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ITW FINANCE EUROPE S.A. (incorporated with limited liability in Luxembourg) EUR 750,000,000 5.25 per cent. Guaranteed Notes due 2014 unconditionally and irrevocably guaranteed by ILLINOIS TOOL WORKS INC. (incorporated in Delaware)
Issue price: 99.874 per cent.
The EUR 750,000,000 5.25 per cent. Guaranteed Notes due 2014 (the Notes) are issued by ITW Finance Europe S.A. (the Issuer).
The Notes will bear interest on their principal amount from (and including) the Interest Commencement Date to (but excluding) 1 October 2014 at a fixed rate of 5.25 per cent. per annum payable annually in arrear on 1 October in each year and commencing on 1 October 2007, as further described in Condition 6 of “Conditions of the Notes”.
The Issuer may, at its option, redeem all, but not some only, of the Notes at any time at a redemption price to be determined in accordance with Condition 8(2) of “Conditions of the Notes”. Also, the Issuer may, at its option, redeem all, but not some only, of the Notes at any time at par plus accrued interest, in the event of certain tax changes as described under Condition 8(3) of “Conditions of the Notes”. Each Noteholder shall have the option, in the event of a Change of Control (as defined in Condition 8(4) of “Conditions of the Notes”), to require the Issuer to redeem or purchase the relevant Note at its principal amount together with accrued interest, as described in “Conditions of the Notes”. The Notes mature on 1 October 2014.
Application has been made to the Commission de Surveillance du Secteur Financier (the CSSF) in its capacity as competent authority under the Luxembourg Act dated 10 July 2005 (the Luxembourg Act) on prospectuses for securities to approve this document as a prospectus and to the Luxembourg Stock Exchange for the listing of the Notes on the Official List of the Luxembourg Stock Exchange and admission to trading on the Luxembourg Stock Exchange’s regulated market.
The Notes will be rated Aa3 by Moody’s Investors Service Inc. (Moody’s) and AA by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (S&P). A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation.
The Notes will initially be represented by a global certificate in registered form (the Global Certificate) which will be deposited with, and registered in the name of a nominee for a common depositary on behalf of Euroclear Bank SA/NV (Euroclear) and Clearstream Bank, société anonyme (Clearstream, Luxembourg) on or about 1 October 2007 (the Issue Date). Interests in the Global Certificate will be exchangeable for individual definitive Certificates in the denomination of EUR 50,000 and integral multiples of EUR 1,000 in excess thereof, only in certain limited circumstances—see “Summary of Provisions relating to the Notes while in Global Form”.
An investment in Notes involves certain risks. Prospective investors should have regard to the factors described under the heading “Risk Factors” beginning on page 6 before making an investment decision.
JPMorgan Société Générale Corporate & Investment Banking
The date of this Prospectus is 26 September 2007. Level: 5 – From: 5 – Tuesday, September 25, 2007 – 2:22 pm – mac7 – 3850 Intro : 3850 Intro
This Prospectus comprises a prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the Prospectus Directive) and for the purposes of the Luxembourg Act.
The Issuer and Illinois Tool Works Inc. (the Guarantor) (together, the Responsible Persons) accept responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of the Issuer and the Guarantor (each having taken all reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. The Issuer and the Guarantor, having made all reasonable enquiries, confirm that this Prospectus contains all material information with respect to the Issuer and the Guarantor and the Notes (including all information which, according to the particular nature of the Issuer, the Guarantor and of the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuer and the Guarantor and of the rights attaching to the Notes), that the information contained or incorporated in this Prospectus is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed in this Prospectus are honestly held and that there are no other material facts the omission of which would make this Prospectus or any of such information or the expression of any such opinions or intentions misleading. The Issuer and the Guarantor accept responsibility accordingly.
The Managers (as described under “Subscription and Sale”, below) have not independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Managers as to the accuracy or completeness of the information contained or incorporated in this Prospectus or any other information provided by the Issuer or the Guarantor in connection with the offering of the Notes. No Manager accepts any liability in relation to the information contained or incorporated by reference in this Prospectus or any other information provided by the Issuer or the Guarantor in connection with the offering of the Notes or their distribution.
No person is or has been authorised by the Issuer, the Guarantor or the Managers or any of their affiliates to give any information or to make any representation not contained in or not consistent with this Prospectus or any other information supplied in connection with the offering of the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Guarantor or any of the Managers or any of their affiliates.
Neither this Prospectus nor any other information supplied in connection with the offering of the Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer, the Guarantor or any of the Managers that any recipient of this Prospectus or any other information supplied in connection with the offering of the Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and/or the Guarantor. Neither this Prospectus nor any other information supplied in connection with the offering of the Notes constitutes an offer or invitation by or on behalf of the Issuer or the Guarantor or any of the Managers to any person to subscribe for or to purchase any Notes in any jurisdiction when it is unlawful to do so.
Neither the delivery of this Prospectus nor the offering, sale or delivery of the Notes shall in any circumstances imply that the information contained herein concerning the Issuer and/or the Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Offering of the Notes is correct as of any time subsequent to the date indicated in the document containing the same. The Managers expressly do not undertake to review the financial condition or affairs of the Issuer or the Guarantor during the life of the Notes or to advise any investor in the Notes of any information coming to their attention. The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) or the securities laws of any state or other jurisdiction of the United States, and are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to or for the account or benefit of U.S. persons (as
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defined in Regulation S under the Securities Act). For a further description of certain restrictions on the offering and sale of the Notes and on distribution of this document, see “Subscription and Sale” below.
This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy the Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Prospectus and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuer, the Guarantor and the Managers do not represent that this Prospectus may be lawfully distributed, or that the Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Guarantor or the Managers which is intended to permit a public offering of the Notes or the distribution of this Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Prospectus nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable securities laws and regulations. Persons into whose possession this Prospectus or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Prospectus and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Prospectus and the offer or sale of Notes in the United States and the European Economic Area (including the United Kingdom and the Grand Duchy of Luxembourg (Luxembourg)), see “Subscription and Sale”.
The contents of websites referred to in this Prospectus will not be deemed to be incorporated by reference herein.
IN CONNECTION WITH THE ISSUE OF THE NOTES, J.P. MORGAN SECURITIES LTD. AS STABILISING MANAGER OR ANY PERSON ACTING ON BEHALF OF J.P. MORGAN SECURITIES LTD. AS STABILISING MANAGER MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER THERE IS NO ASSURANCE THAT J.P. MORGAN SECURITIES LTD. AS STABILISING MANAGER (OR PERSONS ACTING ON BEHALF OF J.P. MORGAN SECURITIES LTD. AS STABILISING MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. ANY STABILISATION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE RELEVANT STABILISING MANAGER(S) (OR PERSONS ACTING ON BEHALF OF ANY STABILISING MANAGER(S)) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.
All references in this document to U.S. dollars, US$ and $ refer to the currency of the United States of America, to euro, EUR, and ¤ refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended.
Statement regarding forward-looking disclosure
This Prospectus contains forward-looking statements. Such statements, which are indicated by words or phrases such as “intent”, “anticipate”, “plan”, “estimate”, “project”, “expects”, “believes” or “currently envisions” and similar phrases are based on current expectations only, and are subject to certain risks, uncertainties, unforeseen events and assumptions. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Included among the factors that could cause results to materially differ are those risks listed under the heading “Risk
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Factors” below. Neither the Issuer nor the Guarantor undertakes any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Contents
Page
Risk Factors...... 6
Information to be Incorporated by Reference ...... 12
Conditions of the Notes ...... 13
Summary of Provisions relating to the Notes while in Global Form ...... 31
Use of Proceeds ...... 33
Form of Guarantee ...... 34
Description of the Issuer ...... 38
Description of the Guarantor ...... 39
Taxation ...... 50
Subscription and Sale ...... 52
General Information ...... 55
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Risk Factors
Each of the Issuer and the Guarantor believes that the following factors may affect its ability to fulfil its obligations under the Notes and the Guarantee, as the case may be. All of these factors are contingencies which may or may not occur and neither the Issuer nor the Guarantor is in a position to express a view on the likelihood of any such contingency occurring.
In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are described below.
Each of the Issuer and the Guarantor believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer or the Guarantor to pay interest, principal or other amounts on or in connection with the Notes may occur for other reasons which may not be considered significant risks by the Issuer and the Guarantor based on information currently available to them or which they may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making any investment decision.
Factors that may affect the Issuer’s ability to fulfil its obligations under the Notes
The Issuer is engaged in obtaining financing in capital markets primarily for the purpose of funding the operations of the Guarantor and its subsidiaries. The Issuer is reliant upon the Guarantor to service any debt obligations entered into by the Issuer.
Factors that may affect the Guarantor’s ability to fulfil its obligations under the Guarantee
A downturn in the major markets served by the Guarantor may adversely affect results.
While the Guarantor’s businesses serve a broad array of end markets, a sustained downturn in the construction, general industrial, automotive or food institutional and service markets could have a material adverse effect on the Guarantor’s business, results of operation or financial condition.
Deterioration in international and domestic business and economic conditions may have a material adverse affect on the Guarantor’s result of operations.
The Guarantor currently has approximately 750 business units in 49 countries. In 2006, approximately 45 per cent. of the Guarantor’s revenues were generated outside of the United States. As the Guarantor continues to expand its global footprint these sales will represent an ever increasing portion of the Guarantor’s revenues. Deterioration in either international or domestic business and economic conditions could occur as a result of a number of factors including: fluctuation in currency exchange rates; limitations on ownership and on repatriation of earnings; transportation delays and interruptions; political, social and economic instability and disruptions; government embargoes or foreign trade restrictions; the imposition of duties and tariffs and other trade barriers; import and export controls; labour unrest and current and changing regulatory environments; the potential for nationalisation of enterprises;
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difficulties in staffing and managing multi-national operations; limitations on its ability to enforce legal rights and remedies; and potentially adverse tax consequences.
If the Guarantor is unable to manage successfully the risks associated with expanding its international business or adequately manage operational fluctuations internationally, the risks could have a material adverse effect on the Guarantor’s business, results of operations or financial condition.
Unfavourable impact of increases in raw materials which could adversely affect results.
The Guarantor’s supply of raw materials for its businesses could be interrupted for a variety of reasons, including availability and pricing. Prices for raw materials necessary for production have fluctuated significantly in the past and significant increases could adversely affect the Guarantor’s results of operations and profit margins. While the Guarantor generally attempts to pass along increased raw material prices to its customers in the form of price increases, there may be a time delay between the increased raw material prices and the Guarantor’s ability to increase the prices of its products, or it may be unable to increase the prices of its products due to pricing pressure or other factors.
The Guarantor’s suppliers of component parts may significantly and quickly increase their prices in response to increases in costs of raw materials that they use to manufacture their component parts. In those circumstances, the Guarantor may not be able to increase its prices commensurately with its increased costs. Consequently, its results of operations and financial condition may be materially adversely affected.
The Guarantor’s future growth is, in part, dependent upon introducing new products and preserving its intellectual property.
The Guarantor’s ability to develop new products based on innovation can affect its competitive position and often requires the investment of significant resources. Difficulties or delays in research, development or production of new products and services or failure to gain market acceptance of new products and technologies may significantly reduce future revenues and materially adversely affect the Guarantor’s competitive position.
Protecting the Guarantor’s intellectual property is critical to its innovation efforts. The Guarantor owns a number of patents, trademarks and licences related to its products and has exclusive and non-exclusive rights under patents owned by others. The Guarantor’s intellectual property may be challenged or infringed upon by third parties or the Guarantor may be unable to maintain, renew or enter into new licence agreements with third party owners of intellectual property on reasonable terms. Unauthorised use of the Guarantor’s intellectual property rights or inability to preserve existing intellectual property rights could materially adversely impact the Guarantor’s competitive position and results of operations.
An unfavourable environment for making acquisitions may adversely affect the Guarantor’s future growth.
The Guarantor completed 53 acquisitions in 2006 resulting in approximately $1.7 billion of acquired annualised revenue. The Guarantor expects to continue its strategy of identifying and acquiring businesses with complementary products and services as well as larger acquisitions that represent potential new platforms. However, there can be no assurance that the Guarantor will be able to continue to find suitable businesses to purchase or that it will be able to acquire such businesses on acceptable terms. If the Guarantor is unsuccessful in its efforts, its ability to continue to grow the Guarantor could be adversely affected.
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Unfavourable tax law changes and tax authority rulings may adversely affect results.
The Guarantor is subject to income taxes in the United States and in various foreign jurisdictions. Domestic and international tax liabilities are subject to the allocation of income among various tax jurisdictions. The Guarantor’s effective tax rate could be adversely affected by changes in the mix among earnings in countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets or tax laws. The amount of income taxes paid is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. authorities. If these audits result in assessments different from amounts reserved, future financial results may include unfavourable adjustments to the Guarantor’s tax liabilities.
Potential adverse outcome in legal proceedings may adversely affect results.
The Guarantor’s businesses expose it to potential toxic tort and other types of product liability claims that are inherent in the design, manufacture and sale of its products and the products of third-party vendors that it uses or resells. The Guarantor currently maintains what it believes to be a suitable and adequate insurance programme consisting of a self-insured retention and excess insurance above that layer. There can be no assurance, however, that the Guarantor will be able to obtain insurance on acceptable terms or that its insurance programme will provide adequate protection against potential liabilities. Even if it maintains an adequate insurance programme, successful claims could have a material adverse effect on the Guarantor’s financial condition, liquidity and results of operations and on the ability to obtain suitable or adequate insurance in the future.
Factors which are material for the purpose of assessing the market risks associated with the Notes
The Notes may not be a suitable investment for all investors
Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
(i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Prospectus or any applicable supplement;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor’s currency;
(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant financial markets; and
(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
Notes subject to optional redemption by the Issuer
The Notes contain an optional redemption feature, which is likely to limit their market value. During any period when the Issuer may elect to redeem the Notes, the market value of the Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.
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The Issuer may be expected to redeem the Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.
Risks related to the Notes generally
Set out below is a brief description of certain risks relating to the Notes generally:
Modification
The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.
The Notes will be unsecured, and therefore will effectively be subordinated to any secured debt
The Notes will not be secured by any of the Issuer’s or the Guarantor’s assets or those of the Guarantor’s subsidiaries. As a result, the Notes are effectively subordinated to any secured debt the Issuer or the Guarantor may incur. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holder of the Issuer’s or the Guarantor’s secured debt may assert rights against the secured assets in order to receive full payment of their debt before the asset may be used to pay the holders of the Notes.
