of Securities, 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 (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. -21- If the Company defaults on a payment of interest on any series of Securities, it shall pay the defaulted interest, plus (to the extent permitted by law) any interest payable on the defaulted interest, in accordance with the terms hereof, to the Persons who are Securityholders of such series on a subsequent special record date, which date shall be at least five Business Days prior to the payment date. The Company shall fix such special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before such special record date, the Company shall mail to each Securityholder of such series a notice that states the special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. Section 2.13. CUSIP Number. ------------ The Company in issuing any series of Securities may use a "CUSIP" number (if then generally in use), and if so, the Trustee may use the CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided, however, 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 such Securities, and that reliance may be placed only on the other identification numbers printed on such Securities. The Company will promptly notify the Trustee of any change in the CUSIP number. Section 2.14. Deposit of Moneys. ----------------- On or before each Interest Payment Date and Maturity Date, the Company shall deposit with the Trustee or Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders of the applicable series of Securities on such Interest Payment Date or Maturity Date, as the case may be. Section 2.15. Persons Deemed Owners. --------------------- Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (except as otherwise specified as contemplated by Section 2.2(a) and Section 2.12) interest, if any, on such Security and for all other -22- purposes whatsoever, whether or not such Security is overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 2.16. Computation of Interest. ----------------------- Except as otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) for Securities of any series, (i) interest, if any, on any Securities which bear interest at a fixed rate shall be computed on the basis of a 360-day year of twelve 30 day months and (ii) interest on any Securities which bear interest at a variable or floating rate shall be computed on the basis of the actual number of days in an interest period divided by the number of days in the year for which such interest is calculated. Section 2.17. Global Securities. ----------------- The Company may issue, if a Board Resolution or Officers' Certificate so provides, some or all of the Securities of a series in temporary or permanent global form. A global Security may be in registered form or in uncertificated form. A global Security shall represent that amount of Securities of a series as specified in the global Security or as endorsed thereon from time to time. At the Company's request, the Registrar shall endorse a global Security to reflect the amount of any increase or decrease in the Securities represented thereby. The Company may issue a global Security only to a depository designated by the Company. A depository may transfer a global Security only as a whole to its nominee or to a successor depository. The Company may establish, among other things, the manner of paying principal and interest on a global Security and whether and upon what terms a beneficial owner of an interest in a global Security may exchange such interest for definitive Securities. The Company, an Affiliate, the Trustee and any Agent shall not be responsible for any acts or omissions of a depository, for any depository records of beneficial ownership interests or for any transactions between the depository and beneficial owners. -23- ARTICLE 3 REDEMPTION OF SECURITIES Section 3.1. Notices to the Trustee. ---------------------- Securities of any series which are redeemable before their maturity shall be redeemable in accordance with their terms and (except as otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) for Securities of any series) in accordance with this Article. If the Company elects to redeem Securities of a series which are redeemable, it shall notify the Trustee in an Officers' Certificate of the Redemption Date and principal amount of Securities of such series to be redeemed. If the Company wishes to reduce the principal amount of a series of Securities to be redeemed, it shall so notify the Trustee of the amount of the reduction and the basis for it. If the Company wishes to credit, and is entitled to credit, against any such redemption Securities of such series it has not previously delivered to the Trustee for cancellation, it shall deliver such Securities with such notice. The Company shall give each notice provided for in this Section 3.1 at least 45 days, but not more than 60 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). Section 3.2. Selection of Securities To Be Redeemed. ----------------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, if less than all the Securities of any series are to be redeemed, the particular Securities of such series or portions thereof to be redeemed shall be selected from the outstanding Securities not previously called for redemption either (x) pro rata, by lot or by such other method as the Trustee considers to be fair and appropriate or (y) in such manner as complies with the requirements of the principal national securities exchange, if any, on which the Securities of such series being redeemed are listed. The amounts to be redeemed shall be equal to $1,000 or any integral multiple thereof, except that if all of the -24- Securities of a series of a Holder are to be redeemed, the entire amount of Securities of such series held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. The Trustee shall select Securities to be redeemed from the Securities of the applicable series outstanding and not previously called for redemption and shall promptly notify the Company and the Registrar in writing of the Securities of any series selected for redemption and, in the case of any Securities of any series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section 3.3. Notice of Redemption. -------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, notice of redemption shall be given by first-class or certified mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder appearing in the security register maintained by the Registrar. All notices of redemption shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price and the amount of accrued interest, if any, to be paid; (c) 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 upon surrender to the Paying Agent of the Securities redeemed; -25- (d) if any Security is to be redeemed in part, the portion of the principal amount (equal to $1,000 or any integral multiple thereof) of such Security to be redeemed and that on or after the Redemption Date, upon surrender for cancellation of such Security to the Paying Agent, a new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the Securityholder; (e) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and the name and address of the Paying Agent; (f) the CUSIP number, if any, relating to such Securities; and (g) whether Securities are being redeemed pursuant to the mandatory redemption or the optional redemption provisions of the Securities. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company. Section 3.4. Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Paying Agent, such Securities called for redemption shall be paid at the Redemption Price plus accrued interest to the Redemption Date, but interest installments whose maturity is on or prior to such Redemption Date will be payable on the relevant Interest Payment Dates to the Holders of record at the close of business on the relevant record dates referred to in the Securities. Section 3.5. Deposit of Redemption Price. --------------------------- On or prior to any Redemption Date, the Company shall deposit with the Paying Agent an amount of money in immediately available funds sufficient to pay the Redemption Price of, and accrued and unpaid interest on, all the Securities or portions thereof which are to be redeemed on that date, other than Securities or portions thereof called for redemption on that date -26- which have been delivered by the Company to the Trustee for cancellation. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price, 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. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and, to the extent lawful, accrued interest thereon shall, until paid, bear interest from the Redemption Date at the rate provided in the Securities, unless otherwise specified as contemplated by Section 2.2(a) with respect to the Securities of such series or in such Securities. Section 3.6. Securities Redeemed or Purchased in Part. ----------------------------------- Upon surrender to the Paying Agent of a Security which is to be redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the unredeemed portion of the principal of the Security so surrendered that is not redeemed. ARTICLE 4 COVENANTS Section 4.1. Payment of Securities. --------------------- The Company shall pay the principal of and interest on each series of Securities on the dates and in the manner provided in such Securities or pursuant to this Indenture. An installment of principal or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company, a Subsidiary of the Company or any Affiliate of any thereof) holds for the benefit of the Holders on that date money deposited and designated for and sufficient to pay the installment and is not prohibited from paying such money to the Holders of the Securities pursuant to the terms of this Indenture. -27- Unless otherwise specified as contemplated by Section 2.2(a) with respect to any series of Securities, the Company will pay interest (including post-petition interest in any proceeding under any applicable Bankruptcy Law) on overdue principal at the rate and in the manner provided in the Securities; it shall pay interest (including post-petition interest in any proceeding under any applicable Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate and in the same manner, to the extent lawful. Section 4.2. Maintenance of Office or Agency. ------------------------------- The Company will maintain in the Borough of Manhattan, The City of New York, State of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange, an office or agency where the Securities may be presented for payment and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee as set forth in Section 10.2. The Company may also from time to time designate one or more other offices or agencies where Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall - -------- ------- in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, State of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designate the Corporate Trust Office of the Trustee as such office of the Company. Section 4.3. Corporate Existence. ------------------- Subject to Article Five, the Company will do or cause to be done all things necessary to, and will cause each of its Material Subsidiaries to, preserve and keep in full force and -28- effect its respective corporate existence, rights (charter and statutory), licenses and/or franchises; provided, however, that -------- ------- the Company or any of its Subsidiaries shall not be required to preserve any such existence, rights, licenses or franchises if (x) the Company shall reasonably determine that the preservation thereof is no longer desirable in the conduct of the business of it and its Subsidiaries taken as a whole or (y) the loss thereof is not materially adverse to the Company and its Subsidiaries taken as a whole or to the ability of the Company to otherwise satisfy its obligations hereunder. Section 4.4. Compliance Certificate. ---------------------- (a) The Company shall deliver to the Trustee, within 120 days after the end of each of its fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest on the Securities of any series are prohibited or, if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.5 below shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Articles 4 or 5 of this Indenture or, if any such violation has occurred, specifying the nature and period of -29- 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 will deliver to the Trustee as soon as possible, and in any event within 10 days after it becomes aware or should reasonably have become aware of the occurrence of any Default or Event of Default in respect of any series of Securities, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.5. SEC Reports. ----------- The Company shall file with the Trustee, within 15 days after it files them with the SEC, copies of the quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA (S) 314(a). If the Company is not subject to the requirements of such Section 13 or 15(d), the Company shall file with the Trustee, within 15 days after it would have been required to file the same with the SEC, financial statements, including any notes thereto (and with respect to annual reports, an auditors' report by a firm of established national reputation), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which the Company would have been required to include in such annual reports, information, documents or other reports if the Company had been subject to the requirements of such Section 13 or 15(d). In addition, the Company shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders generally to be filed with the Trustee and mailed, no later than the date such materials are mailed or made available to the Company's stockholders, to the Holders at their addresses as set forth in the register of Securities maintained by the Registrar. Section 4.6. Waiver of Stay, Extension or Usury Laws. ------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or -30- advantage of, any stay or extension law or any usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on Securities of any series 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 4.7. Limitations on Liens. -------------------- The Company covenants that it will not issue, incur, create, assume or guarantee, and will not permit any Restricted Subsidiary to issue, incur, create, assume or guarantee, any Indebtedness secured by a Lien upon any Principal Property of the Company or such Restricted Subsidiary or upon any shares of stock or Indebtedness of any Restricted Subsidiary held by the Company (whether such Principal Property, shares or Indebtedness are now existing or owed or hereafter created or acquired) without in any such case effectively providing concurrently with the issuance, incurrence, creation, assumption or guaranty of any such secured Indebtedness, or the grant of a Lien with respect to any such Indebtedness of any Restricted Subsidiary, that the Securities (together with, if the Company shall so determine, any other Indebtedness of or guarantee by the Company or such Restricted Subsidiary) shall be secured by a mortgage ranking equally and ratably with (or, at the option of the Company, prior to), and for so long as such other Indebtedness is so secured, such secured debt. The foregoing restriction, however, will not apply to: (a) Liens on property, shares of stock or Indebtedness or other assets of any corporation existing at the time such corporation becomes a Restricted Subsidiary; provided that such Liens are not incurred in anticipation of such corporation becoming a Restricted Subsidiary; (b) Liens on property, shares of stock or Indebtedness existing at the time of acquisition thereof by the Company or a Restricted Subsidiary or Liens on property, shares of stock or Indebtedness to secure any Indebtedness for borrowed money incurred prior to, at the time of, or within 270 days after, the latest of the acquisition thereof, or, in the case of property, the completion of construction, the completion of improvements or the commencement of substantial commercial operation of such property, for the purpose of financing all or any part of the -31- purchase price thereof, such construction or the making of such improvements; (c) Liens to secure Indebtedness owing to the Company or to a Restricted Subsidiary; (d) Liens existing at the date of the initial issuance of the Securities of such series; (e) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to the Company or a Restricted Subsidiary; provided that such Lien was not incurred in -------- anticipation of such merger or consolidation or sale, lease or other disposition; (f) Liens created in connection with a project financed with, and created to secure, a Nonrecourse Obligation; or (g) extensions, renewals or replacements of any Liens permitted by any of the foregoing clauses (a) through (f); provided, however, that any Liens permitted by any of the - -------- ------- foregoing clauses (a) through (f) shall not extend to or cover any property of the Company or such Restricted Subsidiary, as the case may be, other than the property specified in such clauses and improvements thereto. Section 4.8. Limitations on Sale and Lease-Back Transactions. ---------------------------------- The Company covenants that it will not, nor will it permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction with respect to any Principal Property, other than any such transaction involving a lease for a term of not more than three years or any such transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, unless: (a) the Company or such Restricted Subsidiary would be entitled to incur Indebtedness secured by a mortgage on the Principal Property involved in such transaction at least equal in amount to the Attributable Debt with respect to such Sale and Lease-Back Transaction, without equally and ratably securing the Securities, pursuant to Section 4.7; or (b) the Company shall apply an amount equal to the greater of the net proceeds of such sale or the Attributable Debt with respect to such Sale and Lease-Back Transaction within 180 days of such sale to either (or a combination of) the retirement (other than any mandatory retirement, mandatory prepayment or sinking fund payment or by payment at maturity) of Indebtedness of the Company or a Restricted Subsidiary that matures more than twelve months after the creation of such Indebtedness or the purchase, construction or development of other comparable property. -32- ARTICLE 5 SUCCESSOR CORPORATION Section 5.1. When Company May Merge, etc. --------------------------- (a) The Company will not, in a single transaction or a series of transactions, consolidate with or merge with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any other Person or Persons, or permit any of its Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Subsidiaries, taken as a whole, to any other Person or Persons, unless: (1) either (A) if the transaction or series of transactions is a merger or consolidation, the Company shall be the Person surviving such merger or consolidation or (B) the Person formed by such consolidation or into which the Company or such Subsidiary, as the case may be, is merged or to which the properties and assets of the Company or such Subsidiary, substantially as an entirety, are transferred (any such surviving Person or transferee Person being the "Surviving Entity") shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and such corporation shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the Company's obligation for the due and punctual payment of the principal of and interest, if any, on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction or series of transactions on a pro forma basis --- ----- (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing with respect to Securities of any series; and -33- (3) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each in form and substance reasonably satisfactory to the Trustee, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition and, if a supplemental indenture is required in connection with such transaction or series of transactions, such supplemental indenture comply with this Indenture and that all conditions precedent herein provided for relating to such transaction or series of transactions have been complied with. Section 5.2. Successor Substituted. --------------------- Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company in accordance with Section 5.1(a) hereof, the successor Person or Persons formed by such consolidation or into which the Company is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or other disposition 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 Company shall be discharged from all obligations and covenants under this Indenture and the Securities. ARTICLE 6 REMEDIES Section 6.1. Events of Default. ----------------- An "Event of Default" means with respect to each series of Securities, individually, any of the following events: (a) default by the Company in the payment of the principal of any Security of such series when the same becomes due and payable upon Stated Maturity, acceleration or otherwise; or (b) default by the Company in the payment of an installment of interest on any Security of such series when the same becomes due and payable, and any such Default continues for a period of 30 days; or -34- (c) default by the Company in the performance or observance of any term, covenant or agreement contained in this Indenture or the Securities (other than Defaults specified in clause (a) or (b) above), and such Default continues for a period of 60 days after written notice of such Default (which notice shall specify the Default, demand that it be remedied and state that it is a "Notice of Default") requiring the Company to remedy the same shall have been given (i) to the Company by the Trustee or (ii) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; or (d) default or defaults under one or more agreements, instruments, mortgages, bonds, debentures or other evidences of Indebtedness, whether now existing or hereinafter created, under which the Company or any Material Subsidiary of the Company then has outstanding Indebtedness in excess of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), and either (i) such Indebtedness is already due and payable in full or (ii) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness unless such acceleration is cured, waived, rescinded or annulled within 30 days after written notice thereof shall been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; or (e) one or more judgments, orders or decrees of any court or regulatory or administrative agency of competent jurisdiction for the payment of money in excess of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), shall be entered against the Company or any Material Subsidiary of the Company and shall not be discharged or fully bonded and there shall have been a period of 60 days after the date on which any period for appeal has expired and during which a stay of enforcement of such judgment, order or decree shall not be in effect; or (f) the Company or any Material Subsidiary of the Company pursuant to or under or within the meaning of any Bankruptcy Law: -35- (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors; or (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Material Subsidiary of the Company in an involuntary case or proceeding, (ii) appoints a Custodian of the Company or any Material Subsidiary of the Company or for all or substantially all of its properties, or (iii) orders the liquidation of the Company or any Material Subsidiary of the Company, and in each case the order or decree remains unstayed and in effect for 60 days. The Trustee shall not be charged with knowledge of any Default or Event of Default (other than, if the Trustee is acting as Paying Agent, those set forth in Section 6.1(a), (b) or, to the extent relating to Section 4.1, (c)) unless written notice thereof shall have been given to a Trust Officer at the Corporate Trust Office of the Trustee by the Company, the Paying Agent, any Holder, any holder of Senior Indebtedness or any of their respective agents. Section 6.2. Acceleration. ------------ If an Event of Default with respect to any series of Securities (other than an Event of Default specified in Section 6.1(f) or (g) with respect to the Company) occurs and is continuing, the Trustee by written notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding, by written notice -36- to the Company and the Trustee, may declare the unpaid principal of (or, if any of the Securities of that series are Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) and accrued interest on all the Securities of such series to be due and payable immediately. If an Event of Default specified in Section 6.1(f) or (g) with respect to the Company occurs and is continuing, then the principal of and accrued interest on all the Securities shall ipso facto become and be immediately due ---- ----- and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration in respect of a series of Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee, Holders of a majority in aggregate principal amount of such series of Securities outstanding, by written notice to the Company