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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
Commission File Number: 1-1927
THE GOODYEAR TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of
incorporation or organization)
 
34-0253240
(I.R.S. Employer
Identification No.)
 
 
 
200 Innovation Way, Akron, Ohio
(Address of Principal Executive Offices)
 
44316-0001
(Zip Code)
Registrant’s telephone number, including area code: (330) 796-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of
 Each Exchange
 on Which
Registered
Common Stock, Without Par Value
 
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
In dicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ
No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o
No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ
No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ
 
 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  þ
 
Accelerated filer  o
 
Non-accelerated filer  o
(Do not check if a smaller reporting company)
 
Smaller reporting company  o
 
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o
No þ
The aggregate market value of the common stock held by nonaffiliates of the registrant, computed by reference to the last sales price of such common stock as of the closing of trading on June 30, 2015, was approximately $8.1 billion.

Shares of Common Stock, Without Par Value, outstanding at January 31, 2016:
267,042,491
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 11, 2016 are incorporated by reference in Part III.


Table of Contents

THE GOODYEAR TIRE & RUBBER COMPANY
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2015
Table of Contents

Item
Number
 
Page Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I.

ITEM 1.
BUSINESS.
BUSINESS OF GOODYEAR
The Goodyear Tire & Rubber Company (the “Company”) is an Ohio corporation organized in 1898. Its principal offices are located at 200 Innovation Way, Akron, Ohio 44316-0001. Its telephone number is (330) 796-2121. The terms “Goodyear,” “Company” and “we,” “us” or “our” wherever used herein refer to the Company together with all of its consolidated U.S. and foreign subsidiary companies, unless the context indicates to the contrary.
We are one of the world’s leading manufacturers of tires, engaging in operations in most regions of the world. In 2015 , our net sales were $16,443 million and Goodyear’s net income and net income available to common shareholders were $307 million , including an after-tax charge of $577 million related to the deconsolidation of our Venezuelan subsidiary. Together with our U.S. and international subsidiaries, we develop, manufacture, market and distribute tires for most applications. We also manufacture and market rubber-related chemicals for various applications. We are one of the world’s largest operators of commercial truck service and tire retreading centers. In addition, we operate approximately 1,100 tire and auto service center outlets where we offer our products for retail sale and provide automotive repair and other services. We manufacture our products in 49 manufacturing facilities in 22 countries, including the United States, and we have marketing operations in almost every country around the world. We employ approximately 66,000  full-time and temporary associates worldwide.
Dissolution of Global Alliance with Sumitomo Rubber Industries
On October 1, 2015, we completed the previously announced dissolution of our global alliance with Sumitomo Rubber Industries, Ltd. (“SRI”) in accordance with the terms and conditions set forth in the Framework Agreement, dated as of June 4, 2015, by and between us and SRI.
Under the global alliance, we owned 75% and SRI owned 25% of two companies, Goodyear Dunlop Tires Europe B.V. (“GDTE”) and Goodyear Dunlop Tires North America, Ltd. (“GDTNA”). In Japan, we owned 25%, and SRI owned 75%, of two companies, one, Nippon Goodyear Ltd. (“NGY”), for the sale of Goodyear-brand passenger and truck tires for replacement in Japan and the other, Dunlop Goodyear Tires Ltd. (“DGT”), for the sale of Goodyear-brand and Dunlop-brand tires to vehicle manufacturers in Japan. We also own 51%, and SRI owns 49%, of a company that coordinated and disseminated both commercialized tire technology and non-commercialized technology among us and SRI, the joint ventures and their respective affiliates (the “Technology JV”), and we own 80%, and SRI owns 20%, of a global purchasing company (the “Purchasing JV”). The global alliance also provided for the investment by us and SRI in the common stock of the other.
As result of the completion of certain of the transactions contemplated by the Framework Agreement:
•
we acquired SRI’s 25% interest in GDTE and SRI’s 75% interest in NGY;
•
we sold to SRI our 75% interest in GDTNA, as well as the Huntsville, Alabama test track used by GDTNA, and our 25% interest in DGT;
•
we maintained control of the Dunlop-related trademarks for tire-related businesses in North America but granted to SRI an exclusive license to develop, manufacture and sell Dunlop-brand tires for motorcycles and for Japanese-owned original equipment manufacturers operating in North America; and
•
SRI obtained exclusive rights to sell Dunlop-brand tires in those countries that were previously non-exclusive under the global alliance, including Russia, Turkey and certain countries in Africa.
We paid to SRI a net amount of $271 million and delivered a promissory note to GDTNA in the initial principal amount of $56 million at an interest rate of LIBOR plus 0.1% and with a maturity date three years following the date of dissolution.
The Framework Agreement also provides that we will liquidate the Technology JV and the Purchasing JV and distribute the remaining assets and liabilities of those entities to us and SRI in accordance with our respective ownership interests, and that we and SRI will conduct an orderly sale of the investments in the common stock of the other.
AVAILABLE INFORMATION
We make available free of charge on our website, http://www.goodyear.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we file or furnish such reports to the Securities and Exchange Commission (the “SEC”). The information on our website is not incorporated by reference in or considered to be a part of this Annual Report on Form 10-K.

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DESCRIPTION OF GOODYEAR’S BUSINESS
G ENERAL I NFORMATION R EGARDING O UR S EGMENTS
For the year ended December 31, 2015 , we operated our business through four operating segments representing our regional tire businesses: North America; Europe, Middle East and Africa (“EMEA”); Asia Pacific; and Latin America.
Financial information related to our operating segments for the three year period ended December 31, 2015 appears in the Note to the Consolidated Financial Statements No. 8, Business Segments.
Effective January 1, 2016, we combined our North America and Latin America strategic business units into one Americas strategic business unit. We have combined the North America and Latin America reportable segments effective on this date to align with the new organizational structure and the basis used for reporting to our Chief Executive Officer beginning in 2016. Our first quarter 2016 Form 10-Q will reflect the new segment structure with prior periods recast for comparable disclosure.
Our principal business is the development, manufacture, distribution and sale of tires and related products and services worldwide. We manufacture and market numerous lines of rubber tires for:
•
automobiles
•
trucks
•
buses
•
aircraft
•
motorcycles
•
earthmoving and mining equipment
•
farm implements
•
industrial equipment, and
•
various other applications.
In each case, our tires are offered for sale to vehicle manufacturers for mounting as original equipment (“OE”) and for replacement worldwide. We manufacture and sell tires under the Goodyear, Dunlop, Kelly, Debica, Sava and Fulda brands and various other Goodyear owned “house” brands, and the private-label brands of certain customers. In certain geographic areas we also:
•
retread truck, aviation and off-the-road, or OTR, tires,
•
manufacture and sell tread rubber and other tire retreading materials,
•
sell chemical products, and
•
provide automotive repair services and miscellaneous other products and services.

Our principal products are new tires for most applications. Approximately 87% of our sales in 2015 and 2014 were for new tires, compared to 86% in 2013 . Sales of chemical products and natural rubber to unaffiliated customers were 2% in 2015 , 3% in 2014 and 4% in 2013 of our consolidated sales ( 5% , 7% and 9% of North America’s total sales in 2015 , 2014 and 2013 , respectively). The percentages of each segment’s sales attributable to new tires during the periods indicated were:

 
 
Year Ended December 31,
Sales of New Tires By
 
2015
 
2014
 
2013
North America
 
81
%
 
80
%
 
78
%
Europe, Middle East and Africa
 
94

 
94

 
94

Asia Pacific
 
89

 
88

 
87

Latin America
 
96

 
92

 
92


Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions.
Goodyear does not include motorcycle, aviation or all terrain vehicle tires in reported tire unit sales.

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Tire unit sales for each segment during the periods indicated were:
GOODYEAR’S ANNUAL TIRE UNIT SALES — SEGMENT
 
Year Ended December 31,
(In millions of tires)
2015
 
2014
 
2013
North America
61.6

 
61.1

 
61.7

Europe, Middle East and Africa
61.1

 
60.5

 
60.8

Asia Pacific
26.0

 
23.0

 
21.9

Latin America
17.5

 
17.4

 
17.9

Goodyear worldwide tire units
166.2

 
162.0

 
162.3


Our replacement and OE tire unit sales during the periods indicated were:
GOODYEAR’S ANNUAL TIRE UNIT SALES — REPLACEMENT AND OE

 
Year Ended December 31,
(In millions of tires)
2015
 
2014
 
2013
Replacement tire units
115.5

 
112.9

 
111.9

OE tire units
50.7

 
49.1

 
50.4

Goodyear worldwide tire units
166.2

 
162.0

 
162.3


New tires are sold under highly competitive conditions throughout the world. On a worldwide basis, we have two major competitors: Bridgestone (based in Japan) and Michelin (based in France). Other significant competitors include Continental, Cooper, Hankook, Kumho, Pirelli, SRI, Toyo, Yokohama and various regional tire manufacturers.
We compete with other tire manufacturers on the basis of product design, performance, price and terms, reputation, warranty terms, customer service and consumer convenience. Goodyear and Dunlop brand tires enjoy a high recognition factor and have a reputation for performance and product design. The Kelly, Debica, Sava and Fulda brands and various house brand tire lines offered by us, and tires manufactured and sold by us to private brand customers, compete primarily on the basis of value and price.
Although we do not consider our tire businesses to be seasonal to any significant degree, we historically sell more replacement tires in EMEA during the third quarter.
N ORTH A MERICA
North America, our largest segment in terms of revenue, develops, manufactures, distributes and sells tires and related products and services in the United States and Canada, and sells tires to various export markets, primarily through intersegment sales. North America manufactures tires in six plants in the United States and two plants in Canada.
North America manufactures and sells tires for automobiles, trucks, buses, earthmoving and mining equipment, commercial and military aviation and industrial equipment, and for various other applications.
Goodyear brand radial passenger tire lines sold in the United States and Canada include the Assurance family of product lines for the premium and mid-tier passenger and cross-over utility vehicle segments; the Eagle family of product lines for the high-performance segment; the Wrangler family of product lines for the sport utility vehicle and light truck segments and the Ultra Grip family of winter tires. Additionally, we offer Dunlop brand radial tire lines including Signature II, SP Sport and Direzza for the passenger and performance segments; the Grandtrek tire lines for the cross-over, sport utility vehicle and light truck segment and SP Winter, Winter Maxx and Grandtrek tire lines for the winter tire segment. North America also manufactures and sells several lines of Kelly brand radial tires for passenger cars and light trucks in the United States and Canada. Goodyear’s North America commercial business unit provides commercial truck tires, retreads, services, tools and business solutions to trucking fleets.
In 2015, North America launched six new consumer tires, under the Goodyear, Dunlop and Kelly brands, including our new Goodyear Wrangler Fortitude HT, Dunlop Signature HP and Kelly Edge tire lines. North America’s commercial truck tire business launched four new tires under the Goodyear Fuel Max tire line to serve our long haul and regional customers as well as the Goodyear Endurance Waste Haul.

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In 2015, North America also launched online tire sales, becoming the first major tire manufacturer to sell products, as well as installation services, online through our website, www.goodyear.com . To date, we have more than 4,000 independent dealer and Company-owned locations signed up as authorized installers. North America also:

•
retreads truck, aviation and OTR tires, primarily as a service to its commercial customers,
•
manufactures tread rubber and other tire retreading materials for trucks, heavy equipment and aviation,
•
provides automotive maintenance and repair services at approximately 600 retail outlets primarily under the Goodyear or Just Tires names,
•
provides trucking fleets with new tires, retreads, mechanical service, preventative maintenance and roadside assistance from approximately 190 Company-owned Goodyear Commercial Tire & Service Centers,
•
sells automotive repair and maintenance items, automotive equipment and accessories and other items to dealers and consumers,
•
sells chemical products and natural rubber to Goodyear’s other business segments and to unaffiliated customers, and
•
provides miscellaneous other products and services.
Markets and Other Information
Tire unit sales to replacement and OE customers served by North America during the periods indicated were:
NORTH AMERICA UNIT SALES — REPLACEMENT AND OE
 
Year Ended December 31,
(In millions of tires)
2015
 
2014
 
2013
Replacement tire units
43.1

 
43.0

 
42.9

OE tire units
18.5

 
18.1

 
18.8

Total tire units
61.6

 
61.1

 
61.7


North America is a major supplier of tires to most manufacturers of automobiles, trucks and aircraft that have production facilities located in North America.
North America’s primary competitors are Bridgestone and Michelin. Other significant competitors include Continental, Cooper, Pirelli, and imports from other regions, primarily Asia.
Goodyear, Dunlop and Kelly brand tires are sold in the United States and Canada through several channels of distribution. The principal channel for Goodyear brand tires is a large network of independent dealers. Goodyear, Dunlop and Kelly brand tires are also sold to numerous national and regional retail marketing firms and in Goodyear Company-owned stores in the United States.
We are subject to regulation by the National Highway Traffic Safety Administration (“NHTSA”), which has established various standards and regulations applicable to tires sold in the United States. NHTSA has the authority to order the recall of automotive products, including tires, having a defect related to motor vehicle safety. In addition, the Transportation Recall Enhancement, Accountability, and Documentation Act (the “TREAD Act”) imposes numerous reporting requirements with respect to tires. The TREAD Act also requires tire manufacturers, among other things, to remedy tire safety defects without charge for five years and comply with revised and more rigorous tire testing standards. NHTSA is also in the process of establishing national tire labeling regulations, under which certain tires sold in the United States will be required to be rated for rolling resistance, traction and tread wear.
E UROPE, M IDDLE E AST A ND A FRICA
Europe, Middle East and Africa, our second largest segment in terms of revenue, develops, manufactures, distributes and sells tires for automobiles, trucks, buses, aircraft, motorcycles, earthmoving and mining equipment, and industrial equipment throughout Europe, the Middle East and Africa under the Goodyear, Dunlop, Debica, Sava and Fulda brands and other house brands, and sells tires to various export markets, primarily through intersegment sales. EMEA manufactures tires in fourteen plants in France, Germany, Luxembourg, Poland, Slovenia, South Africa and Turkey.