EU Savings Directive
If, following implementation of this Directive, a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. If a withholding tax is imposed on payment made by a Paying Agent following implementation of this Directive, the Issuer will be required to maintain a Paying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Directive.
Change of law
The conditions of the Notes and the Guarantee of the Guarantor (the Guarantee) are based on New York law in effect as at the date of this Prospectus. No assurance can be given as to the impact of any possible judicial decision or change to New York law or administrative practice after the date of this Prospectus.
United States securities laws restrict the circumstances under which you can transfer the Notes
The Notes have not been and will not be registered under the Securities Act and are being offered in transactions not subject to the registration requirements of the Securities Act and applicable state securities laws. Therefore, the Notes may be transferred or resold only in transactions registered under, exempt from or not subject to the registration requirements of, the Securities Act and all applicable state securities laws. For a description of certain restrictions on offers, sales and deliveries of the Notes, see “Subscription and Sale”. It is the responsibility of individual investors to ensure that any offers and resales of Notes that they may take comply with all applicable laws.
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Denominations involve integral multiples: definitive Certificates
The Notes have denominations consisting of a minimum of EUR 50,000 plus one or more higher integral multiples of EUR 1,000. It is possible that the Notes may be traded in amounts that are not integral multiples of EUR 50,000. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than EUR 50,000 in his account with the relevant clearing system at the relevant time may not receive a definitive Certificate in respect of such holding (should definitive Certificates be printed) and would need to purchase a principal amount of Notes such that its holding amounts to EUR 50,000.
If definitive Certificates are issued, holders should be aware that definitive Certificates which have a denomination that is not an integral multiple of the EUR 50,000 may be illiquid and difficult to trade.
Risks related to the market generally
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:
The secondary market generally
The Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market.
Exchange rate risks and exchange controls
The Issuer will pay principal and interest on the Notes and the Guarantor will make any payments under the Guarantee in euro. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the Investor’s Currency) other than euro. These include the risk that exchange rates may significantly change (including changes due to devaluation of the euro or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the Specified Currency would decrease (1) the Investor’s Currency-equivalent yield on the Notes, (2) the Investor’s Currency-equivalent value of the principal payable on the Notes and (3) the Investor’s Currency- equivalent market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.
Interest rate risks
Investment in the Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of them.
Credit ratings may not reflect all risks
Moodys and S&P have assigned credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.
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Legal investment considerations may restrict certain investments
The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) the Notes are legal investments for it, (2) the Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of the Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules.
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Information to be Incorporated by Reference
The information set out in the table below, which has previously been filed with the Commission de Surveillance du Secteur Financier (the CSSF), shall be deemed to be incorporated in, and to form part of, this Prospectus provided however that any statement contained in any document incorporated by reference in, and forming part of, this Prospectus shall be deemed to be modified or superseded for the purpose of this Prospectus to the extent that a statement contained herein modifies or supersedes such statement. The Issuer will, at the specified offices of the Fiscal Agent in Luxembourg, provide, free of charge, upon oral or written request, a copy of this Prospectus (or any document incorporated by reference in this Prospectus). Written or oral requests for such documents should be directed to the specified office of the Listing Agent in Luxembourg. Such documents will also be available to view on the website of the Luxembourg Stock Exchange (www.bourse.lu). The reports filed with United States Securities Exchange Commission (the SEC) can be reviewed and copied at the SEC’s office at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of those reports can be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Reports filed with the SEC can also be accessed at http://www.sec.gov via the internet (the information contained on this website does not form part of this Prospectus). For ease of reference, the tables below set out the relevant page references for the Annual Report to Stockholders in respect of the Guarantor for fiscal year ended 31 December 2006 which has been filed with the SEC on Form 10-K in February 2007 and the Quarterly Reports on Form 10-Q in respect of the Guarantor for the quarters ended 31 March 2007 and 30 June 2007 which have been filed with the SEC in May 2007 and August 2007, respectively. Any information not listed in the cross-reference table but included in the documents incorporated by reference is given for information purposes only. The Guarantor’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Illinois Tool Works Inc. Annual Report to Stockholders for fiscal year ended 31 December 2006 Statement of Income for the years ended 31 December 2006, 2005 and 2004 .... Page 50 Statement of Financial Position at 31 December 2006 and 31 December 2005...... Page 51 Statement of Cash Flows for the years ended 31 December 2006, 2005 and 2004...... Page 52 Notes to Financial Statements ...... Pages 53 to 74 Report of Independent Registered Public Accounting Firm ...... Page 49 Quarterly Report to Stockholders for the quarter ended 31 March 2007 Statement of Income ...... Page 3 Statement of Financial Position ...... Page 4 Statement of Cash Flows ...... Page 5 Notes to Financial Statements ...... Pages 6 to 8 Quarterly Report to Stockholders for the quarter and six months ended 30 June 2007 Statement of Income ...... Page 3 Statement of Financial Position ...... Page 4 Statement of Cash Flows ...... Page 5 Notes to Financial Statements ...... Pages 6 to 9 ITW Finance Europe S.A. Report of the Reviseur d’ Enterprises on the Opening Accounts ...... Pages 2 to 3 Audited Balance Sheet as at 7 September 2007 ...... Page 4 Notes to Balance Sheet ...... Pages 5 to 6
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Conditions of the Notes
The following is the text of the Conditions of the Notes which (subject to modification and except for the paragraphs in italics) will be endorsed on Certificates issued in respect of the Notes:
The EUR 750,000,000 5.25 per cent. Guaranteed Notes due 2014 (the Notes, which expression shall in these Conditions, unless the context otherwise requires, include any further notes issued pursuant to Condition 15 and forming a single series with the Notes) of ITW Finance Europe S.A. (the Issuer) are issued subject to and with the benefit of (i) a deed of guarantee dated 26 September 2007 (as amended or supplemented from time to time, the Guarantee) and (ii) an agency agreement dated 1 October 2007 (such agreement as amended and/or supplemented and/or restated from time to time, the Agency Agreement) made between the Issuer, Illinois Tool Works Inc. as guarantor (the Guarantor) and The Bank of New York (in its capacity as principal paying agent only, the Principal Paying Agent, and in its collective capacity as fiscal agent and principal paying agent, the Fiscal Agent, and in its capacity as transfer agent, the Transfer Agent), and The Bank of New York (Luxembourg) S.A. (as Luxembourg paying agent and, in its capacity as registrar, the Registrar, being together with the Fiscal Agent and the Transfer Agent, the Paying Agents).
The statements in these Conditions include summaries of, and are subject to, the detailed provisions of and definitions in the Guarantee and the Agency Agreement. Copies of the Guarantee and the Agency Agreement are available for inspection during normal business hours at the specified office of each of the Paying Agents. The holders of the Notes (the Noteholders) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Guarantee and the Agency Agreement applicable to them. References in these Conditions to the Fiscal Agent, the Registrar, the Transfer Agent and the Paying Agents shall include any successor appointed under the Agency Agreement.
The owners shown in the records of Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg) of book-entry interests in Notes are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement applicable to them.
1. Form, Denomination and Title
(1) Form and denomination
The Notes are in registered form, serially numbered, in denominations of EUR 50,000 each and integral multiples of EUR 1,000 in excess thereof (referred to as the principal amount of a Note).
The Notes are not issuable in bearer form.
(2) Registrar and Title
The Registrar will maintain a register (the Register) in respect of the Notes in accordance with the provisions of the Agency Agreement. A note certificate (each a Certificate) will be issued to each Noteholder in respect of its registered holding of Notes. Each Certificate will be numbered serially with an identifying number which will be recorded on the relevant Certificate and in the Register of Noteholders which the Issuer will procure to be kept by the Registrar.
Title to the Notes passes only by registration in the Register of Noteholders. The holder of any Note will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest or any writing on, or the theft or loss of, the Certificate issued in respect of it) and no person will be liable for so treating the holder. In these Conditions Noteholder and (in
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relation to a Note) holder means the person in whose name a Note is registered in the Register of Noteholders.
For a description of the procedures for transferring title to book-entry interests in the Notes, see the Agency Agreement and Condition 2.
2. Transfers of Notes and Issue of Certificates
(1) Transfers
Subject to paragraphs (4) and (5) below, a Note may be transferred by depositing the Certificate issued in respect of that Note, with the form of transfer on the back duly completed and signed, at the specified office of the Registrar or any of the Transfer Agents.
(2) Delivery of new Certificates
Each new Certificate to be issued upon transfer of Notes will, within five business days of receipt by the Registrar or the relevant Transfer Agent of the duly completed form of transfer endorsed on the relevant Certificate, be mailed by uninsured mail at the risk of the holder entitled to the Note to the address specified in the form of transfer. For the purposes of this Condition, business day shall mean a day on which banks are open for business in the city in which the specified office of the Transfer Agent with whom a Certificate is deposited in connection with a transfer is located.
Except in the limited circumstances described herein (see “Summary of Provisions Relating to the Notes while in Global Form”), owners of interests in the Notes will not be entitled to receive physical delivery of Certificates. Issues of Certificates upon transfer of Notes are subject to compliance by the transferor and transferee with the certification procedures described above and in the Agency Agreement.
Where some but not all of the Notes in respect of which a Certificate is issued are to be transferred, a new Certificate in respect of the Notes not so transferred will, within five business days of receipt by the Registrar or the relevant Transfer Agent of the original Certificate, be mailed by uninsured mail at the risk of the holder of the Notes not so transferred to the address of such holder appearing on the Register of Noteholders or as specified in the form of transfer.
(3) Formalities free of charge
Registration of transfer of Notes will be effected without charge by or on behalf of the Issuer, the Guarantor or any Paying Agent but upon payment (or the giving of such indemnity as the Issuer, the Guarantor or any Transfer Agent may reasonably require) in respect of any tax or other governmental charges which may be imposed in relation to such transfer.
(4) Closed Periods
No Noteholder may require the transfer of a Note to be registered during the period of 15 days ending on the due date for any payment of principal or interest on that Note.
(5) Regulations
All transfers of Notes and entries on the Register of Noteholders will be made subject to the detailed regulations concerning transfer of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests one.
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3. Status of the Notes
The Notes will constitute direct, unconditional and (subject as provided under Condition 5) unsecured obligations of the Issuer and will at all times (subject as provided above) rank pari passu and rateably among themselves and (subject to such obligations as are mandatorily preferred by law) with all other present and future unsecured and unsubordinated obligations of the Issuer.
4. Guarantee
(1) Guarantee
The payment of the principal and interest in respect of the Notes has been unconditionally and irrevocably guaranteed by the Guarantor under the Guarantee.
(2) Status of the Guarantee
The obligations of the Guarantor under the Guarantee constitute direct, unconditional and (subject as provided under Condition 5) unsecured obligations of the Guarantor and (subject as provided in Condition 5(1)) rank and will rank pari passu and rateably (subject to such obligations as are mandatorily preferred by law) with all other present and future unsecured and unsubordinated obligations of the Guarantor. The original of the Guarantee is held by the Fiscal Agent on behalf of, and copies are available for inspection by, the Noteholders at its specified office.
5. Negative Pledge
(1) Negative Pledge
So long as any of the Notes remain outstanding, each of the Issuer and the Guarantor will not, nor will either of them permit any of their Restricted Subsidiaries to, issue, assume or guarantee any notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (hereinafter, Debt) secured by a mortgage, security interest, lien, pledge or other encumbrance (hereinafter, liens) upon any Principal Property or upon any shares of stock or indebtedness of any Restricted Subsidiary (whether such Principal Property, shares of stock or indebtedness are now owned or hereafter acquired) without in any such case effectively providing concurrently with such issuance, assumption, or guarantee that the Notes (together with, if the Issuer or the Guarantor so determines, any other indebtedness or obligation then existing and any other indebtedness or obligation, thereafter created, ranking equally with the Notes) shall be secured equally and rateably with (or prior to) such Debt so long as such Debt shall be so secured, except that the foregoing provisions shall not apply to:
(a) liens affecting property of a corporation existing at the time it becomes a Subsidiary or at the time it is merged into or consolidated with or purchased by the Issuer or the Guarantor or a Subsidiary;
(b) liens existing at the time of acquisition of the property affected thereby or incurred to secure payment of all or part of the purchase price of such property or to secure Debt incurred prior to, at the time of or within 180 days after the acquisition of such property for the purpose of financing all or part of the purchase price thereof (provided such liens are limited to such property and improvements thereon);
(c) liens placed within 180 days of completion of construction of new plants built on property which, in the opinion of the Board of Directors of the Issuer or the Guarantor (as the case may be), was, prior to such construction, substantially unimproved for the use intended by the Issuer or the Guarantor, to secure all or part of the cost of
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construction of such plants, or to secure Debt incurred to provide funds for any such purpose;
(d) liens which secure indebtedness owing by a Restricted Subsidiary to the Issuer or the Guarantor or another Restricted Subsidiary;
(e) liens existing on the date of this Prospectus;
(f) liens arising by reason of mortgages on property owned or leased by the Issuer or the Guarantor or a Restricted Subsidiary in favour of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or in favour of any other country or any political subdivision thereof, or in favour of holders of securities issued by any such entity, pursuant to any contract or statute (including, without limitation, mortgages to secure Debt of the pollution control or industrial revenue bond type) or to secure any indebtedness incurred or guaranteed for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such mortgages;
(g) mechanics’, materialmen’s, carriers’, workmen’s, vendors’ or other like liens, arising in the ordinary course of business in respect of obligations which are not past due or which are being contested in good faith;
(h) liens arising by reason of any deposit with, or the giving of any form of security to (i) any surety company or clerk of any court, or in escrow, as collateral in connection with, or in lieu of, any bond or appeal from any judgment or decree against the Issuer or the Guarantor or a Restricted Subsidiary, or in connection with other proceedings or actions at law or in equity by or against the Issuer or the Guarantor or a Restricted Subsidiary, or (ii) any government or governmental department, agency or instrumentality, which deposit or security is required or permitted to qualify the Issuer or the Guarantor or a Restricted Subsidiary to conduct business (or perform any contract with such entities), to maintain self-insurance, or to obtain the benefit of, or comply with, any law pertaining to workers’ compensation, unemployment insurance, old age pensions, social security, or similar matters;
(i) liens existing on property acquired by the Issuer or the Guarantor or a Restricted Subsidiary through the exercise of rights arising out of defaults on receivables acquired in the ordinary course of business;
(j) liens for judgments or awards, so long as the finality of any such judgment or award is being contested in good faith and execution thereon is stayed;
(k) liens for taxes or assessments or governmental charges or levies not yet past due or delinquent or which can thereafter be paid without penalty, or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established; and any other liens of a nature substantially similar to those described in this clause (k) which do not, in the opinion of the Board of Directors of the Issuer or the Guarantor, materially impair the use of such property in the operation of the business of the Issuer or the Guarantor and its Restricted Subsidiaries taken as a whole or the value of such property for the purposes of such business; or
(l) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any lien referred to in the foregoing clauses (a) to (k) inclusive or of any Debt secured thereby, provided that the principal amount of Debt secured thereby shall not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement, and that such extended, renewed or replacement lien shall be limited to all or part of the same property which secured the lien extended, renewed or replaced (plus improvements on such property).