and the Trustee, may, on behalf of all Holders of such series of Securities, rescind and annul such declaration and its consequences if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section 7.8 and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Securities of such series, (iii) the principal of such series of Securities which has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by such series of Securities, and (iv) interest upon overdue principal and, to the extent that payment of such interest is lawful, overdue interest at the rate borne by such series of Securities which has become due otherwise than by such declaration of acceleration; (b) such rescission or annulment would not conflict with any judgment or decree of a court of competent jurisdiction; and -37- (c) all Events of Default with respect to such series of Securities, other than the non-payment of principal of and interest on such series of Securities which has become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.4. No such rescission shall affect any subsequent Default or Event of Default with respect to such series of Securities or impair any right consequent thereon. Section 6.3. Other Remedies. -------------- If an Event of Default with respect to a series of Securities occurs and is continuing, the Trustee may in its discretion pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on such Securities or to enforce the performance of any provision of such Securities or this Indenture. All rights of action and claims under this Indenture or the Securities of any series may be enforced by the Trustee even if it does not possess any of the Securities of such series 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 with respect to a series of Securities 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 6.4. Waiver of Past Defaults. ----------------------- Subject to the provisions of Sections 6.2, 6.7 and 9.2, the Holders of not less than a majority in aggregate principal amount of the outstanding Securities of any series by notice to the Trustee may, on behalf of the Holders of all the Securities of such series, waive any existing Default or Event of Default, with respect to such series, and its consequences. When a Default or Event of Default with respect to a series of Securities is so waived, it shall be deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. -38- Section 6.5. Control by Majority. ------------------- The Holders of at least a majority in aggregate principal amount of the then outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, however, that the Trustee may refuse to -------- ------- follow any direction (a) that conflicts with any rule of law or this Indenture, (b) that the Trustee determines may be unduly prejudicial to the rights of another Securityholder of such series, or (c) that may expose the Trustee to Personal liability unless the Trustee has indemnification satisfactory to it in its sole discretion against any loss or expense caused by its following such direction; and provided, further, that -------- ------- the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Section 6.6. Limitation on Suits. ------------------- No Holder of any Securities of any series shall have any right to pursue any remedy with respect to this Indenture or such Securities unless: (a) the Holder gives written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (b) the Holders of at least 25% in principal amount of the then outstanding Securities of that series make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer and, if requested, provide to the Trustee reasonable indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, provision of indemnity; and (e) during such 60-day period the Holders of a majority in aggregate principal amount of the then outstanding Securities of that series do not give the Trustee a direction which is inconsistent with the request. The foregoing limitations shall not apply to a suit instituted by a Holder of Securities of a series for the -39- enforcement of the payment of principal of or accrued interest on such Securities held by such Holder on or after the respective due dates set forth in such Securities. A Securityholder of a series may not use this Indenture to prejudice the rights of any other Securityholder of such series or to obtain priority or preference over such other Securityholder. Section 6.7. Right of Holders To Receive Payment. ----------------------------------- Notwithstanding any other provision in this Indenture, the right of any Holder of a Security to receive payment of the principal of and interest on such 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 the Stated Maturity or Interest Payment Date, as the case may be, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder. Section 6.8. Collection Suit by Trustee. -------------------------- If an Event of Default specified in clause (a) or (b) of Section 6.1 with respect to Securities of any series occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust in favor of the Holders against the Company or any other obligor on the Securities of such series for the whole amount of principal of 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 of such series and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.9. Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect and receive -40- 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 Holder 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 Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.8. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder 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 Holder in any such proceeding. Section 6.10. Priorities. ---------- If the Trustee collects any money pursuant to this Article Six, it shall pay out such money in the following order: First: to the Trustee for amounts due under Section 7.8; Second: to Holders for interest accrued, if any, on the Securities of the applicable series, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; Third: to Holders for principal owing under the Securities of the applicable series, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities of the applicable series for principal; and Fourth: the balance, if any, to the Company. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may in -41- its discretion require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to any suit by the Trustee, any suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than 10% in aggregate principal amount of the outstanding Securities of any series. Section 6.12. Restoration of Rights and Remedies. ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Security and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE 7 TRUSTEE Section 7.1. Duties. ------ (a) In case an Event of Default has occurred and is continuing, with respect to Securities of any series, the Trustee shall exercise, with respect to Securities of such series, such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default, with respect to the Securities of any series: (1) the Trustee need perform, with respect to Securities of such series, only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and -42- (2) in the absence of bad faith on its part, the Trustee may, with respect to Securities of such series, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (c) No provision of this Indenture shall be construed to relieve the Trustee 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 7.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (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 6.5. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1. (f) The Trustee shall not be liable for interest on, or be required to invest, any assets received by it except as the Trustee may agree with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. -43- Section 7.2. Rights of Trustee. ----------------- Subject to Section 7.1 hereof and the provisions of TIA (S) 315: (a) The Trustee may rely, and shall be protected from 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 consult with counsel and may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Sections 10.4 and 10.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture other than any liabilities arising out of its own negligence. (e) The Trustee may consult with counsel of its own choosing and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, -44- unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. Section 7.3. Individual Rights of Trustee. ---------------------------- The Trustee, any Paying Agent, Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 7.11 and 7.12 and TIA (S)(S) 310 and 311, may otherwise deal with the Company and its Subsidiaries with the same rights it would have if it were not the Trustee, Paying Agent, Registrar or such other agent. Section 7.4. Trustee's Disclaimer. -------------------- The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement in the Securities other than the Trustee's certificate of authentication. Section 7.5. Notice of Default. ----------------- If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder of the affected series notice of the Default or Event of Default within 30 days thereafter; provided, however, that, except in the case of a Default in the - -------- ------- payment of the principal of or interest on any Security or in the payment of any sinking fund installment, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee of the board of directors or a committee of the directors of the Trustee and/or Trust Officers in good faith determines that the withholding of such notice is in the interest of the Holders. Section 7.6. Money Held in Trust. ------------------- All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required herein or by -45- law. The Trustee shall not be under any liability for interest on any moneys received by it hereunder. Section 7.7. Reports by Trustee to Holders. ----------------------------- Within 60 days after May 15 of each year beginning with the May 15 following the date of this Indenture, the Trustee shall, to the extent that any of the events described in TIA (S) 313(a) has occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such May 15 that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c). A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company shall notify the Trustee in writing if the Securities become listed on any securities exchange or automatic quotation system. Section 7.8. Compensation and Indemnity. -------------------------- The Company covenants and agrees to pay the Trustee from time to time reasonable compensation for its services. 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 incurred or made by it. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability incurred by it arising out of or in connection with the administration of this trust and its rights or duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against -46- any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.8, the Trustee shall have a Lien prior to the Securities on all assets held or collected by the Trustee, in its capacity as Trustee, except assets held in trust for the benefit of the Holders of particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 6.1(f) or (g) with respect to the Company, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The Company's obligations under this Section 7.8 and any Lien arising hereunder shall survive the resignation or removal of any trustee, the discharge of the Company's obligations pursuant to Article Eight and/or the termination of this Indenture. Section 7.9. Replacement of Trustee. ---------------------- The Trustee may resign with respect to any series of Securities issued hereunder by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities of any series may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee with the Company's consent. The Company may remove the Trustee with respect to any series of Securities if: (a) the Trustee fails to comply with Section 7.11; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a receiver or other public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason with respect to the Securities of one or more series, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee, with respect to the Securities of such series. -47- The Trustee shall be entitled to payment of its fees and reimbursement of its expenses while acting as Trustee, and to the extent such amounts remain unpaid, the Trustee that has resigned or has been removed shall retain the Lien afforded by Section 7.8. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Securities of any series may appoint a successor Trustee to replace the successor Trustee appointed by the Company with respect to the Securities of that series. In the case of the appointment hereunder of a successor Trustee with respect to all Securities, a successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.8, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees as co-Trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder -48- administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, subject, nevertheless, to its Lien, if any, provided for in Section 7.8. If a successor Trustee with respect to the Securities of one or more series does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities of such series may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.11, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any provisions of this Section 7.9 shall become effective upon acceptance of appointment by the successor trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.9, the Company's obligations under Section 7.8 shall continue for the benefit of the retiring Trustee. Section 7.10. Successor Trustee by Merger, etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall, if such resulting, surviving or transferee corporation or -49- national banking association is otherwise eligible hereunder, be the successor Trustee. Section 7.11. Eligibility; Disqualification. ----------------------------- There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(5) and which shall have a combined capital and surplus of at least $100,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinabove specified in this Article. The Trustee shall comply with TIA (S) 310(b). Section 7.12. Preferential Collection of Claims Against Company. --------------------------------- The Trustee shall comply with TIA (S) 311(a) excluding any creditor relationship listed in TIA (S) 311(b). If the present or any future Trustee shall resign or be removed, it shall be subject to TIA (S) 311(a) to the extent provided therein. ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE Section 8.1. Termination of the Company's Obligations. ---------------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, the Company may terminate its obligations under this Indenture with respect to any series of Securities, except those obligations referred to in the penultimate paragraph of this Section 8.1, if all Securities of such series previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment money has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by -50- the Company and thereafter repaid to the Company, as provided in Section 8.4) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if: (a) either (i) pursuant to Article Three, the Company shall have given notice to the Trustee and mailed a notice to each Securityholder of such series of the redemption of all of the Securities of such series under arrangements satisfactory to the Trustee for the giving of such notice or (ii) all Securities of such series have otherwise become due and payable hereunder; (b) the Company shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Securityholders of such series for that purpose, money in such amount as is sufficient without consideration of reinvestment of such interest, to pay principal of and interest on the outstanding Securities of such series to maturity or redemption; provided that the Trustee shall have been -------- irrevocably instructed to apply such money to the payment of said principal and interest with respect to such Securities; (c) no Default or Event of Default with respect to this Indenture applicable to such series or the Securities of such series shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound; (d) the Company shall have paid all other sums payable by it hereunder; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for the termination of the Company's obligations under such Securities and this Indenture applicable to such Securities have been complied with. Such Opinion of Counsel shall also state that such satisfaction and discharge does not -51- result in a default under any agreement or instrument then known to such counsel that binds or affects the Company. Notwithstanding the foregoing paragraph, the Company's obligations in Sections 2.6, 2.7, 2.8, 2.9, 4.1, 4.2, 7.8, 8.4 and 8.5 shall survive until the Securities of such series are no longer outstanding pursuant to the last paragraph of Section 2.9. After the Securities are no longer outstanding, the Company's obligations in Sections 7.8, 8.4 and 8.5 shall survive. After such delivery or irrevocable deposit the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities of such series and this Indenture applicable to such Securities except for those surviving obligations specified above. Section 8.2. Legal Defeasance and Covenant Defeasance. -------------------- (a) Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, the Company may, at its option by Board Resolution or by an Officers' Certificate, at any time, with respect to the Securities of any series, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding Securities of such series 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 of such series 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 of such series, which shall thereafter be deemed to be "outstanding" only for the purposes of paragraph (e) below and the other Sections of and matters under this Indenture applicable to such Securities referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Securities and this Indenture applicable to such Securities insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following -52- which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Securities of such series to receive solely from the trust fund described in paragraph (d) below and as more fully set forth in such paragraph payments in respect of the principal of and interest on such Securities when such payments are due, (ii) the Company's obligations with respect to such Securities under Sections 2.7, 2.8 and 4.2 and, with respect to the Trustee, under Section 7.8, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv) this Section 8.2 and Section 8.5. Subject to compliance with this Section 8.2, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) below with respect to Securities of any series. (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 5 and in Section 4.3, except as to the corporate existence of the Company and in Sections 4.4 through 4.8 and in certain other sections with respect to the outstanding Securities of such series identified in any supplemental indenture pursuant to Section 2.2(a) on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and such 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 such outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1(c) with respect to such series of Securities, but, except as specified above, the remainder of this Indenture applicable to such Securities 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 of such series: -53- (i) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.11 who shall agree to comply with the provisions of this Section 8.2 applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities of such series, (x) money in an amount or (y) direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which guarantee or obligation the full faith and credit of the United States is pledged ("U.S. Government Obligations") maturing as to principal and interest in such amounts of money and at such times as are sufficient without consideration of any reinvestment of such interest, to pay principal of and interest on the outstanding Securities of such series not later than one day before the due date of any payment, or (z) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge principal of and interest on the outstanding Securities of such series on the Maturity Date or otherwise in accordance with the terms of this Indenture and of the Securities of such series; provided, -------- however, that the Trustee (or other qualifying trustee) ------- shall have received an irrevocable written order from the Company instructing the Trustee (or other qualifying trustee) to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities of such series; (ii) no Default or Event of Default with respect to such series of Securities shall have occurred and be continuing on the date of such deposit; (iii) such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound; (iv) in the case of an election under paragraph (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the -54- Internal Revenue Service a ruling or (y) since the date of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (v) in the case of an election under paragraph (c) above, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (vi) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance under paragraph (b) above or the Covenant Defeasance under paragraph (c) above, as the case may be, have been complied with; and (vii) the Company shall have delivered to the Trustee an amount sufficient to cover its fees and expenses as Trustee under this Indenture through the term of the Securities to be defeased, or made adequate provision therefor to the satisfaction of the Trustee. (e) All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee; collectively for purposes of this paragraph (e), the "Trustee") pursuant to paragraph (d) above in respect of the outstanding Securities of such series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture applicable to such Securities, to the payment, either directly or through any Paying Agent (other than the Company or any Affiliate of the Company) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal and interest, but such money need not be -55- segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to paragraph (d) above or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities of such series. Anything in this Section 8.2 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request, in writing, of the Company any money or U.S. Government Obligations held by it as provided in paragraph (d) above which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.3. Application of Trust Money. -------------------------- The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Sections 8.1 and 8.2, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Securities of such series. Section 8.4. Repayment to Company. -------------------- Subject to Sections 7.8, 8.1 and 8.2, the Trustee shall promptly pay to the Company, upon receipt by the Trustee of an Officers' Certificate, any excess money, determined in accordance with Section 8.2, held by it at any time. The Trustee and the Paying Agent shall pay to the Company, 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 or principal or interest that remains unclaimed for two years after payment to the Securityholders of such series 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 -56- or mail to each Securityholder of such series entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to money must look solely to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. Section 8.5. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations to any payment in respect of Securities of any series 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 obligations under this Indenture and the Securities of such series 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 has made any -------- ------- payment of principal of or interest on any Securities of such series because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of Securities of such series to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1. Without Consent of Holders. -------------------------- The Company and the Trustee may amend, waive or supplement this Indenture or the Securities of any series without notice to or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to evidence the succession of another Person to the Company and the assumption by any such successor of -57- the obligations of the Company herein and in the Securities of any series in accordance with Article Five; (c) to provide for uncertificated Securities in addition to certificated Securities; (d) to comply with any requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (e) to make any change that would provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder; or (f) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.2(a), respectively. Upon the request of the Company accompanied by a resolution of its Board of Directors, authorizing the execution of any such supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects its own rights, duties, protections or immunities under this Indenture or otherwise. Section 9.2. With Consent of Holders. ----------------------- Subject to Section 6.4, the Company and the Trustee may amend or supplement this Indenture or the Securities of any series or any supplemental indenture relating to any series of Securities with the written consent of the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected then outstanding, and the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected then outstanding by written notice to the Trustee may waive future compliance by the Company with any provision of this Indenture, such Securities or any supplemental indenture relating to such Securities. Upon the request of the Company, accompanied by a resolution of its Board of Directors authorizing the execution -58- of any supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Securityholders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties, protections or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. Notwithstanding the provisions of this Section 9.2, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.4, may not: (a) reduce the percentage in aggregate outstanding principal amount of Securities of any series the Holders of which must consent to an amendment, supplement or waiver of any provision of this Indenture, the Securities of such series or any supplemental indenture; (b) reduce the rate or change the time for payment of interest on any Security of any series or change the method or formula for calculating interest; (c) reduce the principal amount outstanding of or extend the fixed maturity of any Security of any series or alter the redemption provisions with respect thereto or reduce the amount of the principal of any outstanding Discount Securities that would be due and payable upon declaration of acceleration of maturity thereof; (d) waive a default in the payment of the principal of or interest on, or redemption or an offer to purchase required hereunder with respect to, any Security of any series; (e) make the principal of or interest on any Security of any series payable in money or in a manner other than that stated in the Security; (f) modify this Section 9.2 or Section 6.4 or Section 6.7; (g) impair the right to institute suit for the enforcement of any payment on or with respect to the Securities of any series; or -59- (h) make such other changes as may require the consent of each Holder so affected pursuant to any supplemental indenture. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders of each Security affected thereby, with a copy to the Trustee, 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 supplemental indenture. Section 9.3. Compliance with Trust Indenture Act. ----------------------------------- Every amendment of or supplement to this Indenture or the Securities shall comply with the TIA as then in effect. Section 9.4. Revocation and Effect of Consents. --------------------------------- Until an amendment, supplement or waiver becomes effective with respect to a series of Securities, a consent to it by a Holder of a Security of such series is a continuing consent by such Holder and every subsequent Holder of that Security or portion of that Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security prior to such amendment, supplement or waiver becoming effective as to the Securities of such series. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. Notwithstanding the above, nothing in this paragraph shall impair the right of any Holder under (S) 316(b) of the TIA. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the second and third sentences of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent -60- to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. Such consent shall be effective only for actions taken within 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder of such series unless it makes a change described in any of clauses (a) through (h) of Section 9.2; if it makes such a change, the amendment, supplement or waiver shall bind every subsequent Holder of a Security of such series or portion of a Security that evidences the same debt as the consenting Holder's Security. Section 9.5. Notation on or Exchange of Securities. ------------------------------------- If an amendment, supplement or waiver changes the terms of a Security of any series, the Trustee shall (in accordance with the specific direction of the Company) request the Holder of such Security to deliver it to the Trustee. The Trustee shall (in accordance with the specific direction of the Company) place an appropriate notation on such 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 such Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.6. Trustee May Sign Amendments, etc. -------------------------------- The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article Nine if the amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, supplement or waiver, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver is authorized or permitted by this Indenture, that it is not inconsistent herewith and that it will be valid and binding upon the Company in accordance with its terms. -61- ARTICLE 10 MISCELLANEOUS Section 10.1. Trust Indenture Act of 1939. --------------------------- This Indenture is subject to the provisions of the TIA that are required to be a part of this Indenture, and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. Section 10.2. Notices. ------- Any notice or communication shall be sufficiently given if in writing and delivered in Person or mailed by first class mail, postage prepaid, addressed as follows: If to the Company, to: VARITY CORPORATION 672 Delaware Avenue Buffalo, New York 14209 Attention: Treasurer If to the Trustee, to: MANUFACTURERS AND TRADERS TRUST COMPANY One M&T Plaza Buffalo, New York 14240 Attention: Corporate Trust Department The parties hereto by notice to the other parties may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed, postage prepaid, to a Holder, including any notice delivered in connection with TIA (S) 310(b), TIA (S) 313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed by first class mail to such Holder at the address of such Holder as it appears on the Securities register maintained by the Registrar and shall be sufficiently given to such Holder if so mailed within the time prescribed. Copies of -62- any such communication or notice to a Holder shall also be mailed to the Trustee. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, if a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. Section 10.3. Communication by Holders with Other Holders. ----------------------------- Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA (S) 312(c). Section 10.4. Certificate and Opinion as to Conditions Precedent. ----------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate 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 10.5. Statements Required in Certificate or Opinion. ---------------------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the Person making such certificate or rendering such 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 -63- 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 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 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 10.6. Rules by Trustee, Paying Agent, Registrar. ------------------------------- The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions. Section 10.7. Governing Law. ------------- This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law. Section 10.8. No Interpretation of Other Agreements. -------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 10.9. No Recourse Against Others. -------------------------- A director, officer, employee, shareholder or Affiliate, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. -64- Section 10.10. Successors. ---------- All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 10.11. Duplicate Originals. ------------------- The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all such executed copies together represent the same agreement. Section 10.12. Separability. ------------ In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefor against any party hereto. Section 10.13. Table of Contents, Headings, etc. -------------------------------- The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. Section 10.14. Benefits of Indenture. --------------------- Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. -65- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. VARITY CORPORATION, as Issuer By:__________________________________ Name: Title: MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee By:__________________________________ Name: Title: EX-4.4 9 FORM OF SUB. INDENTURE RELATING TO VARITY SUBORDINATED DEBT EXHIBIT 4.4 _______________________________________________________________ _______________________________________________________________ ____________________ VARITY CORPORATION, as Issuer, and MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee ____________________ INDENTURE Dated as of , 1995 ____________________ Subordinated Debt Securities _______________________________________________________________ _______________________________________________________________ Reconciliation and tie between Trust Indenture Act of 1939 and Indenture dated as of , 1995 Trust Indenture Indenture Act Section Section - --------------- --------- (S) 310(a)(1) ........................................ 7.11 (a)(2) ........................................ 7.11 (a)(3) ........................................ N.A. (a)(4) ........................................ N.A. (a)(5) ........................................ 7.11 (b) ........................................ 7.11; 11.2 (c) ........................................ N.A. (S) 311(a) ........................................ 7.12 (b) ........................................ 7.12 (c) ........................................ N.A. (S) 312(a) ........................................ 2.6 (b) ........................................ 11.3 (c) ........................................ 11.3 (S) 313(a) ........................................ 7.7 (b) ........................................ 7.7 (c) ........................................ 7.7; 11.2 (d) ........................................ 7.7 (S) 314(a) ........................................ 4.4; 4.5; 11.2 (b) ........................................ N.A. (c)(1) ........................................ 11.4 (c)(2) ........................................ 11.4 (c)(3) ........................................ N.A. (d) ........................................ N.A. (e) ........................................ 11.5 (f) ........................................ N.A. (S) 315(a) ........................................ 7.1(b) (b) ........................................ 7.5; 11.2 (c) ........................................ 7.1(a) (d) ........................................ 7.1(c) (e) ........................................ 6.11 (S) 316(a) (last sentence) ........................................ 2.9 (a)(1)(A) ........................................ 6.5 (a)(1)(B) ........................................ 6.4 (a)(2) ........................................ N.A. (b) ........................................ 6.7 (c) ........................................ N.A. (S) 317(a)(1) ........................................ 6.8 (a)(2) ........................................ 6.9 (b) ........................................ 2.5 (S) 318(a) ........................................ 11.1 (b) ........................................ N.A. (c) ........................................ 11.1 _______________ Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. -i- TABLE OF CONTENTS ----------------- Page ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions..................................... 1 Section 1.2. Incorporation by Reference of Trust Indenture Act................................. 9 Section 1.3. Rules of Construction........................... 10 ARTICLE 2 THE SECURITIES Section 2.1. Forms Generally................................. 10 Section 2.2. Title, Terms and Denominations.................. 11 Section 2.3. Execution, Authentication, Delivery and Dating.................................... 14 Section 2.4. Registrar and Paying Agent...................... 16 Section 2.5. Paying Agent To Hold Money in Trust............. 17 Section 2.6. Securityholder Lists............................ 18 Section 2.7. Transfer and Exchange........................... 18 Section 2.8. Replacement Securities.......................... 19 Section 2.9. Outstanding Securities; Determination of Holders' Action.............. 19 Section 2.10. Temporary Securities............................ 20 Section 2.11. Cancellation.................................... 20 Section 2.12. Payment of Interest; Defaulted Interest...................................... 21 Section 2.13. CUSIP Number.................................... 21 Section 2.14. Deposit of Moneys............................... 22 Section 2.15. Persons Deemed Owners........................... 22 Section 2.16. Computation of Interest......................... 22 Section 2.17. Global Securities............................... 22 ARTICLE 3 REDEMPTION OF SECURITIES Section 3.1. Notices to the Trustee.......................... 23 Section 3.2. Selection of Securities To Be Redeemed...................................... 24 Section 3.3. Notice of Redemption............................ 25 Section 3.4. Effect of Notice of Redemption.................. 26 Section 3.5. Deposit of Redemption Price..................... 26 Section 3.6. Securities Redeemed or Purchased in Part.......................................... 26 -ii- Page ---- ARTICLE 4 COVENANTS Section 4.1. Payment of Securities........................... 27 Section 4.2. Maintenance of Office or Agency................. 27 Section 4.3. Corporate Existence............................. 28 Section 4.4. Compliance Certificate.......................... 28 Section 4.5. SEC Reports..................................... 29 Section 4.6. Waiver of Stay, Extension or Usury Laws.......................................... 30 Section 4.7. Limitation on Liens............................. 30 Section 4.8. Limitation on Sale and Lease-Back Transactions.................................. 32 ARTICLE 5 SUCCESSOR CORPORATION Section 5.1. When Company May Merge, etc..................... 32 Section 5.2. Successor Substituted........................... 33 ARTICLE 6 REMEDIES Section 6.1. Events of Default............................... 34 Section 6.2. Acceleration.................................... 36 Section 6.3. Other Remedies.................................. 38 Section 6.4. Waiver of Past Defaults......................... 38 Section 6.5. Control by Majority............................. 38 Section 6.6. Limitation on Suits............................. 39 Section 6.7. Right of Holders To Receive Payment............. 40 Section 6.8. Collection Suit by Trustee...................... 40 Section 6.9. Trustee May File Proofs of Claim................ 40 Section 6.10. Priorities...................................... 41 Section 6.11. Undertaking for Costs........................... 41 Section 6.12. Restoration of Rights and Remedies.............. 42 ARTICLE 7 TRUSTEE Section 7.1. Duties.......................................... 42 Section 7.2. Rights of Trustee............................... 43 Section 7.3. Individual Rights of Trustee.................... 45 Section 7.4. Trustee's Disclaimer............................ 45 Section 7.5. Notice of Default............................... 45 -iii- Page ---- Section 7.6. Money Held in Trust............................. 45 Section 7.7. Reports by Trustee to Holders................... 46 Section 7.8. Compensation and Indemnity...................... 46 Section 7.9. Replacement of Trustee.......................... 47 Section 7.10. Successor Trustee by Merger, etc................ 49 Section 7.11. Eligibility; Disqualification................... 50 Section 7.12. Preferential Collection of Claims Against Company............................... 50 ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE Section 8.1. Termination of the Company's Obligations................................... 50 Section 8.2. Legal Defeasance and Covenant Defeasance.................................... 52 Section 8.3 Application of Trust Money...................... 56 Section 8.4. Repayment to Company............................ 56 Section 8.5. Reinstatement................................... 57 ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1. Without Consent of Holders...................... 58 Section 9.2. With Consent of Holders......................... 59 Section 9.3. Compliance with Trust Indenture Act............. 60 Section 9.4. Revocation and Effect of Consents............... 60 Section 9.5. Notation on or Exchange of Securities.................................... 61 Section 9.6. Trustee May Sign Amendments, etc................ 62 ARTICLE 10 SUBORDINATION Section 10.1. Agreement to Subordinate........................ 62 Section 10.2. Liquidation; Dissolution; Bankruptcy............ 62 Section 10.3. Default on Senior Debt.......................... 63 Section 10.4. Acceleration of Securities...................... 64 Section 10.5. When Distribution Must be Paid Over............. 64 Section 10.6. Notice by Company............................... 65 Section 10.7. Subrogation..................................... 65 Section 10.8. Relative Rights................................. 65 Section 10.9. Subordination May Not Be Impaired by Company....................................... 66 -iv- Page ---- Section 10.10. Distribution or Notice to Representative................................ 66 Section 10.11. Rights of Trustee and Paying Agent.............. 66 Section 10.12. Authorization to Effect Subordination................................. 67 ARTICLE 11 MISCELLANEOUS Section 11.1. Trust Indenture Act of 1939..................... 67 Section 11.2. Notices......................................... 68 Section 11.3. Communication by Holders with Other Holders....................................... 68 Section 11.4. Certificate and Opinion as to Conditions Precedent.......................... 69 Section 11.5. Statements Required in Certificate or Opinion.................................... 69 Section 11.6. Rules by Trustee, Paying Agent, Registrar..................................... 70 Section 11.7. Governing Law................................... 70 Section 11.8. No Interpretation of Other Agreements.................................... 70 Section 11.9. No Recourse Against Others...................... 70 Section 11.10. Successors...................................... 70 Section 11.11. Duplicate Originals............................. 70 Section 11.12. Separability.................................... 70 Section 11.13. Table of Contents, Headings, etc................ 71 Section 11.14. Benefits of Indenture........................... 71 SIGNATURES......................................................... 72 -v- INDENTURE, dated as of , 1995, between VARITY CORPORATION, a Delaware corporation (the "Company"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation, as trustee (the "Trustee"). For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders of the Securities or of any series thereof, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. ----------- "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. "Agent" means any Registrar or Paying Agent of the Securities. "Attributable Debt" when used in connection with a Sale and Lease-Back Transaction involving a Principal Property shall mean, at the time of determination, the lesser of: (a) the fair value of such property (as determined in good faith by the Board of Directors of the Company); or (b) the present value of the total net amount of rent required to be paid under such lease during the remaining term thereof (including any renewal term or period for which such lease has been extended), discounted at the rate of interest set forth or implicit in the terms of such lease or, if not practicable to determine such rate, the weighted average interest rate per annum borne by the Securities of each series outstanding pursuant to this Indenture compounded semi-annually. For purposes of the fore- going definition, rent shall not include amounts required to be paid by the lessee, whether or not designated as rent or additional rent, on account of or contingent upon maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall be the lesser of the net amount determined assuming termination upon the first date such lease may be terminated (in which case the net amount shall also include the amount of the penalty, but no rent shall be considered as required to be paid under such -2- lease subsequent to the first date upon which it may be so terminated) or the net amount determined assuming no such termination. "Bankruptcy Law" means Title 11 of the United States Code or any similar federal, state or foreign law for the relief of debtors. "Board of Directors" means the board of directors of the Company or any duly authorized committee of such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York, State of New York, or the city in which the Trustee has its Corporate Trust Office, are authorized or obligated by law, regulation or executive order to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Company" means the party named as such in this Indenture until a successor replaces it (or any previous successor) pursuant to this Indenture, and thereafter means such successor. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by any one -3- of its Chairman of the Board, its Vice-Chairman, its President or a Vice President, and by any one of its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the corporate trust office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which on the date hereof is One M&T Plaza, Buffalo, New York 14240, Attention: Corporate Trust Department. "Covenant Defeasance" shall have the meaning set forth in Section 8.2. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Discount Security" means any Security which provides for an amount less than the principal thereof to be due and payable upon a declaration of acceleration of the Stated Maturities thereof pursuant to Section 6.2. "Event of Default" has the meaning set forth in Section 6.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "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 of America, as in effect on the date hereof. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, with respect to any Person, without duplication, (i) all obligations for borrowed money, (ii) all obligations evidenced by bonds, debentures, notes or -4- other similar instruments, (iii) all Capitalized Lease Obligations, (iv) all obligations 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 accrued expenses arising in the ordinary course of business), (v) all fixed unconditional obligations issued or contracted for as payment in consideration of the purchase by such Person of the stock or substantially all the assets of another Person or a merger or consolidation, (vi) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction which secure Indebtedness of a Person other than the issuer of the letter of credit or the accepting bank, (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons guaranteed by such Person to the extent of the guarantee; and (viii) all obligations of the type referred to in clauses (i) through (vii) of other Persons 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 value of such property or asset at the time the Lien is created or the amount of the obligation so secured. "Indenture" means this Indenture, as amended, modified or supplemented from time to time, in accordance herewith, and includes, with respect to a particular series of Securities, the terms of such series of Securities established or contemplated by Section 2.2(a). "Interest Payment Date", for any series of Securities, has the meaning provided in the form of such Securities set forth in the supplemental indenture, Board Resolution, or Officers' Certificate under which such Securities are issued. "Issue Date" means, with respect to any particular series of Securities, the original date of issuance of such series; provided that, in the case of a series subject to a -------- Periodic Offering, the Issue Date shall be the original issue date or dates established pursuant to the proviso of the third paragraph of Section 2.3. "Legal Defeasance" shall have the meaning set forth in Section 8.2. "Lien" means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind. -5- A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Material Subsidiary" means, at any particular time, any Subsidiary of any Person that (a) accounted for more than 10% of the consolidated revenues of such Person and its Subsidiaries on a consolidated basis for the most recently completed fiscal year of such Person or (b) was the owner of more than 10% of the consolidated assets of such Person and its Subsidiaries on a consolidated basis as at the end of such fiscal year, all as shown on the consolidated financial statements of such Person and its Subsidiaries for such fiscal year. "Maturity Date" means, with respect to any Security, the date on which any principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise. "Nonrecourse Obligation" means Indebtedness or other obligations substantially related to (i) the acquisition of assets not previously owned by the Company or any Restricted Subsidiary or (ii) the financing of a project involving the development or expansion of properties of the Company or any Restricted Subsidiary, as to which the obligee with respect to such Indebtedness or obligation has no recourse to the Company or any Restricted Subsidiary or any assets of the Company or any Restricted Subsidiary other than the assets which were acquired with the proceeds of such transaction or the project financed with the proceeds of such transaction (and the proceeds thereof). "Officer" means the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Chief Operating Officer, the Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of the Company and delivered to the Trustee. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. -6- Subject to any express provision hereof, the counsel may be an employee of or counsel to the Company. "Paying Agent" has the meaning set forth in Section 2.4, except that, for the purposes of Articles Three and Eight, the Paying Agent shall not be: (i) the Company, (ii) a Subsidiary of the Company or (iii) any of the Company's Affiliates. "Periodic Offering" means an offering of Securities of a series from time to time the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the Stated Maturity or Stated Maturities thereof, the original Issue Date or Dates thereof, the redemption provisions, if any, and any other terms specified as contemplated by Section 2.2(a) with respect thereto, are to be determined by the Company, or one or more of the Company's agents or employees designated in an Officers' Certificate, upon the issuance of such Securities. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "principal" means, with respect to any debt security, the principal of the security plus, with respect to the Securities only, the premium, if any, on the security. "Principal Property" shall mean the land, land improvements, buildings and fixtures (to the extent they constitute real property interests) (including any leasehold interest therein) constituting the principal corporate office, any manufacturing plant or any manufacturing facility (whether now owned or hereafter acquired) which: (a) is owned by the Company or any of its Subsidiaries; (b) is located within any of the present 50 States of the United States of America (or the District of Columbia); (c) has not been determined in good faith by the Board of Directors of the Company not to be materially important to the total business conducted by the Company and its Subsidiaries taken as a whole; and (d) has a book value on the date as of which the determination is being made in excess of .5% of consolidated total assets of the Company as most recently determined on or prior to such date. -7- "Redemption Date" means, with respect to any Security to be redeemed, the date fixed by the Company for such redemption pursuant to this Indenture and the Securities. "Redemption Price" means, with respect to any Security to be redeemed, the price fixed for such redemption pursuant to the terms of this Indenture and the Securities. "Registrar" shall have the meaning set forth in Section 2.4. "Regular Record Date", for any series of Securities, has the meaning provided in the form of such Securities set forth in the supplemental indenture, Board Resolution or Officers' Certificate under which such Securities are issued. "Representative" means the trustee or other agent or representative for any Senior Indebtedness. "Restricted Subsidiary" shall mean any Subsidiary of the Company which owns any Principal Property. "Sale and Lease-Back Transaction" shall mean any sale or transfer by the Company or one of its Restricted Subsidiaries of any Principal Property that is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof, if such sale or transfer is made with the intent of leasing, or as part of an arrangement involving the lease of, such Principal Property to the Company or one of its Restricted Subsidiaries. "SEC" 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. "Securities" means the securities that are issued under this Indenture, as amended or supplemented from time to time pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Indebtedness" means all Indebtedness of the Company and all renewals, extensions or refundings thereof. -8- Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness shall not include (i) any Indebtedness of the Company to any of its Subsidiaries, or (ii) any Indebtedness created or evidenced pursuant to an instrument that expressly provides that such Indebtedness is not superior in right of payment to the Securities. "Stated Maturity" means, when used with respect to any Security of a particular series or any installment of principal thereon, the date specified in such Security of such series as the fixed date on which any principal of such Security of such series is due and payable, and when used with respect to any other Indebtedness, means any date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness is due and payable. "Subsidiary" means, with respect to any Person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof and (ii) any other Person (other than a corporation), including, without limitation, a joint venture, in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions). "Surviving Entity" shall have the meaning set forth in Section 5.1. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces such party (or any previous successor) in accordance with the provisions of this Indenture, and thereafter means such successor. "Trust Officer" means the Chairman of the Board, the President or any other officer of the Trustee assigned by the Trustee to administer its corporate trust matters and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. -9- "U.S. Government Obligations" shall have the meaning set forth in Section 8.2. "Vice President" shall include Senior Vice President or a Vice President with any other prefix. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). Section 1.2. Incorporation by Reference of Trust Indenture Act. ----------------------------------- Whenever this Indenture refers to a provision of the TIA, the 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: "Commission" means the SEC; "indenture securities" means the Securities; "indenture security holder" means a Securityholder or Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. Section 1.3. Rules of Construction. --------------------- For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: -10- (a) a term has the meaning assigned to it; (b) words in the singular include the plural, and words in the plural include the singular; (c) "or" is not exclusive; (d) provisions apply to successive events and transactions; (e) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (f) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (g) all references to $ or dollars refer to the lawful currency of the United States of America. ARTICLE 2 THE SECURITIES Section 2.1. Forms Generally. --------------- The Securities of each series shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions (as set forth in a Board Resolution or, to the extent established pursuant to rather than set forth in a Board Resolution, an Officers' Certificate of the Company detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any applicable law or with the rules of any securities exchange or as may, consistently herewith, be determined by the Officers executing such Securities, as evidenced by their execution thereof. The Securities shall be issuable only in registered form without coupons. The indenture supplemental hereto or the Board Resolution or Officers' Certificate establishing the form of security of any series shall be delivered to the Trustee concurrently with or -11- prior to the delivery of the Company Order contemplated by Section 2.3 for the authentication and delivery of such Securities. The definitive Securities shall be printed, typewritten, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the Officers executing such Securities, as evidenced by their execution of such Securities. Each Security shall be dated the date of its authentication. Section 2.2. Title, Terms and Denominations. ------------------------------ (a) The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture shall be unlimited. The Securities may be issued in one or more series. There shall be established and, subject to Section 2.3, set forth, or determined in the manner provided, in one or more indentures supplemental hereto or in or pursuant to a Board Resolution (as set forth in such Board Resolution or, to the extent established pursuant to rather then set forth in such Board Resolution, an Officers' Certificate detailing such establishment): (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 2.7, 2.8, 2.10, 3.6 or 9.5 and except for any Securities which, pursuant to Section 2.3, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on any Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; -12- (4) the date or dates on which the principal of the Securities of the series is payable or the method of determination thereof; (5) the rate or rates at which the Securities of the series shall bear interest (which in no event shall be greater than the then applicable legal rate therefor), if any, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Securities on any Interest Payment Date and/or the method by which such rate or rates or Regular Record Date or Dates shall be determined; (6) the place or places where, subject to the provisions of Section 4.2, the principal of and any interest on Securities of the series shall be payable, any Securities of the series may be surrendered for regis- tration of transfer, Securities of the series may be surrendered for exchange and notices and demands to or upon the Company in respect of the Securities of the series and this Indenture may be served; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof, the conditions, if any, giving rise to such obligation, and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, and any provisions for the remarketing of such Securities; (9) the denominations in which any Securities of the series shall be issuable, if other than denominations of $1,000 and any integral multiple thereof; (10) if the amount of payments of principal of and any interest on the Securities of the series is to be determined with reference to an index, formula or other method, the manner in which such amounts shall be -13- determined and the calculation agent, if any, with respect thereto; (11) if other than the principal amount thereof, the portion of the principal amount of any Securities of the series which shall be payable upon declaration of acceleration of the Stated Maturity thereof pursuant to Section 6.2; (12) if other than as defined in Section 1.1, the meaning of "Business Day" when used with respect to any Securities of the series; (13) if the Securities of the series may be issued or delivered (whether upon original issuance or upon exchange of a temporary Security of such series or otherwise), or any installment of principal of or any interest is payable, only upon receipt of certain certificates or other documents or satisfaction of other conditions in addition to those specified in this Indenture, the form and terms of such certificates, documents or conditions; (14) the forms of the Securities; (15) whether the Securities of the series shall be issued in whole or in part in the form of a global Security or Securities and, in such case, the depositary for such global Security or Securities; (16) any provision for defeasance or discharge of the Securities of the series, if different from those set forth herein; (17) any listing of the Securities of a series on a securities exchange; (18) the price or prices at which the Securities of a series will be issued; and (19) any other terms of the series not inconsistent with the provisions hereof, but which may include covenants, Events of Default, definitions and other provisions in lieu of or in addition to those set forth in this Indenture as of the date hereof and amendments to or other changes in any of the covenants, Events of Default, definitions and other provisions set forth in this Indenture as of the date hereof. -14- All Securities of any one series shall be substan- tially identical except as to denomination, the rate or rates of interest, if any, the Stated Maturities, the date from which interest, if any, shall accrue and except as may otherwise be provided in or pursuant to the Board Resolutions or Officers' Certificates referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened for issuances of additional Securities of such series or for the establishment of additional terms with respect to the Securities of such series, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolutions, such Officers' Certificates or in any such indenture supplemental hereto. (b) Unless otherwise provided as contemplated by Section 2.2(a) with respect to any series of Securities, any Securities of a series shall be issuable in denominations of $1,000 and any integral multiple thereof. (c) The Securities of any one series shall rank pari passu in right of payment with the Securities of any other series. Section 2.3. Execution, Authentication, Delivery and Dating. ------------------------- Two Officers shall sign, or one Officer shall sign and one Officer shall attest to (provided that in either case, one such Officer must be the Chairman of the Board, President, a Vice President, Treasurer or Secretary) the Securities for the Company by manual or facsimile signatures. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, executed by the Company, to the Trustee for -15- authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities; provided, however, -------- ------- that, with respect to Securities of a series subject to a Periodic Offering, (a) such Company Order may be delivered by the Company to the Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (b) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to a Company Order or pursuant to such procedures acceptable to the Trustee as may be specified from time to time by a Company Order, (c) the rate or rates of interest, if any, the Stated Maturity or Maturities, the original Issue Date or Dates, the redemption provisions, if any, and any other terms of Securities of such series shall be determined by Company Order or pursuant to such procedures and (d) if provided for in such procedures, such Company Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Company, or the Company's duly authorized agent or agents designated in an Officers' Certificate, which oral instructions shall be confirmed promptly in writing. The Trustee shall be entitled to rely on such oral instructions, whether or not confirmed in writing. Each Security shall be dated the date of its authentication. The Trustee may appoint an authenticating agent 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 or an Affiliate. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee's -16- Certificate of Authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within- mentioned Indenture. ________________________________, as Trustee By: _______________________ Authorized Officer Notwithstanding the foregoing, if any Security of any series shall have been duly authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 2.11 together with a written statement (which need not comply with Section 11.4 or 11.5 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 2.4. Registrar and Paying Agent. -------------------------- The Company shall maintain, with respect to each series of Securities, an office or agency in the Borough of Manhattan, The City of New York, State of New York where such Securities may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency where such Securities may be presented for payment (the "Paying Agent") and an office or agency where notices and demands to or upon the Company in respect of such Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. Except as otherwise expressly provided in this Indenture, the Company or any Affiliate of the Company may act as Paying Agent. -17- The Company shall enter into an appropriate agency agreement, with respect to each series of Securities, with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar, Paying Agent or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.8. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Securities. Section 2.5. Paying Agent To Hold Money in Trust. ----------------------------------- Each Paying Agent shall hold in trust for the benefit of Securityholders of a particular series or the Trustee all money held by the Paying Agent for the payment of principal of, or interest on, the Securities of such series (whether such money has been distributed to it by the Company or any other obligor on such Securities), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on such Securities) in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, the money shall be segregated and held as a separate trust fund. The Company at any time may require a Paying Agent to distribute all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any payment Default with respect to such Securities, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds distributed. Upon doing so, the Paying Agent (other than an obligor under the Securities) shall have no further liability for the money so paid over to the Trustee. Upon any bankruptcy or reorganization proceeding involving the Company, the Trustee shall act as Paying Agent for the Securities. Section 2.6. Securityholder Lists. -------------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders of each series of Securities and shall otherwise comply with TIA (S) 312(a). If -18- the Trustee is not the Registrar, the Company shall furnish to the Trustee at least ten Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders of such series of Securities, which list may be conclusively relied upon by the Trustee. Section 2.7. Transfer and Exchange. --------------------- When Securities of any series are presented to the Registrar 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, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that such 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, duly executed by the Holder thereof or his attorney-in-fact 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 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 similar governmental charge payable upon exchanges or transfers pursuant to Section 2.3, 2.8, 2.11, 3.6 or 8.5). At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series of any authorized denomination or denominations, of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee or a duly appointed authenticating agent shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same -19- benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. The 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 or (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part. Section 2.8. Replacement Securities. ---------------------- If a mutilated Security of any series is surrendered to the Trustee or if the Holder of a Security of any series claims that such Security has been lost, destroyed or wrongfully taken, the Company shall issue, and the Trustee shall authenticate, 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 the Trustee and the Company, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such Holder for its 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 2.9. Outstanding Securities; Determination of Holders' Action. -------------------------------- Securities of any series outstanding at any time are all Securities of such series that have been authenticated by the Trustee, except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or any of its Affiliates holds the Security; provided, however, that in determining whether the -------- ------- Holders of the required principal amount of Securities of any series have concurred in any direction, waiver or consent, Securities of such series owned by the Company or other obligor on the Securities of such series or an Affiliate of the Company or such other obligor shall be disregarded, except that for the sole purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, -20- only Securities which the Trustee knows are so owned shall be disregarded. If a Security is replaced pursuant to Section 2.8 (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 2.8. If on a Redemption Date or a Maturity Date the Paying Agent (other than the Company or an Affiliate of the Company) holds cash or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Securities payable on that date, and is not prohibited from paying such cash or U.S. Government Obligations to the Holders of such Securities pursuant to the terms of this Indenture, then on and after that date such Securities cease to be outstanding and interest on them shall cease to accrue. Section 2.10. Temporary Securities. -------------------- Until definitive Securities of any series are prepared and ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. 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, definitive Securities in exchange for temporary Securities. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive 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 (other than the Company or an Affiliate of the Company), 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. Subject to Section 2.8, the Company may not issue new Securities to replace -21- Securities that it has paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Securities, such acquisition shall not operate as a payment, 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. Payment of Interest; Defaulted Interest. -------------------- Unless otherwise provided as contemplated by Section 2.2(a) with respect to any series of Securities, 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 (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. If the Company defaults on a payment of interest on any series of Securities, it shall pay the defaulted interest, plus (to the extent permitted by law) any interest payable on the defaulted interest, in accordance with the terms hereof, to the Persons who are Securityholders of such series on a subsequent special record date, which date shall be at least five Business Days prior to the payment date. The Company shall fix such special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before such special record date, the Company shall mail to each Securityholder of such series a notice that states the special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. Section 2.13. CUSIP Number. ------------ The Company in issuing any series of Securities may use a "CUSIP" number (if then generally in use), and if so, the Trustee may use the CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided, however, 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 such Securities, and that reliance may be placed only on the other identification numbers printed on such Securities. The Company will promptly notify the Trustee of any change in the CUSIP number. -22- Section 2.14. Deposit of Moneys. ----------------- On or before each Interest Payment Date and Maturity Date, the Company shall deposit with the Trustee or Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders of the applicable series of Securities on such Interest Payment Date or Maturity Date, as the case may be. Section 2.15. Persons Deemed Owners. --------------------- Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (except as otherwise specified as contemplated by Section 2.2(a) and Section 2.12) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 2.16. Computation of Interest. ----------------------- Except as otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) for Securities of any series, (i) interest, if any, on any Securities which bear interest at a fixed rate shall be computed on the basis of a 360-day year of twelve 30 day months and (ii) interest on any Securities which bear interest at a variable or floating rate shall be computed on the basis of the actual number of days in an interest period divided by the number of days in the year for which such interest is calculated. Section 2.17. Global Securities. ----------------- The Company may issue, if a Board Resolution or Officers' Certificate so provides, some or all of the Securities of a series in temporary or permanent global form. A global Security may be in registered form or in uncertificated form. A global Security shall represent that amount of Securities of a series as specified in the global Security or as endorsed thereon from time to time. At the Company's request, -23- the Registrar shall endorse a global Security to reflect the amount of any increase or decrease in the Securities represented thereby. The Company may issue a global Security only to a depository designated by the Company. A depository may transfer a global Security only as a whole to its nominee or to a successor depository. The Company may establish, among other things, the manner of paying principal and interest on a global Security and whether and upon what terms a beneficial owner of an interest in a global Security may exchange such interest for definitive Securities. The Company, an Affiliate, the Trustee and any Agent shall not be responsible for any acts or omissions of a depository, for any depository records of beneficial ownership interests or for any transactions between the depository and beneficial owners. ARTICLE 3 REDEMPTION OF SECURITIES Section 3.1. Notices to the Trustee. ---------------------- Securities of any series which are redeemable before their maturity shall be redeemable in accordance with their terms and (except as otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) for Securities of any series) in accordance with this Article. If the Company elects to redeem Securities of a series which are redeemable, it shall notify the Trustee in an Officers' Certificate of the Redemption Date and principal amount of Securities of such series to be redeemed. If the Company wishes to reduce the principal amount of a series of Securities to be redeemed, it shall so notify the Trustee of the amount of the reduction and the basis for it. If the Company wishes to credit, and is entitled to credit, against any such redemption Securities of such series it has not previously delivered to the Trustee for cancellation, it shall deliver such Securities with such notice. -24- The Company shall give each notice provided for in this Section 3.1 at least 45 days, but not more than 60 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). Section 3.2. Selection of Securities To Be Redeemed. ----------------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, if less than all the Securities of any series are to be redeemed, the particular Securities of such series or portions thereof to be redeemed shall be selected from the outstanding Securities not previously called for redemption either (x) pro rata, by lot or by such other method as the Trustee considers to be fair and appropriate or (y) in such manner as complies with the requirements of the principal national securities exchange, if any, on which the Securities of such series being redeemed are listed. The amounts to be redeemed shall be equal to $1,000 or any integral multiple thereof, except that if all of the Securities of a series of a Holder are to be redeemed, the entire amount of Securities of such series held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. The Trustee shall select Securities to be redeemed from the Securities of the applicable series outstanding and not previously called for redemption and shall promptly notify the Company and the Registrar in writing of the Securities of any series selected for redemption and, in the case of any Securities of any series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section 3.3. Notice of Redemption. -------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, notice of redemption shall be given by first-class or certified mail, postage prepaid, mailed not less than 30 nor more than 60 -25- days prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder appearing in the security register maintained by the Registrar. All notices of redemption shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price and the amount of accrued interest, if any, to be paid; (c) 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 upon surrender to the Paying Agent of the Securities redeemed; (d) if any Security is to be redeemed in part, the portion of the principal amount (equal to $1,000 or any integral multiple thereof) of such Security to be redeemed and that on or after the Redemption Date, upon surrender for cancellation of such Security to the Paying Agent, a new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the Securityholder; (e) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and the name and address of the Paying Agent; (f) the CUSIP number, if any, relating to such Securities; and (g) whether Securities are being redeemed pursuant to the mandatory redemption or the optional redemption provisions of the Securities. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company. -26- Section 3.4. Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Paying Agent, such Securities called for redemption shall be paid at the Redemption Price plus accrued interest to the Redemption Date, but interest installments whose maturity is on or prior to such Redemption Date will be payable on the relevant Interest Payment Dates to the Holders of record at the close of business on the relevant record dates referred to in the Securities. Section 3.5. Deposit of Redemption Price. --------------------------- On or prior to any Redemption Date, the Company shall deposit with the Paying Agent an amount of money in immediately available funds sufficient to pay the Redemption Price of, and accrued and unpaid interest on, all the Securities or portions thereof which are to be redeemed on that date, other than Securities or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price, 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. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and, to the extent lawful, accrued interest thereon shall, until paid, bear interest from the Redemption Date at the rate provided in the Securities, unless otherwise specified as contemplated by Section 2.2(a) with respect to the Securities of such series or in such Securities. Section 3.6. Securities Redeemed or Purchased in Part. ----------------------------------- Upon surrender to the Paying Agent of a Security which is to be redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange -27- for, the unredeemed portion of the principal of the Security so surrendered that is not redeemed. ARTICLE 4 COVENANTS Section 4.1. Payment of Securities. --------------------- The Company shall pay the principal of and interest on each series of Securities on the dates and in the manner provided in such Securities or pursuant to this Indenture. An installment of principal or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company, a Subsidiary of the Company or any Affiliate of any thereof) holds for the benefit of the Holders on that date money deposited and designated for and sufficient to pay the installment and is not prohibited from paying such money to the Holders of the Securities pursuant to the terms of this Indenture. Unless otherwise specified as contemplated by Section 2.2(a) with respect to any series of Securities, the Company will pay interest (including post-petition interest in any proceeding under any applicable Bankruptcy Law) on overdue principal at the rate and in the manner provided in the Securities; it shall pay interest (including post-petition interest in any proceeding under any applicable Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate and in the same manner, to the extent lawful. Section 4.2. Maintenance of Office or Agency. ------------------------------- The Company will maintain in the Borough of Manhattan, The City of New York, State of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange, an office or agency where Securities may be presented for payment and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands -28- may be made or served at the address of the Trustee as set forth in Section 11.2. The Company may also from time to time designate one or more other offices or agencies where Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall - -------- ------- in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, State of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the Corporate Trust Office of the Trustee as such office of the Company. Section 4.3. Corporate Existence. ------------------- Subject to Article Five, the Company will do or cause to be done all things necessary to, and will cause each of its Material Subsidiaries to, preserve and keep in full force and effect its respective corporate existence, rights (charter and statutory), licenses and/or franchises; provided, however, that -------- ------- the Company or any of its Subsidiaries shall not be required to preserve any such existence, rights, licenses or franchises if (x) the Company shall reasonably determine that the preservation thereof is no longer desirable in the conduct of the business of it and its Subsidiaries taken as a whole or (y) the loss thereof is not materially adverse to the Company and its Subsidiaries taken as a whole or to the ability of the Company to otherwise satisfy its obligations hereunder. Section 4.4. Compliance Certificate. ---------------------- (a) The Company shall deliver to the Trustee, within 120 days after the end of its fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and -29- conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest on the Securities of any series are prohibited or, if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.5 below shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Articles 4 or 5 of this Indenture 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 will deliver to the Trustee as soon as possible, and in any event within 10 days after it becomes aware or should reasonably have become aware of the occurrence of any Default or Event of Default in respect of any series of Securities, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.5. SEC Reports. ----------- The Company shall file with the Trustee, within 15 days after it files them with the SEC, copies of the quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA (S) 314(a). If the Company is not subject to the requirements of such Section 13 or 15(d), the Company shall file with the Trustee, within 15 days after it would have been required to file the same with the SEC, -30- financial statements, including any notes thereto (and with respect to annual reports, an auditors' report by a firm of established national reputation), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which the Company would have been required to include in such annual reports, information, documents or other reports if the Company had been subject to the requirements of such Section 13 or 15(d). In addition, the Company shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders generally to be filed with the Trustee and mailed, no later than the date such materials are mailed or made available to the Company's stockholders, to the Holders at their addresses as set forth in the register of Securities maintained by the Registrar. Section 4.6. Waiver of Stay, Extension or Usury Laws. ------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or 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 which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on Securities of any series 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 4.7. Limitations on Liens. -------------------- The Company covenants that it will not issue, incur, create, assume or guarantee, and will not permit any Restricted Subsidiary to issue, incur, create, assume or guarantee, any Indebtedness secured by a Lien upon any Principal Property of the Company or such Restricted Subsidiary or upon any shares of stock or Indebtedness of any Restricted Subsidiary held by the Company (whether such Principal Property, shares or Indebtedness are now existing or owed or hereafter created or acquired) without in any such case effectively providing concurrently with the issuance, incurrence, creation, assumption or guaranty -31- of any such secured Indebtedness, or the grant of a Lien with respect to any such Indebtedness of any Restricted Subsidiary, that the Securities (together with, if the Company shall so determine, any other Indebtedness of or guarantee by the Company or such Restricted Subsidiary) shall be secured by a mortgage ranking equally and ratably with (or, at the option of the Company, prior to), and for so long as such other Indebtedness is so secured, such secured debt. The foregoing restriction, however, will not apply to: (a) Liens on property, shares of stock or Indebtedness or other assets of any corporation existing at the time such corporation becomes a Restricted Subsidiary; provided -------- that such Liens are not incurred in anticipation of such corporation becoming a Restricted Subsidiary; (b) Liens on property, shares of stock or Indebtedness existing at the time of acquisition thereof by the Company or a Restricted Subsidiary or Liens on property, shares of stock or Indebtedness to secure any Indebtedness for borrowed money incurred prior to, at the time of, or within 270 days after, the latest of the acquisition thereof, or, in the case of property, the completion of construction, the completion of improvements or the commencement of substantial commercial operation of such property, for the purpose of financing all or any part of the purchase price thereof, such construction or the making of such improvements; (c) Liens to secure Indebtedness owing to the Company or to a Restricted Subsidiary; (d) Liens existing at the date of the initial issuance of the Securities of such series; (e) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to the Company or a Restricted Subsidiary; provided that such Lien -------- was not incurred in anticipation of such merger or consolidation or sale, lease or other disposition; (f) Liens created in connection with a project financed with, and created to secure, a Nonrecourse Obligation; or (g) extensions, renewals or replacements of any Liens permitted by any of the foregoing clauses (a) through (f); provided, however, that any Liens -------- ------- permitted by any of the foregoing clauses (a) through (f) shall not extend to or cover any property of the Company or such Restricted Subsidiary, as the case may be, other than the property specified in such clauses and improvements thereto. -32- Section 4.8. Limitations on Sale and Lease-Back Transactions. ---------------------------------- The Company covenants that it will not, nor will it permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction with respect to any Principal Property, other than any such transaction involving a lease for a term of not more than three years or any such transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, unless: (a) the Company or such Restricted Subsidiary would be entitled to incur Indebtedness secured by a mortgage on the Principal Property involved in such transaction at least equal in amount to the Attributable Debt with respect to such Sale and Lease-Back Transaction, without equally and ratably securing the Securities, pursuant to Section 4.7; or (b) the Company shall apply an amount equal to the greater of the net proceeds of such sale or the Attributable Debt with respect to such Sale and Lease-Back Transaction within 180 days of such sale to either (or a combination of) the retirement (other than any mandatory retirement, mandatory prepayment or sinking fund payment or by payment at maturity) of Indebtedness of the Company or a Restricted Subsidiary that matures more than twelve months after the creation of such Indebtedness or the purchase, construction or development of other comparable property. ARTICLE 5 SUCCESSOR CORPORATION Section 5.1. When Company May Merge, etc. --------------------------- (a) The Company will not, in a single transaction or a series of transactions, consolidate with or merge with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any other Person or Persons, or permit any of its Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Subsidiaries, taken as a whole, to any other Person or Persons, unless: (1) either (A) if the transaction or series of transactions is a merger or consolidation, the Company -33- shall be the Person surviving such merger or consolidation or (B) the Person formed by such consolidation or into which the Company or such Subsidiary, as the case may be, is merged or to which the properties and assets of the Company or such Subsidiary, substantially as an entirety, are transferred (any such surviving Person or transferee Person being the "Surviving Entity") shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and such corporation shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the Company's obligation for the due and punctual payment of the principal of and interest, if any, on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction or series of transactions on a pro forma basis --- ----- (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing with respect to Securities of any series; and (3) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each in form and substance reasonably satisfactory to the Trustee, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition and, if a supplemental indenture is required in connection with such transaction or series of transactions, such supplemental indenture comply with this Indenture and that all conditions precedent herein provided for relating to such transaction or series of transactions have been complied with. Section 5.2. Successor Substituted. --------------------- Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company in accordance with Section 5.1(a) hereof, the successor Person or Persons formed by such consolidation or into which the Company is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or other -34- disposition 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 Company shall be discharged from all obligations and covenants under this Indenture and the Securities. ARTICLE 6 REMEDIES Section 6.1. Events of Default. ----------------- An "Event of Default" means with respect to each series of Securities, individually, any of the following events: (a) default by the Company in the payment of the principal of any Security of such series when the same becomes due and payable upon Stated Maturity, acceleration or otherwise, whether or not such payment is prohibited by Article 10; or (b) default by the Company in the payment of an installment of interest on any Security of such series when the same becomes due and payable, and any such Default continues for a period of 30 days, whether or not such payment is prohibited by Article 10; or (c) default by the Company in the performance or observance of any term, covenant or agreement contained in this Indenture or the Securities (other than Defaults specified in clause (a) or (b) above), and such Default continues for a period of 60 days after written notice of such Default (which notice shall specify the Default, demand that it be remedied and state that it is a "Notice of Default") requiring the Company to remedy the same shall have been given (i) to the Company by the Trustee or (ii) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; or (d) default or defaults under one or more agreements, instruments, mortgages, bonds, debentures or other evidences of Indebtedness, whether now existing or hereinafter created, under which the Company or any Material Subsidiary of the Company then has outstanding -35- Indebtedness in excess of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), and either (i) such Indebtedness is already due and payable in full or (ii) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness unless such acceleration is cured, waived, rescinded or annulled within 30 days after written notice thereof shall been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding; or (e) one or more judgments, orders or decrees of any court or regulatory or administrative agency of competent jurisdiction for the payment of money in excess of $10 million or more individually or $20 million or more in the aggregate (or, in each case, the equivalent thereof in any other currency), shall be entered against the Company or any Material Subsidiary of the Company and shall not be discharged or fully bonded and there shall have been a period of 60 days after the date on which any period for appeal has expired and during which a stay of enforcement of such judgment, order or decree shall not be in effect; or (f) the Company or any Material Subsidiary of the Company pursuant to or under or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors; or (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: -36- (i) is for relief against the Company or any Material Subsidiary of the Company in an involuntary case or proceeding, (ii) appoints a Custodian of the Company or any Material Subsidiary of the Company or for all or substantially all of its properties, or (iii) orders the liquidation of the Company or any Material Subsidiary of the Company, and in each case the order or decree remains unstayed and in effect for 60 days. The Trustee shall not be charged with knowledge of any Default or Event of Default (other than, if the Trustee is acting as Paying Agent, those set forth in Section 6.1(a), (b) or, to the extent relating to Section 4.1, (c)) unless written notice thereof shall have been given to a Trust Officer at the Corporate Trust Office of the Trustee by the Company, the Paying Agent, any Holder, any holder of Senior Indebtedness or any of their respective agents. Section 6.2. Acceleration. ------------ If an Event of Default with respect to any series of Securities (other than an Event of Default specified in Section 6.1(f) or (g) with respect to the Company) occurs and is continuing, the Trustee by written notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding, by written notice to the Company and the Trustee, may declare the unpaid principal of (or, if any of the Securities of that series are Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) and accrued interest on all the Securities of such series to be due and payable immediately. If an Event of Default specified in Section 6.1(f) or (g) with respect to the Company occurs and is continuing, then the principal of and accrued interest on all the Securities shall ipso facto become and be immediately due ---- ----- and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration in respect of a series of Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee, Holders of a majority in aggregate -37- principal amount of such series of Securities outstanding, by written notice to the Company and the Trustee, may, on behalf of all Holders of such series of Securities, rescind and annul such declaration and its consequences if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section 7.8 and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Securities of such series, (iii) the principal of such series of Securities which has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by such series of Securities, and (iv) interest upon overdue principal and, to the extent that payment of such interest is lawful, overdue interest at the rate borne by such series of Securities which has become due otherwise than by such declaration of acceleration; (b) such rescission or annulment would not conflict with any judgment or decree of a court of competent jurisdiction; and (c) all Events of Default with respect to such series of Securities, other than the non-payment of principal of and interest on such series of Securities which has become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.4. No such rescission shall affect any subsequent Default or Event of Default with respect to such series of Securities or impair any right consequent thereon. Section 6.3. Other Remedies. -------------- If an Event of Default with respect to a series of Securities occurs and is continuing, the Trustee may in its discretion pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on -38- such Securities or to enforce the performance of any provision of such Securities or this Indenture. All rights of action and claims under this Indenture or the Securities of any series may be enforced by the Trustee even if it does not possess any of the Securities of such series 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 with respect to a series of Securities 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 6.4. Waiver of Past Defaults. ----------------------- Subject to the provisions of Sections 6.2, 6.7 and 9.2, the Holders of not less than a majority in aggregate principal amount of the outstanding Securities of any series by notice to the Trustee may, on behalf of the Holders of all the Securities of such series, waive any existing Default or Event of Default, with respect to such series, and its consequences. When a Default or Event of Default with respect to a series of Securities is so waived, it shall be deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 6.5. Control by Majority. ------------------- The Holders of at least a majority in aggregate principal amount of the then outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, however, that the Trustee may refuse to -------- ------- follow any direction (a) that conflicts with any rule of law or this Indenture, (b) that the Trustee determines may be unduly prejudicial to the rights of another Securityholder of such series, or (c) that may expose the Trustee to Personal liability unless the Trustee has indemnification satisfactory to it in its sole discretion against any loss or expense caused by its following such direction; and provided, further, that -------- ------- the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. -39- Section 6.6. Limitation on Suits. ------------------- No Holder of any Securities of any series shall have any right to pursue any remedy with respect to this Indenture or such Securities unless: (a) the Holder gives written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (b) the Holders of at least 25% in principal amount of the then outstanding Securities of that series make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer and, if requested, provide to the Trustee reasonable indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, provision of indemnity; and (e) during such 60-day period the Holders of a majority in aggregate principal amount of the then outstanding Securities of that series do not give the Trustee a direction which is inconsistent with the request. The foregoing limitations shall not apply to a suit instituted by a Holder of Securities of a series for the enforcement of the payment of principal of or accrued interest on such Securities held by such Holder on or after the respective due dates set forth in such Securities. A Securityholder of a series may not use this Indenture to prejudice the rights of any other Securityholder of such series or to obtain priority or preference over such other Securityholder. Section 6.7. Right of Holders To Receive Payment. ----------------------------------- Notwithstanding any other provision in this Indenture, the right of any Holder of a Security to receive payment of the principal of and interest on such 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 the Stated Maturity or Interest Payment Date, as the case may -40- be, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder. Section 6.8. Collection Suit by Trustee. -------------------------- If an Event of Default specified in clause (a) or (b) of Section 6.1 with respect to Securities of any series occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust in favor of the Holders against the Company or any other obligor on the Securities of such series for the whole amount of principal of 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 of such series and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.9. Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder 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 Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.8. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder 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 Holder in any such proceeding. -41- Section 6.10. Priorities. ---------- If the Trustee collects any money pursuant to this Article Six, it shall pay out such money in the following order: First: to the Trustee for amounts due under Section 7.8; Second: to Holders for interest accrued, if any, on the Securities of the applicable series, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; Third: to Holders for principal owing under the Securities of the applicable series, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities of the applicable series for principal; and Fourth: the balance, if any, to the Company. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may in its discretion require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to any suit by the Trustee, any suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than 10% in aggregate principal amount of the outstanding Securities of any series. Section 6.12. Restoration of Rights and Remedies. ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Security and such proceeding has been discontinued or -42- abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE 7 TRUSTEE Section 7.1. Duties. ------ (a) In case an Event of Default has occurred and is continuing, with respect to Securities of any series, the Trustee shall exercise, with respect to Securities of such series, such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default, with respect to the Securities of any series: (1) the Trustee need perform, with respect to Securities of such series, only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may, with respect to Securities of such series, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own -43- 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 7.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (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 6.5. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1. (f) The Trustee shall not be liable for interest on, or be required to invest, any assets received by it except as the Trustee may agree with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. Section 7.2. Rights of Trustee. ----------------- Subject to Section 7.1 hereof and the provisions of TIA (S) 315: (a) The Trustee may rely, and shall be protected from 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 consult with counsel and may require an Officers' -44- Certificate or an Opinion of Counsel, which shall conform to Sections 11.4 and 11.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture other than any liabilities arising out of its own negligence. (e) The Trustee may consult with counsel of its own choosing and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture 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 costs, expenses and liabilities which may be incurred therein or thereby. Section 7.3. Individual Rights of Trustee. ---------------------------- The Trustee, any Paying Agent, Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 7.11 and 7.12 and TIA (S)(S) 310 and 311, may otherwise deal with the Company and its Subsidiaries with the same rights it would have if it were not the Trustee, Paying Agent, Registrar or such other agent. -45- Section 7.4. Trustee's Disclaimer. -------------------- The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement in the Securities other than the Trustee's certificate of authentication. Section 7.5. Notice of Default. ----------------- If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder of the affected series notice of the Default or Event of Default within 30 days thereafter; provided, however, that, except in the case of a Default in the - -------- ------- payment of the principal of or interest on any Security or in the payment of any sinking fund installment, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee of the board of directors or a committee of the directors of the Trustee and/or Trust Officers in good faith determines that the withholding of such notice is in the interest of the Holders. Section 7.6. Money Held in Trust. ------------------- All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required herein or by law. The Trustee shall not be under any liability for interest on any moneys received by it hereunder. Section 7.7. Reports by Trustee to Holders. ----------------------------- Within 60 days after May 15 of each year beginning with the May 15 following the date of this Indenture, the Trustee shall, to the extent that any of the events described in TIA (S) 313(a) has occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such May 15 that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c). A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed with the SEC -46- and each securities exchange, if any, on which the Securities are listed. The Company shall notify the Trustee in writing if the Securities become listed on any securities exchange or automatic quotation system. Section 7.8. Compensation and Indemnity. -------------------------- The Company covenants and agrees to pay the Trustee from time to time reasonable compensation for its services. 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 incurred or made by it. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability incurred by it arising out of or in connection with the administration of this trust and its rights or duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.8, the Trustee shall have a Lien prior to the Securities on all assets held or collected by the Trustee, in its capacity as Trustee, except assets held in trust for the benefit of the Holders of particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 6.1(f) or (g) with respect to the Company, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. -47- The Company's obligations under this Section 7.8 and any Lien arising hereunder shall survive the resignation or removal of any trustee, the discharge of the Company's obligations pursuant to Article Eight and/or the termination of this Indenture. Section 7.9. Replacement of Trustee. ---------------------- The Trustee may resign with respect to any series of Securities issued hereunder by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities of any series may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee with the Company's consent. The Company may remove the Trustee with respect to any series of Securities if: (a) the Trustee fails to comply with Section 7.11; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a receiver or other public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason with respect to the Securities of one or more series, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee, with respect to the Securities of such series. The Trustee shall be entitled to payment of its fees and reimbursement of its expenses while acting as Trustee, and to the extent such amounts remain unpaid, the Trustee that has resigned or has been removed shall retain the Lien afforded by Section 7.8. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Securities of any series may appoint a successor Trustee to replace the successor Trustee appointed by the Company with respect to the Securities of that series. In the case of the appointment hereunder of a successor Trustee with respect to all Securities, a successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as -48- Trustee to the successor Trustee, subject to the Lien provided in Section 7.8, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees as co-Trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, subject, nevertheless, to its Lien, if any, provided for in Section 7.8. -49- If a successor Trustee with respect to the Securities of one or more series does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities of such series may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.11, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any provisions of this Section 7.9 shall become effective upon acceptance of appointment by the successor trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.9, the Company's obligations under Section 7.8 shall continue for the benefit of the retiring Trustee. Section 7.10. Successor Trustee by Merger, etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall, if such resulting, surviving or transferee corporation or national banking association is otherwise eligible hereunder, be the successor Trustee. Section 7.11. Eligibility; Disqualification. ----------------------------- There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(5) and which shall have a combined capital and surplus of at least $100,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be -50- eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinabove specified in this Article. The Trustee shall comply with TIA (S) 310(b). Section 7.12. Preferential Collection of Claims Against Company. --------------------------------- The Trustee shall comply with TIA (S) 311(a) excluding any creditor relationship listed in TIA (S) 311(b). If the present or any future Trustee shall resign or be removed, it shall be subject to TIA (S) 311(a) to the extent provided therein. ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE Section 8.1. Termination of the Company's Obligations. --------------------- Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, the Company may terminate its obligations under this Indenture with respect to any series of Securities, except those obligations referred to in the penultimate paragraph of this Section 8.1, if all Securities of such series previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment money has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company, as provided in Section 8.4) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if: (a) either (i) pursuant to Article Three, the Company shall have given notice to the Trustee and mailed a notice to each Securityholder of such series of the redemption of all of the Securities of such series under arrangements satisfactory to the Trustee for the giving of such notice or (ii) all Securities of such series have otherwise become due and payable hereunder; (b) the Company shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an -51- irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Securityholders of such series for that purpose, money in such amount as is sufficient without consideration of reinvestment of such interest, to pay principal of and interest on the outstanding Securities of such series to maturity or redemption; provided that the Trustee shall have been -------- irrevocably instructed to apply such money to the payment of said principal and interest with respect to such Securities and; provided, further, that the provisions of -------- ------- Article 10 permit payments with respect to the securities at the time of deposit; (c) no Default or Event of Default with respect to this Indenture applicable to such series or the Securities of such series shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound; (d) the Company shall have paid all other sums payable by it hereunder; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for the termination of the Company's obligations under such Securities and this Indenture applicable to such Securities have been complied with. Such Opinion of Counsel shall also state that such satisfaction and discharge does not result in a default under any agreement or instrument then known to such counsel that binds or affects the Company. Notwithstanding the foregoing paragraph, the Company's obligations in Sections 2.6, 2.7, 2.8, 2.9, 4.1, 4.2, 7.8, 8.4 and 8.5 shall survive until the Securities of such series are no longer outstanding pursuant to the last paragraph of Section 2.9. After the Securities are no longer outstanding, the Company's obligations in Sections 7.8, 8.4 and 8.5 shall survive. After such delivery or irrevocable deposit the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities of such series -52- and this Indenture applicable to such Securities except for those surviving obligations specified above. Section 8.2. Legal Defeasance and Covenant Defeasance. -------------------- (a) Unless otherwise specified in a supplemental indenture, Board Resolution or Officers' Certificate as contemplated by Section 2.2(a) with respect to any series of Securities, the Company may, at its option by Board Resolution or by an Officers' Certificate, at any time, with respect to the Securities of any series, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding Securities of such series 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 of such series 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 of such series, which shall thereafter be deemed to be "outstanding" only for the purposes of paragraph (e) below and the other Sections of and matters under this Indenture applicable to such Securities referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Securities and this Indenture applicable to such Securities insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), and Holders of such Securities and any amounts deposited under paragraph (d) below shall cease to be subject to any obligations to, or the rights of, any holder of Senior Indebtedness under Article 10 or otherwise, except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Securities of such series to receive solely from the trust fund described in paragraph (d) below and as more fully set forth in such paragraph payments in respect of the principal of and interest on such Securities when such payments are due, (ii) the Company's obligations with respect to such Securities under Sections 2.7, 2.8 and 4.2 and, with respect to the Trustee, under Section 7.8, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv) this Section 8.2 and Section 8.5. Subject to -53- compliance with this Section 8.2, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) below with respect to Securities of any series. (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 5 and in Section 4.3, except as to the corporate existence of the Company and in Sections 4.4 through 4.8 and in certain other sections with respect to the outstanding Securities of such series identified in any supplemental indenture pursuant to Section 2.2(a) on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and such 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 such outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1(c) with respect to such series of Securities, but, except as specified above, the remainder of this Indenture applicable to such Securities 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 of such series: (i) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.11 who shall agree to comply with the provisions of this Section 8.2 applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities of such series, (x) money in an amount or (y) direct non-callable obligations of, or non-callable obligations guaranteed by, the United States -54- of America for the payment of which guarantee or obligation the full faith and credit of the United States is pledged ("U.S. Government Obligations") maturing as to principal and interest in such amounts of money and at such times as are sufficient without consideration of any reinvestment of such interest, to pay principal of and interest on the outstanding Securities of such series not later than one day before the due date of any payment, or (z) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge principal of and interest on the outstanding Securities of such series on the Maturity Date or otherwise in accordance with the terms of this Indenture and of the Securities of such series; provided, -------- however, that the Trustee (or other qualifying trustee) ------- shall have received an irrevocable written order from the Company instructing the Trustee (or other qualifying trustee) to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities of such series and; provided further, that -------- ------- the provisions of Article 10 permit payments with respect to the Securities at the time of deposit; (ii) no Default or Event of Default with respect to such series of Securities shall have occurred and be continuing on the date of such deposit; (iii) such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound; (iv) in the case of an election under paragraph (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the -55- same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (v) in the case of an election under paragraph (c) above, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (vi) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance under paragraph (b) above or the Covenant Defeasance under paragraph (c) above, as the case may be, have been complied with; and (vii) the Company shall have delivered to the Trustee an amount sufficient to cover its fees and expenses as Trustee under this Indenture through the term of the Securities to be defeased, or made adequate provision therefor to the satisfaction of the Trustee. (e) All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee; collectively for purposes of this paragraph (e), the "Trustee") pursuant to paragraph (d) above in respect of the outstanding Securities of such series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture applicable to such Securities, to the payment, either directly or through any Paying Agent (other than the Company or any Affiliate of the Company) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to paragraph (d) above or the principal and interest received in respect thereof other than any such tax, fee or other charge -56- which by law is for the account of the Holders of the outstanding Securities of such series. Anything in this Section 8.2 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request, in writing, of the Company any money or U.S. Government Obligations held by it as provided in paragraph (d) above which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.3. Application of Trust Money. -------------------------- The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Sections 8.1 and 8.2, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Securities of such series. Section 8.4. Repayment to Company. -------------------- Subject to Sections 7.8, 8.1 and 8.2, the Trustee shall promptly pay to the Company, upon receipt by the Trustee of an Officers' Certificate, any excess money, determined in accordance with Section 8.2, held by it at any time. The Trustee and the Paying Agent shall pay to the Company, 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 or principal or interest that remains unclaimed for two years after payment to the Securityholders of such series 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 Securityholder of such series entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to money must look solely to the Company for payment as general creditors unless an applicable abandoned property law designates -57- another Person, and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. Section 8.5. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations to any payment in respect of Securities of any series 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 obligations under this Indenture and the Securities of such series 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 has made any -------- ------- payment of principal of or interest on any Securities of such series because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of Securities of such series to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1. Without Consent of Holders. -------------------------- The Company and the Trustee may amend, waive or supplement this Indenture or the Securities of any series without notice to or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to evidence the succession of another Person to the Company and the assumption by any such successor of the obligations of the Company herein and in the Securities of any series in accordance with Article Five; (c) to provide for uncertificated Securities in addition to certificated Securities; -58- (d) to comply with any requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (e) to make any change that would provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder; or (f) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.2(a), respectively. Upon the request of the Company accompanied by a resolution of its Board of Directors, authorizing the execution of any such supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects its own rights, duties, protections or immunities under this Indenture or otherwise. Section 9.2. With Consent of Holders. ----------------------- Subject to Section 6.4, the Company and the Trustee may amend or supplement this Indenture or the Securities of any series or any supplemental indenture relating to any series of Securities with the written consent of the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected then outstanding, and the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected then outstanding by written notice to the Trustee may waive future compliance by the Company with any provision of this Indenture, such Securities or any supplemental indenture relating to such Securities. Upon the request of the Company, accompanied by a resolution of its Board of Directors authorizing the execution of any supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Securityholders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own -59- rights, duties, protections or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. Notwithstanding the provisions of this Section 9.2, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.4, may not: (a) reduce the percentage in aggregate outstanding principal amount of Securities of any series the Holders of which must consent to an amendment, supplement or waiver of any provision of this Indenture, the Securities of such series or any supplemental indenture; (b) reduce the rate or change the time for payment of interest on any Security of any series or change the method or formula for calculating interest; (c) reduce the principal amount outstanding of or extend the fixed maturity of any Security of any series or alter the redemption provisions with respect thereto or reduce the amount of the principal of any outstanding Discount Securities that would be due and payable upon declaration of acceleration of maturity thereof; (d) waive a default in the payment of the principal of or interest on, or redemption or an offer to purchase required hereunder with respect to, any Security of any series; (e) make the principal of or interest on any Security of any series payable in money or in a manner other than that stated in the Security; (f) modify this Section 9.2 or Section 6.4 or Section 6.7; (g) modify or change any provision of this Indenture affecting the subordination of the Securities of any series in a manner adverse to such Holders; (h) impair the right to institute suit for the enforcement of any payment on or with respect to the Securities of any series; or -60- (i) make such other changes as may require the consent of each Holder so affected pursuant to any supplemental indenture. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders of each Security affected thereby, with a copy to the Trustee, 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 supplemental indenture. Section 9.3. Compliance with Trust Indenture Act. ----------------------------------- Every amendment of or supplement to this Indenture or the Securities shall comply with the TIA as then in effect. Section 9.4. Revocation and Effect of Consents. --------------------------------- Until an amendment, supplement or waiver becomes effective with respect to a series of Securities, a consent to it by a Holder of a Security of such series is a continuing consent by such Holder and every subsequent Holder of that Security or portion of that Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security prior to such amendment, supplement or waiver becoming effective as to the Securities of such series. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. Notwithstanding the above, nothing in this paragraph shall impair the right of any Holder under (S) 316(b) of the TIA. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the second and third sentences of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent -61- to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. Such consent shall be effective only for actions taken within 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder of such series unless it makes a change described in any of clauses (a) through (i) of Section 9.2; if it makes such a change, the amendment, supplement or waiver shall bind every subsequent Holder of a Security of such series or portion of a Security that evidences the same debt as the consenting Holder's Security. Section 9.5. Notation on or Exchange of Securities. ------------------------------------- If an amendment, supplement or waiver changes the terms of a Security of any series, the Trustee shall (in accordance with the specific direction of the Company) request the Holder of such Security to deliver it to the Trustee. The Trustee shall (in accordance with the specific direction of the Company) place an appropriate notation on such 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 such Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.6. Trustee May Sign Amendments, etc. -------------------------------- The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article Nine if the amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, supplement or waiver, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver is authorized or permitted by this Indenture, that it is not inconsistent herewith and that it will be valid and binding upon the Company in accordance with its terms. -62- ARTICLE 10 SUBORDINATION Section 10.1. Agreement to Subordinate. ------------------------ The Company, for itself and its successors, agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Security is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Indebtedness, and that the subordination is for the benefit of the holders of Senior Indebtedness. This Article 10 shall constitute a continuing offer to all Persons who become holders of, or continue to hold Senior Indebtedness, and such provisions are made for the benefit of the holders of the Senior Indebtedness, and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Section 10.2. Liquidation; Dissolution; Bankruptcy. ------------------------------------ Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property or in an assignment for the benefit of creditors or any marshalling of the assets and liabilities of the Company: (1) holders of Senior Indebtedness shall be entitled to receive payment in full of all obligations with respect to the Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness, whether or not such interest is an allowable claim in any such proceeding) before Securityholders shall be entitled to receive any payment of any obligations with respect to the Securities; and (2) until all obligations with respect to Senior Indebtedness (as provided in subsection (1) above) are paid in full, any distribution to which Securityholders would be entitled but for this Article shall be made to holders of Senior Indebtedness, as their interests may appear, except that Securityholders may receive securities -63- that are subordinated to at least the same extent as the Securities to Senior Indebtedness. Section 10.3. Default on Senior Debt. ---------------------- The Company may not make any payment or distribution to the Trustee or any Securityholder in respect of obligations with respect to the Securities and may not acquire from the Trustee or any Securityholders any Securities for cash or property (other than Indebtedness which is subordinated to at least the same extent as the Securities to Senior Indebtedness), until all obligations with respect to the Senior Indebtedness have been paid in full if: (i) there occurs and is continuing a default in the payment of any obligations with respect to the Senior Indebtedness at the final scheduled maturity thereof or that permits holders of such Senior Indebtedness to accelerate its maturity or the maturity of which has been accelerated; or (ii) there occurs and is continuing an event of default, other than a payment default, on any Senior Indebtedness that permits holders of Senior Indebtedness to accelerate its maturity, and such event of default is the subject of judicial proceedings or the Company receives a notice of the default from a Person who may give it pursuant to Section 10.11 hereof. If the Company receives any such notice, a subsequent notice received within 360 days thereafter relating to Senior Indebtedness shall not be effective for purposes of this Section. The Company may resume payments on and distributions in respect of the Securities and may acquire them when (1) the default is cured or waived or has ceased to exist or such notice has been rescinded or annulled, or (2) in the case of an event of default referred to in Section 10.3(ii) hereof, 179 days pass after the Trustee receives written notice of such default and the holders of Senior Indebtedness as to which such default relates have not declared such Senior Indebtedness to be immediately due and payable, if this Article otherwise permits the payment or acquisition at the time of such payment or acquisition. -64- Section 10.4. Acceleration of Securities. -------------------------- If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. Section 10.5. When Distribution Must Be Paid Over. ---------------------- In the event that a distribution is made to the Trustee or any Securityholder at a time when such distribution is prohibited by Section 10.2 or 10.3 hereof, the Trustee or such Securityholder who receives the distribution shall hold it in trust for the benefit of, and, upon written request, pay it over to, the holders of Senior Indebtedness as their interests may appear, for application to the payment of all obligations with respect to Senior Indebtedness remaining unpaid to the extent necessary to pay such obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Securityholders or the Company or any other Person money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.6. Notice by Company. ----------------- The Company shall promptly notify the Trustee and any Paying Agent of any facts known to the Company that would cause a payment of any obligations with respect to the Securities to violate this Article 10, but failure to give such notice shall not affect the subordination of the Securities to the Senior Indebtedness provided in this Article 10. -65- Section 10.7. Subrogation. ----------- After all Senior Indebtedness is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Securityholders have been applied to the payment of Senior Indebtedness. A distribution made under this Article 10 to holders of Senior Indebtedness which otherwise would have been made to Securityholders shall not, as between the Company and Securityholders, be deemed a payment by the Company to or on account of the Senior Indebtedness. Section 10.8. Relative Rights. --------------- This Article 10 defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; (2) affect the relative rights of Securityholders and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (3) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Securityholders. If the Company fails because of this Article to pay principal of or interest on a Security on the due date, the failure is still a Default or Event of Default. Section 10.9. Subordination May Not Be Impaired by Company. ------------------------ No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. -66- Section 10.10. Distribution or Notice to Representative. ---------------------- Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Securityholders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Securityholders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Section 10.11. Rights of Trustee and Paying Agent. --------------------- Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, neither the Trustee nor any Paying Agent shall be charged with knowledge of the existence of any facts which would prohibit the making of any payment or distribution by the Trustee or such Paying Agent, and the Trustee or such Paying Agent may continue to make payments on the Securities unless, in the case of the Trustee, and in the case of such Paying Agent as long as the Trustee is such Paying Agent, a Trust Officer shall have received at the Corporate Trust Office of the Trustee, and in the case of a Paying Agent other than the Trustee, it shall have received, in each case at least two Business Days prior to the date of such payment, written notice of facts that would cause the payment of any obligations with respect to the Securities to violate this Article. The Trustee or any Paying Agent, as applicable, shall promptly provide a copy of such notice to the Securityholders. Only the Company, a Representative or a holder of an issue of Senior Indebtedness that has no Representative may give notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.8 hereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have -67- if it were not the Trustee subject to TIA (S) 310(b) and 311. Any Agent may do the same with like rights. Section 10.12. Authorization to Effect Subordination. ----------------------- Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee his attorney-in-fact for any and all such purposes. ARTICLE 11 MISCELLANEOUS Section 11.1. Trust Indenture Act of 1939. --------------------------- This Indenture is subject to the provisions of the TIA that are required to be a part of this Indenture, and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. Section 11.2. Notices. ------- Any notice or communication shall be sufficiently given if in writing and delivered in Person or mailed by first class mail, postage prepaid, addressed as follows: If to the Company, to: VARITY CORPORATION 672 Delaware Avenue Buffalo, New York 14209 Attention: Treasurer If to the Trustee, to: MANUFACTURERS AND TRADERS TRUST COMPANY One M&T Plaza Buffalo, New York 14240 Attention: Corporate Trust Department -68- The parties hereto by notice to the other parties may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed, postage prepaid, to a Holder, including any notice delivered in connection with TIA (S) 310(b), TIA (S) 313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed by first class mail to such Holder at the address of such Holder as it appears on the Securities register maintained by the Registrar and shall be sufficiently given to such Holder if so mailed within the time prescribed. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, if a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. Section 11.3. Communication by Holders with Other Holders. ----------------------------- Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA (S) 312(c). Section 11.4. Certificate and Opinion as to Conditions Precedent. ----------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate 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. -69- Section 11.5. Statements Required in Certificate or Opinion. ---------------------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the Person making such certificate or rendering such 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 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 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 11.6. Rules by Trustee, Paying Agent, Registrar. ------------------------------- The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions. Section 11.7. Governing Law. ------------- This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law. Section 11.8. No Interpretation of Other Agreements. -------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. -70- Section 11.9. No Recourse Against Others. -------------------------- A director, officer, employee, shareholder or Affiliate, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. Section 11.10. Successors. ---------- All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 11.11. Duplicate Originals. ------------------- The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all such executed copies together represent the same agreement. Section 11.12. Separability. ------------ In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefor against any party hereto. Section 11.13. Table of Contents, Headings, etc. -------------------------------- The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. Section 11.14. Benefits of Indenture. --------------------- Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. -71- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. VARITY CORPORATION, as Issuer By:________________________________ Name: Title: MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee By:________________________________ Name: Title: EX-5.1 10 OPINION OF CAHILL GORDON & REINDEL, SPECIAL COUNSEL TO KELSEY EXHIBIT 5.1 January 23, 1995 (212) 701-3000 Kelsey-Hayes Company 11878 Hubbard Road Livonia, Michigan 48150 Varity Corporation 672 Delaware Avenue Buffalo, New York 14209 Re: Kelsey-Hayes Company Debt Securities Guaranteed by Varity Corporation ------------------------------------ Dear Sirs: We have acted as special counsel to Kelsey-Hayes Com- pany, a Delaware corporation (the "Company"), and Varity Corpora- tion, a Delaware corporation (the "Guarantor"), in connection with the filing of a Joint Registration Statement on Form S-3 (the "Reg- istration Statement") under the Securities Act of 1933, as amended (the "Act"), providing for the issuance of up to $100 million aggregate principal amount of the Company's Debt Securities (the "Debt Securities") and the Guarantor's guarantees thereon (the -2- "Guarantees") to be issued under an indenture (the "Indenture") to be substantially in the form filed as an Exhibit to the Registra- tion Statement. We advise you that, in our opinion, when the Registra- tion Statement has become effective under the Act and the terms of the Debt Securities and of their issue and sale have been duly established and upon the execution and delivery of the Indenture and execution and authentication of the Debt Securities and Guar- antees in accordance with the Indenture and delivery of the Debt Securities and the Guarantees to the purchasers thereof against payment therefor, the Debt Securities and the Guarantees will be legal, valid and binding obligations of the Company and the Guar- antor, respectively, enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganiza- tion and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Registration State- ment and related Prospectus. Our consent to such reference does not constitute a consent under Section 7 of the Act, as in con- senting to such reference we have not certified any part of the Registration Statement and do not otherwise come within the cate- gories of persons whose consent is required under Section 7 or under the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Cahill Gordon & Reindel EX-5.2 11 OPINION OF CAHILL GORDON & REINDEL, SPECIAL COUNSEL TO VARITY EXHIBIT 5.2 January 23, 1995 (212) 701-3000 Varity Corporation 672 Delaware Avenue Buffalo, New York 14209 Re: Varity Corporation Debt Securities ------------------ Dear Sirs: We have acted as special counsel to Varity Corporation, a Delaware corporation (the "Company"), in connection with the filing of a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), providing for the issuance of up to $100 million aggregate principal amount of the Company's Debt Securities (the "Debt Securities") to be issued under an indenture (the "Indenture") to be substantially in the form filed as an Exhibit to the Registration Statement. We advise you that, in our opinion, when the Registration Statement has become effective under the Act and the terms of the Debt Securities and of their issue and sale have been duly -2- established and the Debt Securities have been duly authorized and upon the execution and delivery of the Indenture and execution and authentication of the Debt Securities in accordance with the Indenture and delivery to the purchasers thereof against payment therefor, the Debt Securities will be legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Registration Statement and related Prospectus. Our consent to such reference does not constitute a consent under Section 7 of the Act, as in consenting to such reference we have not certified any part of the Registration Statement and do not otherwise come within the categories of persons whose consent is required under Section 7 or under the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Cahill Gordon & Reindel EX-12 12 CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES FOR VARITY EXHIBIT 12 VARITY CORPORATION RATIO OF EARNINGS TO FIXED CHARGES
Years Ended January 31, ----------------------- 1990 1991 1992 1993 1994 ------ ------ ------ ------ ------ (dollar amounts in millions) Earnings (loss) from continuing operations before income taxes 42.2 59.7 (85.0) 58.8 69.2 ------ ------ ------ ------ ------ Interest expense: Operating activities 51.1 119.7 111.4 106.0 38.3 Rental 3.5 4.4 5.7 5.6 4.9 ------ ------ ------ ------ ------ Total Interest expense 54.6 124.1 117.1 111.6 43.2 ------ ------ ------ ------ ------ Earnings before interest expense and income taxes 96.8 183.8 32.1 170.4 112.4 ====== ====== ====== ====== ====== Fixed charges: Total interest expense 54.6 124.1 117.1 111.6 43.2 ====== ====== ====== ====== ====== Ratio of earnings to fixed charges 1.77 1.48 - 1.53 2.60 Coverage deficiency on fixed charges - - (85.0) - -
VARITY CORPORATION RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended October 31, ----------------------------- 1993 1994 ------ ------ (dollar amounts in millions) Earnings from continuing operations before income taxes 47.4 85.6 ------ ------ Interest expense: Operating activities 29.5 20.7 Rental 3.7 3.6 ------ ------ Total Interest expense 33.2 24.3 ------ ------ Earnings before interest expense and Income taxes 80.6 109.9 ====== ====== Fixed charges: Total Interest expense 33.2 24.3 ====== ====== Ratio of earnings to fixed charges 2.43 4.52
EX-23.1 13 CONSENT OF KPMG PEAT MARWICK LLP. EXHIBIT 23.1 Consent of Independent Auditors ------------------------------- The Board of Directors Varity Corporation: We consent to the use of our report incorporated herein by reference and to the reference to our firm under the heading "Experts" in the Registration Statement. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Buffalo, New York January 23, 1995 EX-25.1 14 FORM T-1: KELSEY-HAYES SENIOR INDENTURE EXHIBIT 25.1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an application to determine eligibility of a Trustee pursuant to Section 305 (b) (2) ___________________ ----------------------- MANUFACTURERS AND TRADERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 16-0538020 (Jurisdiction of incorporation (I.R.S. employer or organization if not a national bank) identification No.) One M&T Plaza Buffalo, New York 14203 (Address of principal executive offices) (Zip Code) ----------------------- KELSEY-HAYES COMPANY (Exact name of obligor as specified in its charter) DELAWARE 38-3084488 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 11878 Hubbard Road Livonia, Michigan 48150 (Address of principal executive offices) (Zip Code) ---------------------- VARITY CORPORATION (Exact name of obligor as specified in its charter) DELAWARE 22-3091314 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 672 Delaware Avenue Buffalo, New York 14209 (Address of principal executive offices) (Zip Code) SENIOR DEBT SECURITIES (Title of indenture securities) ================================================================================ ITEM 1. GENERAL INFORMATION Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Superintendent of Bank of the State of New York, 2 World Trade Center, New York, NY 10047 and Albany, NY 12203. Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045. Federal Deposit Insurance Corporation, Washington, D.C. 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR If the obligor is an affiliate of the trustee, describe each such affiliation. None. - 1 - ITEM 16 LIST OF EXHIBITS Exhibit 1. Organization Certificate of the Trustee as Now in Effect. Incorporated by reference herein to Exhibit 1, Form T-1, Registration Statement No. 33-7309. Exhibit 2. Certificate of Authority of the Trustee to Commence Business. Incorporated by reference herein to Exhibit 2, Form T-1, Registration Statement No. 33-7309. Exhibit 3. Authorization of the Trustee to Exercise Corporate Trust Powers. Incorporated by reference herein to Exhibit 3, Form T-1, Registration Statement No. 33-7309. Exhibit 4. Existing By-Laws of the Trustee. Incorporated by reference herein to Exhibit 4, Form T-1, Registration Statement No. 33-7309. Exhibit 5. Not Applicable. Exhibit 6. Consent of the Trustee. Incorporated by reference herein to Exhibit 6, Form T-1, Registration Statement No. 33-7309. Exhibit 7. Report of Condition of the Trustee. Exhibit 8. Not Applicable. Exhibit 9. Not Applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, Manufacturers and Traders Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Buffalo, and State of New York, on the 17th day of January 1995. MANUFACTURERS AND TRADERS TRUST COMPANY By: /s/ Russell T. Whitley ----------------------------------- Russell T. Whitley Assistant Vice President - 2 - Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF MANUFACTURERS & TRADERS TRUST COMPANY ONE M&T PLAZA, BUFFALO, NY 14203-0223, AND FOREIGN AND DOMESTIC SUBSIDIARIES, A MEMBER OF THE FEDERAL RESERVE SYSTEM, AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1994, PUBLISHED IN ACCORDANCE WITH A CALL MADE BY THE FEDERAL RESERVE BANK OF THIS DISTRICT PURSUANT TO THE PROVISIONS OF THE FEDERAL RESERVE ACT. Dollar Amounts in Thousands - -------------------------------------------------------------------------------- ASSETS 1. Cash and balances due from depository institutions: a. Noninterest-bearing balances and currency and coin(1)....... $ 329,227 b. Interest-bearing balances(2)................................ 70,043 2. Securities: a. Held-to-maturity securities................................. 224,213 b. Available-for-sale securities............................... 1,382,841 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds sold.......................................... 227,750 b. Securities purchased under agreements to resell............. 331,066 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income $6,169,053 b. LESS: Allowance for loan and lease losses 199,642 c. LESS: Allocated transfer risk reserve 0 ---------- d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c)......... 5,969,411 5. Assets held in trading accounts................................ 6,790 6. Premises and fixed assets (including capitalized leases)....... 120,117 7. Other real estate owned........................................ 8,382 8. Investments in unconsolidated subsidiaries and associated companies...................................................... 0 9. Customers' liability to this bank on acceptances outstanding... 1,068 10. Intangible assets............................................. 8,282 11. Other assets.................................................. 140,991 --------- 12. Total assets (sum of items 1 through 11)...................... $8,820,181 ========= - ------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. LIABILITIES 13. Deposits: a. In domestic offices....................................... $5,843,745 (1) Noninterest-bearing(1).................. $1,047,220 (2) Interest-bearing........................ 