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In 2015, EMEA launched three new consumer tires, including several models in the Goodyear Ultra Grip Performance line for the winter tire segment, as well as the new all season Goodyear Vector 4-Seasons line. EMEA also introduced five new commercial tires including the Ultra Grip Max for all wheel positions. These new products provide extended mobility in winter conditions, more versatility and superior tire performance to commercial customers. EMEA also:

•
sells aviation tires, and manufactures and sells retreaded aviation tires,
•
provides various retreading and related services for truck and OTR tires, primarily for its commercial truck tire customers,
•
offers automotive repair services at retail outlets, and
•
provides miscellaneous other products and services.
Markets and Other Information
Tire unit sales to replacement and OE customers served by EMEA during the periods indicated were:
EUROPE, MIDDLE EAST AND AFRICA UNIT SALES — REPLACEMENT AND OE
 
Year Ended December 31,
(In millions of tires)
2015
 
2014
 
2013
Replacement tire units
43.8

 
43.7

 
44.2

OE tire units
17.3

 
16.8

 
16.6

Total tire units
61.1

 
60.5


60.8


EMEA is a significant supplier of tires to most vehicle manufacturers across the region.
EMEA’s primary competitors are Michelin, Bridgestone, Continental, Pirelli, several regional and local tire producers and imports from other regions, primarily Asia.
Goodyear and Dunlop brand tires are sold for replacement in EMEA through various channels of distribution, principally independent multi-brand tire dealers. In some areas, Goodyear brand tires, as well as Dunlop, Debica, Sava and Fulda brand tires, are distributed through independent dealers, regional distributors and retail outlets, of which approximately 80 are owned by Goodyear.
Our European operations are subject to regulation by the European Union. The Tire Labeling Regulation applies to all passenger car, light truck and commercial truck tires and requires that consumers be informed about the tire's fuel efficiency, wet grip and noise characteristics.
A SIA P ACIFIC
Our Asia Pacific segment manufactures and sells tires for automobiles, trucks, aircraft, and farm, earthmoving and mining equipment throughout the Asia Pacific region, and sells tires to various export markets, primarily through intersegment sales. Asia Pacific manufactures tires in seven plants in China, India, Indonesia, Japan, Thailand and Malaysia. Asia Pacific also:
•
retreads truck tires and aviation tires,
•
manufactures tread rubber and other tire retreading materials for aviation tires,
•
provides automotive maintenance and repair services at retail outlets, and
•
provides miscellaneous other products and services.
In 2015, Asia Pacific launched two new consumer tires including the Assurance DuraPlus and EfficientGrip Performance tires. Asia Pacific also launched two new commercial tire products in China and Australia.

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Markets and Other Information
Tire unit sales to replacement and OE customers served by Asia Pacific during the periods indicated were:
ASIA PACIFIC UNIT SALES — REPLACEMENT AND OE
 
Year Ended December 31,
(In millions of tires)
2015
 
2014
 
2013
Replacement tire units
14.3

 
12.7

 
12.4

OE tire units
11.7

 
10.3

 
9.5

Total tire units
26.0

 
23.0

 
21.9


Asia Pacific’s major competitors are Bridgestone and Michelin along with many other global brands present in different parts of the region, including Continental, Dunlop, Hankook and a large number of regional and local tire producers.
Asia Pacific sells primarily Goodyear brand tires throughout the region and also sells the Dunlop brand in Australia and New Zealand. Other brands of tires, such as Blue Streak, Kelly and Diamondback, are sold in smaller quantities. Tires are sold through a network of licensed and franchised retail stores and multi-brand retailers through a network of wholesale dealers. In Australia, we also operate a network of approximately 230 retail stores under the Beaurepaires brand.
L ATIN A MERICA
Our Latin America segment manufactures and sells automobile and truck tires throughout Central and South America and in Mexico, and sells tires to various export markets, primarily through intersegment sales. Latin America manufactures tires in five plants in Brazil, Chile, Colombia, Peru and Venezuela. Latin America also:

•
retreads, and provides various materials and related services for retreading truck tires,
•
manufactures other products, including OTR tires, and
•
provides miscellaneous other products and services.
Goodyear brand radial passenger tire lines sold throughout Latin America include the Assurance family of product lines for the premium and mid-tier consumer segment; the Direction family of product lines for the mid-tier segment; and the Eagle and Efficient Grip product lines for the sport performance segment. For the sport utility vehicle and light truck segments, Latin America has the Wrangler family of product lines and in 2015 introduced the Efficient Grip SUV. Additionally, the commercial business provides products for the long haul, regional haul, city service, and mixed service and OTR segments. In 2015, the commercial business launched three new tires: KMAX S, D Traction and Extreme.
Currency exchange control regulations and continued reductions in access to U.S. dollars through official currency exchange mechanisms have restricted the ability of our Venezuelan subsidiary to pay dividends and royalties and to settle liabilities. These conditions, combined with other government regulations such as price and profit margin controls and strict labor laws, have increasingly limited our ability to make and execute operational decisions at our Venezuelan subsidiary. We concluded that we no longer meet the accounting criteria for control and, as a result, we deconsolidated our Venezuelan subsidiary on December 31, 2015. Refer to the Note to the Consolidated Financial Statements No. 1, Accounting Policies.
Markets and Other Information
Tire unit sales to replacement and OE customers served by Latin America during the periods indicated were:
LATIN AMERICA UNIT SALES — REPLACEMENT AND OE
 
Year Ended December 31,
(In millions of tires)
2015
 
2014
 
2013
Replacement tire units
14.3

 
13.5

 
12.4

OE tire units
3.2

 
3.9

 
5.5

Total tire units
17.5

 
17.4

 
17.9


Latin America is a significant supplier of tires to most manufacturers of automobiles, trucks, and construction and mining equipment located in the region. Goodyear brand tires are sold for replacement primarily through independent dealers. Significant competitors include Pirelli, Bridgestone, Michelin and Continental, and imports from other regions, primarily Asia.

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In 2012, Brazil adopted a tire labeling regulation, which took effect in 2015 and set requirements for tire certification and labeling for rolling resistance, wet grip braking and noise for all radial passenger car, light truck and commercial truck tires sold in that country. The adoption of labeling regulations is in two phases, with labeling of certain new products required in 2015 and labeling of all tires required by the end of 2016.

GENERAL BUSINESS INFORMATION
Sources and Availability of Raw Materials
The principal raw materials used by Goodyear are synthetic and natural rubber. Synthetic rubber accounts for approximately 60% of all rubber consumed by us on an annual basis. Our plants located in Beaumont and Houston, Texas supply a major portion of our global synthetic rubber requirements. We purchase all of our requirements for natural rubber in the world market.
Other important raw materials and components we use are carbon black, steel cord, fabrics and petrochemical-based commodities. Substantially all of these raw materials and components are purchased from independent suppliers, except for certain chemicals we manufacture. We purchase most raw materials and components in significant quantities from several suppliers, except in those instances where only one or a few qualified sources are available. We anticipate the continued availability of all raw materials and components we will require during 2016 , subject to spot shortages and unexpected disruptions caused by natural disasters such as hurricanes and other similar events.
Substantial quantities of fuel and other petrochemical-based commodities are used in the production of tires, synthetic rubber and other products. Supplies of such fuels and commodities have been and are expected to continue to be available to us in quantities sufficient to satisfy our anticipated requirements, subject to spot shortages.
In 2015 , raw material costs decreased by approximately 11% in our tire businesses compared to 2014 , primarily driven by a decrease in natural and synthetic rubber prices and cost savings initiatives during 2015. For the full year of 2016 , we expect our raw material costs, including raw material cost savings, will decline approximately 9% compared to 2015 . However, natural and synthetic rubber prices and other commodity prices have experienced significant volatility, and this estimate could change significantly based on fluctuations in the cost of these and other key raw materials.
Patents and Trademarks
We own approximately 2,000 product, process and equipment patents issued by the United States Patent Office and approximately 3,500 patents issued or granted in other countries around the world. We have approximately 500 applications for United States patents pending and approximately 2,200 patent applications on file in other countries around the world. While such patents and patent applications as a group are important, we do not consider any patent or patent application to be of such importance that the loss or expiration thereof would materially affect Goodyear or any business segment.
We own, control or use approximately 1,700 different trademarks, including several using the word “Goodyear” or the word “Dunlop.” Approximately 13,200 registrations and 700 pending applications worldwide protect these trademarks. While such trademarks as a group are important, the only trademarks we consider material to our business, or to the business of any of our segments, are those using the word “Goodyear,” and with respect to certain of our international business segments, those using the word “Dunlop.” We believe our trademarks are valid and most are of unlimited duration as long as they are adequately protected and appropriately used.
Backlog
Our backlog of orders is not considered material to, or a significant factor in, evaluating and understanding any of our business segments or our businesses considered as a whole.
Research and Development
Our direct and indirect expenditures on research, development and certain engineering activities relating to the design, development and significant modification of new and existing products and services and the formulation and design of new, and significant improvements to existing, manufacturing processes and equipment during the periods indicated were:
 
Year Ended December 31,
(In millions)
2015
 
2014
 
2013
Research and development expenditures
$382
 
$399
 
$390


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Employees
At December 31, 2015 , we employed approximately 66,000  full-time and temporary people throughout the world, including approximately 36,000  people covered under collective bargaining agreements. Approximately 6,700 of our employees in the United States are covered by a master collective bargaining agreement with the United Steelworkers ("USW"), which expires in July 2017. Approximately 21,000 of our employees outside of the United States are covered by union contracts that currently have expired or that will expire in 2016 , primarily in Germany, Brazil and South Africa. In addition, approximately 1,000 of our employees in the United States are covered by other contracts with the USW and various other unions. Unions represent the major portion of our employees in Europe and Latin America.
Compliance with Environmental Regulations
We are subject to extensive regulation under environmental and occupational health and safety laws and regulations. These laws and regulations relate to, among other things, air emissions, discharges to surface and underground waters and the generation, handling, storage, transportation and disposal of waste materials and hazardous substances. We have several continuing programs designed to ensure compliance with Federal, state and local environmental and occupational safety and health laws and regulations. We expect capital expenditures for pollution control facilities and occupational safety and health projects to be $35 million  to $45 million annually in 2016 and 2017 .
We also incur ongoing expenses to maintain and operate our pollution control facilities and conduct our other environmental activities, including the control and disposal of hazardous substances. These expenditures are expected to be sufficient to comply with existing environmental laws and regulations and are not expected to have a material adverse effect on our competitive position.
In the future, we may incur increased costs and additional charges associated with environmental compliance and cleanup projects necessitated by the identification of new waste sites, the impact of new environmental laws and regulatory standards, or the availability of new technologies. Compliance with Federal, state and local environmental laws and regulations in the future may require a material increase in our capital expenditures and could adversely affect our earnings and competitive position.
INFORMATION ABOUT INTERNATIONAL OPERATIONS
We engage in manufacturing and/or sales operations in most countries in the world, often through subsidiary companies. We have manufacturing operations in 22 countries, including the United States. Most of our international manufacturing operations are engaged in the production of tires. Certain other products are also manufactured in plants located outside the United States. Financial information related to our geographic areas for the three year period ended December 31, 2015 appears in the Note to the Consolidated Financial Statements No. 8, Business Segments, and is incorporated herein by reference.
In addition to the ordinary risks of the marketplace, in some countries our operations are affected by price or profit margin controls, import controls, labor regulations, tariffs, extreme inflation and/or fluctuations in currency values. Furthermore, in certain countries where we operate, transfers of funds into or out of such countries are generally or periodically subject to certain requirements. Refer to “Item 1A. Risk Factors” for a discussion of the risks related to our international operations.


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EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are: (1) the names and ages of all executive officers of the Company at February 9, 2016, (2) all positions with the Company presently held by each such person, and (3) the positions held by, and principal areas of responsibility of, each such person during the last five years.
Name
 
Position(s) Held
 
Age
Richard J. Kramer
 
Chairman of the Board, Chief Executive Officer
and President
 
52
 
Mr. Kramer was elected Chief Executive Officer and President in April 2010 and Chairman in October 2010. He is the principal executive officer of the Company. Mr. Kramer joined Goodyear in March 2000 and has served as Executive Vice President and Chief Financial Officer (June 2004 to August 2007), President, North America (March 2007 to February 2010) and Chief Operating Officer (June 2009 to April 2010).
 
 
 
 
 
Laura K. Thompson
 
Executive Vice President and Chief Financial Officer
 
51
Ms. Thompson was named Executive Vice President and Chief Financial Officer in December 2013. She is Goodyear’s principal financial officer. Ms. Thompson joined Goodyear in 1983 and has served as Vice President, Business Development (June 2005 to February 2011) and Vice President, Finance, North America (March 2011 to November 2013).
 
 
 
 
 
Stephen R. McClellan
 
President, Americas
 
50

 
Mr. McClellan was named President, Americas effective January 1, 2016. He is the executive officer responsible for Goodyear's operations in North America and Latin America. Mr. McClellan joined Goodyear in 1988 and has served as President, Consumer Tires, North America (August 2008 to August 2011) and President, North America (August 2011 to December 2015).
 
 
 
 
 
Jean-Claude Kihn
 
President, Europe, Middle East and Africa
 
56

 
Mr. Kihn was named President, Europe, Middle East and Africa effective January 1, 2016. He is the executive officer responsible for Goodyear’s operations in Europe, the Middle East and Africa. Mr. Kihn joined Goodyear in 1988 and has served as Senior Vice President and Chief Technical Officer (January 2008 to December 2012), Senior Vice President and Managing Director, Goodyear Brazil (December 2012 to October 2014) and President, Latin America (November 2014 to December 2015).
 
 
 
 
 
Christopher R. Delaney
 
President, Asia Pacific
 
54

 
Mr. Delaney joined Goodyear as President-Elect, Asia Pacific on August 24, 2015, and was named President, Asia Pacific effective January 1, 2016. He is the executive officer responsible for Goodyear’s operations in Asia, Australia, New Zealand and the Western Pacific. Prior to joining Goodyear, Mr. Delaney was Chief Executive Officer and Managing Director of Goodman Fielder Ltd., a food products company in Australia, New Zealand and the Asia Pacific region, from July 2011 until March 2015 and was President, Asia Pacific for Campbell Soup Company from October 2009 until June 2011.
 