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(2) Limitation on Sale and Lease-Back
So long as any of the Notes remain outstanding, each of the Issuer and the Guarantor will not, nor will permit any Restricted Subsidiary to, enter into any arrangement with any person providing for the leasing by the Issuer or the Guarantor or any Restricted Subsidiary of any Principal Property (whether such Principal Property is now owned or hereafter acquired), except for temporary leases for a term, including any renewal, of not more than three years and except for leases between the Issuer or the Guarantor and a Restricted Subsidiary or between Restricted Subsidiaries, which Principal Property has been or is to be sold or transferred by the Issuer or the Guarantor or such Restricted Subsidiary to such person (hereinafter, a Sale and Lease-Back Transaction), unless either:
(a) the Issuer or the Guarantor or such Restricted Subsidiary would be entitled, in accordance with the provisions of Condition 5(1) (other than provisions with respect to exempted indebtedness), to incur Debt secured by a lien on such property without equally and rateably securing the Notes, or
(b) the Issuer or the Guarantor within 180 days after the effective date of the Sale and Lease-Back Transaction applies an amount equal to the Value of such transaction to the voluntary retirement of its Funded Debt.
(3) Exempted Indebtedness
Notwithstanding the provisions contained in Condition 5(1) and Condition 5(2), each of the Issuer and the Guarantor and their Restricted Subsidiaries may issue or guarantee Debt which would otherwise be subject to the limitation of Condition 5(1), without securing the Notes, or may enter into Sale and Lease-Back Transactions which would otherwise be subject to the limitation of Condition 5(2), without retiring Funded Debt, or enter into a combination of such transactions, if the sum of (i) the principal amount of all such debt incurred after the date hereof, and which would otherwise be or have been prohibited by the limitations of Condition 5(1) and Condition 5(2) and (ii) the aggregate Value of all such Sale and Lease-Back Transactions after the date hereof does not at any such time exceed 10 per cent. of the Consolidated Net Tangible Assets of the Guarantor and its consolidated Subsidiaries as shown in the audited consolidated balance sheet contained in the latest annual report to the stockholders of the Guarantor.
(4) Interpretation
For the purposes of these Conditions:
Consolidated Net Tangible Assets means the excess over current liabilities of total assets after deducting goodwill, trade names, trademarks, patents, unamortised debt discount, unamortised expense incurred in the issuance of debt, and other like intangibles, as shown on such consolidated balance sheet prepared in accordance with generally accepted accounting principles.
Funded Debt shall mean indebtedness (including the Notes) maturing by the terms thereof more than one year after the original creation thereof.
Principal Property means any manufacturing plant or other facility owned or leased by the Issuer or the Guarantor or any Restricted Subsidiary, except any such plant or facility with a book value of less than two per cent. of the Guarantor’s Consolidated Net Tangible Assets (before deducting accumulated depreciation).
Restricted Subsidiary means any Subsidiary in which the Guarantor’s investment or the investment of the Guarantor’s Subsidiaries exceeds two per cent. of the Guarantor’s Consolidated Net Tangible Assets as at the date of the determination.
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Subsidiary means any corporation at least a majority of the outstanding securities of which having ordinary voting power to elect a majority of the board of directors of such corporation (whether or not any other class of securities has or might have voting power by reason of the happening of a contingency) is at the time owned or controlled, directly or indirectly, by the Issuer or the Guarantor, or by one or more Subsidiaries, or by the Issuer or the Guarantor and one or more Subsidiaries.
Value shall mean an amount equal to the greater of the net proceeds of the sale or transfer of the property leased pursuant to such Sale and Lease-Back Transaction, or the fair value in the opinion of the Board of Directors of the Issuer or the Guarantor (as the case may be) of the leased property at the time of entering into such Sale and Lease-Back Transaction. For the purposes of this Condition.
6. Interest
(1) Interest Rate and Interest Payment Dates
The Notes bear interest from and including 1 October 2007 (the Issue Date and the Interest Commencement Date) at the rate of 5.25 per cent. per annum, payable annually in arrear on 1 October (each an Interest Payment Date). The first payment of interest shall be in respect of the period from and including 1 October 2007 to, but excluding, 1 October 2008, and shall be made on 1 October 2008 and thereafter, for each successive period, from and including an Interest Payment Date to but excluding the next Interest Payment Date.
(2) Interest Accrual
Each Note will cease to bear interest from and including its due date for redemption unless, upon due presentation, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of payment. In such event, interest will continue to accrue until whichever is the earlier of:
(a) the date on which all amounts due in respect of such Note have been paid; and
(b) five days after the date on which the full amount of the moneys payable in respect of such Notes has been received by the Fiscal Agent or the Registrar, as the case may be, and notice to that effect has been given to the Noteholders in accordance with Condition 13.
(3) Calculation of Broken Interest
When interest is required to be calculated in respect of a period of less than a full year, it shall be calculated on the basis of (a) the actual number of days in the period from and including the date from which interest begins to accrue (the Accrual Date), but excluding the date on which it falls due divided by (b) the actual number of days from and including the Accrual Date, but excluding the next following Interest Payment Date.
(4) General
Interest in respect of any Note shall be calculated per EUR 1,000 in principal amount of the Notes (the Calculation Amount). The amount of interest payable per Calculation Amount shall be equal to the product of 5.25 per cent., the Calculation Amount and the day-count fraction for the relevant period (as determined in accordance with the previous paragraph), rounding the resulting figure to the nearest EUR 0.01 (Euro 0.005 being rounded upwards).
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7. Payments
(1) Payments in respect of Notes
Payment of principal and interest will be made by transfer to the registered account of the Noteholder or by Euro cheque drawn on a bank that processes payments in Euro mailed to the registered address of the Noteholder if it does not have a registered account. Payments of principal and payments of interest due otherwise than on an Interest Payment Date will only be made against surrender of the relevant Certificate at the specified office of any of the Agents. Interest on Notes due on an Interest Payment Date will be paid to the holder shown on the Register of Noteholders at the close of business on the date (the record date) being the fifteenth day before the due date for the payment of interest.
For the purposes of this Condition 7, a Noteholder’s registered account means the Euro account maintained by or on behalf of it with a bank that processes payments in Euro, details of which appear on the Register of Noteholders at the close of business, in the case of principal, on the second business day (as defined below) before the due date for payment and, in the case of interest, on the relevant record date, and a Noteholder’s registered address means its address appearing on the Register of Noteholders at that time.
(2) Payments subject to Applicable Laws
Payments in respect of principal and interest on Notes are subject in all cases to any fiscal or other laws and regulations applicable in the place of payment, but without prejudice to the provisions of Condition 9.
(3) No commissions
No commissions or expenses shall be charged to the Noteholders in respect of any payments made in accordance with this Condition 7.
(4) Payment on Business Days
Where payment is to be made by transfer to a registered account, payment instructions (for value the due date or, if that is not a Business Day (as defined below), for value the first following day which is a Business Day) will be initiated and, where payment is to be made by cheque, the cheque will be mailed, on the Business Day preceding the due date for payment or, in the case of a payment of principal or a payment of interest due otherwise than on an Interest Payment Date, if later, on the Business Day on which the relevant Certificate is surrendered at the specified office of a Paying Agent.
Noteholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due if the due date is not a Business Day, if the Noteholder is late in surrendering its Certificate (if required to do so) or if a cheque mailed in accordance with this Condition 7 arrives after the due date for payment.
In this Condition 7, Business Day means a day (other than a Saturday or Sunday) on which commercial banks are open for business in London, and a day on which the TARGET System is open and, in the case of presentation of a Note Certificate, in the place in which the Note Certificate is presented.
(5) Partial Payments
If the amount of principal or interest which is due on the Notes is not paid in full, the Registrar will annotate the Register of Noteholders with a record of the amount of principal, premium (if any) or interest in fact paid.
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(6) Paying Agents
The names of the initial Paying Agents and their initial specified offices are set out at the end of these Conditions. The Issuer and the Guarantor reserve the right at any time to terminate the appointment of any Paying Agent and to appoint additional or other Paying Agents provided that:
(a) there will at all times be a Fiscal Agent;
(b) there will at all times be a Paying Agent (which may be the Fiscal Agent) having a specified office in a European city which, so long as the Notes are listed on the Luxembourg Stock Exchange, shall be Luxembourg;
(c) the Issuer undertakes that it will, so long as such a paying agent exists, ensure that it maintains a Paying Agent in a Member State of the European Union that is not obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive;
(d) there will at all times be a Paying Agent in a jurisdiction within Europe, other than the jurisdiction in which the Issuer is incorporated; and
(e) there will at all times be a Registrar and a transfer agent.
Notice of any termination or appointment, and of any changes in specified offices will be given to the Noteholders promptly by the Issuer in accordance with Condition 13.
8. Redemption and Purchase
(1) Redemption at Maturity
Unless previously redeemed, called or purchased and cancelled as provided below, the Issuer will redeem the Notes at their principal amount on 1 October 2014.
(2) Issuer’s Call Option
The Notes will be redeemable, in whole but not in part at the Issuer’s option, at any time at a redemption price equal to the greater of (i) 100 per cent. of the principal amount of such Notes or (ii) as determined by the Quotation Agent (as defined below), the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption) discounted to the redemption date on an annual basis (based on the actual number of days elapsed divided by 365 (or, if any of those days elapsed fall in a leap year, the sum of (x) the number of those days falling in a leap year divided by 366 and (y) the number of those days falling in a non- leap year divided by 365)) at the Reference Dealer Rate (as defined below), plus in each case, accrued interest thereon to the date of redemption.
For the purposes of this Condition 8(2):
Business Day means, in relation to any place, a day on which commercial banks and foreign exchange markets settle payments in that place.
Quotation Agent means the Reference Dealer (as defined below).
Reference Dealer means J.P. Morgan Securities Ltd. or its successor.
Reference Dealer Rate means with respect to the Reference Dealer and any redemption date, the price, expressed as a percentage (rounded to three decimal places, 0.0005 being rounded upwards), at which the gross redemption yield (as calculated by the Reference
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Dealer) on the Notes, if they were to be purchased at such price on the third Business Day prior to the date fixed for redemption, would be equal to the gross redemption yield on such Business Day of the Reference Bond on the basis of the middle market price of the Reference Bond prevailing at 11:00 a.m. (London time) on such Business Day as determined by the Reference Dealer.
Reference Bond means, in relation to the Reference Dealer Rate, at the discretion of the Reference Dealer, a European government bond whose maturity is closest to the maturity of the Notes, or such other European government bond as the Reference Dealer, may, with the advice of three brokers of, or market makers in, European government bonds selected by the Reference Dealer, determine to be appropriate for determining the Reference Dealer Rate.
Notice of any redemption will be given to the Noteholders at least 30 days but not more than 60 days before the redemption date.
Unless the Issuer defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the Notes called for redemption.
(3) Redemption for Taxation Reasons
If:
(a) as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction (as defined in Condition 9), or any change in the official interpretation of the laws or regulations of a Relevant Jurisdiction, which change or amendment becomes effective after 26 September 2007, on the next Interest Payment Date either (i) the Issuer would be required to pay additional amounts as provided or referred to in Condition 9 or (ii) the Guarantor would be unable for reasons outside its control to procure payment by the Issuer and in making payment itself would be required to pay such additional amounts; and
(b) the requirement cannot be avoided by the Issuer or, as the case may be, the Guarantor taking reasonable measures available to it,
the Issuer may at its option, having given not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition 13 (which notice shall be irrevocable), redeem all the Notes, but not some only, at any time at their principal amount together with interest accrued to but excluding the date of redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or, as the case may be, the Guarantor would be obliged to pay such additional amounts, were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Fiscal Agent a certificate signed by two authorised signatories of the Issuer or, as the case may be, the Guarantor stating that the requirement referred to in (a) and (b) above will apply on the next Interest Payment Date and an opinion of independent legal advisers of recognised standing to the effect that the Issuer or, as the case may be, the Guarantor has or will become obliged to pay such additional amounts as a result of the change or amendment.
(4) Noteholder Put
If a Put Event (as defined below) occurs, each Noteholder shall have the option (unless, prior to the giving of the Put Event Notice (as defined below), the Issuer shall have given notice under Condition 8(2) or 8(3)) to require the Issuer to redeem or, at the Issuer’s option, purchase (or procure the purchase of) any or all of the Notes at their principal amount together with interest accrued up to but excluding the Put Date (as defined below). Such option (the Put Option) shall operate as set out below.
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If a Put Event occurs then, within 21 days of the end of the Change of Control Period (as defined below), the Issuer shall give notice (a Put Event Notice) to the Noteholders in accordance with Condition 13 specifying the nature of the Put Event and the procedure for exercising the Put Option.
To exercise the Put Option if the relevant Notes are held outside of Euroclear and Clearstream, Luxembourg, the Noteholder must within 30 days after a Put Event (the Put Period) deliver the Certificate in respect of such Notes at the specified office of any Paying Agent at any time during normal business hours of such Paying Agent falling within the Put Period, accompanied by a duly signed and completed notice of exercise in the then-current form obtainable from the specified office of any Paying Agent (a Put Notice) and in which the Noteholder must specify the registered account of such Noteholder (or, if payment is required to be made by cheque, the registered address of such Noteholder (as per Condition 7(1)) to which payment is to be made under this Condition 8(4). The Issuer shall at its option redeem or purchase (or procure the purchase of) the relevant Notes on the date that is seven days (or, if that day is not a Business Day, the first Business Day following the seven day period) after the expiration of the Put Period (the Put Date) unless the Notes have been previously redeemed or purchased and cancelled. Payment in respect of any Certificate so delivered will be made on the Put Date by transfer for value on the Put Date to the registered account of such Noteholder (or if a registered address is specified for payment by cheque, by cheque sent by first class post to such specified registered address). A Put Notice, once given, shall be irrevocable.