4,796,525 ---------- b. In foreign offices, Edge and Agreement subsidiaries, and IBFs.................................... 310,222 (1) Noninterest-bearing..................... $ 0 (2) Interest-bearing........................ 310,222 ---------- 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased................................... 1,722,160 b. Securities sold under agreements to repurchase............ 101,514 15. a. Demand notes issued to the U.S. Treasury.................. 102,294 b. Trading liabilities....................................... 2,874 16. Other borrowed money: a. With original maturity of one year or less................ 0 b. With original maturity of more than one year.............. 0 17. Mortgage indebtedness and obligations under capitalized leases.................................................... 513 18 Bank's liability on acceptances executed and outstanding.. 1,068 19. Subordinated notes and debentures......................... 75,000 20. Other liabilities......................................... 91,092 21. Total liabilities (sum of items 13 through 20)............ 8,250,482 --------- 22. Limited-life preferred stock and related surplus.......... 0 EQUITY CAPITAL 23. Perpetual preferred stock and related surplus............. 0 24. Common stock.............................................. 120,635 25. Surplus (exclude all surplus related to preferred stock).. 87,524 26. a. Undivided profits and capital reserves................ 391,161 b. Net unrealized holding gains (losses) on available- for-sale securities................................... (29,621) 27. Cumulative foreign currency translation adjustments....... 0 28. Total equity capital (sum of items 23 through 27)......... 569,699 --------- 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28).............. $8,820,181 ========== - ------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. I, Randall A. Krolewicz, A.V.P. of the named bank do hereby declare that this Report of Condition and Income has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. /S/ RANDALL A. KROLEWICZ - ---------------------------------------------- Signature of Officer Authorized to Sign Report 10/21/94 - ---------------------------------------------- Date of Signature We, the undersigned directors (trustees), attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /S/ ROBERT G. WILMERS - ---------------------------------------------- Director (Trustee) /S/ BRENT D. BAIRD - ---------------------------------------------- Director (Trustee) /S/ RAYMOND D. STEVENS, JR. - ---------------------------------------------- Director (Trustee) EX-25.2 15 FORM T-1: KELSEY-HAYES SUBORDINATED INDENTURE EXHIBIT 25.2 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an application to determine eligibility of a Trustee pursuant to Section 305 (b) (2) ___________________ ----------------------- MANUFACTURERS AND TRADERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 16-0538020 (Jurisdiction of incorporation (I.R.S. employer or organization if not a national bank) identification No.) One M&T Plaza Buffalo, New York 14203 (Address of principal executive offices) (Zip Code) ----------------------- KELSEY-HAYES COMPANY (Exact name of obligor as specified in its charter) DELAWARE 38-3084488 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 11878 Hubbard Road Livonia, Michigan 48150 (Address of principal executive offices) (Zip Code) ---------------------- VARITY CORPORATION (Exact name of obligor as specified in its charter) DELAWARE 22-3091314 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 672 Delaware Avenue Buffalo, New York 14209 (Address of principal executive offices) (Zip Code) SUBORDINATED DEBT SECURITIES (Title of indenture securities) ================================================================================ ITEM 1. GENERAL INFORMATION Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Superintendent of Bank of the State of New York, 2 World Trade Center, New York, NY 10047 and Albany, NY 12203. Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045. Federal Deposit Insurance Corporation, Washington, D.C. 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR If the obligor is an affiliate of the trustee, describe each such affiliation. None. - 1 - ITEM 16 LIST OF EXHIBITS Exhibit 1. Organization Certificate of the Trustee as Now in Effect. Incorporated by reference herein to Exhibit 1, Form T-1, Registration Statement No. 33-7309. Exhibit 2. Certificate of Authority of the Trustee to Commence Business. Incorporated by reference herein to Exhibit 2, Form T-1, Registration Statement No. 33-7309. Exhibit 3. Authorization of the Trustee to Exercise Corporate Trust Powers. Incorporated by reference herein to Exhibit 3, Form T-1, Registration Statement No. 33-7309. Exhibit 4. Existing By-Laws of the Trustee. Incorporated by reference herein to Exhibit 4, Form T-1, Registration Statement No. 33-7309. Exhibit 5. Not Applicable. Exhibit 6. Consent of the Trustee. Incorporated by reference herein to Exhibit 6, Form T-1, Registration Statement No. 33-7309. Exhibit 7. Report of Condition of the Trustee. Exhibit 8. Not Applicable. Exhibit 9. Not Applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, Manufacturers and Traders Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Buffalo, and State of New York, on the 17th day of January 1995. MANUFACTURERS AND TRADERS TRUST COMPANY By: /s/ Russell T. Whitley ----------------------------------- Russell T. Whitley Assistant Vice President - 2 - Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF MANUFACTURERS & TRADERS TRUST COMPANY ONE M&T PLAZA, BUFFALO, NY 14203-0223, AND FOREIGN AND DOMESTIC SUBSIDIARIES, A MEMBER OF THE FEDERAL RESERVE SYSTEM, AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1994, PUBLISHED IN ACCORDANCE WITH A CALL MADE BY THE FEDERAL RESERVE BANK OF THIS DISTRICT PURSUANT TO THE PROVISIONS OF THE FEDERAL RESERVE ACT. Dollar Amounts in Thousands - -------------------------------------------------------------------------------- ASSETS 1. Cash and balances due from depository institutions: a. Noninterest-bearing balances and currency and coin(1)....... $ 329,227 b. Interest-bearing balances(2)................................ 70,043 2. Securities: a. Held-to-maturity securities................................. 224,213 b. Available-for-sale securities............................... 1,382,841 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds sold.......................................... 227,750 b. Securities purchased under agreements to resell............. 331,066 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income $ 6,169,053 b. LESS: Allowance for loan and lease losses 199,642 c. LESS: Allocated transfer risk reserve 0 --------- d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c)......... 5,969,411 5. Assets held in trading accounts................................ 6,790 6. Premises and fixed assets (including capitalized leases)....... 120,117 7. Other real estate owned........................................ 8,382 8. Investments in unconsolidated subsidiaries and associated companies...................................................... 0 9. Customers' liability to this bank on acceptances outstanding... 1,068 10. Intangible assets............................................. 8,282 11. Other assets.................................................. 140,991 --------- 12. Total assets (sum of items 1 through 11)...................... $8,820,181 ========= - ------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. LIABILITIES 13. Deposits: a. In domestic offices....................................... $5,843,745 (1) Noninterest-bearing(1).................. $1,047,220 (2) Interest-bearing........................ 4,796,525 ---------- b. In foreign offices, Edge and Agreement subsidiaries, and IBFs.................................... 310,222 (1) Noninterest-bearing..................... $ 0 (2) Interest-bearing........................ 310,222 ---------- 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased................................... 1,722,160 b. Securities sold under agreements to repurchase............ 101,514 15. a. Demand notes issued to the U.S. Treasury.................. 102,294 b. Trading liabilities....................................... 2,874 16. Other borrowed money: a. With original maturity of one year or less................ 0 b. With original maturity of more than one year.............. 0 17. Mortgage indebtedness and obligations under capitalized leases.................................................... 513 18 Bank's liability on acceptances executed and outstanding.. 1,068 19. Subordinated notes and debentures......................... 75,000 20. Other liabilities......................................... 91,092 21. Total liabilities (sum of items 13 through 20)............ 8,250,482 --------- 22. Limited-life preferred stock and related surplus.......... 0 EQUITY CAPITAL 23. Perpetual preferred stock and related surplus............. 0 24. Common stock.............................................. 120,635 25. Surplus (exclude all surplus related to preferred stock).. 87,524 26. a. Undivided profits and capital reserves................ 391,161 b. Net unrealized holding gains (losses) on available- for-sale securities................................... (29,621) 27. Cumulative foreign currency translation adjustments....... 0 28. Total equity capital (sum of items 23 through 27)......... 569,699 --------- 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28).............. $8,820,181 ========= - ------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. I, Randall A. Krolewicz, A.V.P. of the named bank do hereby declare that this Report of Condition and Income has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. /S/ RANDALL A. KROLEWICZ - ---------------------------------------------- Signature of Officer Authorized to Sign Report 10/21/94 - ---------------------------------------------- Date of Signature We, the undersigned directors (trustees), attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /S/ ROBERT G. WILMERS - ---------------------------------------------- Director (Trustee) /S/ BRENT D. BAIRD - ---------------------------------------------- Director (Trustee) /S/ RAYMOND D. STEVENS, JR. - ---------------------------------------------- Director (Trustee) EX-25.3 16 FORM T-1: VARITY SENIOR INDENTURE EXHIBIT 25.3 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an application to determine eligibility of a Trustee pursuant to Section 305 (b) (2) ___________________ ----------------------- MANUFACTURERS AND TRADERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 16-0538020 (Jurisdiction of incorporation (I.R.S. employer or organization if not a national bank) identification No.) One M&T Plaza Buffalo, New York 14203 (Address of principal executive offices) (Zip Code) ----------------------- VARITY CORPORATION (Exact name of obligor as specified in its charter) DELAWARE 22-3091314 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 672 Delaware Avenue Buffalo, New York 14209 (Address of principal executive offices) (Zip Code) ---------------------- SENIOR DEBT SECURITIES (Title of indenture securities) ================================================================================ ITEM 1. GENERAL INFORMATION Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Superintendent of Bank of the State of New York, 2 World Trade Center, New York, NY 10047 and Albany, NY 12203. Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045. Federal Deposit Insurance Corporation, Washington, D.C. 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR If the obligor is an affiliate of the trustee, describe each such affiliation. None. - 1 - ITEM 16 LIST OF EXHIBITS Exhibit 1. Organization Certificate of the Trustee as Now in Effect. Incorporated by reference herein to Exhibit 1, Form T-1, Registration Statement No. 33-7309. Exhibit 2. Certificate of Authority of the Trustee to Commence Business. Incorporated by reference herein to Exhibit 2, Form T-1, Registration Statement No. 33-7309. Exhibit 3. Authorization of the Trustee to Exercise Corporate Trust Powers. Incorporated by reference herein to Exhibit 3, Form T-1, Registration Statement No. 33-7309. Exhibit 4. Existing By-Laws of the Trustee. Incorporated by reference herein to Exhibit 4, Form T-1, Registration Statement No. 33-7309. Exhibit 5. Not Applicable. Exhibit 6. Consent of the Trustee. Incorporated by reference herein to Exhibit 6, Form T-1, Registration Statement No. 33-7309. Exhibit 7. Report of Condition of the Trustee. Exhibit 8. Not Applicable. Exhibit 9. Not Applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, Manufacturers and Traders Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Buffalo, and State of New York, on the 17th day of January 1995. MANUFACTURERS AND TRADERS TRUST COMPANY By: /s/ Russell T. Whitley ----------------------------------- Russell T. Whitley Assistant Vice President - 2 - Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF MANUFACTURERS & TRADERS TRUST COMPANY ONE M&T PLAZA, BUFFALO, NY 14203-0223, AND FOREIGN AND DOMESTIC SUBSIDIARIES, A MEMBER OF THE FEDERAL RESERVE SYSTEM, AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1994, PUBLISHED IN ACCORDANCE WITH A CALL MADE BY THE FEDERAL RESERVE BANK OF THIS DISTRICT PURSUANT TO THE PROVISIONS OF THE FEDERAL RESERVE ACT. Dollar Amounts in Thousands - -------------------------------------------------------------------------------- ASSETS 1. Cash and balances due from depository institutions: a. Noninterest-bearing balances and currency and coin(1)....... $ 329,227 b. Interest-bearing balances(2)................................ 70,043 2. Securities: a. Held-to-maturity securities................................. 224,213 b. Available-for-sale securities............................... 1,382,841 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds sold.......................................... 227,750 b. Securities purchased under agreements to resell............. 331,066 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income $6,169,053 b. LESS: Allowance for loan and lease losses 199,642 c. LESS: Allocated transfer risk reserve 0 ---------- d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c)......... 5,969,411 5. Assets held in trading accounts................................ 6,790 6. Premises and fixed assets (including capitalized leases)....... 120,117 7. Other real estate owned........................................ 8,382 8. Investments in unconsolidated subsidiaries and associated companies...................................................... 0 9. Customers' liability to this bank on acceptances outstanding... 1,068 10. Intangible assets............................................. 8,282 11. Other assets.................................................. 140,991 ---------- 12. Total assets (sum of items 1 through 11)...................... $8,820,181 ========== - ------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. LIABILITIES 13. Deposits: a. In domestic offices....................................... $5,843,745 (1) Noninterest-bearing(1).................. $1,047,220 (2) Interest-bearing........................ 4,796,525 --------- b. In foreign offices, Edge and Agreement subsidiaries, and IBFs.................................... 310,222 (1) Noninterest-bearing..................... $ 0 (2) Interest-bearing........................ 310,222 ---------- 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased................................... 1,722,160 b. Securities sold under agreements to repurchase............ 101,514 15. a. Demand notes issued to the U.S. Treasury.................. 102,294 b. Trading liabilities....................................... 2,874 16. Other borrowed money: a. With original maturity of one year or less................ 0 b. With original maturity of more than one year.............. 0 17. Mortgage indebtedness and obligations under capitalized leases.................................................... 513 18 Bank's liability on acceptances executed and outstanding.. 1,068 19. Subordinated notes and debentures......................... 75,000 20. Other liabilities......................................... 91,092 21. Total liabilities (sum of items 13 through 20)............ 8,250,482 --------- 22. Limited-life preferred stock and related surplus.......... 0 EQUITY CAPITAL 23. Perpetual preferred stock and related surplus............. 0 24. Common stock.............................................. 120,635 25. Surplus (exclude all surplus related to preferred stock).. 87,524 26. a. Undivided profits and capital reserves................ 391,161 b. Net unrealized holding gains (losses) on available- for-sale securities................................... (29,621) 27. Cumulative foreign currency translation adjustments....... 0 28. Total equity capital (sum of items 23 through 27)......... 569,699 --------- 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28).............. $8,820,181 ========== - ------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. I, Randall A. Krolewicz, A.V.P. of the named bank do hereby declare that this Report of Condition and Income has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. /S/ RANDALL A. KROLEWICZ - ---------------------------------------------- Signature of Officer Authorized to Sign Report 10/21/94 - ---------------------------------------------- Date of Signature We, the undersigned directors (trustees), attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /S/ ROBERT G. WILMERS - ---------------------------------------------- Director (Trustee) /S/ BRENT D. BAIRD - ---------------------------------------------- Director (Trustee) /S/ RAYMOND D. STEVENS, JR. - ---------------------------------------------- Director (Trustee) EX-25.4 17 FORM T-1: VARITY SUBORDINATED INDENTURE EXHIBIT 25.4 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an application to determine eligibility of a Trustee pursuant to Section 305 (b) (2) ___________________ ----------------------- MANUFACTURERS AND TRADERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 16-0538020 (Jurisdiction of incorporation (I.R.S. employer or organization if not a national bank) identification No.) One M&T Plaza Buffalo, New York 14203 (Address of principal executive offices) (Zip Code) ----------------------- VARITY CORPORATION (Exact name of obligor as specified in its charter) DELAWARE 22-3091314 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 672 Delaware Avenue Buffalo, New York 14209 (Address of principal executive offices) (Zip Code) ---------------------- SUBORDINATED DEBT SECURITIES (Title of indenture securities) ================================================================================ ITEM 1. GENERAL INFORMATION Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Superintendent of Bank of the State of New York, 2 World Trade Center, New York, NY 10047 and Albany, NY 12203. Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045. Federal Deposit Insurance Corporation, Washington, D.C. 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR If the obligor is an affiliate of the trustee, describe each such affiliation. None. - 1 - ITEM 16 LIST OF EXHIBITS Exhibit 1. Organization Certificate of the Trustee as Now in Effect. Incorporated by reference herein to Exhibit 1, Form T-1, Registration Statement No. 33-7309. Exhibit 2. Certificate of Authority of the Trustee to Commence Business. Incorporated by reference herein to Exhibit 2, Form T-1, Registration Statement No. 33-7309. Exhibit 3. Authorization of the Trustee to Exercise Corporate Trust Powers. Incorporated by reference herein to Exhibit 3, Form T-1, Registration Statement No. 33-7309. Exhibit 4. Existing By-Laws of the Trustee. Incorporated by reference herein to Exhibit 4, Form T-1, Registration Statement No. 33-7309. Exhibit 5. Not Applicable. Exhibit 6. Consent of the Trustee. Incorporated by reference herein to Exhibit 6, Form T-1, Registration Statement No. 33-7309. Exhibit 7. Report of Condition of the Trustee. Exhibit 8. Not Applicable. Exhibit 9. Not Applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, Manufacturers and Traders Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Buffalo, and State of New York, on the 17th day of January 1995. MANUFACTURERS AND TRADERS TRUST COMPANY By: /s/ Russell T. Whitley ----------------------------------- Russell T. Whitley Assistant Vice President - 2 - Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF MANUFACTURERS & TRADERS TRUST COMPANY ONE M&T PLAZA, BUFFALO, NY 14203-0223, AND FOREIGN AND DOMESTIC SUBSIDIARIES, A MEMBER OF THE FEDERAL RESERVE SYSTEM, AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1994, PUBLISHED IN ACCORDANCE WITH A CALL MADE BY THE FEDERAL RESERVE BANK OF THIS DISTRICT PURSUANT TO THE PROVISIONS OF THE FEDERAL RESERVE ACT. Dollar Amounts in Thousands - -------------------------------------------------------------------------------- ASSETS 1. Cash and balances due from depository institutions: a. Noninterest-bearing balances and currency and coin(1)....... $ 329,227 b. Interest-bearing balances(2)................................ 70,043 2. Securities: a. Held-to-maturity securities................................. 224,213 b. Available-for-sale securities............................... 1,382,841 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds sold.......................................... 227,750 b. Securities purchased under agreements to resell............. 331,066 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income $6,169,053 b. LESS: Allowance for loan and lease losses 199,642 c. LESS: Allocated transfer risk reserve 0 ---------- d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c)......... 5,969,411 5. Assets held in trading accounts................................ 6,790 6. Premises and fixed assets (including capitalized leases)....... 120,117 7. Other real estate owned........................................ 8,382 8. Investments in unconsolidated subsidiaries and associated companies...................................................... 0 9. Customers' liability to this bank on acceptances outstanding... 1,068 10. Intangible assets............................................. 8,282 11. Other assets.................................................. 140,991 ---------- 12. Total assets (sum of items 1 through 11)...................... $8,820,181 ========== - ------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. LIABILITIES 13. Deposits: a. In domestic offices....................................... $5,843,745 (1) Noninterest-bearing(1).................. $1,047,220 (2) Interest-bearing........................ 4,796,525 ---------- b. In foreign offices, Edge and Agreement subsidiaries, and IBFs.................................... 310,222 (1) Noninterest-bearing..................... $ 0 (2) Interest-bearing........................ 310,222 ---------- 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased................................... 1,722,160 b. Securities sold under agreements to repurchase............ 101,514 15. a. Demand notes issued to the U.S. Treasury.................. 102,294 b. Trading liabilities....................................... 2,874 16. Other borrowed money: a. With original maturity of one year or less................ 0 b. With original maturity of more than one year.............. 0 17. Mortgage indebtedness and obligations under capitalized leases.................................................... 513 18 Bank's liability on acceptances executed and outstanding.. 1,068 19. Subordinated notes and debentures......................... 75,000 20. Other liabilities......................................... 91,092 21. Total liabilities (sum of items 13 through 20)............ 8,250,482 --------- 22. Limited-life preferred stock and related surplus.......... 0 EQUITY CAPITAL 23. Perpetual preferred stock and related surplus............. 0 24. Common stock.............................................. 120,635 25. Surplus (exclude all surplus related to preferred stock).. 87,524 26. a. Undivided profits and capital reserves................ 391,161 b. Net unrealized holding gains (losses) on available- for-sale securities................................... (29,621) 27. Cumulative foreign currency translation adjustments....... 0 28. Total equity capital (sum of items 23 through 27)......... 569,699 --------- 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28).............. $8,820,181 ========== - ------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. I, Randall A. Krolewicz, A.V.P. of the named bank do hereby declare that this Report of Condition and Income has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. /S/ RANDALL A. KROLEWICZ - ---------------------------------------------- Signature of Officer Authorized to Sign Report 10/21/94 - ---------------------------------------------- Date of Signature We, the undersigned directors (trustees), attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /S/ ROBERT G. WILMERS - ---------------------------------------------- Director (Trustee) /S/ BRENT D. BAIRD - ---------------------------------------------- Director (Trustee) /S/ RAYMOND D. STEVENS, JR. - ---------------------------------------------- Director (Trustee) -----END PRIVACY-ENHANCED MESSAGE-----