 
 
 
 
 
David L. Bialosky
 
Senior Vice President, General Counsel and Secretary
 
58

 
Mr. Bialosky joined Goodyear as Senior Vice President, General Counsel and Secretary in September 2009. He is Goodyear's chief legal officer.
 
 
 
 
 
 
Paul Fitzhenry
 
Senior Vice President, Global Communications
 
56

 
Mr. Fitzhenry joined Goodyear as Senior Vice President, Global Communications in October 2012. He is the executive officer responsible for Goodyear's communications activities worldwide. Prior to joining Goodyear, he was Vice President of Corporate Communications of Tyco International, a diversified global industrial company, from 2007 until September 2012.


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Name
 
Position(s) Held
 
Age
 
 
 
 
 
Richard Kellam
 
Senior Vice President, Sales and Marketing Excellence
 
54

 
Mr. Kellam joined Goodyear as Senior Vice President, Sales and Marketing Excellence in September 2014. He is the executive officer responsible for Goodyear’s global sales and marketing activities. Prior to joining Goodyear, Mr. Kellam served in positions of increasing responsibility at Mars Incorporated, a global manufacturer of confectionery, pet food and other food products, including most recently as Global Chief Customer Officer from 2009 until September 2014.

 
 
 
 
 
 
Scott H. King
 
Senior Vice President, Strategy and Business Development
 
54

 
Mr. King was named Senior Vice President, Strategy and Business Development on April 13, 2015. He is the executive officer responsible for Goodyear's strategic initiatives and business development activities. Mr. King rejoined Goodyear after serving as Chief Financial Officer of Veyance Technologies, Inc., Goodyear's former Engineered Products Division, from August 2007 until February 2015. From April 2006 to August 2007, he served as Vice President, Finance of Goodyear's Engineered Products Division.
 
 
 
 
 
 
John T. Lucas
 
Senior Vice President, Global Human Resources
 
56

 
Mr. Lucas joined Goodyear as Senior Vice President, Global Human Resources on February 2, 2015. He is Goodyear’s chief human resources officer. Prior to joining Goodyear, Mr. Lucas was Senior Vice President of Human Resources for Lockheed Martin Corporation, a global security and aerospace company, from February 2010 until February 2015.
 
 
 
 
 
Gregory L. Smith
 
Senior Vice President, Global Operations
 
52

 
Mr. Smith joined Goodyear as Senior Vice President, Global Operations in October 2011. He is the executive officer responsible for Goodyear's global manufacturing and related supply chain activities. Prior to joining Goodyear, Mr. Smith served in operations, manufacturing and supply chain positions of increasing responsibility at ConAgra Foods, a packaged foods company, since 2001, including most recently as Executive Vice President, Supply Chain and Operations from December 2007 to September 2011.
 
 
 
 
 
Joseph Zekoski
 
Senior Vice President and Chief Technical Officer
 
65

 
Mr. Zekoski was named Senior Vice President and Chief Technical Officer on February 24, 2015. He is the executive officer responsible for Goodyear's research and tire technology development, engineering and product quality worldwide. Mr. Zekoski joined Goodyear in 1979 and has served as Vice President, Global Product Development and Innovation Center Operations (January 2008 to December 2011) and Interim Chief Technical Officer (December 2012 to February 2015).
 
 
 
 
 
Richard J. Noechel
 
Vice President and Controller
 
47

 
Mr. Noechel became Vice President and Controller in March 2011. He is Goodyear's principal accounting officer. Mr. Noechel joined Goodyear in October 2004 and has served as Vice President, Finance, North America from December 2008 to February 2011.

No family relationship exists between any of the above executive officers or between the executive officers and any director of the Company.
Each executive officer is elected by the Board of Directors of the Company at its annual meeting to a term of one year or until his or her successor is duly elected. In those instances where the person is elected at other than an annual meeting, such person’s term will expire at the next annual meeting.


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ITEM 1A.
RISK FACTORS.
You should carefully consider the risks described below and other information contained in this Annual Report on Form 10-K when considering an investment decision with respect to our securities. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. Any of the events discussed in the risk factors below may occur. If they do, our business, results of operations, financial condition or liquidity could be materially adversely affected. In such an instance, the trading price of our securities could decline, and you might lose all or part of your investment.
If we do not successfully implement our strategic initiatives, our operating results, financial condition and liquidity may be materially adversely affected.
Volatile global industry conditions continued in 2015, and our business was impacted by trends that negatively affected the tire industry in general. These negative trends include economic weakness in Europe, recessionary economic conditions and political volatility in Latin America, particularly in Brazil and Venezuela, and slowing growth in Asia Pacific. Global tire industry demand continues to be difficult to predict. In addition, we were also impacted by the continued strengthening of the U.S. dollar against most foreign currencies. If these overall trends continue or worsen, then our operational and financial condition could be adversely affected.
In order to offset the impact of these trends, we have announced important strategic initiatives, such as our operational excellence and sales and marketing excellence initiatives, increasing our low-cost manufacturing capacity, reducing our high-cost manufacturing capacity, increasing sales in emerging markets, and improving the profitability of our EMEA segment. We are also undertaking significant capital investments in building, expanding and modernizing manufacturing facilities around the world, including a new manufacturing facility in San Luis Potosi, Mexico to supply the Americas. The failure to implement successfully our important strategic initiatives may materially adversely affect our operating results, financial condition and liquidity.
Our operational excellence initiatives are aimed at improving our manufacturing efficiency and creating an advantaged supply chain focused on reducing our total delivered costs, optimizing working capital levels and delivering best in industry customer service. Our sales and marketing excellence initiatives are intended to drive sustainable growth through standard processes and innovative solutions delivered to customers and consumers. If we fail to execute these initiatives successfully, we may fail to achieve our financial goals.
If economic and political conditions in emerging markets, such as Eastern Europe, the Middle East, Latin America, China and India, deteriorate significantly, we may not be able to increase our sales in emerging markets and our operating results, financial condition and liquidity could be materially adversely affected.
Our performance is also dependent on our ability to improve the volume and mix of higher margin tires we sell in our targeted market segments. In order to do so, we must be successful in developing, producing, marketing and selling products that consumers desire and that offer higher margins to us. Shifts in consumer demand away from higher margin tires could materially adversely affect our business. We are currently capacity constrained with respect to the production of certain higher margin tires, particularly in North America. We plan to alleviate these constraints by utilizing our global manufacturing footprint to meet the demand for our tires and by adding manufacturing capacity in the Americas, such as our new plant in San Luis Potosi, Mexico. However, in spite of these initiatives, we may not be able to meet all of the demand for certain of our higher margin tires, which could harm our competitive position and limit our growth.
We cannot assure you that our strategic initiatives will be successful. If not, we may not be able to achieve or sustain future profitability, which would impair our ability to meet our debt and other obligations and would otherwise negatively affect our operating results, financial condition and liquidity.
We face significant global competition and our market share could decline.
New tires are sold under highly competitive conditions throughout the world. We compete with other tire manufacturers on the basis of product design, performance, price and terms, reputation, warranty terms, customer service and consumer convenience. On a worldwide basis, we have two major competitors, Bridgestone (based in Japan) and Michelin (based in France), that have large shares of the markets of the countries in which they are based and are aggressively seeking to maintain or improve their worldwide market share. Other significant competitors include Continental, Cooper, Hankook, Kumho, Pirelli, SRI, Toyo, Yokohama and various regional tire manufacturers. Our competitors produce significant numbers of tires in low-cost countries, and have announced plans to further increase their production capacity.
Our ability to compete successfully will depend, in significant part, on our ability to continue to innovate and manufacture the types of tires demanded by consumers, and to reduce costs by such means as reducing excess and high-cost capacity, leveraging global purchasing, improving productivity, eliminating redundancies and increasing production at low-cost supply sources. If we are unable to compete successfully, our market share may decline, materially adversely affecting our results of operations and financial condition.

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We could be negatively impacted by the decision to impose tariffs on certain tires imported from China.
The imposition of tariffs on certain tires imported from China may reduce our flexibility to utilize our global manufacturing footprint to meet demand for our tires around the world. In addition, the imposition of tariffs in the United States may result in the Chinese tires subject to such tariffs being diverted to other regions of the world, such as Europe, Latin America or elsewhere in Asia, which could materially adversely affect our results of operations, financial condition and liquidity in those regions.
Our international operations have certain risks that may materially adversely affect our operating results, financial condition and liquidity.
We have manufacturing and distribution facilities throughout the world. Our international operations are subject to certain inherent risks, including:
•
exposure to local economic conditions;
•
adverse foreign currency fluctuations;
•
adverse currency exchange controls;
•
withholding taxes and restrictions on the withdrawal of foreign investment and earnings;
•
labor regulations;
•
government price and profit margin controls;
•
expropriations of property;
•
adverse changes in the diplomatic relations of foreign countries with the United States;
•
the potential instability of foreign governments;
•
hostility from local populations and insurrections;
•
risks of renegotiation or modification of existing agreements with governmental authorities;
•
export and import restrictions; and
•
other changes in laws or government policies.
The likelihood of such occurrences and their potential effect on us vary from country to country and are unpredictable. Certain regions, including Latin America, Asia, Eastern Europe, the Middle East and Africa, are inherently more economically and politically volatile and as a result, our business units that operate in these regions could be subject to significant fluctuations in sales and operating income from quarter to quarter. Because a significant percentage of our operating income in recent years has come from these regions, adverse fluctuations in the operating results in these regions could have a significant impact on our results of operations in future periods.
For example, since 2003, Venezuela has imposed currency exchange controls that establish the exchange rate between the Venezuelan bolivar fuerte and the U.S. dollar and restrict the ability to exchange bolivares fuertes for dollars. These restrictions have delayed and limited our ability to pay third-party and affiliated suppliers and to otherwise repatriate funds from Venezuela. In addition, other government regulations, such as price and profit margin controls and strict labor laws, have increasingly limited our ability to make and execute operational decisions at our Venezuelan subsidiary. The lack of currency exchangeability, combined with these other operating restrictions, have significantly limited our Venezuelan subsidiary’s ability to maintain normal production and control over its operations. As a result, we deconsolidated the operations of our Venezuelan subsidiary, recognized a pre-tax $646 million charge and began reporting its results using the cost method of accounting effective December 31, 2015.
In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include import and export laws, anti-competition laws, anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, and other local laws prohibiting corrupt payments to governmental officials, data privacy requirements, tax laws, and accounting, internal control and disclosure requirements. Violations of these laws and regulations could result in civil and criminal fines, penalties and sanctions against us, our officers or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our reputation, business and results of operations. In certain foreign jurisdictions, there is a higher risk of fraud or corruption and greater difficulty in maintaining effective internal controls and compliance programs. Although we have implemented policies and procedures designed to promote compliance with applicable laws and regulations, there can be no assurance that our employees, contractors or agents will not violate our policies or applicable laws and regulations.

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We have foreign currency translation and transaction risks that may materially adversely affect our operating results, financial condition and liquidity.
The financial position and results of operations of many of our international subsidiaries are initially recorded in various foreign currencies and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. The strengthening of the U.S. dollar against these foreign currencies ordinarily has a negative impact on our reported sales and operating margin (and conversely, the weakening of the U.S. dollar against these foreign currencies has a positive impact). For the year ended December 31, 2015 , foreign currency translation unfavorably affected sales by $1,563 million and unfavorably affected segment operating income by $145 million compared to the year ended December 31, 2014 . The volatility of currency exchange rates may materially adversely affect our operating results.
If we fail to extend or renegotiate our primary collective bargaining contracts with our labor unions as they expire from time to time, or if our unionized employees were to engage in a strike or other work stoppage or interruption, our business, results of operations, financial condition and liquidity could be materially adversely affected.
We are a party to collective bargaining contracts with our labor unions, which represent a significant number of our employees. Our master collective bargaining agreement with the USW covers approximately 6,700 employees in the United States at December 31, 2015 , and expires July 29, 2017. In addition, approximately 21,000 of our employees outside of the United States are covered by union contracts that have expired or are expiring in 2016, primarily in Germany, Brazil and South Africa. Although we believe that our relations with our employees are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire from time to time. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if our unionized workers engage in a strike or other work stoppage or interruption, we could experience a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material adverse effect on our business, results of operations, financial condition and liquidity.
Our long term ability to meet our obligations, to repay maturing indebtedness or to implement strategic initiatives may be dependent on our ability to access capital markets in the future and to improve our operating results.
The adequacy of our liquidity depends on our ability to achieve an appropriate combination of operating improvements, financing from third parties and access to capital markets. We may need to undertake additional financing actions in the capital markets in order to ensure that our future liquidity requirements are addressed or to implement strategic initiatives. These actions may include the issuance of additional debt or equity, or the factoring of our accounts receivable.
Our access to the capital markets cannot be assured and is dependent on, among other things, the ability and willingness of financial institutions to extend credit on terms that are acceptable to us or our suppliers, or to honor future draws on our existing lines of credit, and the degree of success we have in implementing our strategic initiatives. Over the past several years, we have increased our use of supplier financing programs and the factoring of our accounts receivable in order to improve our working capital efficiency and reduce our costs. If these programs become unavailable or less attractive to us or our suppliers, our liquidity could be adversely affected.
Future liquidity requirements, or our inability to access cash deposits or make draws on our lines of credit, also may make it necessary for us to incur additional debt. A substantial portion of our assets is subject to liens securing our indebtedness. As a result, we are limited in our ability to pledge our remaining assets as security for additional secured indebtedness.
Our inability to access the capital markets or incur additional debt in the future could have a material adverse effect on our liquidity and operations, and could require us to consider further measures, including deferring planned capital expenditures, reducing discretionary spending, selling additional assets and restructuring existing debt.
Financial difficulties, work stoppages, supply disruptions or economic conditions affecting our major OE customers, dealers or suppliers could harm our business.
Volatile global industry conditions continued in 2015, particularly in EMEA and Latin America. As a result of these industry conditions, automotive vehicle production and global tire industry demand continues to be difficult to predict.
Although sales to our OE customers account for approximately 20% of our net sales, demand for our products by OE customers and production levels at our facilities are impacted by automotive vehicle production. We may experience future declines in sales volume due to declines in new vehicle sales, the discontinuation or sale of certain OE brands, platforms or programs, increased competition, or weakness in the demand for replacement tires, which could result in us incurring under-absorbed fixed costs at our production facilities or slowing the rate at which we are able to recover those costs.
Automotive production can also be affected by labor relation issues, financial difficulties or supply disruptions. Our OE customers could experience production disruptions resulting from their own or supplier labor, financial or supply difficulties. Such events may cause an OE customer to reduce or suspend vehicle production. As a result, an OE customer could halt or significantly reduce purchases of our products, which would harm our results of operations, financial condition and liquidity.