To exercise the Put Option, if the relevant Notes are held through Euroclear or Clearstream, Luxembourg the Noteholder must, within the Put Period, give notice to the Fiscal Agent of such exercise in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice being given on such Noteholder’s instruction by Euroclear and Clearstream, Luxembourg or any common depositary for them to the Registrar by electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time.
A Put Event will be deemed to occur if:
(i) an offer to acquire capital stock of the Guarantor (Shares), whether expressed as a tender offer, merger proposal, legal offer, an invitation to tender, a scheme with regard to such acquisition or in any other way, is made in circumstances where such offer is available to all holders of Shares or all holders of Shares other than any holder of Shares who is the person making such offer (or any Affiliate of such person or Related Person with respect to such person) or who is excluded from the offer by reason of being connected with one or more specific jurisdictions and, such offer having become or been declared unconditional in all respects, the Guarantor becomes aware that the right to cast more than 50 per cent. of the votes which may ordinarily be cast at a general meeting of holders of Shares has or will become beneficially owned (within the meaning of Rule 13d-3 of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act)) by the offeror and/or its Affiliates or Related Persons (the Relevant Person) or an event occurs which has a like or similar effect (such event being a Change of Control) provided that a Change of Control shall be deemed not to have occurred if all or substantially all of the shareholders of the Relevant Person are, or immediately prior to the event which would otherwise have constituted a Change of Control were, the shareholders of the Guarantor with the same pro rata interests in the share capital of the Relevant Person as such shareholders have, or as the case may be, had, in the share capital of the Guarantor,
where for the purposes of this Condition 8(4)(i) only:
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shareholders means any shareholders along with any persons acting as a “group” for purposes of Section 13(d) of the Exchange Act, or any successor provision thereto, along with any Affiliates or Related Persons;
Affiliate of any person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control of such person;
control means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and controlling and controlled have correlative meanings;
Related Person of any person means any other person owning 5 per cent. or more of the outstanding capital stock or other equity interest or combined voting power of such person; and
(ii) on the date (the Relevant Announcement Date) that is the earlier of (x) the date of the first public announcement of the relevant Change of Control and (y) the date of the earliest Relevant Potential Change of Control Announcement (if any), the Notes carry from any of Fitch Ratings Ltd. (Fitch), Moody’s Investors Service Limited (Moody’s) or Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (S&P) or any of their respective successors or any other rating agency (each a Substitute Rating Agency) of international standing, specified by the Guarantor (each, a rating agency):
(A) an investment grade credit rating (Baa3/BBB-, or equivalent, or better), and such rating from any rating agency is within the Change of Control Period either downgraded to a non-investment grade credit rating (Ba1/BB+, or equivalent, or worse) or withdrawn and is not within the Change of Control Period subsequently (in the case of a downgrade) upgraded or (in the case of a withdrawal) reinstated to an investment grade credit rating by such rating agency; or
(B) a non-investment grade credit rating (Ba1/BB+, or equivalent, or worse), and such rating from any rating agency is within the Change of Control Period downgraded by one or more notches (for illustration, Ba1/BB+ to Ba2/BB being one notch) or withdrawn and is not within the Change of Control Period subsequently (in the case of a downgrade) upgraded or (in the case of a withdrawal) reinstated to its earlier credit rating or better by such rating agency; or
(C) no credit rating, and no rating agency assigns within the Change of Control Period an investment grade credit rating to the Notes,
provided that if on the Relevant Announcement Date the Notes carry a credit rating from more than one rating agency, at least one of which is investment grade, then subparagraph (A) will apply; and provided further that in making the relevant decision(s) referred to in (ii) above, the relevant rating agency announces publicly or confirms (having been so requested in writing by the Guarantor) in writing to the Guarantor that such decision(s) resulted, in whole or in part, from the occurrence of the Change of Control.
If the rating designations employed by any of Fitch, Moody’s or S&P are changed from those which are described in paragraph (ii) of the definition of “Put Event” above, or if a rating is procured from a Substitute Rating Agency, the Guarantor shall determine the rating designations of Fitch, Moody’s or S&P or such Substitute Rating Agency (as appropriate) as are most equivalent to the prior rating designations of Fitch, Moody’s or S&P and this Condition 8(4) shall be read accordingly.
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For the purposes of this Condition 8(4):
Change of Control Period means the period commencing on the Relevant Announcement Date and ending 90 days after the Change of Control (or such longer period for which the Notes are under consideration (such consideration having been announced publicly within the period ending 90 days after the Change of Control) for rating review or, as the case may be, rating by a rating agency, such period not to exceed 60 days after the public announcement of such consideration); and
Relevant Potential Change of Control Announcement means any public announcement or statement by the Guarantor, any actual or potential bidder or any adviser thereto relating to any potential Change of Control where within 180 days following the date of such announcement or statement, a Change of Control occurs.
The Issuer and the Guarantor will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act of 1934 and any other securities laws or regulations in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Notes, the Issuer and the Guarantor will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of these Notes by virtue of such compliance.
(5) Purchases
The Issuer, the Guarantor or any of the Guarantor’s other Subsidiaries may at any time purchase Notes in any manner and at any price.
(6) Cancellations
All Notes which are (a) redeemed or (b) purchased by or on behalf of the Issuer, the Guarantor or any of the Guarantor’s other Subsidiaries will forthwith be cancelled, and accordingly may not be reissued or resold.
(7) Notices Final
Upon the expiry of any notice as is referred to in paragraph (2) above the Issuer shall be bound to redeem the Notes to which the notice refers in accordance with the terms of such paragraph.
9. Payment of Additional Interest
(1) In Luxembourg by the Issuer
All payments in respect of the Notes by or on behalf of the Issuer shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (Taxes) imposed or levied by or on behalf of the Relevant Jurisdiction, unless the withholding or deduction of the Taxes is required by law. In that event, the Issuer will pay such additional amounts as may be necessary in order that the net amounts received by the Noteholders after the withholding or deduction shall equal the respective amounts which would have been receivable in respect of the Notes in the absence of the withholding or deduction; except that no additional amounts shall be payable in relation to any payment in respect of any Note:
(a) presented for payment by or on behalf of a holder who is liable to pay the Taxes in respect of the Note by reason of his having some connection with the Relevant Jurisdiction other than the mere holding of the Note; or
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(b) presented for payment in Luxembourg; or
(c) where such withholding or deduction is imposed on a payment to an individual or a residual entity in the meaning of article 4.2 of the European Council Directive 2003/48/EC on taxation of savings income in the form of interest or other (the Directive) and is required to be made pursuant to the Directive or any law implementing or complying with, or introduced in order to conform to, the Directive; or
(d) presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note to another Paying Agent in a Member State of the European Union; or
(e) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that a holder would have been entitled to additional amounts on presenting the same for payment on the last day of the period of 30 days assuming that day to have been a Business Day (as defined in Condition 7); or
(f) where such withholding or deduction is imposed on a payment to a Luxembourg resident individual and is required to be made pursuant to the Luxembourg Law of 23 December 2005 relating to the introduction of a final 10 per cent. withholding tax on certain savings income.
(2) Interpretation
In these Conditions:
(a) Relevant Date means the date on which the payment first becomes due but, if the full amount of the money payable has not been received by the Fiscal Agent on or before the due date, it means the date on which, the full amount of the money having been so received, notice to that effect has been duly given to the Noteholders by the Issuer in accordance with Condition 13; and
(b) Relevant Jurisdiction means Luxembourg or any political subdivision or any authority thereof or therein having power to tax or any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax to which the Issuer becomes subject in respect of payments made by it of principal and interest on the Notes.
(3) In the United States by the Issuer or the Guarantor
The Issuer or the Guarantor, as the case may be, will, subject to the exceptions and limitations set forth below, pay as additional interest to a Noteholder that is a United States Alien (as defined below) such amounts as may be necessary so that every net payment on such Note after deduction or withholding for or on account of any present or future tax, assessment or other governmental charge of whatever nature imposed upon or as a result of such payment by the United States (or any political subdivision or taxing authority thereof or therein), will not be less than the amount provided for in such Note to be then due and payable. However, the Issuer or the Guarantor, as the case may be, will not be required to make any payment of additional interest for or on account of:
(a) any tax, assessment or other governmental charge that would not have been imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor or beneficiary of, or a person holding a power over, such holder, if such holder is an estate or a trust, or a member or shareholder of such holder, if such holder is a partnership or corporation) and the United States, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, person holding a power, member or shareholder) being or having been a citizen or resident or treated as
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a resident thereof or being or having been engaged in trade or business or present therein or having or having had a permanent establishment therein, or (ii) the presentation by the holder of a Note for payment more than 15 days after the date on which such payment became due and payable or on which payment thereof was duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge that would not have been imposed but for such holder’s past or present status as a personal holding company, controlled foreign corporation, passive foreign investment company (including a qualified election fund) or foreign private foundation or other tax exempt organisation with respect to the United States or as a corporation that accumulates earnings to avoid United States Federal income tax;
(d) any tax, assessment or other governmental charge that is payable otherwise than by deduction or withholding from a payment on a Note;
(e) any tax, assessment or other governmental charge required to be deducted or withheld by any Paying Agent from any payment on a Note, if such payment can be made without such deduction or withholding by any other Paying Agent;
(f) any tax, assessment or other governmental charge that would not have been imposed but for the holder’s failure to comply with any applicable certification, information, documentation or other reporting requirement concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of a Note if, without regard to any tax treaty, such compliance is required by statute or regulation of the United States as a precondition to relief or exemption from such tax, assessment or other governmental charge;
(g) any tax, assessment or other governmental charge imposed by reason of the holder (i) owning or having owned, directly or indirectly, actually or constructively, 10 per cent. or more of the total combined voting power of all classes of stock of the Guarantor entitled to vote, (ii) receiving interest described in Section 881(c)(3)(A) of the United States Internal Revenue Code or (iii) being a controlled foreign corporation with respect to the United States that is related to the Guarantor by actual or constructive stock ownership; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and (g);
nor shall such additional interest be paid with respect to any payment on a Note to a holder that is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner would not have been entitled to the additional interest had such beneficiary, settlor, member or beneficial owner been the holder of such Note.
For purposes of the foregoing, the holding of or the receipt of any payment with respect to a Note shall not constitute a connection between the holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or a person having power over, such holder if such holder is an estate, a trust, a partnership or a corporation) and the United States.
The term United States Alien means any person who, for United States Federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non-resident alien fiduciary of a foreign estate or trust, or a foreign partnership one or more of the members of which is, for United States Federal income tax purposes, a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust.
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10. Prescription
Under New York’s statute of limitations, any legal action upon the Notes must be commenced within six years after the payment thereof is due. Thereafter, Notes will become generally unenforceable.
11. Events of Default
The holder of any Note may give notice to the Issuer that the Note is, and it shall accordingly forthwith become, immediately due and repayable at its principal amount, together with interest accrued to the date of repayment, if any of the following events (Events of Default) shall have occurred and be continuing:
(a) default in the payment of any instalment of interest upon any Note as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of (or premium, if any, on) the Notes as and when the same shall become due and payable; or
(c) failure on the part of the Issuer or the Guarantor duly to observe or perform any other of the covenants or agreements on the part of the Issuer or the Guarantor in the Notes, or in these Conditions, for a period of 60 days after the date on which written notice specifying such failure and requiring the Issuer or the Guarantor (as the case may be) to remedy the same shall have been given by registered or certified mail to the Issuer or the Guarantor (as the case may be) by the Agent, or to the Issuer by the Noteholders of at least twenty-five per cent. in aggregate principal amount of the Notes at the time outstanding; or
(d) the Guarantor shall pursuant to or within the meaning of Title 11 of the U.S. Code or any similar federal or state law for the relief of debtors (Bankruptcy Law):
(1) commence a voluntary case;
(2) consent to the entry of an order for relief against it in an involuntary case;
(3) consent to the appointment of a receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law (Custodian) of the Guarantor or for all or substantially all of its property; or
(4) make a general assignment for the benefit of its creditors; or
(e) a court of competent jurisdiction shall enter an order or decree under any Bankruptcy Law that:
(1) is for relief against the Guarantor in an involuntary case;
(2) appoints a Custodian of the Guarantor or for all or substantially all of its property; or
(3) orders the liquidation of the Guarantor, and the order or decree remains unstayed and in effect for 60 days; or
(f) the Issuer is (or is, or could be, deemed by law or a court to be) insolvent or bankrupt (including, without limitation, the laws of Luxembourg, bankruptcy (faillite), insolvency, voluntary or judicial liquidation (liquidation voluntaire or judiciaire), composition with creditors (concordat préventif de faillite), reprieve from payment (sursis de paiement), controlled management (gestion contrôlée), fraudulent conveyance (actio pauliana), general settlement with creditors, reorganisation or similar laws affecting the rights of creditors generally) or is unable to pay its debts, stops, suspends or threatens to stop or
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suspend payment of all or a material part of (or of a particular type of) its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment of all of (or all of a particular type of) its debts (or of any part which it will or might otherwise be unable to pay when due), proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared or comes into effect in respect of or affecting all or any part of (or of a particular type of) the debts of the Issuer; or
(g) an order is made or an effective resolution passed for the winding-up or dissolution of the Issuer (including, without limitation, bankruptcy (faillite), insolvency, voluntary or judicial liquidation (liquidation voluntaire or judiciaire), composition with creditors (concordat préventif de faillite), reprieve from payment (sursis de paiement), controlled management (gestion contrôlée), fraudulent conveyance (action pauliana), general settlement with creditors, reorganisation or similar laws affecting the rights of creditors generally), or the Issuer ceases or threatens to cease to carry on all or a material part of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation on terms approved by an Extraordinary Resolution of the Noteholders; or
(h) if the Guarantee ceases to be, or is claimed by the Guarantor not to be, in full force and effect; or
(i) if the Issuer ceases to be a subsidiary wholly-owned and controlled, directly or indirectly, by the Guarantor.