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In addition, the bankruptcy, restructuring or consolidation of one or more of our major OE customers, dealers or suppliers could result in the write-off of accounts receivable, a reduction in purchases of our products or a supply disruption to our facilities, which could negatively affect our results of operations, financial condition and liquidity.
Our capital expenditures may not be adequate to maintain our competitive position and may not be implemented in a timely or cost-effective manner.
Our capital expenditures are limited by our liquidity and capital resources and the amount we have available for capital spending is limited by the need to pay our other expenses and to maintain adequate cash reserves and borrowing capacity to meet unexpected demands that may arise. We believe that our ratio of capital expenditures to sales is lower than the comparable ratio for our principal competitors.
Productivity improvements and manufacturing cost improvements may be required to offset potential increases in labor and raw material costs and competitive price pressures. In addition, as part of our strategy to increase the percentage of tires that are produced at our lower-cost production facilities and to increase our capacity to produce higher margin tires, we may need to modernize or expand our facilities. We are currently building a new manufacturing facility in San Luis Potosi, Mexico and are undertaking significant expansion and modernization projects at certain of our manufacturing facilities in the United States, Brazil, Germany and China.
We may not have sufficient resources to implement planned capital expenditures with minimal disruption to our existing manufacturing operations, or within desired time frames and budgets. Any disruption to our operations, delay in implementing capital improvements or unexpected costs may materially adversely affect our business and results of operations.
If we are unable to make sufficient capital expenditures, or to maximize the efficiency of the capital expenditures we do make, we may be unable to achieve productivity improvements, which may harm our competitive position, or to manufacture the products necessary to compete successfully in our targeted market segments. In addition, plant construction and modernization may temporarily disrupt our manufacturing operations and lead to temporary increases in our costs.
Raw material and energy costs may materially adversely affect our operating results and financial condition.
Raw material costs have historically been volatile, and we may experience increases in the prices of natural and synthetic rubber, carbon black and petrochemical-based commodities. Market conditions or contractual obligations may prevent us from passing any such increased costs on to our customers through timely price increases. Additionally, higher raw material and energy costs around the world may offset our efforts to reduce our cost structure. As a result, higher raw material and energy costs could result in declining margins and operating results and adversely affect our financial condition. The volatility of raw material costs may cause our margins, operating results and liquidity to fluctuate. In addition, lower raw material costs may put downward pressure on the price of tires, which could ultimately reduce our margins and adversely affect our results of operations.
We have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise materially adversely affect our financial health.
We have a substantial amount of debt. As of December 31, 2015 , our debt (including capital leases) on a consolidated basis was approximately $5.8 billion. Our substantial amount of debt and other obligations could have important consequences. For example, it could:
•
make it more difficult for us to satisfy our obligations;
•
impair our ability to obtain financing in the future for working capital, capital expenditures, research and development, acquisitions or general corporate requirements;
•
increase our vulnerability to general adverse economic and industry conditions;
•
limit our ability to use cash flows from operating activities in other areas of our business or to return cash to shareholders because we would need to dedicate a substantial portion of these funds for payments on our indebtedness;
•
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
•
place us at a competitive disadvantage compared to our competitors.
The agreements governing our debt, including our credit agreements, limit, but do not prohibit, us from incurring additional debt and we may incur a significant amount of additional debt in the future, including additional secured debt. If new debt is added to our current debt levels, our ability to satisfy our debt obligations may become more limited.
Our ability to make scheduled payments on, or to refinance, our debt and other obligations will depend on our financial and operating performance, which, in turn, is subject to our ability to implement our strategic initiatives, prevailing economic conditions and certain financial, business and other factors beyond our control. If our cash flow and capital resources are insufficient to fund our debt service and other obligations, we may be forced to reduce or eliminate our share repurchase program and the dividend on our common stock, reduce or delay expansion plans and capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. We cannot assure you that our operating performance, cash flow and capital resources will be

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sufficient to pay our debt obligations when they become due. We cannot assure you that we would be able to dispose of material assets or operations or restructure our debt or other obligations if necessary or, even if we were able to take such actions, that we could do so on terms that are acceptable to us.
Any failure to be in compliance with any material provision or covenant of our debt instruments, or a material reduction in the borrowing base under our revolving credit facility, could have a material adverse effect on our liquidity and operations.
The indentures and other agreements governing our secured credit facilities, senior unsecured notes and our other outstanding indebtedness impose significant operating and financial restrictions on us. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. These restrictions limit our ability to, among other things:
•
incur additional debt or issue redeemable preferred stock;
•
pay dividends, repurchase shares or make certain other restricted payments or investments;
•
incur liens;
•
sell assets;
•
incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us;
•
enter into affiliate transactions;
•
engage in sale/leaseback transactions; and
•
engage in certain mergers or consolidations or transfers of substantially all of our assets.
Availability under our first lien revolving credit facility is subject to a borrowing base, which is based on eligible accounts receivable and inventory. To the extent that our eligible accounts receivable and inventory decline, our borrowing base will decrease and the availability under that facility may decrease below its stated amount. In addition, if at any time the amount of outstanding borrowings and letters of credit under that facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess.
Our ability to comply with these covenants or to maintain our borrowing base may be affected by events beyond our control, including deteriorating economic conditions, and these events could require us to seek waivers or amendments of covenants or alternative sources of financing or to reduce expenditures. We cannot assure you that such waivers, amendments or alternative financing could be obtained, or if obtained, would be on terms acceptable to us.
A breach of any of the covenants or restrictions contained in any of our existing or future financing agreements, including the financial covenants in our secured credit facilities, could result in an event of default under those agreements. Such a default could allow the lenders under our financing agreements, if the agreements so provide, to discontinue lending, to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies, and/or to declare all borrowings outstanding thereunder to be due and payable. In addition, the lenders could terminate any commitments they have to provide us with further funds. If any of these events occur, we cannot assure you that we will have sufficient funds available to pay in full the total amount of obligations that become due as a result of any such acceleration, or that we will be able to find additional or alternative financing to refinance any such accelerated obligations. Even if we obtain additional or alternative financing, we cannot assure you that it would be on terms that would be acceptable to us.
We cannot assure you that we will be able to remain in compliance with the covenants to which we are subject in the future and, if we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Certain of our borrowings are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, which would require us to use more of our available cash to service our indebtedness. There can be no assurance that we will be able to enter into swap agreements or other hedging arrangements in the future, or that existing or future hedging arrangements will offset increases in interest rates. As of December 31, 2015 , we had $1,769 million of variable rate debt outstanding.
We have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales.
We operate with significant operating and financial leverage. Significant portions of our manufacturing, selling, administrative and general expenses are fixed costs that neither increase nor decrease proportionately with sales. In addition, a significant portion of our interest expense is fixed. There can be no assurance that we would be able to reduce our fixed costs proportionately in response to a decline in our net sales and therefore our competitiveness could be significantly impacted. As a result, a decline in our net sales could result in a higher percentage decline in our income from operations and net income.

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We may incur significant costs in connection with our contingent liabilities and tax matters.
We have significant reserves for contingent liabilities and tax matters. The major categories of our contingent liabilities include workers' compensation and other employment-related claims, product liability and other tort claims, including asbestos claims, and environmental matters. Our recorded liabilities and estimates of reasonably possible losses for our contingent liabilities are based on our assessment of potential liability using the information available to us at the time and, where applicable, any past experience and recent and current trends with respect to similar matters. Our contingent liabilities are subject to inherent uncertainties, and unfavorable judicial or administrative decisions could occur that we did not anticipate. Such an unfavorable decision could include monetary damages, fines or other penalties or an injunction prohibiting us from taking certain actions or selling certain products. If such an unfavorable decision were to occur, it could result in a material adverse impact on our financial position and results of operations in the period in which the decision occurs, or in future periods.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including with respect to transfer pricing. While we apply consistent transfer pricing policies and practices globally, support transfer prices through economic studies, seek advance pricing agreements and joint audits to the extent possible and believe our transfer prices to be appropriate, such transfer prices, and related interpretations of tax laws, are occasionally challenged by various taxing authorities globally. We have received various tax assessments challenging our interpretations of applicable tax laws in various jurisdictions. Although we believe we have complied with applicable tax laws, have strong positions and defenses and have historically been successful in defending such claims, our results of operations could be materially adversely affected in the case we are unsuccessful in the defense of existing or future claims.
If we wish to appeal any future adverse judgment in any of these proceedings, we may be required to post an appeal bond with the relevant court. If we were subject to a significant adverse judgment or experienced an interruption or reduction in the availability of bonding capacity, we may be required to provide letters of credit or post cash collateral, which may have a material adverse effect on our liquidity.
For further information regarding our contingent liabilities and tax matters, refer to the Note to the Consolidated Financial Statements, No.  19 , Commitments and Contingent Liabilities. For further information regarding our accounting policies with respect to certain of our contingent liabilities and uncertain income tax positions, refer to “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies.”
We are subject to extensive government regulations that may materially adversely affect our operating results.
We are subject to regulation by the Department of Transportation through the National Highway Traffic Safety Administration, or NHTSA, which has established various standards and regulations applicable to tires sold in the United States and tires sold in a foreign country that are identical or substantially similar to tires sold in the United States. NHTSA has the authority to order the recall of automotive products, including tires, having safety-related defects.
The Transportation Recall Enhancement, Accountability, and Documentation Act, or TREAD Act, imposes numerous requirements with respect to the early warning reporting of warranty claims, property damage claims, and bodily injury and fatality claims and also requires tire manufacturers, among other things, to comply with revised and more rigorous tire testing standards. Compliance with the TREAD Act regulations has increased the cost of producing and distributing tires in the United States. In addition, while we believe that our tires are free from design and manufacturing defects, it is possible that a recall of our tires, under the TREAD Act or otherwise, could occur in the future. A substantial recall could have a material adverse effect on our reputation, operating results and financial condition.
In addition, as required by the Energy Independence and Security Act of 2007, NHTSA will establish a national tire fuel efficiency consumer information program. When the related rule-making process is completed, certain tires sold in the United States will be required to be rated for rolling resistance, traction and tread wear. While the Federal law will preempt state tire fuel efficiency laws adopted after January 1, 2006, we may become subject to additional tire fuel efficiency legislation, either in the United States or other countries.
Our European operations are subject to regulation by the European Union. In 2009, two regulations, the Tire Safety Regulation and the Tire Labeling Regulation, applicable to tires sold in the European Union were adopted. The Tire Safety Regulation sets performance standards that tires for cars and light and commercial trucks need to meet for rolling resistance, wet grip braking (passenger car tires only) and noise in order to be sold in the European Union, and became effective beginning in 2012, with continuing phases that will become effective through 2020. The Tire Labeling Regulation applies to all passenger car, light truck and commercial truck tires and requires that consumers be informed about the tire's fuel efficiency, wet grip and noise characteristics. Other countries, such as Brazil, have also adopted tire labeling regulations, and additional countries may also introduce similar regulations in the future.
Tires produced or sold in Europe also have to comply with various other standards, including environmental laws such as REACH (Registration, Evaluation, Authorisation and Restriction of Chemical Substances), which regulates the use of chemicals in the

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European Union. For example, REACH prohibits the use of highly aromatic oils in tires, which were used as compounding components to improve certain performance characteristics.
These U.S. and European regulations, rules adopted to implement these regulations, or other similar regulations that may be adopted in the United States, Europe or elsewhere in the future may require us to alter or increase our capital spending and research and development plans or cease the production of certain tires, which could have a material adverse effect on our operating results.
Laws and regulations governing environmental and occupational safety and health are complicated, change frequently and have tended to become stricter over time. As a manufacturing company, we are subject to these laws and regulations both inside and outside the United States. We may not be in complete compliance with such laws and regulations at all times. Our costs or liabilities relating to them may be more than the amount we have reserved, and that difference may be material.
In addition, our manufacturing facilities may become subject to further limitations on the emission of “greenhouse gases” due to public policy concerns regarding climate change issues or other environmental or health and safety concerns. While the form of any additional regulations cannot be predicted, a “cap-and-trade” system similar to the one adopted in the European Union could be adopted in the United States. Any such “cap-and-trade” system (including the system currently in place in the European Union) or other limitations imposed on the emission of “greenhouse gases” could require us to increase our capital expenditures, use our cash to acquire emission credits or restructure our manufacturing operations, which could have a material adverse effect on our operating results, financial condition and liquidity.
Compliance with the laws and regulations described above or any of the myriad of applicable foreign, Federal, state and local laws and regulations currently in effect or that may be adopted in the future could materially adversely affect our competitive position, operating results, financial condition and liquidity.
We may be adversely affected by any disruption in, or failure of, our information technology systems.
We rely upon the capacity, reliability and security of our information technology, or IT, systems across all of our major business functions, including our research and development, manufacturing, retail, financial and administrative functions. We also face the challenge of supporting our older systems and implementing upgrades when necessary. Our security measures are focused on the prevention, detection and remediation of damage from computer viruses, unauthorized access, cyber attack, natural disasters and other similar disruptions. We may incur significant costs in order to implement the security measures that we feel are necessary to protect our IT systems. However, our IT systems may remain vulnerable to damage despite our implementation of security measures that we deem to be appropriate.
Any system failure, accident or security breach involving our IT systems could result in disruptions to our operations. A breach in the security of our IT systems could include the theft of our intellectual property or trade secrets, negatively impact our manufacturing or retail operations, or result in the compromise of personal information of our employees, customers or suppliers. While we have, from time to time, experienced system failures, accidents and security breaches involving our IT systems, these incidents have not had a material impact on our operations, and we are not aware of any resulting theft, loss or disclosure of, or damage to, material data or confidential information. To the extent that any system failure, accident or security breach results in material disruptions to our operations or the theft, loss or disclosure of, or damage to, material data or confidential information, our reputation, business, results of operations and financial condition could be materially adversely affected.
If we are unable to attract and retain key personnel our business could be materially adversely affected.
Our business substantially depends on the continued service of key members of our management. The loss of the services of a significant number of members of our management could have a material adverse effect on our business. Our future success will also depend on our ability to attract and retain highly skilled personnel, such as engineering, marketing and senior management professionals. Competition for these employees is intense, and we could experience difficulty from time to time in hiring and retaining the personnel necessary to support our business. If we do not succeed in retaining our current employees and attracting new high quality employees, our business could be materially adversely affected.
We may be impacted by economic and supply disruptions associated with events beyond our control, such as war, acts of terror, political unrest, public health concerns, labor disputes or natural disasters.
We manage businesses and facilities worldwide. Our facilities and operations, and the facilities and operations of our suppliers and customers, could be disrupted by events beyond our control, such as war, acts of terror, political unrest, public health concerns, labor disputes or natural disasters. Any such disruption could cause delays in the production and distribution of our products and the loss of sales and customers. We may not be insured against all such potential losses and, if insured, the insurance proceeds that we receive may not adequately compensate us for all of our losses.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.
None.

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ITEM 2.
PROPERTIES.
We manufacture our products in 49 manufacturing facilities located around the world including 14 plants in the United States.
N ORTH A MERICA M ANUFACTURING F ACILITIES .   North America owns or leases and operates 17 manufacturing facilities in the United States and Canada.
• 8
tire plants ( 6 in the United States and 2 in Canada),
• 4
chemical plants,
• 1
tire mold plant,
• 1
tire retread plant,
• 2
aviation retread plants, and
• 1
mix plant in Canada.
These facilities have floor space aggregating approximately 19  million square feet.
E UROPE , M IDDLE E AST A ND A FRICA M ANUFACTURING F ACILITIES .   EMEA owns or leases and operates 17 manufacturing facilities in 9 countries, including:
• 14
tire plants,
• 1
tire mold and tire manufacturing machine facility,
• 1
aviation retread plant, and
• 1
mix plant.
These facilities have floor space aggregating approximately 19  million square feet.
A SIA P ACIFIC M ANUFACTURING F ACILITIES .   Asia Pacific owns and operates 8 manufacturing facilities in 6 countries, including 7 tire plants and 1 aviation retread plant. These facilities have floor space aggregating approximately 7  million square feet.
L ATIN A MERICA M ANUFACTURING F ACILITIES .   Latin America owns or leases and operates 7 manufacturing facilities in 5 countries, including 5 tire plants and 2 tire retread plants. These facilities have floor space aggregating approximately 5  million square feet.
P LANT U TILIZATION .   Our worldwide tire capacity utilization rate was approximately 86% during 2015 compared to approximately 85% in 2014 and 80% in 2013 . The reported capacity utilization is an overall average for the Company. Our utilization rate can vary significantly between product lines, such as high-value-added and low-value-added tires or consumer and commercial tires, and can also vary between business segments.
O THER F ACILITIES .   We also own and operate two research and development facilities and technical centers, and seven tire proving grounds. We lease our Corporate and North America headquarters, research and development facility and technical center in Akron, Ohio. We operate approximately 1,100 retail outlets for the sale of our tires to consumer and commercial customers, approximately 50 tire retreading facilities and approximately 160 warehouse distribution facilities. Substantially all of these facilities are leased. We do not consider any one of these leased properties to be material to our operations. For additional information regarding leased properties, refer to the Notes to the Consolidated Financial Statements No. 13, Property, Plant and Equipment and No. 14, Leased Assets.


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ITEM 3.
LEGAL PROCEEDINGS.
Asbestos Litigation
We are currently one of numerous defendants in legal proceedings in certain state and Federal courts involving approximately 67,400 claimants at December 31, 2015 relating to their alleged exposure to materials containing asbestos in products allegedly manufactured by us or asbestos materials present at our facilities. We manufactured, among other things, rubber coated asbestos sheet gasket materials from 1914 through 1973 and aircraft brake assemblies containing asbestos materials prior to 1987. Some of the claimants are independent contractors or their employees who allege exposure to asbestos while working at certain of our facilities. It is expected that in a substantial portion of these cases there will be no evidence of exposure to a Goodyear manufactured product containing asbestos or asbestos in our facilities. The amount expended by us and our insurers on defense and claim resolution was approximately $19 million during 2015 . The plaintiffs in the pending cases allege that they were exposed to asbestos and, as a result of such exposure, suffer from various respiratory diseases, including in some cases mesothelioma and lung cancer. The plaintiffs are seeking unspecified actual and punitive damages and other relief. For additional information on asbestos litigation, refer to the Note to the Consolidated Financial Statements No. 19, Commitments and Contingent Liabilities.
Amiens Labor Claims
Approximately 800 former employees of the closed Amiens, France manufacturing facility have asserted wrongful termination or other claims totaling €111 million ( $121 million ) against Goodyear Dunlop Tires France. We intend to vigorously defend ourselves against these claims, and any additional claims that may be asserted against us, and cannot estimate the amounts, if any, that we may ultimately pay in respect of such claims.
Other Matters
In addition to the legal proceedings described above, various other legal actions, indirect tax assessments, claims and governmental investigations and proceedings covering a wide range of matters are pending against us, including claims and proceedings relating to several waste disposal sites that have been identified by the United States Environmental Protection Agency and similar agencies of various states for remedial investigation and cleanup, which sites were allegedly used by us in the past for the disposal of industrial waste materials. Based on available information, we do not consider any such action, assessment, claim, investigation or proceeding to be material, within the meaning of that term as used in Item 103 of Regulation S-K and the instructions thereto. For additional information regarding our legal proceedings, refer to the Note to the Consolidated Financial Statements No. 19, Commitments and Contingent Liabilities.

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PART II.

ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The principal market for our common stock is the NASDAQ Global Select Market (Stock Exchange Symbol: GT).
Information relating to the high and low sale prices of shares of our common stock and dividends declared on our common stock appears under the caption “Quarterly Data and Market Price Information” in Item 8 of this Annual Report at page 117, and is incorporated herein by reference. Under our primary credit facilities we are permitted to pay dividends on our common stock as long as no default will have occurred and be continuing, additional indebtedness can be incurred under the credit facilities following the payment, and certain financial tests are satisfied. On October 6, 2015, we announced an increase in the quarterly cash dividend on our common stock to $0.07 per share from $0.06 per share, beginning on December 1, 2015. At December 31, 2015 , there were 15,733 record holders of the 267,017,982 shares of our common stock then outstanding.
The following table presents information with respect to repurchases of common stock made by us during the three months ended December 31, 2015 .
Period
 
Total Number of Shares Purchased (1)
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value
of Shares that May
Yet Be Purchased
Under the Plans or Programs (2)
10/1/15-10/31/15
 
—

 
$
—

 
—

 
$
136,702,685

11/1/15-11/30/15
 
1,268,983

 
33.20

 
1,268,983

 
94,572,552

12/1/15-12/31/15
 
1,701,488

 
34.04

 
1,701,488

 
36,645,866

Total
 
2,970,471

 
$
33.68

 
2,970,471

 


(1)
Total number of shares purchased as part of our common stock repurchase program and delivered to us by employees as payment for the exercise price of stock options and the withholding taxes due upon the exercise of stock options or the vesting or payment of stock awards.
(2)
On September 18, 2013, the Board of Directors authorized $100 million for use in our common stock repurchase program. On May 27, 2014, the Board of Directors approved an increase in that authorization to $450 million. On February 4, 2016, the Board of Directors approved a further increase in that authorization to $1.1 billion. This program expires on December 31, 2018. We intend to repurchase shares of common stock in open market transactions in order to offset new shares issued under equity compensation programs and to provide for additional shareholder returns. During the three month period ended December 31, 2015, we repurchased 2,970,471 shares at an average price of $33.68 per share, or $100 million in the aggregate.
Set forth in the table below is certain information regarding the number of shares of our common stock that were subject to outstanding stock options or other compensation plan awards at December 31, 2015.
EQUITY COMPENSATION PLAN INFORMATION
Plan Category
 
Number of Shares to be
Issued upon Exercise of
Outstanding Options, Warrants and Rights
 
Weighted Average
Exercise Price of
Outstanding Options, Warrants and Rights
 
Number of Shares
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding Shares Reflected in Column (a))
 
 
 
(a)
 
 
 
 
 
Equity compensation plans approved by shareholders
 
7,782,696

 
$
17.15

 
8,645,222

(1)  
Equity compensation plans not approved by shareholders
 
—

 
—

 
—

 
Total
 
7,782,696

 
$
17.15

 
8,645,222

 
(1)
Under our equity-based compensation plans, up to a maximum of 969,530 performance shares in respect of performance periods ending on or subsequent to December 31, 2015, 103,492 shares of time-vested restricted stock and 673,093 restricted stock units have been awarded. In addition, up to 36,854 shares of common stock may be issued in respect of the deferred payout of awards made under our equity compensation plans. The number of performance shares indicated assumes the maximum possible payout that may be earned during the relevant performance periods.


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ITEM 6.
SELECTED FINANCIAL DATA.
 
Year Ended December 31, (1)
(In millions, except per share amounts)
2015 (2)
 
2014 (3)
 
2013 (4)
 
2012 (5)
 
2011 (6)
Net Sales
$
16,443

 
$
18,138

 
$
19,540

 
$
20,992

 
$
22,767

Net Income (Loss)
376

 
2,521

 
675

 
237

 
417

Less: Minority Shareholders’ Net Income
69

 
69

 
46

 
25

 
74

Goodyear Net Income (Loss)
$
307

 
$
2,452

 
$
629

 
$
212

 
$
343

  Less: Preferred Stock Dividends
—

 
7

 
29

 
29

 
22

Goodyear Net Income (Loss) available to Common Shareholders
$
307

 
$
2,445

 
$
600

 
$
183

 
$
321

Goodyear Net Income (Loss) available to Common Shareholders — Per Share of Common Stock:
 
 
 

 
 

 
 

 
 

  Basic
$
1.14

 
$
9.13

 
$
2.44

 
$
0.75

 
$
1.32

 
 
 
 

 
 

 
 

 
 

  Diluted
$
1.12

 
$
8.78

 
$
2.28

 
$
0.74

 
$
1.26

 
 
 
 
 
 
 
 
 
 
Cash Dividends Declared per Common Share
$
0.25

 
$
0.22

 
$
0.05

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
Total Assets
$
16,439

 
$
18,044

 
$
17,437

 
$
16,844

 
$
17,556

Long Term Debt and Capital Leases Due Within One Year
587

 
148

 
73

 
96

 
156

Long Term Debt and Capital Leases
5,120

 
6,216

 
6,162

 
4,888

 
4,789

Goodyear Shareholders’ Equity
3,920

 
3,610

 
1,606

 
370

 
749

Total Shareholders’ Equity
4,142

 
3,845

 
1,868

 
625

 
1,017

 
 
 
 
 
 
 
 
 
 

(1)
Refer to “Basis of Presentation” and “Principles of Consolidation” in the Note to the Consolidated Financial Statements No. 1, Accounting Policies.
(2)
Goodyear net income in 2015 included net charges after-tax and minority of $794 million due to the loss on the deconsolidation of our Venezuelan subsidiary; rationalization charges, including accelerated depreciation and asset write-offs; settlement charges related to pension plans in North America; charges related to the early repayment of debt; and charges related to labor claims with respect to a previously closed facility in Greece. Goodyear net income in 2015 also included net gains after-tax and minority of $195 million resulting from royalty income related to the termination of a licensing agreement; the gain on the dissolution of the global alliance with SRI; discrete income tax items; insurance recoveries for claims related to discontinued products; and the settlement of certain indirect tax claims in Latin America.
(3)
Goodyear net income in 2014 included net charges after-tax and minority of $323 million due to changes in the exchange rate of the Venezuelan bolivar fuerte against the U.S. dollar; rationalization charges, including accelerated depreciation and asset write-offs; curtailment and settlement losses related to pension plans in North America and the UK; charges related to labor claims with respect to a previously closed facility in Greece; charges related to a government investigation in Africa; and the settlement of certain indirect tax claims in Latin America. Goodyear net income in 2014 also included net gains after-tax and minority of $1,985 million resulting from discrete income tax items, including the release of substantially all of the valuation allowance on our net deferred U.S. tax assets; and net gains on assets sales.
(4)
Goodyear net income in 2013 included net charges after-tax and minority of $156 million due to the devaluation of the Venezuelan bolivar fuerte against the U.S. dollar; rationalization charges, including accelerated depreciation and asset write-offs; and charges related to labor claims with respect to a previously closed facility in Greece. Goodyear net income in 2013 also included net gains after-tax and minority of $59 million resulting from certain foreign government tax incentives, tax law changes and interest earned on favorable tax judgments; insurance recoveries for a flood in Thailand; and gains on asset sales.
(5)
Goodyear net income in 2012 included net charges after-tax and minority of $325 million due to rationalization charges, including accelerated depreciation and asset write-offs; charges related to the early redemption of debt and a credit facility amendment and restatement; charges related to labor claims with respect to a previously closed facility in Greece; charges related to a tornado in the United States; settlement charges related to a pension plan; discrete charges related to income taxes; and charges related to a strike in South Africa. Goodyear net income in 2012 also included net gains after-tax and minority of $35 million related to insurance recoveries for a flood in Thailand and gains on asset sales.