12. Replacement of Certificates
Should any Certificate be lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Registrar, upon payment by the claimant of the expenses incurred in connection with the replacement and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Certificates must be surrendered before replacements will be issued.
13. Notices
All notices to the Noteholders will be valid if mailed to them at their respective addresses in the Register of Noteholders maintained by the Registrar and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of that Exchange so require, published in a daily newspaper in Luxembourg or on the website of the Luxembourg Stock Exchange, www.bourse.lu. It is expected that publication will normally be made in the Financial Times and the d’Wort. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange on which the Notes are for the time being listed. Any notice shall be deemed to have been given on the second day after being so mailed or on the date of publication or, if so published more than once or on different dates, on the date of the first publication, and in the case of publication on the website of the Luxembourg Stock Exchange, on the date of such publication.
14. Meetings of Noteholders and Modification
(1) Provisions for Meetings
The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the modification by Extraordinary Resolution of these Conditions, the Guarantee or the provisions of the Agency Agreement. The quorum at any meeting for passing an Extraordinary Resolution will be one or more persons present holding or representing in aggregate more than 50 per cent. in principal amount of the Notes for the time being outstanding, or at any adjourned meeting one or
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more persons present whatever the principal amount of the Notes held or represented by him or them, except that at any meeting the business of which includes the modification of certain of these Conditions the necessary quorum for passing an Extraordinary Resolution will be one or more persons present holding or representing in aggregate not less than one half, or at any adjourned meeting not less than one quarter, of the principal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders will be binding on all Noteholders, whether or not they are present at the meeting.
(2) Modification
The Fiscal Agent may agree, without the consent of the Noteholders, to any modification of any of these Conditions or any of the provisions of the Notes, the Guarantee or the Agency Agreement (i) for the purpose of curing any ambiguity or of curing, correcting or supplementing any defective provision contained herein or therein, (ii) in any manner which is not materially prejudicial to the interests of the Noteholders or (iii) in any manner which, in the sole opinion of the Issuer, is of a formal, minor or technical nature. Any modification shall be binding on the Noteholders and, unless otherwise agreed by the Fiscal Agent (which agreement shall not be unreasonably withheld or delayed), any modification shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 13.
For the avoidance of doubt, the application of the articles 86 to 94-8 of the Luxembourg Law on commercial companies of August 10, 1915, as amended, is specifically excluded.
15. Further Issues
The Issuer may from time to time without the consent of the Noteholders create and issue further notes, having terms and conditions the same as those of the Notes, or the same except for the amount of the first payment of interest, which may be consolidated and form a single series with the outstanding Notes.
16. Governing Law
(1) Governing Law
The Agency Agreement, the Guarantee and the Notes are governed by, and will be construed in accordance with, the laws of the State of New York.
(2) Jurisdiction
Any State or federal courts sitting in the Borough of Manhattan, the City of New York shall have exclusive jurisdiction to adjudicate any disputes which may arise out of or in connection with the Notes, the Guarantee or the Agency Agreement and accordingly any legal action or proceedings arising out of or in connection with the Notes, the Guarantee or the Agency Agreement (Proceedings) may be brought in such courts. Each of the Issuer, the Guarantor and the Paying Agents have in the Agency Agreement and, in the case of the Guarantor, in the Guarantee irrevocably submitted to the exclusive jurisdiction of such courts and waived any objection which it may now or hereafter have to Proceedings in any such courts whether on the ground of the laying of venue or on the ground that the Proceedings have been brought in an inconvenient form.
(3) Waiver of Jury Trial
The Issuer, the Guarantor and the Paying Agents have in the Agency Agreement and, in the case of the Guarantor, in the Guarantee waived, to the fullest extent permitted by applicable
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law, any right it may have to a trial by jury in any legal proceeding directly or indirectly arising out of or relating to the Agency Agreement, the Guarantee or any Note (whether based on contract, tort or any other theory). Each of the Issuer, the Guarantor and each of the Paying Agents, therein (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of Proceedings, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties to the Agency Agreement have been induced to enter in the Agency Agreement by, among other things, the mutual waivers and certifications in this section.
(4) Waiver of Immunity
To the extent that any of the Issuer, the Guarantor and the Paying Agents have or hereafter may acquire any immunity from jurisdiction of any court or from any legal process with respect to itself or its property, the Issuer, the Guarantor and the Paying Agents have in the Agency Agreement and, in the case of the Guarantor, in the Guarantee irrevocably waived such immunity in respect of their obligations under the Agency Agreement, the Guarantee or under any Note.
(5) Service of Process
The Issuer and the Guarantor have agreed in the Agency Agreement that the process by which any Proceedings in New York City are begun may be served on it by being delivered to CT Corp. If the appointment of the person appointed to receive process on behalf of the Issuer or the Guarantor (as the case may be) ceases to be effective, the Issuer or the Guarantor (as the case may be) shall forthwith appoint a further person in the State of New York to accept service of process on its behalf and notify the name and address of such person to the Fiscal Agent.
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Summary of Provisions Relating to the Notes while in Global Form
The Global Certificate contains the following provisions which apply to the Notes in respect of which they are issued whilst they are represented by the Global Certificate, some of which modify the effect of the Conditions. Terms defined in the Conditions have the same meaning in the paragraphs below.
1. Accountholders
For so long as all of the Notes are represented by the Global Certificate and such Global Certificate is held on behalf of a clearing system, each person (other than another clearing system) who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg (as the case may be) as the holder of a particular aggregate principal amount of such Notes (each an Accountholder) (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg (as the case may be) as to the aggregate principal amount of such Notes standing to the account of any person shall, in the absence of manifest error, be conclusive and binding for all purposes) shall be treated as the holder of such aggregate principal amount of such Notes (and the expression Noteholders and references to holding of Notes and to holder of Notes shall be construed accordingly) for all purposes other than with respect to payments on such Notes, the right to which shall be vested, as against the Issuer, solely in the nominee for the relevant clearing system (the Relevant Nominee) in accordance with and subject to the terms of the Global Certificate. Each Accountholder must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each payment made to the Relevant Nominee.
2. Cancellation
Cancellation of any Note following its redemption or purchase by the Issuer or any of its Subsidiaries will be effected by reduction in the aggregate principal amount of the Notes in the Register of Noteholders and by the annotation of the appropriate schedule to the Global Certificate.
3. Payments
Payments of principal and interest in respect of Notes represented by the Global Certificate will be made upon presentation or, if no further payment falls to be made in respect of the Notes, against presentation and surrender of the Global Certificate to or to the order of the Fiscal Agent or such other Paying Agent as shall have been notified to the holder of the Global Certificate for such purpose.
Distributions of amounts with respect to book-entry interests in the Global Certificate will be credited, to the extent received by the Fiscal Agent, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures.
A record of each payment made will be endorsed on the appropriate schedule to the Global Certificate by or on behalf of the Fiscal Agent and shall be prima facie evidence that payment has been made.
Payments of interest on the Notes shall be made from the Issue Date in arrear, at the rates, on the dates for payment, and in accordance with the methods of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Notes.
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4. Notices
So long as all the Notes are represented by the Global Certificate and such Global Certificate is held on behalf of a clearing system, notices to Noteholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled Accountholders in substitution for notification as required by the Conditions, save that, for so long as the Notes are listed on the Luxembourg Stock Exchange and the Luxembourg Stock Exchange so requires, such notice shall also be published on the website of the Luxembourg Stock Exchange, www.bourse.lu.
5. Registration of Title (Exchange for definitive Certificates)
Registration of title to Notes in a name other than that of the Relevant Nominee will not be permitted unless either (i) Euroclear or Clearstream, Luxembourg are closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announce an intention permanently to cease business or do in fact do so and no alternative clearing system is available or (ii) principal or interest in respect of any Note is not paid when due and payable in accordance with the Conditions. In these circumstances title to a Note may be transferred into the names of holders notified by the Relevant Nominee in accordance with the Conditions, provided that any transfer of Notes shall be in an amount equal to EUR 50,000 or in integral multiples of EUR 1,000 in excess thereof.
The Registrar will not register title to the Notes in a name other than that of the Relevant Nominee for a period of 15 calendar days preceding the due date for any payment of principal or interest in respect of the Notes.
6. Transfers
Transfers of book-entry interests in the Notes will be effected through the records of Euroclear and Clearstream, Luxembourg and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants.
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Use of Proceeds
The net proceeds of the issue of the Notes, amounting to approximately EUR 746,430,000, will be distributed by the Issuer to the Guarantor for the Guarantor and its subsidiaries’ general corporate purposes.
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Form of Guarantee
THIS GUARANTEE is given on 26 September 2007 by Illinois Tool Works Inc. (the Guarantor).
WHEREAS:
(A) The Guarantor has agreed to guarantee the obligations of ITW Finance Europe S.A. (the Issuer) under the EUR 750,000,000 5.25 per cent. Guaranteed Notes due 2014 (the Notes) to be issued by the Issuer pursuant to a Fiscal Agency Agreement (the Agency Agreement) dated 1 October 2007 between, among others, the Issuer, the Guarantor, The Bank of New York as Fiscal Agent (the Fiscal Agent) and the other Agents referred to therein.
(B) Terms defined in the Conditions of the Notes (the Conditions) and in the Agency Agreement and not otherwise defined in this Guarantee shall have the same meaning when used in this Guarantee.
NOW THIS GUARANTEE WITNESSETH as follows:
1. The Guarantor as primary obligor unconditionally and irrevocably:
(a) guarantees to the holder from time to time of each Note by way of continuing guarantee the due and punctual payment of all amounts payable by the Issuer on or in respect of the Note (including any additional amounts which may become payable under Condition 9) as and when the same shall become due according to the Conditions; and
(b) agrees that, if and each time that the Issuer shall fail to make any payments referred to in Clause 1(a) above as and when the same become due, the Guarantor will on demand (without requiring the relevant Noteholder first to take steps against the Issuer or any other person) make those payments to the relevant Noteholder the amounts (as to which the certificate of the relevant Noteholder shall in the absence of manifest error be conclusive) in the currency in which those payments are payable by the Issuer.
2. The Guarantor will, subject to the exceptions and limitations set forth below, pay as additional interest to a Noteholder that is a United States Alien (as defined below) such amounts as may be necessary so that every net payment on this Guarantee or such Note after deduction or withholding for or on account of any present or future tax, assessment or other governmental charge of whatever nature imposed upon or as a result of such payment by the United States (or any political subdivision or taxing authority thereof or therein), will not be less than the amount provided for in such Note to be then due and payable. However, the Guarantor, as the case may be, will not be required to make any payment of additional interest for or on account of:
(a) any tax, assessment or other governmental charge that would not have been imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor or beneficiary of, or a person holding a power over, such holder, if such holder is an estate or a trust, or a member or shareholder of such holder, if such holder is a partnership or corporation) and the United States, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, person holding a power, member or shareholder) being or having been a citizen or resident or treated as a resident thereof or being or having been engaged in trade or business or present therein or having or having had a permanent establishment therein, or (ii) the presentation by the holder of a Note for payment more than 15 days after the date on which such payment became due and payable or on which payment thereof was duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge;
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(c) any tax, assessment or other governmental charge that would not have been imposed but for such holder’s past or present status as a personal holding company, controlled foreign corporation, passive foreign investment company (including a qualified election fund) or foreign private foundation or other tax exempt organisation with respect to the United States or as a corporation that accumulates earnings to avoid United States Federal income tax;
(d) any tax, assessment or other governmental charge that is payable otherwise than by deduction or withholding from a payment on a Note;
(e) any tax, assessment or other governmental charge required to be deducted or withheld by any Paying Agent from any payment on a Note, if such payment can be made without such deduction or withholding by any other Paying Agent;
(f) any tax, assessment or other governmental charge that would not have been imposed but for the holder’s failure to comply with any applicable certification, information, documentation or other reporting requirement concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of a Note if, without regard to any tax treaty, such compliance is required by statute or regulation of the United States as a precondition to relief or exemption from such tax, assessment or other governmental charge;
(g) any tax, assessment or other governmental charge imposed by reason of the holder (i) owning or having owned, directly or indirectly, actually or constructively, 10 per cent. or more of the total combined voting power of all classes of stock of the Guarantor entitled to vote, (ii) receiving interest described in Section 881(c)(3)(A) of the United States Internal Revenue Code or (iii) being a controlled foreign corporation with respect to the United States that is related to the Guarantor by actual or constructive stock ownership; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and (g),
nor shall such additional interest be paid with respect to any payment on a Note to a holder that is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner would not have been entitled to the additional interest had such beneficiary, settlor, member or beneficial owner been the holder of such Note.
For purposes of the foregoing, the holding of or the receipt of any payment with respect to a Note shall not constitute a connection between the holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or a person having power over, such holder if such holder is an estate, a trust, a partnership or a corporation) and the United States.
The term United States Alien means any person who, for United States Federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non-resident alien fiduciary of a foreign estate or trust, or a foreign partnership one or more of the members of which is, for United States Federal income tax purposes, a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust.
3. The obligations of the Guarantor under this Guarantee are absolute and unconditional and shall not be affected by any matter or thing which but for this provision might operate to affect the obligations including, without limitation:
(a) any time or indulgence granted to or composition with the Issuer or any other person;
(b) the taking, variation, renewal or release of remedies or securities against the Issuer or any other person; or
(c) any unenforceability, invalidity or irregularity.
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4. The Guarantor hereby waives the benefits of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect of any Note or the indebtedness evidenced thereby and covenants that this Guarantee will not be discharged in respect of any Note except by complete performance of the obligations contained in this Guarantee. The Guarantor hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest, if any, on the Notes, legal proceedings may be instituted by any Noteholder or representative, agent or trustee thereof directly against the Guarantor to enforce this Guarantee without first proceeding against the Issuer.
5. Where any discharge (whether in respect of the obligations of the Issuer or any security for the obligations of the Issuer or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be repaid on bankruptcy, liquidation or otherwise without limitation, the liability of the Guarantor under this Guarantee shall continue as if there had been no discharge or arrangement. The holder of any Note, acting in good faith, shall be entitled to concede or compromise any claim that any payment, security or other disposition is liable to avoidance or repayment.