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(6)
Goodyear net income in 2011 included net charges after-tax and minority of $217 million due to rationalization charges, including accelerated depreciation and asset write-offs; charges related to the early redemption of debt; charges related to a flood in Thailand; and charges related to a tornado in the United States. Goodyear net income in 2011 also included net gains after-tax and minority of $51 million from the benefit of certain tax adjustments and gains on asset sales.


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
The Goodyear Tire & Rubber Company is one of the world’s leading manufacturers of tires, with one of the most recognizable brand names in the world and operations in most regions of the world. We have a broad global footprint with 49 manufacturing facilities in 22 countries, including the United States. Through December 31, 2015, we operated our business through four operating segments representing our regional tire businesses: North America; Europe, Middle East and Africa; Asia Pacific; and Latin America.
Effective January 1, 2016, we combined our North America and Latin America strategic business units into one Americas strategic business unit. We have combined the North America and Latin America reportable segments effective on this date to align with the new organizational structure and the basis used for reporting to our Chief Executive Officer beginning in 2016. Our first quarter 2016 Form 10-Q will reflect the new segment structure with prior periods recast for comparable disclosure.
Volatile global industry conditions continued in 2015, including economic weakness in Europe, recessionary economic conditions and political volatility in Latin America, particularly in Brazil and Venezuela, and slowing growth in Asia Pacific. In addition, we were impacted by the continued strengthening of the U.S. dollar against most foreign currencies.
Despite these challenging industry and economic conditions, we produced record segment operating income of $2,022 million in 2015, including record segment operating income of $1,108 million in North America and $319 million in Asia Pacific. Our 2015 results reflect a 2.6% increase in tire unit shipments compared to 2014. In 2015, excluding Venezuela, we realized approximately $369 million of cost savings, including raw material cost saving measures of approximately $228 million, which exceeded the impact of general inflation. Our raw material costs, including cost saving measures, decreased by approximately 11% in 2015 compared to 2014.
In the second quarter of 2015, we announced that we selected San Luis Potosi, Mexico as the site for our new consumer tire factory to serve customers in the Americas. The new factory, combined with investments in our existing factories, will help us meet the demand for our products in the Americas. We expect the new factory to begin production in 2017.
On October 1, 2015, we completed the dissolution of our global alliance with SRI in accordance with the terms and conditions set forth in the Framework Agreement, dated as of June 4, 2015, by and between us and SRI. For further information, refer to “Item 1. Business — Business of Goodyear — Dissolution of Global Alliance with Sumitomo Rubber Industries.”
We also took several steps throughout 2015 to proactively manage our balance sheet, liquidity needs and interest expense, including the amendment and restatement of our European revolving credit facility, the repricing of and $600 million of repayments on our second lien term loan, and the refinancing of $1.0 billion of senior notes and €250 million of GDTE senior notes. These actions will result in aggregate annualized interest savings of approximately $65 million, including $55 million in 2016. For further information, refer to “Liquidity and Capital Resources.”
Net sales were $16,443 million in 2015 , compared to $18,138 million in 2014 . Net sales decreased in 2015 due to unfavorable foreign currency translation, primarily in EMEA, and lower sales in other tire-related businesses, primarily third-party chemical sales in North America. These declines were partially offset by higher tire unit volume, primarily in Asia Pacific.
Goodyear net income in 2015 was $307 million , compared to Goodyear net income of $2,452 million in 2014 , and Goodyear net income available to common shareholders was $307 million , or $1.12 per diluted share, compared to Goodyear net income available to common shareholders of $2,445 million , or $8.78 per diluted share, in 2014 . The decrease in Goodyear net income in 2015 compared to 2014 was primarily driven by an increase in income tax expense in 2015 as a result of the reversal of the valuation allowance on our U.S. deferred tax assets in the fourth quarter of 2014 and the loss on the deconsolidation of our Venezuelan subsidiary, partially offset by the improvement in segment operating income and Other (Income) Expense. Other (Income) Expense in 2015 included increased royalty income due to the termination of a licensing agreement associated with the sale of our former Engineered Products business, the gain on the dissolution of the global alliance with SRI and a benefit in general and product liability — discontinued products from the recovery of past costs from an asbestos insurer and changes in assumptions for probable insurance recoveries for asbestos claims.

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Our total segment operating income for 2015 was $2,022 million , compared to $1,712 million in 2014 . The $310 million, or 18.1%, increase in segment operating income was due primarily to a decline in raw material costs of $594 million, which more than offset the impact of higher conversion costs of $149 million, unfavorable foreign currency translation of $145 million and higher selling, administrative and general expense ("SAG") of $70 million. Segment operating income also benefited by an improvement in volume of $74 million. Refer to "Results of Operations — Segment Information” for additional information.
In order to drive future growth and address the volatile economic environment, we remain focused on our key strategies:
•
Continuing to focus on market-back product development;
•
Taking a selective approach to the market, targeting profitable segments where we have competitive advantages;
•
Improving our manufacturing efficiency and creating an advantaged supply chain focused on reducing our total delivered costs, optimizing working capital levels and delivering best in industry customer service;
•
Focusing on cash flow to provide funding for our capital allocation plan described below; and
•
Building top talent and teams.
On February 9, 2016, we announced a $650 million increase in our share repurchase program, bringing the total authorized amount under that program to $1.1 billion. Additionally, effective December 1, 2015, we increased the quarterly cash dividend on our common stock from $0.06 per share to $0.07 per share. Our capital allocation plan also provides for capital expenditures, debt repayments and pension funding, and restructuring payments. Refer to “Liquidity and Capital Resources — Overview” for additional information.
Pension and Benefit Plans
At December 31, 2015, our unfunded global pension liability was $642 million, compared to $714 million at December 31, 2014. As a result of the deconsolidation of our Venezuelan subsidiary, the December 31, 2015 unfunded global pension liability excludes $80 million of pension liabilities related to our Venezuela pension plan. The unfunded global pension liability of $714 million at December 31, 2014 included $43 million related to Venezuela.
Our U.S. pension strategy includes the accelerated funding of pension plans in conjunction with significantly reducing exposure in the investment portfolio of those plans to future equity market movements. The fixed income investments held for these plans are designed to offset the subsequent impact of discount rate movements on the plans’ benefit obligations so that the funded status remains stable. The strategy also provides for the opportunistic settling of pension obligations when conditions warrant.
During 2013 and 2014, we contributed $2,035 million to fully fund our U.S. pension plans. Consistent with our pension strategy, we transitioned those plans’ asset allocations to a portfolio of substantially all fixed income securities designed to offset subsequent changes in discount rates. As a result of the full funding of our hourly U.S. pension plans in 2014, the pension benefits for hourly associates were frozen in 2014, and these associates now receive Company contributions to a defined contribution plan. Our salaried U.S. pension plans were previously frozen.
During 2015, we completed programs to offer lump sums over a limited time to certain former employees in our U.S. pension plans. Payments of $190 million related to this offer were made from existing plan assets to approximately 7,000 former employees who elected to receive a lump sum. As a result, total lump sum payments from these plans exceeded annual service and interest cost in 2015; therefore, we recognized a pre-tax corporate pension settlement charge of $137 million in the fourth quarter of 2015.
These actions continue to provide stability to our funded status, improve our earnings and operating cash flow, and provide greater transparency to our underlying tire business.
Net actuarial losses in Accumulated Other Comprehensive Loss (“AOCL”) related to the U.S. pension plans decreased by $342 million during 2015. The net decrease was due to the immediate recognition of $386 million in AOCL from the sale of GDTNA and pension settlement charges as well as the amortization of $106 million in net periodic cost, partially offset by an increase of $150 million due to actuarial losses experienced during 2015, primarily related to 2015 actual returns on plan assets below our assumed long-term rate of return, reflecting the impact of increases in interest rates on our portfolio of fixed income securities.
Globally we expect our 2016 net periodic pension cost to be approximately $65 million to $85 million, compared to $135 million in 2015. The decrease is primarily due to a change in our method of measuring service and interest costs for pension plans that utilize a yield curve approach and the deconsolidation of our Venezuelan subsidiary. For 2015, we measured service and interest costs for plans that utilize a yield curve by using a single weighted average discount rate derived from the yield curve to measure the plan obligations. For 2016, we elected to measure service and interest cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. We believe this new approach provides a more precise measurement of service and interest costs by aligning the timing of projected benefit cash flows to the corresponding rates on the yield curve. This change is expected to reduce our 2016 net periodic pension cost by approximately

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$50 million to $75 million compared to the previous method and does not affect the measurement of plan benefit obligations. Net periodic pension cost in 2015 included $27 million related to Venezuela.
Liquidity
At December 31, 2015 , we had $1,476 million in Cash and Cash Equivalents as well as $2,676 million of unused availability under our various credit agreements, compared to $2,161 million and $2,317 million, respectively, at December 31, 2014 . The decrease in cash and cash equivalents of $685 million resulted primarily from 2015 capital expenditures of $983 million, net debt repayments of $477 million, the impact on our cash balance of the deconsolidation of our Venezuelan subsidiary of $320 million, the net payment related to the dissolution of the global alliance with SRI of $271 million, common stock repurchases of $180 million and common stock dividends of $68 million. These decreases were partially offset by cash flows from operating activities of $1,687 million.
New Products
Globally, we launched 13 new consumer tires and 14 new commercial tires in 2015. Refer to “Item 1. Business” for a discussion of new tires launched in each of our business units.
Outlook
As of December 31, 2015, we deconsolidated the operations of our Venezuelan subsidiary. Our Venezuelan subsidiary contributed $119 million in segment operating income in 2015. The various outlook items summarized below exclude the impact of our Venezuelan operations in 2015 in order to provide greater clarity regarding our expectations with respect to the performance of our remaining businesses in 2016.
We expect that our full-year tire unit volume for 2016 will be up approximately 3% from 164.8 million tire units (excluding our Venezuelan subsidiary) in 2015, and for unabsorbed fixed overhead costs to be a benefit of approximately $50 million in 2016 compared to 2015. We also expect cost savings to more than offset general inflation in 2016. Based on current spot rates, we expect foreign currency translation to negatively affect segment operating income by approximately $45 million in 2016 compared to 2015.
Based on current raw material spot prices, for the full year of 2016, we expect our raw material costs will be approximately 9% lower than 2015, including raw material cost saving measures, and we expect the benefit of lower raw material costs to more than offset declines in price and product mix. However, natural and synthetic rubber prices and other commodity prices have experienced significant volatility, and this estimate could change significantly based on fluctuations in the cost of these and other key raw materials. We are continuing to focus on price and product mix, to substitute lower cost materials where possible and to work to identify additional substitution opportunities, to reduce the amount of material required in each tire, and to pursue alternative raw materials.
Refer to “Item 1A. Risk Factors” for a discussion of the factors that may impact our business, results of operations, financial condition or liquidity and “Forward-Looking Information — Safe Harbor Statement” for a discussion of our use of forward-looking statements.

RESULTS OF OPERATIONS — CONSOLIDATED
All per share amounts are diluted and refer to Goodyear net income available to common shareholders.
2015 Compared to 2014
Goodyear net income in 2015 was $307 million , compared to Goodyear net income of $2,452 million in 2014 . Goodyear net income available to common shareholders in 2015 was $307 million , or $1.12 per share, compared to Goodyear net income available to common shareholders of $2,445 million , or $8.78 per share, in 2014 . The decrease in Goodyear net income and Goodyear net income available to common shareholders in 2015 was primarily driven by an increase in income tax expense in 2015 following a tax benefit of $1,834 million in 2014, primarily due to the reversal of the valuation allowance on our U.S. deferred tax assets in the fourth quarter of 2014. The $577 million after-tax loss on the deconsolidation of our Venezuelan subsidiary also negatively affected 2015 results. Partially offsetting these declines were improvements in segment operating income and Other (Income) Expense discussed below.

24

Net Sales
Net sales in 2015 of $ 16,443  million decreased $1,695 million , or 9% , compared to $18,138 million in 2014 due primarily to unfavorable foreign currency translation of $1,563 million, primarily in EMEA, lower sales in other tire-related businesses of $283 million, primarily related to a decrease in the price of third-party chemical sales in North America, and a decline in price and product mix of $83 million, primarily in Asia Pacific, as a result of the impact of lower raw material costs on pricing. Net sales were also negatively impacted by $73 million due to our exit from the farm tire business in EMEA in the fourth quarter of 2014. These declines were partially offset by higher tire unit volume of $308 million, primarily in Asia Pacific and EMEA. Consumer and commercial net sales in 2015 were $9,907 million and $3,342 million, respectively. Consumer and commercial net sales in 2014 were $10,510 million and $3,849 million, respectively.
The following table presents our tire unit sales for the periods indicated:
 
Year Ended December 31,
(In millions of tires)
2015
 
2014
 
% Change
Replacement Units
 

 
 

 
 

North America (U.S. and Canada)
43.1

 
43.0

 
0.2
%
International
72.4

 
69.9

 
3.6
%
Total
115.5

 
112.9

 
2.3
%
OE Units
 

 
 

 
 

North America (U.S. and Canada)
18.5

 
18.1

 
2.2
%
International
32.2

 
31.0

 
3.9
%
Total
50.7

 
49.1

 
3.3
%
Goodyear worldwide tire units
166.2

 
162.0

 
2.6
%
The increase in worldwide tire unit sales of 4.2 million units, or 2.6% , compared to 2014 , included an increase of 2.6 million replacement tire units, or 2.3% , primarily in Asia Pacific. OE units increased 1.6 million units, or 3.3% , primarily in Asia Pacific. The volume increases in Asia Pacific were primarily related to growth in China and India, and for replacement due to the fourth quarter acquisition of NGY in Japan in conjunction with the dissolution of the global alliance with SRI. Consumer and commercial unit sales in 2015 were 152.4 million and 12.4 million, respectively. Consumer and commercial unit sales in 2014 were 147.4 million and 12.6 million, respectively.
Cost of Goods Sold
Cost of goods sold (“CGS”) was $12,164 million in 2015 , decreasing $1,742 million , or 12.5% , from $13,906 million in 2014 . CGS was 74.0% of sales in 2015 compared to 76.7% of sales in 2014 . CGS in 2015 decreased due to foreign currency translation of $1,160 million, primarily in EMEA, lower raw material costs of $594 million, primarily in North America and EMEA, lower costs in other tire-related businesses of $284 million, primarily related to lower raw material costs for third-party chemical sales in North America, and a benefit of $2 million ($2 million after-tax and minority) related to an indirect tax assessment in Latin America. These decreases were partially offset by higher tire volume of $234 million and higher conversion costs of $149 million due to inflation on wages and benefits and other costs. CGS in 2015 included pension expense of $85 million, excluding the pension settlement charges described below, which decreased from $123 million in 2014 due primarily to a full year benefit from the freezing of our hourly U.S. pension plans.
During 2015, we offered lump sum payments over a limited time to certain former employees in our U.S. pension plans. Payments of $190 million related to this offer were made from existing plan assets in the fourth quarter of 2015. As a result, total lump sum payments from these plans exceeded annual service and interest cost in 2015 and we recognized a pre-tax corporate pension settlement charge of $137 million ($86 million after-tax and minority) in the fourth quarter of 2015, including $88 million which was charged to CGS.
CGS in 2015 included accelerated depreciation of $8 million ($7 million after-tax and minority), primarily related to our plan to close our Wolverhampton, U.K. mixing and retreading facility and to transfer the production to other manufacturing facilities in EMEA. Accelerated depreciation was $7 million ($5 million after-tax and minority) in 2014, which was primarily related to the closure of one of our manufacturing facilities in Amiens, France and our exit of the farm tire business in EMEA.