6. The Guarantor represents and warrants that:
(a) the obligations of the Guarantor under this Guarantee constitute the direct, unconditional and unsecured obligations of the Guarantor and (subject as provided above) rank and will rank pari passu and rateably (subject to such obligations as are mandatorily preferred by law) with all other present and future unsecured and unsubordinated obligations of the Guarantor; and
(b) all necessary consents and authorisations for the giving and implementation of this Guarantee have been obtained.
7. Until all amounts which may be or become payable under the Notes have been irrevocably paid in full, the Guarantor shall not by virtue of this Guarantee be subrogated to any rights of any holder of any Note or claim in competition with the holders against the Issuer.
8. This Guarantee shall enure for the benefit of the Noteholders and shall be deposited with and held by the Fiscal Agent.
9. This Guarantee is governed by, and will be construed in accordance with, the laws of the State of New York.
10. (a) The Guarantor irrevocably agrees for the benefit of the Noteholders that any State or federal courts sitting in the Borough of Manhattan, the City of New York shall have exclusive jurisdiction to adjudicate any disputes which may arise out of or in connection this Guarantee and accordingly any legal action or proceedings arising out of or in connection with the Guarantee (Proceedings) may be brought in such courts.
(b) The Guarantor irrevocably submits to the exclusive jurisdiction of such courts and waives any objection which it may now or hereafter have to Proceedings in any such courts whether on the ground of the laying of venue or on the ground that the Proceedings have been brought in an inconvenient form.
(c) The Guarantor waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any legal proceeding directly or indirectly arising out of or relating to the Agency Agreement, the Guarantee or any Note (whether based on contract, tort or any other theory).
(d) The Guarantor (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event
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of Proceedings, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties to the Agency Agreement have been induced to enter in the Agency Agreement by, among other things, the mutual waivers and certifications in this section.
(e) To the extent that the Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process with respect to itself or its property, the Guarantor irrevocably waives such immunity in respect of its obligations under the Agency Agreement, the Guarantee or under any Note.
(f) The process by which any Proceedings in New York City are begun may be served on the Guarantor by being delivered to CT Corp. If the appointment of the person appointed to receive process on behalf of the Guarantor ceases to be effective, the Guarantor shall forthwith appoint a further person in the State of New York to accept service of process on its behalf and notify the name and address of such person to the Fiscal Agent and, failing such appointment within 15 days, the Fiscal Agent shall be entitled to appoint such a person by written notice addressed and delivered to the Guarantor.
(g) Nothing in this Guarantee shall affect the right to serve process in any other manner permitted by law.
11. The obligations of the Guarantor herein shall be considered satisfied when all sums due from the Issuer in respect of the Notes have been paid.
IN WITNESS whereof this Guarantee has been entered into by the Guarantor on the date which appears first on page 1.
EXECUTED by ILLINOIS TOOL WORKS INC. acting by [ ] ......
[SEAL]
Attest: ......
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Description of the Issuer
ITW Finance Europe S.A. (the Issuer) was incorporated with limited liability under the laws of Luxembourg on 7 September 2007 (for an unlimited duration) as a public limited liability company (société anonyme) with registration number B 131 654. The registered office of the Issuer is 7, rue Nicolas Bové, L-1253 Luxembourg. The telephone number of the issuer is +352 2602 2830. The Issuer has elected to become domesticated as a corporation in the State of Delaware, under Delaware law.
Business
The Issuer is engaged in obtaining financing in capital markets primarily for the purpose of funding the operations of the Guarantor and its subsidiaries. The Issuer will over time, and at funding, enter into various intercompany financing arrangements with the Guarantor and its wholly-owned subsidiaries (Affiliated Borrowers). In every case, the obligations of the Issuer and the Affiliated Borrowers will be guaranteed by the Guarantor.
The Issuer has not engaged, since its incorporation, in any material activities and no interim or annual financial statements have been produced as at the date of this prospectus.
Directors
Set forth below are the names, positions and principal outside activities of the Issuer’s directors, the business address of whom is 3600 West Lake Avenue, Glenview, Illinois 60026-1215 in the case of Allan C. Sutherland and Felix L. Rodriguez Jr and 7, rue Nicholas Bové, L-1253, Luxembourg in the case of Maurits De Smedt and Monique Martins:
Name Position Principal Outside Activities Allan C. Sutherland Director None Felix L. Rodriguez Jr Director None Maurits De Smedt Director None Monique Martins Director None
There are no potential conflicts of interest between the duties to the Issuer of the persons listed above and their private interests or other duties.
Organisational Structure
The Issuer is a direct, wholly owned finance vehicle subsidiary of the Guarantor. The Issuer has no subsidiaries and no employees.
Capitalisation
The authorised and issued fully-paid share capital of the issuer is EUR 31,000, consisting of 31 shares of EUR 1,000 each, of which all are held by the Guarantor, which is the U.S parent of the Issuer.
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Description of the Guarantor
Overview
Illinois Tool Works Inc. (ITW or the Company) was established in 1912 and originally incorporated on 8 May 1915. ITW is a worldwide manufacturer of highly engineered products and specialty systems. The Company designs and produces an array of highly engineered fasteners and components, equipment and consumable systems, and speciality products and equipment for customers around the world.
ITW has more than 750 decentralised business units located in 49 countries, employing approximately 55,000 men and women. The Company is organised for internal reporting purposes into four business segments: Engineered Products North America, Engineered Products International, Specialty Systems North America and Specialty Systems International.
Included in the ITW group are 749 subsidiaries of ITW, 132 of which are incorporated in the United States and 617 in other countries.
History
ITW was formed in 1912 by four inventors, Frank W. England, Paul B. Goddard, Oscar T. Hogg and Carl G. Olson, who responded to a newspaper advert placed by financier Harold Byron Smith, to manufacture and sell metal-cutting tools. The Company expanded its original product range from metal cutting tool products to include truck transmissions, pumps and other items for the United States of America’s World War I effort. ITW became a public company and was listed on the New York Stock Exchange in 1963 with an initial stock price of U.S. $26.00.
Since the 1960s, ITW has extended its reach into the construction, industrial, packaging, finishing systems and automotive markets. ITW made more than 100 acquisitions worldwide during the 1990s alone, including Akron Standard, Anchor Fasteners and Stampings, CS Packaging, DeVilbiss, Dynatec, Hobart Brothers Company, Miller Group, Orgapack, Trans Tech, United Silicone, Vortec and Premark International. Today, ITW comprises more than 750 decentralised business units located in 49 countries, employing approximately 55,000 men and women.
ITW began operating in 1912 and was incorporated in 1915 in Illinois as a corporation originally known as Illinois Tool Works. On 10 August 1961, ITW’s name was changed to Illinois Tool Works Inc. ITW is currently governed by the laws of the State of Delaware, United States of America, and is registered at the Secretary of State of the State of Delaware under number 0568702. ITW’s principal executive offices are located at 3600 West Lake Avenue, Glenview, Illinois 60026-1215 (telephone +1 847 724 7500).
ITW is listed on the New York Stock Exchange under ticker symbol “ITW”.
Strategy
The key elements of ITW’s strategy are as follows:
Decentralisation
ITW adopts a decentralised operating strategy and focus in relation to its worldwide collection of business units. ITW seeks to place its businesses close to the people who buy its products. This familiarity results in entrepreneurial sales and support activities, and allows ITW to quickly identify and respond to customer needs at the business unit level by providing innovative value added products and services. This decentralisation sometimes leads to breaking a business into smaller business units so that they are better able to focus on their customers and the products that serve those customers.
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80/20 principle
ITW operates its business according to the “80/20” principle, which is based on the concept that 20 per cent. of a business’ customers and products generate 80 per cent. of its total revenue. The essential concept of this strategy is to focus on the most profitable products and customers (the 20 per cent. that account for 80 per cent. of the value) and to spend less time and fewer resources on the less important (the 80 per cent. that account for only 20 per cent. of the value).
Some ways in which ITW implements its 80/20 strategy in practice include:
Simplifying product lines by reducing the number of products offered by combining the features of similar products, outsourcing products or, as a last resort, eliminating low-value products.
Segmenting the customer base by focusing on the 80/20 customers separately and finding alternative ways, such as outsourcing and specialty pricing programmes to serve the 20/80 customers.
Simplifying the supplier base by partnering with 80/20 suppliers and reducing the number of 20/80 suppliers.
Designing business processes, systems and measurements to specifically target the 80/20 customers and products.
Other specific strategies aimed at helping ITW reach its goals include: in-lining, cellular manufacturing, manufacturing to the market rate of demand and restructuring projects that reduce costs and improve margins. Corporate management works closely with those business units that have operating results below expectations to help those units apply this 80/20 business process and improve their results.
Innovation
ITW focuses on developing commercial innovations. It has in place a management and sales force (many of whom are trained engineers) who are well equipped to provide practical and time-sensitive solutions to the most complex situations, as well as a seasoned workforce that intimately understands the manufacturing challenges facing customers and can develop innovative solutions from the ground up.
ITW also supports its businesses through its Technology Centre. Working on a request-only basis from its business units, the Technology Centre provides advanced consulting on issues such as cutting-edge materials, mechanical designs and manufacturing processes.
Diversification
ITW has continued to expand its global footprint by adding new product platforms and entering new geographic markets. This larger footprint provides it with a more stable business base and allows it to exploit economic opportunities on a global basis. This diversification allows ITW to overcome market uncertainties by offsetting strength in one market against fluctuations in another. In management’s view, when ITW uses its assets efficiently (in accordance with its 80/20 process) across a broad mix of products and markets, its product risk and geographic market risk is reduced.
ITW intends to focus on continued diversification in the years ahead. As part of this strategy ITW intends to continue its expansion into new geographic markets such as China, India and Eastern Europe with existing products and technologies. As these markets mature, ITW believes it is well placed to satisfy the likely growth in demand for specialised industrial products in those markets.
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Acquisition Acquisitions have been a major component of ITW’s growth over the last twenty five years. ITW searches for companies with long-term growth potential, strong products and brand names, an experienced and capable management team, room for margin improvement and opportunities to increase market penetration.
As part of this strategy, ITW has developed a formal acquisition-training programme, which focuses on all stages of the process from acquisition-sourcing criteria to the successful closing and integration of the acquired business.
Recent Developments The Company’s consolidated results of operations for the six months ended 30 June 2007 were as follows (as compared against the six months ended 30 June 2006):
1111111111113Six Months Ended 30 June 1111122007 111112 2006 (Dollars in thousands) Operating revenues ...... $7,918,730 $6,876,506 Operating income ...... $1,267,325 $1,199,732 Margin ...... 16.0% 17.4% (Source: Interim unaudited Financial Statements for six months ended 30 June 2007)
Revenues for the six months ended 30 June 2007 were 15.2 per cent. higher than for the six months ended 30 June 2006. This was primarily due to revenues from acquisitions and favourable currency translation. Revenues from ITW’s base manufacturing business for the six months ended 30 June 2007 were 2.4 per cent. higher than for the six months ended 30 June 2006. This was primarily due to an 8.0 per cent. increase in international base manufacturing business revenues. These increases were offset by a 1.4 per cent. decline in North American base manufacturing business revenues. European economic strength and market demand continued the growth seen in the last half of 2006. North American base revenues declined, although at a lower rate than the first quarter 2007, due to weak industrial production and slow demand throughout the North American end markets, primarily automotive and construction.
Operating income in the six months ended 30 June 2007 improved as compared to the six months ended 30 June 2006. This was primarily due to leverage from the growth in base manufacturing business revenues, favourable currency translation versus the prior year and the effect of acquisitions, partially offset by increased restructuring expenses and the effect of divestitures. Operating margins were negatively affected by lower margins of acquired businesses, including amortisation expenses.
The Guarantor’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Products ITW produces a broad array of products which are organised for internal reporting purposes into the following four segments described below:
Engineered Products - North America Segment Businesses in this segment are located in North America and manufacture a variety of short lead- time plastic and metal components and fasteners, as well as specialty products for a diverse customer base. These commercially oriented, value-added engineered products become part of the customers’ products and typically are manufactured and delivered in a time period of less than 30 days.
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In the plastic and metal components and fasteners category, products include:
metal fasteners and fastening tools for the commercial, residential and renovation construction industries;
metal plate connecting components, machines and software for the commercial and residential construction industries;
laminate products for the commercial, residential and renovation construction industries and furniture markets;
metal fasteners and components for automotive, appliance and general industrial applications;
plastic components for automotive, appliance, furniture, electronics and general industrial applications; and
plastic fasteners for automotive, appliance, electronics and general industrial applications.
In the specialty products category, products include:
reclosable packaging for consumer food and storage applications;
hand wipes and cleaners for use in industrial manufacturing;
chemical fluids which clean or add lubrication to machines and automobiles;
adhesives for industrial, construction and consumer purposes;
epoxy and resin-based coating products for industrial applications;
components for industrial machines;
automotive aftermarket maintenance and appearance products; and
swabs, wipes and mats for clean room usage in the electronics and pharmaceutical industries.
ITW’s engineered products generally serve the construction, automotive and consumer durables market.
Engineered Products - International Segment
Businesses in this segment are located outside North America and manufacture a variety of short lead-time plastic and metal components and fasteners, as well as specialty products for a diverse customer base. These commercially oriented, value-added products become part of the customers’ products and typically are manufactured and delivered in a time period of less than 30 days.
In the plastic and metal components and fastener category, products include:
metal fasteners and fastening tools for the commercial, residential and renovation construction industries;
laminate products for the commercial, residential and renovation construction industries and furniture markets;
metal plate connecting components and software for the commercial and residential construction markets;
metal fasteners for automotive, appliance and general industrial applications;
metal components for automotive, appliance and general industrial applications;
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plastic components for automotive, appliance, electronics and general industrial applications; and
plastic fasteners for automotive, appliance, electronics and general industrial applications.
In the specialty products category, products include:
reclosable packaging for consumer food applications;
electronic component packaging trays used for the storage, shipment and manufacturing insertion of electronic components and microchips;
adhesives for industrial, construction and consumer purposes;
chemical fluids which clean or add lubrication to machines and automobiles;
epoxy and resin-based coating products for industrial applications;
automotive aftermarket maintenance and appearance products; and
swabs, wipes and mats for clean room usage in the electronics and pharmaceutical industries.
Specialty Systems - North America Segment
Businesses in this segment are located in North America and design and manufacture longer lead- time machinery and related consumables, as well as specialty equipment and systems for a diverse customer base. These commercially oriented, value-added products become part of the customers’ processes and typically are manufactured and delivered in a time period of more than 30 days.
In the machinery and related consumables category, products include:
industrial packaging equipment and plastic and steel strapping for the bundling and shipment of a variety of products for customers in numerous end markets;
welding equipment, metal consumables and related accessories for a variety of end market users;
equipment and plastic consumables to multi-pack cans and bottles for the food and beverage industry;
plastic stretch film and related packaging equipment for various industrial purposes;
paper and plastic products used to protect shipments of goods in transit;
marking tools and inks for various end users;
foil and film and related equipment used to decorate a variety of consumer products; and
solder materials, services and equipment for the electronic and microelectronic assembly industry.
In the specialty equipment and systems category, products include:
commercial food equipment such as dishwashers, refrigerators, cooking equipment and food machines for use by restaurants, institutions and supermarkets and related service;
paint spray equipment for a variety of general industrial applications;
materials and structural testing machinery and software;
static control equipment for electronics and industrial applications;
airport ground power generators for commercial and military applications; and
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supply chain management software for the industrial, aerospace and health care markets.
The specialty systems line businesses generally serve the general industrial, food institutional and service, maintenance, repair and operations/metals and food and beverage markets.
Specialty Systems – International Segment
Businesses in this segment are located outside North America and design and manufacture longer lead-time machinery and related consumables, as well as specialty equipment for a diverse customer base. These commercially oriented, value-added products become part of the customers’ processes and typically are manufactured and delivered in a time period of more than 30 days.
In the machinery and related consumables category, products include:
industrial packaging equipment and plastic and steel strapping for the bundling and shipment of a variety of products for customers in numerous end markets;
welding equipment and metal consumables for a variety of end market users;
equipment and plastic consumables that multi-pack cans and bottles for the food and beverage industry;
plastic stretch film and related packaging equipment for various industrial purposes;
paper and plastic products used to protect shipments of goods in transit;
foil and film and related equipment used to decorate a variety of consumer products; and
solder materials, services and equipment for the electronic and microelectronic assembly industry.
In the specialty equipment category, products include:
commercial food equipment such as dishwashers, refrigerators and cooking equipment for use by restaurants, institutions and supermarkets and related service;
materials and structural testing machinery and software;
paint spray equipment for a variety of general industrial applications;
static control equipment for electronics and industrial applications; and
airport ground power generators for commercial applications.
Business Units and Markets
ITW’s 750 decentralised business units are located in 49 countries. These business units are aggregated and organised for internal reporting purposes into the four segments: Engineered Products – North America, Engineered Products – International, Specialty Systems – North America and Specialty Systems – International as described above.
Property, Plant and Equipment
As at 30 June 2007 the total net book value of the Company’s premises was U.S.$ 2,116,828,000 (compared with U.S.$ 1,916,032,000 as at 30 June 2006).
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As of 31 December 2006, the Company operated the following plants and office facilities, excluding regional sales offices and warehouse facilities:
Floor Space Number of 1111111111111123 1111Properties 1111 Owned 1111 Leased 1111 Total (In millions of square feet) Engineered Products – North America ...... 161 8.5 3.5 12.0 Engineered Products – International ...... 148 6.0 2.5 8.5 Specialty Systems – North America ...... 167 9.5 3.8 13.3 Specialty Systems – International ...... 147 7.2 4.4 11.6 Corporate...... 1111 30 1111 2.5 1111 0.2 1111 2.7 653 33.7 14.4 48.1 1111 1111 1111 1111
The principal plants outside of the U.S. are in Australia, Belgium, Brazil, Canada, China, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Spain, Switzerland and the United Kingdom.
The Company’s properties are primarily of steel, brick or concrete construction and are maintained in good operating condition. Productive capacity, in general, currently exceeds operating levels. Capacity levels are somewhat flexible based on the number of shifts operated and on the number of overtime hours worked. The Company adds productive capacity from time to time as required by increased demand. Additions to capacity can be made within a reasonable period of time due to the nature of the businesses.
ITW does not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.
Legal Proceedings
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those involving environmental, tax, product liability (including toxic tort) and general liability claims. The Company accrues for such liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, the Company’s estimates of the outcomes of these matters and its experience in contesting, litigating and settling other similar matters. The Company believes resolution of these matters, individually and in the aggregate, will not have a material adverse effect on its financial position, liquidity or future operations.
Among the toxic tort cases in which the Company is a defendant, the Company, as well as its subsidiaries Hobart Brothers Company and Miller Electric Mfg. Co., have been named, along with numerous other defendants, in lawsuits alleging injury from exposure to welding consumables. The plaintiffs in these suits claim unspecified damages for injuries resulting from the plaintiffs’ alleged exposure to asbestos, manganese and/or toxic fumes in connection with the welding process. Based upon its experience in defending these claims, the Company believes that the resolution of these proceedings will not have a material adverse effect on its financial position, liquidity or future operations. The Company has not recorded any significant reserves related to these cases.
Intellectual Property
Intellectual property rights associated with ITW’s products are assets that are important for maintaining its competitive position. ITW relies on a combination of patents, proprietary technology, trademarks, trade names and domain name registrations, to define and protect its rights to the intellectual property in its products and these are protected and defended where appropriate.
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ITW typically ranks in the top 100 patent recipients in the United States. ITW owns approximately 3,400 unexpired United States patents covering articles, methods and machines, with many counterparts of these patents having also been obtained in various foreign countries. In addition, the Company has approximately 1,500 applications for patents pending in the United States Patent Office, but there is no assurance that any patent will be issued. The Company maintains an active patent department for the administration of patents and processing of patent applications.
Many of the Company’s products are sold under various owned or licensed trademarks, which are important to the Company. Among the most significant are: ITW, Acme, Alpine, Angleboard, Apex, Ark-Les, Bernard, Betaprint, Binks, Buehler, Buildex, Chemtronics, Click Commerce, Covid, Deltar, Devcon, DeVilbiss, Dymon, Dynatec, Electrocal, Evercoat, E-Z Ancor, Fastex, Foilmark, Foster, Franklynn, Futura Coatings, Gema, Hi-Cone, Hobart, Instron, Intellibuild, Keps, Kester, Krafft, LPS, Magna, Magnaflux, Meyercord, Miller, Mima, Minigrip, Nexus, Orbitalum, Orgapack, Paktron, Paslode, Permatex, Plexus, Polymark, Pro/Mark, Pryda, QMI, Ramset, Ransburg, Red Head, Resopal, Rippey, Rockwell, Rocol, Shakeproof, Shore, Signode, Simco, Space Bag, Spiroid, Spit, Stero, Strapex, Tapcon, Teks, Tempil, Tenax, Texwipe, Traulsen, Truswal Systems, Unipac, Valeron, Versachem, Vulcan, WERCS, Wilsonart, Wynn’s and Zip-Pak.
Directors and Principal Officers of the Company
Set forth below are the names, positions and experience of ITW’s directors and principal officers, the business address of each of whom is 3600 West Lake Avenue, Glenview, Illinois 60026.
Director or officer Name Position of ITW since William F. Aldinger Director 1998 Michael J. Birck Director 1996 Marvin D. Brailsford Director 1996 Susan Crown Director 1994 Don H. Davis, Jr. Director 2000 Robert C. McCormack Director 1978–1987 1993 Robert S. Morrison Director 2003 James A. Skinner Director 2005 Harold B. Smith Director 1968 David B. Speer Chairman 2006 Director 2005 Chief Executive Officer 2005 Thomas J. Hansen Vice Chairman 2006 Sharon M. Brady Sr. VP, Human Resources 2006 Robert E. Brunner Executive Vice President 2006 Russell M. Flaum Executive Vice President 1993 Philip M. Gresh, Jr. Executive Vice President 2000 Craig A. Hindman Executive Vice President 2004 Ronald D. Kropp Senior VP & CFO 2006 Roland M. Martel Executive Vice President 2006 David C. Parry Executive Vice President 2006 E. Scott Santi Executive Vice President 2004 Allan C. Sutherland Sr. VP, Taxes & Investments 1998 Jane L. Warner Executive Vice President 2007 James H. Wooten, Jr. Sr. VP, General Counsel & Secretary 2006 Hugh J. Zentmyer Executive Vice President 1995
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William F. Aldinger Mr. Aldinger has served as a director of ITW since 1998. Previous positions include Chairman and Chief Executive Officer of HSBC Finance Corporation and Chairman and Chief Executive Officer of its parent company, HSBC North America Holdings Inc.. He serves as President and Chief Executive Officer of Capmark Financial Group Inc. and on the boards of AT&T Inc, Capmark Financial Group Inc., KKR Financial Corp. and The Charles Schwab Corporation.
Michael J. Birck Mr. Birck has served as a director of ITW since 1996. He has also previously served as President and Chief Executive Officer of Tellabs, Inc., which he founded in 1975. He is a director of Molex, Inc. and the chairman and a director of Tellabs, Inc.
Marvin D. Brailsford Mr. Brailsford has served as a director of ITW since 1996. He is a retired Vice President of Kaiser-Hill Company LLC. Prior to his employment with Kaiser-Hill, he served with the United States Army for 33 years. He is a director of Conn’s, Inc.
Susan Crown Ms. Crown has served as a director of ITW since 1994. She has been Vice President of Henry Crown and Company since 1984 and is a director of Northern Trust Corporation and its subsidiary, The Northern Trust Company.
Don H. Davis, Jr. Mr. Davis, Jr. has served as a director of ITW since 2000. He was Chairman of the Board of Rockwell Automation, Inc. between 1998 and 2005 and Chief Executive Officer from 1997-2004. He is a director of Journal Communications, Inc.
Robert C. McCormack Mr. McCormack served as a director of ITW from 1978-1987 and since 1993. He has served as Deputy Under Secretary of Defense and Assistant Secretary of the Navy. He is an Advisory Director of Trident Capital, Inc, a director of DeVry, Inc., MeadWestvaco Corp., Northern Trust Corporation and its subsidiary, The Northern Trust Company.
Robert S. Morrison Mr. Morrison has served as a director of ITW since 2003. He has previously held the positions of Vice Chairman of PepsiCo, Inc., Chairman, President and Chief Executive Officer of The Quaker Oats Company and interim Chairman and Chief Executive Officer of 3M Co. Mr. Morrison is a director of 3M, The Tribune Company and Aon Corporation.
James A. Skinner Mr. Skinner has served as a director of ITW since 2005. He is Vice Chairman and Chief Executive Officer of McDonald’s Corporation, and was previously President and Chief Operating Officer of McDonald’s Restaurant Group, President and Chief Operating Officer of McDonald’s Europe, Asia/Pacific, Middle East and Africa and President of McDonald’s-Europe. He is a director of McDonald’s Corporation and Walgreen Co.
Harold B. Smith Mr. Smith has served as a director of ITW since 1968. He is a retired officer of ITW and is a director of W.W. Grainger Inc. and Northern Trust Corporation and its subsidiary, The Northern Trust Company.
David B. Speer Mr. Speer has served as Chairman of ITW since May 2006 and as Chief Executive Officer of ITW since August 2005 and was President from August 2004 to May 2006, previously serving as Executive Vice President from 1995 to August 2004. Mr. Speer has 28 years of service with ITW. He is a director of Rockwell Automation, Inc. and has served as a director of ITW since 2005.
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Thomas J. Hansen Mr. Hansen has served as Vice Chairman of ITW since 2006, having previously been Sales and Marketing Manager and General manager of the Shakeproof Industrial Products businesses, Vice President & General Manager of the North American Industrial Metal Fastener and Buckle divisions, President of ITW’s North American Industrial and Automotive fastener businesses, President of its worldwide Metal Fastener and Components businesses and Executive Vice President in 1998. He has been a director of CDW Corp since 2005. Prior to joining ITW, Mr. Hansen was employed by Singer Controls.
Sharon Brady Ms. Brady is the Senior Vice President of Human Resources of ITW. Prior to joining ITW in 2006, Ms. Brady was Vice President and Chief Human Resource Officer of Snap-On Inc. and has also served as a Vice President of Human Resources of Sears, Roebuck & Co.’s Home Services Division, and President and Director of the Human Resources Management Association of Chicago, of which she is a member.
Robert E. Brunner Mr. Brunner is an Executive Vice President of ITW. Prior to this, he has served as President of ITW’s Global Automotive Fasteners division, President of North American Automotive Fasteners and Vice President/General Manager of Shakeproof Automotive Division.
Russell M. Flaum Mr. Flaum is an Executive Vice President of ITW. He joined Signode Corporation (acquired by ITW in 1986) in 1975 as a Sales Representative and was Vice President of Marketing in 1986. He became President of Signode’s U.S. business in 1990. He currently serves as Director at Evanston Northwestern Healthcare Corporation, Quanex Corporation in Houston, Texas, the National Association of Manufacturers, and Ryerson.
Philip M. Gresh, Jr. Mr. Gresh is an Executive Vice President of ITW, having previously been ITW Hi-Cone USA’s Vice President of Sales and Vice President/General Manager and President of Hi-Cone Businesses Worldwide. Prior to joining ITW, he held positions with Continental Can Company, Inc. and was President of Heuft USA in Downers Grove, IL. He is on the Board of Directors of the Ocean Conservancy and a Member of Finance Committee of the Board of Directors of Edward Hospital in Naperville, Illinois.
Craig A. Hindman Mr. Hindman is an Executive Vice President of ITW. Mr. Hindman joined ITW in 1976 and has worked as General Manager of the Buildex Division, Vice President and General Manager of the Paslode Division and Duo-Fast and President of the ITW Finishing Group of Companies. Mr. Hindman is a past board member of Orchard Village and Junior Achievement of Lake County.
Ronald D. Kropp Mr. Kropp is the Senior Vice President & Chief Financial Officer of ITW. He joined ITW in 1993 after six years at Arthur Andersen and has served as Vice President & Controller of Financial Reporting and Director of Corporate Accounting and Manager of Consolidated Reporting and Analysis. He is a Certified Public Accountant.
Roland M. Martel Mr. Martel is an Executive Vice President of ITW. He joined ITW in 1994 as the General Manager of ITW Anchor Stampings. Over the years, he has held various Vice President and President positions in the ITW Metal Components division and previously served as President of ITW’s Global Automotive Division.
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David C. Parry Mr. Parry is an Executive Vice President of ITW. He joined ITW in 1994 and has served as Vice President and General Manager of ITW Performance Polymers, General Manager of Devon Plexus and ITW Devcon and President of ITW Performance Polymers.