25

Selling, Administrative and General Expense
SAG was $2,614 million in 2015 , decreasing $106 million , or 3.9% , from $2,720 million in 2014 . SAG was 15.9% of sales in 2015, compared to 15.0% in 2014 . The decrease in SAG was due to foreign currency translation of $258 million, primarily in EMEA, and favorable adjustments of $35 million in general and product liability reserves in North America due to claims experience, which was partially offset by the impact of inflation on wages and benefits and other costs. SAG in 2015 included transaction costs of $6 million ($4 million after-tax and minority) related to announced asset sales. SAG in 2015 included pension expense of $50 million, excluding pension settlement charges, compared to $52 million in 2014, primarily related to North America. SAG also included $49 million of the corporate pension settlement charge of $137 million recorded in the fourth quarter of 2015.
Rationalizations
We recorded net rationalization charges of $114 million in 2015 ($85 million after-tax and minority). Net rationalization charges include charges of $38 million related to the plan to close our Wolverhampton, U.K. mixing and retreading facility and a plan to transfer consumer tire production from our manufacturing facility in Wittlich, Germany to other manufacturing facilities in EMEA. We also initiated plans in 2015 for manufacturing and SAG headcount reductions in EMEA, North America and Latin America.
We recorded net rationalization charges of $95 million in 2014 ($66 million after-tax and minority). Net rationalization charges included charges of $74 million for associate severance and idle plant costs, partially offset by pension curtailment gains of $22 million, related to the closure of one of our manufacturing facilities in Amiens, France. Rationalization actions initiated in 2014 primarily consisted of manufacturing headcount reductions related to EMEA's plans to improve operating efficiency. In addition, EMEA, Latin America and Asia Pacific also initiated plans to reduce SAG headcount.
Upon completion of the 2015 plans, we estimate that annual segment operating income will improve by approximately $66 million ($32 million CGS and $34 million SAG). The savings realized in 2015 from rationalization plans totaled $31 million ($14 million CGS and $17 million SAG) including $20 million primarily related to the closure of one of our manufacturing facilities in Amiens, France and our exit of the farm tire business in EMEA.
For further information, refer to the Note to the Consolidated Financial Statements No. 2, Costs Associated with Rationalization Programs.
Interest Expense
Interest expense was $412 million in 2015 , decreasing $16 million from $428 million in 2014 . The decrease was due primarily to lower average debt balances of $6,101 million in 2015 compared to $6,765 million in 2014 , partially offset by an increase in average interest rates to 6.75% in 2015 compared to 6.42% in 2014 . Interest expense in 2014 was favorably impacted by $6 million related to interest recovered on the settlement of indirect tax claims in Latin America.
Loss on Deconsolidation of Venezuelan Subsidiary
Our wholly-owned subsidiary, C.A. Goodyear de Venezuela, manufactures, markets and distributes consumer and commercial tires throughout Venezuela. Evolving conditions in Venezuela, including currency exchange control regulations and continued reductions in access to U.S. dollars through official currency exchange mechanisms, have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar fuerte and the U.S. dollar, and have restricted the ability of our Venezuelan subsidiary to pay dividends and royalties and to settle liabilities. This lack of currency exchangeability, combined with other operating restrictions, have significantly limited our Venezuelan subsidiary's ability to maintain normal production and control over its operations. As a result of these conditions, we concluded that effective as of December 31, 2015, we do not meet the accounting criteria for control over our Venezuelan subsidiary and began reporting the results of our Venezuelan subsidiary using the cost method of accounting. This change resulted in a pre-tax charge of $646 million ($577 after-tax) in the fourth quarter of 2015. Refer to the Note to the Consolidated Financial Statements No. 1, Accounting Policies.
Other (Income) Expense
Other Income in 2015 was $115 million , improving $417 million from Other Expense of $302 million in 2014 . The improvement in Other (Income) Expense was due, in part, to 2015 royalty income of $192 million, increasing $157 million from $35 million of income in 2014. Royalty income in 2015 included a one-time pre-tax gain of $155 million ($99 million after-tax and minority) on the recognition of deferred royalty income resulting from the termination of a licensing agreement associated with the sale of our former Engineered Products business ("Veyance"). The licensing agreement was terminated following the acquisition of Veyance by Continental AG in January 2015. No further royalty income will be recognized under this agreement.
Other (Income) Expense also included net foreign currency exchange losses of $77 million in 2015, decreasing $162 million from $239 million in 2014. Net foreign currency exchange losses in 2014 included net losses of $200 million ($175 million after-tax and minority) resulting from the devaluation of the Venezuelan bolivar fuerte against the U.S. dollar. Foreign currency exchange also reflects net gains and losses resulting from the effect of exchange rate changes on various foreign currency transactions

26

worldwide, including $34 million of losses in 2015 related to changes in the SICAD exchange rate in Venezuela. For further discussion on Venezuela, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources."
Other (Income) Expense included a net benefit of $25 million from general and product liability — discontinued products in 2015, an improvement of $50 million from expense of $25 million in 2014. General and product liability — discontinued products in 2015 included a benefit of $25 million ($16 million after-tax and minority) for the recovery of past costs from one of our asbestos insurers and a benefit of $21 million for changes in assumptions related to probable insurance recoveries for asbestos claims in future periods.
Other (Income) Expense also included financing fees and financial instruments expense of $111 million in 2015 , increasing $34 million from $77 million in 2014 . Financing fees and financial instruments expense consists of the amortization of deferred financing fees, commitment fees and charges incurred in connection with financing transactions. Financing fees in 2015 included a charge of $57 million ($35 million after-tax and minority) primarily related to a $41 million redemption premium and $14 million of expense for the write-off of deferred financing fees and unamortized discount related to the redemption of the $1.0 billion 8.25% senior notes due 2020.
Other (Income) Expense in 2015 also included net gains on asset sales of $71 million ($60 million after-tax and minority) compared to net gains on asset sales of $3 million ($4 million after-tax and minority) in 2014. Net gains on asset sales in 2015 included a net gain of $48 million ($38 million after-tax and minority) related to the dissolution of the global alliance with SRI and a gain of $30 million ($32 million after-tax and minority) on the sale of our investment in shares of SRI. Refer to the Note to the Consolidated Financial Statements No. 5, Dissolution of Global Alliance with Sumitomo Rubber Industries. Net gains on asset sales in 2015 also included losses of $14 million in EMEA, primarily related to the sales of certain sub-Saharan Africa retail businesses.
Other (Income) Expense in 2015 and 2014 included charges of $4 million ($4 million after-tax and minority) and $22 million ($22 million after-tax and minority), respectively, for labor claims related to a previously closed facility in Greece. Other (Income) Expense in 2014 also included charges of $16 million ($16 million after-tax and minority) related to a government investigation involving our compliance with the U.S. Foreign Corrupt Practices Act in certain countries in Africa.
For further information, refer to the Note to the Consolidated Financial Statements No. 4, Other (Income) Expense.
Income Taxes
Income tax expense in 2015 was $232 million on income before income taxes of $608 million . For 2014 , income tax benefit was $ 1,834 million on income before income taxes of $687 million . The increase in income taxes for 2015 compared to 2014 was primarily due to the reversal of the tax valuation allowance on our net U.S. deferred tax assets in the fourth quarter of 2014. Income tax expense for 2015 included discrete net tax benefits of $18 million ($18 million after minority interest), due primarily to a $9 million benefit from the conclusion of non-U.S. tax claims and an $8 million benefit from the release of a valuation allowance related to U.S. state deferred tax assets.
Income tax benefit in 2014 was favorably impacted by $1,980 million ($1,981 million after minority interest) of discrete tax adjustments, including a benefit of $2,179 million from the December 31, 2014 release of substantially all of the valuation allowance on our net U.S. deferred tax assets as discussed further below, partially offset by charges of $131 million to record deferred taxes on certain undistributed earnings of certain foreign subsidiaries. The 2014 income tax benefit also included charges of $37 million to establish valuation allowances on the net deferred tax assets of our Venezuelan and Brazilian subsidiaries, due to continuing operating losses and currency devaluations in Venezuela, a charge of $9 million to establish a valuation allowance on the net deferred tax assets of a Luxembourg subsidiary, and a charge of $11 million due to an enacted law change in Chile.
In 2015, in addition to the items noted above, the difference between our effective tax rate and the U.S. statutory rate was primarily due to certain of our foreign subsidiaries continuing to maintain a full valuation allowance against their net deferred tax assets, the realization of $55 million of U.S. tax credits as a result of certain subsidiary dividend payments and legislation enacted in the fourth quarter of 2015 and $69 million of tax benefits related to the deconsolidation of our Venezuelan subsidiary.
At December 31, 2015, our valuation allowance on certain of our U.S. Federal, state and local deferred tax assets was $98 million and our valuation allowance on our foreign deferred tax assets was $523 million .

27

Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of our net deferred tax assets. Each reporting period we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. If recent positive evidence provided by the profitability in certain EMEA subsidiaries continues, it will provide us the opportunity to apply greater significance to our forecasts in assessing the need for a valuation allowance. We believe it is reasonably possible that sufficient positive evidence required to release all, or a portion, of these valuation allowances will exist within the next twelve months. This may result in a reduction of the valuation allowance and one-time tax benefit of up to $275 million ( $275 million after minority interest).
For further information, refer to the Note to the Consolidated Financial Statements No. 6, Income Taxes.
Minority Shareholders’ Net Income
Minority shareholders’ net income was $69 million in 2015 and 2014 . Minority shareholders' net income no longer includes the minority interests of GDTNA and GDTE following the dissolution of our global alliance with SRI on October 1, 2015.
2014 Compared to 2013
For the year ended December 31, 2014, Goodyear net income was $2,452 million, compared to net income of $629 million in 2013. For the year ended December 31, 2014, Goodyear net income available to common shareholders was $2,445 million, or $8.78 per share, compared to Goodyear net income available to common shareholders of $600 million, or $2.28 per share, in 2013. The increase in Goodyear net income and Goodyear net income available to common shareholders in 2014 was driven by net income tax benefits of $1,834 million, due primarily to the release of substantially all of the valuation allowance on our net U.S. deferred tax assets and to higher segment operating income.
Net Sales
Net sales in 2014 of $18,138 million decreased $1,402 million, or 7%, compared to $19,540 million in 2013 due primarily to unfavorable foreign currency translation of $571 million, primarily in Latin America, lower sales in other tire-related businesses of $407 million, primarily in North America, due to a decrease in the volume of third-party chemical sales, a decline in price and product mix of $374 million, primarily in EMEA, as a result of the impact of lower raw material costs on pricing, and lower tire volume of $57 million. Product mix was also negatively impacted by lower OTR tire sales. Consumer and commercial net sales in 2014 were $10,510 million and $3,849 million, respectively. Consumer and commercial net sales in 2013 were $10,946 million and $4,113 million, respectively.
The following table presents our tire unit sales for the periods indicated:
 
Year Ended December 31,
(In millions of tires)
2014
 
2013
 
% Change
Replacement Units
 

 
 

 
 

North America (U.S. and Canada)
43.0

 
42.9

 
0.2
 %
International
69.9

 
69.0

 
1.3
 %
Total
112.9

 
111.9

 
0.9
 %
OE Units
 

 
 

 
 

North America (U.S. and Canada)
18.1

 
18.8

 
(3.7
)%
International
31.0

 
31.6

 
(1.9
)%
Total
49.1

 
50.4

 
(2.6
)%
Goodyear worldwide tire units
162.0

 
162.3

 
(0.2
)%
The decrease in worldwide tire unit sales of 0.3 million units, or 0.2%, compared to 2013, included a decrease of 1.3 million OE units, or 2.6%, primarily in the Latin America consumer business, driven primarily by weaker consumer OE vehicle production in Brazil and our selective fitment strategy. Replacement tire volume increased 1.0 million units, or 0.9%, primarily in the Latin America consumer business, driven by overall industry growth. Consumer and commercial unit sales in 2014 were 147.4 million and 12.6 million, respectively. Consumer and commercial unit sales in 2013 were 147.5 million and 12.7 million, respectively.