E. Scott Santi Mr. Santi is an Executive Vice President of ITW. He joined the company in 1983 and has spent his entire career with ITW. Previous positions include General Manager of ITW’s Vortec, Vice President & General Manager of ITW’s Hobart Ground Power, Vice President & General Manager for Hobart Brothers, Director of the Hobart Institute of Welding Technology (trustee/director), Group Vice President for the Welding Products Group and President of the Welding Products Focus Markets Group.
Allan C. Sutherland Mr. Sutherland is the Senior Vice President of Taxes & Investments of ITW. He joined ITW as Manager of Federal Tax in 1993 and has also served as Senior Vice President of Leasing and Investments. Prior to joining ITW, Mr. Sutherland was a senior manager in the tax department with Ernst & Young.
Jane L. Warner Ms. Warner is an Executive Vice President of ITW. Ms. Warner joined ITW in 2005 as President of its Worldwide Finishing businesses. She is a Director of MeadWestvaco Corp. and Tenneco Inc. and was previously the President of Plexus Systems, a manufacturing software company, and a Vice President with EDS. Ms. Warner also previously served as President of a division of Textron Automotive and served in a variety of executive positions with General Motors.
James H. Wooten, Jr. Mr. Wooten is the Senior Vice President, General Counsel and Secretary of ITW. Prior to joining ITW in 1988, he was an Associate with the law firm of Gardner, Carton & Douglas.
Hugh J. Zentmyer Mr. Zentmyer has been an Executive Vice President of ITW since 1996. He joined Signode Corporation (acquired by ITW) in 1986 and held a variety of accounting positions and served as Vice President of Finance for the Strapping Division. He serves on the board of the Marmon Group.
The Company believes that there are no potential conflicts of interest between any duties owed to the Company by its Directors and Principal Officers and their private interest and/or other duties.
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Taxation
Luxembourg Taxation
The following summary is of a general nature and is included herein solely for information purposes. It is based on the laws presently in force in Luxembourg, though it is not intended to be, nor should it be construed to be, legal or tax advice. Prospective investors in the Notes should therefore consult their own professional advisers as to the effects of state, local or foreign laws, including Luxembourg tax law, to which they may be subject.
Withholding Tax
(i) Non-resident holders of Notes
Under Luxembourg general tax laws currently in force and subject to the laws of 21 June 2005 (the Laws) mentioned below, there is no withholding tax on payments of principal, premium or interest made to non-resident holders of Notes, nor on accrued but unpaid interest in respect of the Notes, nor is any Luxembourg withholding tax payable upon redemption or repurchase of the Notes held by non-resident holders of Notes.
Under the Laws implementing the EC Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments and ratifying the treaties entered into by Luxembourg and certain dependent and associated territories of EU Member States (the Territories), payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to or for the immediate benefit of an individual beneficial owner or a residual entity, as defined by the Laws, which is a resident of, or established in, an EU Member State (other than Luxembourg) or one of the Territories will be subject to a withholding tax unless the relevant recipient has adequately instructed the relevant paying agent to provide details of the relevant payments of interest or similar income to the fiscal authorities of his/her/its country of residence or establishment, or, in the case of an individual beneficial owner, has provided a tax certificate issued by the fiscal authorities of his/her country of residence in the required format to the relevant paying agent. Where withholding tax is applied, it will be levied at a rate of 15 per cent. during the first three-year period starting 1 July 2005, at a rate of 20 per cent. for the subsequent three-year period and at a rate of 35 per cent. thereafter. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of interest under the Notes coming within the scope of the Laws would at present be subject to withholding tax of 15 per cent.
(ii) Resident holders of Notes
Under Luxembourg general tax laws currently in force and subject to the law of 23 December 2005 (the Law) mentioned below, there is no withholding tax on payments of principal, premium or interest made to Luxembourg resident holders of Notes, nor on accrued but unpaid interest in respect of Notes, nor is any Luxembourg withholding tax payable upon redemption or repurchase of Notes held by Luxembourg resident holders of Notes.
Under the Law payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to or for the immediate benefit of an individual beneficial owner who is a resident of Luxembourg will be subject to a withholding tax of 10 per cent. Such withholding tax will be in full discharge of income tax if the beneficial owner is an individual acting in the course of the management of his/her private wealth. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of interest under the Notes coming within the scope of the Law would be subject to withholding tax of 10 per cent.
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United States Taxation
Certain U.S. Federal Income Tax Consequences
The discussion of tax matters in this Prospectus is not intended or written to be used, and cannot be used by any person, for the purpose of avoiding U.S. federal, state or local tax penalties, and was written to support the promotion or marketing of the Notes. Each taxpayer should seek advice based on such person’s particular circumstances from an independent tax advisor.
This section discusses certain U.S. federal income tax consequences of the ownership and disposition of Notes by Non-U.S. Holders (as defined below). It does not describe all of the tax consequences that may be relevant to a Non-U.S. Holder in light of such holder’s particular circumstances or to holders who may be subject to special rules, such as banks, partnerships, controlled foreign corporations, certain former citizens and residents of the United States subject to tax as expatriates, holders that are in the United States for more than 183 days in any taxable year, holders whose interest on, or gain from, the Notes is effectively connected with a trade or business of such holder in the United States or holders that own, or are deemed to own, stock with 10 per cent. or more of the total combined voting power of the Guarantor.
This discussion is based on U.S. tax laws currently in effect, changes to which subsequent to the date of this Prospectus may affect the tax consequences described below, possibly with retroactive effect. Persons considering the purchase of Notes are urged to consult their tax advisers with regard to the application of U.S. federal income tax laws to their particular situations, as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
As used herein, the term Non-U.S. Holder means a beneficial owner of a Note that is, for U.S. federal income tax purposes, (i) a nonresident alien individual, (ii) a foreign corporation or (iii) a foreign estate or trust.
Payments to a Non-U.S. Holder of interest or principal with respect to its Notes by the Issuer or Guarantor, as well as proceeds from a sale or other disposition of Notes by a Non-U.S. Holder, will not be subject to U.S. federal withholding tax or backup withholding tax, provided that the Non- U.S. Holder properly certifies on IRS Form W-8BEN, under penalties of perjury, that it is not a “U.S. person”. However, payments to a Non-U.S. Holder of interest with respect to the Notes may be subject to certain U.S. information reporting requirements.
EU Savings Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required, from 1 July 2005, to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have agreed to adopt similar measures (a withholding system in the case of Switzerland) with effect from the same date.
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Subscription and Sale
J.P. Morgan Securities Ltd. and Société Générale (together the Managers) have, pursuant to a Subscription Agreement (the Subscription Agreement) dated 26 September 2007, jointly and severally agreed to subscribe or procure subscribers for the Notes at the issue price of 99.874 per cent. of the principal amount of Notes, less a combined management, underwriting and selling commission of 0.35 per cent. of the principal amount of the Notes. The Issuer will also reimburse the Managers in respect of certain of their expenses, and has agreed to indemnify the Managers against certain liabilities, incurred in connection with the issue of the Notes. The Subscription Agreement may be terminated in certain circumstances prior to payment of the Issuer.
United States
The Notes have not been and will not be registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act) except in certain transactions exempt from the registration requirements of the Securities Act.
The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and regulations thereunder.
Each Manager has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Notes (a) as part of their distribution at any time or (b) otherwise until 40 days after the later of the commencement of the offering and the Closing Date within the United States or to, or for the account or benefit of, U.S. persons and that it will have sent to each dealer to which it sells any Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.
In addition, until 40 days after the commencement of the offering, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each Manager has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Prospectus to the public in that Relevant Member State other than:
(a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;
(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than EUR 43,000,000 and (3) an annual net turnover of more than EUR 50,000,000, as shown in its last annual or consolidated accounts;
(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the Joint Lead Managers; or
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(d) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes shall require the Issuer, the Guarantor or any Manager to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
The Grand Duchy of Luxembourg
In addition to the cases described in the European Economic Area selling restrictions above in which the Managers can make an offer of Notes to the public in an EEA Member State (including the Grand Duchy of Luxembourg), the Managers can also make an offer of Notes to the public in the Grand Duchy of Luxembourg:
(a) at any time, to national and regional governments, central banks, international and supranational institutions (such as the International Monetary Fund, the European Central Bank, the European Investment Bank) and other similar international organisations;
(b) at any time, to legal entities which are authorised or regulated to operate in the financial markets (including, credit institutions, investment firms, other authorised or regulated financial institutions, insurance companies, undertakings for collective investment and their management companies, pension and investment funds and their management companies, commodity dealers) as well as entities not so authorised or regulated whose corporate purpose is solely to invest in securities; and
(c) at any time, to certain natural persons or small and medium-sized enterprises (as defined in the Luxembourg act dated 10 July 2005 on prospectuses for securities implementing the Prospectus Directive into Luxembourg law) recorded in the register of natural persons or small and medium-sized enterprises considered as qualified investors as held by the Commission de surveillance du secteur financier as competent authority in Luxembourg in accordance with the Prospectus Directive.
United Kingdom
Each Manager has represented and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the Guarantor; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.
General
Each Manager has severally acknowledged that no representation is made by the Issuer, the Guarantor or any Manager that any action has been or will be taken in any jurisdiction by the Issuer, the Guarantor or any Manager that would permit a public offering of the Notes, or
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possession or distribution of the Preliminary Prospectus or the Prospectus in any country or jurisdiction where action for that purpose is required. Each Manager has agreed to comply to the best of its knowledge and belief in all material respects with all applicable securities laws and regulations in each jurisdiction in which it purchases, offers, sells or delivers Notes or has in its possession or distributes the Preliminary Prospectus or the Prospectus, in all cases at its own expense unless agreed otherwise.
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General Information
Authorisation
1. The issue of the Notes was duly authorised by resolutions of the Board of Directors of the Issuer dated 13 September 2007 and 24 September 2007 and the giving of the Guarantee was duly authorised by a resolution of the Board of Directors of the Guarantor dated 3 August 2007.
Listing and Admission to Trading
2. Application has been made to the CSSF to approve this document as a prospectus. Application has also been made to the Luxembourg Stock Exchange for the notes to be admitted to trading on the Luxembourg Stock Exchange’s regulated market and to be listed on the Official List of the Luxembourg Stock Exchange. The Luxembourg Stock Exchange’s regulated market is a regulated market for the purposes of the Investment Services Directive (Directive 93/22/EEC).
Expenses in connection with admission to trading will approximately be EUR 10,700.
Clearing Systems
3. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN for this issue is XS0323494715 and the Common Code is 032349471.
The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brusssels and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.
No significant change
4. There has been no significant change in the financial or trading position of the Guarantor and its subsidiaries (the Group) since 30 June 2007 and there has been no material adverse change in the financial position or prospects of the Group since 31 December 2006.
Litigation
5. Save as disclosed in this Prospectus on page 45 neither the Issuer nor the Guarantor nor any other member of the Group was involved in any governmental, legal or arbitration proceedings (including any proceedings which are pending or threatened of which the Issuer or the Guarantor are aware) in the 12 months preceding the date of this document which may have, or have had in such period a significant effect on the financial position or profitability of the Issuer, Guarantor or the Group.
Auditors
6. The auditors of the Issuer are Deloitte S.A. Deloitte S.A. is registered with the Institute des Révisseurs d’Enterprises. The auditors of the Issuer have no material interest in the Issuer.
The Guarantor’s consolidated financial statements and management’s report on the effectiveness of internal control over financial reporting set out in this Prospectus from the Guarantor’s Annual Report on Form 10-K for the two fiscal years ended 31 December 2005 and 31 December 2006 have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing therein and as set out in this Prospectus. Deloitte & Touche LLP is registered with the Public Company Accounting Oversight Board (United States). The auditors of the Guarantor have no material interest in the Guarantor.
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Documents Available
7. Copies of the following documents will be available from the specified office of the Paying Agent for the time being in Luxembourg so long as any of the Notes remains outstanding:
(a) the articles of association (with an English translation thereof) of the Issuer and the Certificate of Incorporation and By laws of the Guarantor;
(b) the consolidated audited financial statements of the Guarantor in respect of the financial years ended 31 December 2005 and 31 December 2006, together with the audit reports in connection therewith. The Guarantor publishes audited consolidated financial statements on an annual basis;
(c) the most recently published unaudited interim financial statements (if any) of the Issuer and the Guarantor. The Guarantor currently prepares unaudited consolidated interim accounts on a quarterly basis; and
(d) the Subscription Agreement, the Agency Agreement, the form of Global Certificate, the form of definitive Certificates and the Guarantee.
In addition copies of this Prospectus are available on the Luxembourg Stock Exchange’s website at www.bourse.lu.
Post-issuance information
8. The Issuer does not intend to provide any post-issuance information in relation to any issues of Notes.
Managers transacting with the Issuer and the Guarantor
9. Certain of the Managers and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services to the Issuer, the Guarantor and their affiliates in the ordinary course of business.
Yield
10. The yield of the Notes will be 5.272 per cent. per annum.
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THE ISSUER ITW Finance Europe S.A. 7, rue Nicolas Bové L-1253 Luxembourg
THE GUARANTOR Illinois Tool Works Inc. 3600 West Lake Avenue Glennview, IL 60026 United States of America
FISCAL, PRINCIPAL PAYING AGENT AND TRANSFER AGENT The Bank of New York One Canada Square London E14 5AL United Kingdom
LUXEMBOURG PAYING AGENT, REGISTRAR AND LISTING AGENT The Bank of New York (Luxembourg) S.A. Aerogolf Centre 1A, Hoehenhof L-1736 Senningerberg Luxembourg
LEGAL ADVISERS To the Guarantor To the Issuer as to New York and Federal Securities law as to Luxembourg law Clifford Chance LLP Oostvogels Pfister Feyten 10 Upper Bank Street Avenue Monterey London E14 5JJ 20 - BP 603 United Kingdom L-2016 Luxembourg
To the Managers as to New York and Federal Securities law Allen & Overy LLP One Bishops Square London E1 6AO United Kingdom
AUDITORS To the Guarantor To the Issuer Deloitte & Touche LLP Deloitte S.A. 111 South Wacker Drive Rue de Neudorf Chicago, IL 60606-4301 L-2220 United States of America Luxembourg Level: 5 – From: 5 – Tuesday, September 25, 2007 – 2:24 pm – mac7 – 3850 Section 06 : 3850 Section 06
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