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Cost of Goods Sold
CGS was $13,906 million in 2014, decreasing $1,516 million, or 9.8%, compared to $15,422 million in 2013. CGS was 76.7% of sales in 2014 compared to 78.9% of sales in 2013. CGS in 2014 decreased due to lower raw material costs of $553 million, primarily in EMEA and North America, lower costs in other tire-related businesses of $439 million, primarily in North America due to a decrease in the volume of third-party chemical sales, the effect of foreign currency translation which reduced costs by $420 million, primarily in Latin America, and lower conversion costs of $101 million. Conversion costs were favorably impacted by lower pension costs and lower under-absorbed fixed overhead costs of approximately $58 million. CGS in 2014 included pension expense of $123 million, excluding the pension curtailment and settlement charges described below, which decreased from $222 million in 2013, due primarily to lower amortization of actuarial losses resulting from 2013 actuarial gains related to our North American plans and the freeze of our hourly U.S. pension plans.
CGS in 2014 included a pension curtailment loss of $33 million ($32 million after-tax and minority) as a result of the accrual freeze to pension plans in North America and a pension settlement loss of $5 million ($4 million after-tax and minority) related to lump sum payments to settle certain liabilities for our U.K. pension plans. CGS in 2014 also included charges for accelerated depreciation of $7 million ($5 million after-tax and minority) compared to $23 million ($17 million after-tax and minority) in 2013, primarily related to the closure of one of our manufacturing facilities in Amiens, France. CGS in 2014 also included savings from rationalization plans of $66 million, of which $48 million related to the closure of one of our manufacturing facilities in Amiens, France and our exit of the farm tire business in EMEA.
Selling, Administrative and General Expense
SAG was $2,720 million in 2014, decreasing $38 million, or 1.4%, compared to $2,758 million in 2013. SAG was 15.0% of sales in 2014, compared to 14.1% in 2013. The decrease in SAG was due to the effect of foreign currency translation that reduced costs by $74 million and lower incentive compensation costs of $35 million, partially offset by higher advertising and marketing costs of $28 million, primarily in EMEA, and inflationary cost increases in wages and benefits and other costs. SAG in 2014 included pension expense of $52 million, compared to $63 million in 2013, primarily related to North America. SAG in 2014 also included savings from rationalization plans of $18 million, of which $7 million related to the closure of one of our manufacturing facilities in Amiens, France and our exit of the farm tire business in EMEA.
Rationalizations
We recorded net rationalization charges of $95 million in 2014 ($66 million after-tax and minority). Net rationalization charges include charges of $74 million for associate severance and idle plant costs, partially offset by pension curtailment gains of $22 million, related to the closure of one of our manufacturing facilities in Amiens, France. Rationalization actions initiated in 2014 primarily consisted of manufacturing headcount reductions related to EMEA's plans to improve operating efficiency. In addition, EMEA, Latin America and Asia Pacific also initiated plans to reduce SAG headcount.
We recorded net rationalization charges of $58 million in 2013 ($41 million after-tax and minority). Rationalization actions initiated in 2013 consisted primarily of manufacturing headcount reductions related to EMEA's plans to improve efficiency and reduce manufacturing capacity in certain Western European countries. In addition, Asia Pacific also initiated plans primarily relating to SAG headcount reductions and the closure of retail facilities in Australia and New Zealand.
For further information, refer to the Note to the Consolidated Financial Statements No. 2, Costs Associated with Rationalization Programs.
Interest Expense
Interest expense was $428 million in 2014, increasing $36 million compared to $392 million in 2013. The increase relates primarily to higher average debt balances of $6,765 million in 2014 compared to $6,330 million in 2013 and an increase in average interest rates to 6.42% in 2014 compared to 6.19% in 2013. Interest expense in 2014 was favorably impacted by $6 million related to interest recovered on the settlement of indirect tax claims in Latin America.
Other Expense
Other Expense in 2014 was $302 million, increasing $205 million from $97 million in 2013. The increase in Other Expense reflects higher net foreign currency exchange losses, which were $239 million in 2014 compared to $118 million in 2013. The increase was due primarily to losses resulting from changes in the exchange rate of the Venezuelan bolivar fuerte against the U.S. dollar of $200 million ($175 million after-tax and minority) in 2014 compared to $115 million ($92 million after-tax and minority) in 2013. For further discussion on Venezuela, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources."

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Other Expense reflected interest income of $28 million for 2014, compared to interest income of $41 million in 2013. Interest income consists primarily of amounts earned on cash deposits. Interest income in 2014 also included $10 million earned on the settlement of indirect tax claims and in 2013 also included $11 million earned on favorable tax judgments, both in Latin America.
Other Expense reflected charges of $25 million in 2014 related to general and product liability — discontinued products, which includes charges for claims against us related primarily to asbestos personal injury claims, net of probable insurance recoveries, compared to $15 million in 2013. The increase in charges in 2014 was due to unfavorable changes in assumptions related to claim trends and probable insurance recoveries for asbestos claims.
Other Expense included an increase in net miscellaneous expense of $27 million in 2014 compared to 2013. Miscellaneous expense in 2014 and 2013 included charges of $22 million ($22 million after-tax and minority) and $6 million ($6 million after-tax and minority), respectively, for labor claims with respect to a previously closed facility in Greece. Miscellaneous expense in 2014 also included charges of $16 million ($16 million after-tax and minority) related to a government investigation involving our compliance with the U.S. Foreign Corrupt Practices Act in certain countries in Africa.
Other Expense reflected a decrease in royalty income in 2014 to $35 million from $51 million in 2013, due primarily to a one-time royalty of $11 million related to chemical operations included in 2013.
Other Expense in 2014 also included net gains on asset sales of $3 million ($4 million after-tax and minority) compared to net gains of $8 million ($7 million after-tax and minority) in 2013.
For further information, refer to the Note to the Consolidated Financial Statements No. 4, Other (Income) Expense.
Income Taxes
Income tax benefit in 2014 was $1,834 million on income before income taxes of $687 million. For 2013, income tax expense was $138 million on income before income taxes of $813 million. In 2014, the difference between our effective tax rate and the U.S. statutory rate was primarily due to the release of substantially all of the valuation allowance on our net U.S. deferred tax assets, as discussed further below. In 2013, the difference between our effective tax rate and the U.S. statutory rate was primarily due to continuing to maintain a full valuation allowance against our net U.S. deferred tax assets and certain foreign deferred tax assets.
Income tax benefit in 2014 was favorably impacted by $1,980 million ($1,981 million after minority interest) of discrete tax adjustments, including a benefit of $2,179 million from the December 31, 2014 release of substantially all of the valuation allowance on our net U.S. deferred tax assets as discussed further below, partially offset by charges of $131 million to record deferred taxes on certain undistributed earnings of certain foreign subsidiaries. The 2014 income tax benefit also included charges of $37 million to establish valuation allowances on the net deferred tax assets of our Venezuelan and Brazilian subsidiaries, due to continuing operating losses and currency devaluations in Venezuela, a charge of $9 million to establish a valuation allowance on the net deferred tax assets of a Luxembourg subsidiary, and a charge of $11 million due to an enacted law change in Chile. Income tax expense in 2013 included discrete net tax benefits of $43 million ($37 million after minority) due primarily to a $33 million benefit from special enterprise zone tax incentives in Poland and a $13 million benefit related to changes in enacted tax laws.
At January 1, 2014, our valuation allowance on our U.S. deferred tax assets was approximately $2,400 million. Since 2002, Goodyear had maintained a full valuation allowance on its U.S. net deferred tax asset position. In each reporting period we assessed the available positive and negative evidence to estimate if sufficient future taxable income would be generated to utilize the existing deferred tax assets. Through 2012, our history of U.S. operating losses limited the weight we applied to other subjective evidence such as our projections for future profitability. Before we changed our judgment on the need for a full valuation allowance, a sustained period of operating profitability was required.
At December 31, 2014, our U.S. operations were in a position of cumulative profits for the most recent three-year period. We concluded that as a consequence of our three-year cumulative profits, achieving full year profitability in 2013 and 2014, our successful completion of labor negotiations with the United Steelworkers in 2013, our full funding of our U.S. pension plans during 2013 and 2014, and our business plan for 2015 and beyond showing continued profitability, that it was more likely than not that a significant portion of our U.S. deferred tax assets would be realized. Accordingly, in the fourth quarter of 2014, we released substantially all of our valuation allowance on our net U.S. deferred tax assets, resulting in a $2,179 million benefit in our provision for income taxes.
At December 31, 2014, our valuation allowance on certain of our U.S federal, state and local deferred tax assets was $14 million and our valuation allowance on our foreign deferred tax assets was $618 million.
For further information, refer to the Note to the Consolidated Financial Statements No. 6, Income Taxes.

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Minority Shareholders’ Net Income
Minority shareholders’ net income was $69 million in 2014, compared to $46 million in 2013. The increase was due to higher earnings in our joint venture in Europe.

RESULTS OF OPERATIONS — SEGMENT INFORMATION
Segment information reflects our strategic business units (“SBUs”), which are organized to meet customer requirements and global competition and are segmented on a regional basis.
Results of operations are measured based on net sales to unaffiliated customers and segment operating income. Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions. Segment operating income is computed as follows: Net Sales less CGS (excluding asset write-off and accelerated depreciation charges) and SAG (including certain allocated corporate administrative expenses). Segment operating income also includes certain royalties and equity in earnings of most affiliates. Segment operating income does not include net rationalization charges (credits), asset sales and certain other items.
Total segment operating income was $2,022 million in 2015 , $1,712 million in 2014 and $1,580 million in 2013 . Total segment operating margin (segment operating income divided by segment sales) in 2015 was 12.3% , compared to 9.4% in 2014 and 8.1% in 2013 .
Management believes that total segment operating income is useful because it represents the aggregate value of income created by our SBUs and excludes items not directly related to the SBUs for performance evaluation purposes. Total segment operating income is the sum of the individual SBUs’ segment operating income. Refer to the Note to the Consolidated Financial Statements No. 8, Business Segments, for further information and for a reconciliation of total segment operating income to Income before Income Taxes.
North America
 
Year Ended December 31,
(In millions)
2015
 
2014
 
2013
Tire Units
61.6

 
61.1

 
61.7

Net Sales
$
7,774

 
$
8,085

 
$
8,684

Operating Income
1,108

 
803

 
691

Operating Margin
14.3
%
 
9.9
%
 
8.0
%

2015 Compared to 2014
North America unit sales in 2015 increased 0.5 million units, or 0.9%, to 61.6 million units. OE tire volume increased approximately 0.4 million units, or 2.5%, primarily in consumer, driven by new fitments. Replacement tire volume increased approximately 0.1 million units, or 0.3%, primarily in consumer.
Net sales in 2015 were $7,774 million , decreasing $311 million , or 3.8% , compared to $8,085 million in 2014 . The decrease was due primarily to lower sales in our other tire-related businesses of $209 million, driven by a decrease in the price of third-party chemical sales. In addition, net sales decreased due to lower price and product mix of $104 million, driven by the impact of lower raw material costs on pricing and unfavorable foreign currency translation of $53 million. These decreases were partially offset by higher volume of $56 million.
Operating income in 2015 was $1,108 million , increasing $305 million , or 38.0%, from $803 million in 2014 . The increase in operating income was due primarily to a decline in raw material costs of $328 million, which more than offset the effect of lower price and product mix of $38 million. Operating income was also positively impacted by lower conversion costs of $27 million driven by a decrease in pension expense, lower transportation costs of $17 million, and higher volume of $11 million. These increases were partially offset by higher SAG of $26 million due to increased advertising, incentive compensation and other costs, which more than offset lower general and product liability expenses, including favorable adjustments of $35 million due to claims experience, and unfavorable foreign currency translation of $22 million.
Operating income in 2015 excluded net pension settlement charges of $137 million, rationalization charges of $9 million, and net gains on asset sales of $1 million. Operating income in 2014 excluded net pension curtailment charges of $33 million, net gains on asset sales of $8 million and a net reversal of rationalization charges of $6 million.

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2014 Compared to 2013
North America unit sales in 2014 decreased 0.6 million units, or 1.0%, to 61.1 million units. OE tire volume decreased approximately 0.6 million units, or 3.3%, primarily in consumer OE, due to our OE selectivity strategy. Replacement tire volume remained flat.
Net sales in 2014 were $8,085 million, decreasing $599 million, or 6.9%, compared to $8,684 million in 2013. The decrease was due primarily to lower sales in our other tire-related businesses of $384 million, driven by a decline in the volume of third-party sales of chemical products. In addition, net sales decreased due to lower price and product mix of $90 million, driven by the impact of lower raw material costs on pricing, unfavorable foreign currency translation of $65 million and lower tire volume of $60 million.
Operating income in 2014 was $803 million, increasing $112 million, or 16.2%, from $691 million in 2013. The increase in operating income was due primarily to lower conversion costs of $93 million. The decrease in conversion costs included lower pension costs of $63 million, lower labor costs due primarily to prior year one-time charges of $27 million related to our USW agreement and lower workers’ compensation costs of $13 million, partially offset by increased profit sharing costs of $18 million. Operating income also benefited from a decline in raw material costs of $191 million, which more than offset the effect of lower price and product mix of $136 million, and higher income from our other tire-related businesses of $19 million, primarily in our retail business. These improvements were partially offset by higher transportation costs of $27 million and lower volume of $11 million. Conversion costs included net savings from rationalization plans of $8 million.
Operating income in 2014 excluded net pension curtailment charges of $33 million, a net reversal of rationalization charges of $6 million and net gains on asset sales of $8 million. Operating income in 2013 excluded net rationalization charges of $12 million and net gains on asset sales of $4 million.
Europe, Middle East and Africa
 
Year Ended December 31,
(In millions)
2015
 
2014
 
2013
Tire Units
61.1

 
60.5

 
60.8

Net Sales
$
5,115

 
$
6,180

 
$
6,567

Operating Income
435

 
438

 
298

Operating Margin
8.5
%
 
7.1
%
 
4.5
%

2015 Compared to 2014
Europe, Middle East and Africa unit sales in 2015 increased 0.6 million units, or 1.0%, to 61.1 million units. OE tire volume increased 0.4 million units, or 2.5%, primarily related to increased industry demand. Replacement tire volume increased 0.2 million units, or 0.4%, primarily due to higher demand in Western Europe, which was partially offset by increased competition in lower-end consumer products in Eastern Europe and our decision to exit the farm tire business at the end of 2014.
Net sales in 2015 were $5,115 million , decreasing $1,065 million , or 17.2% , compared to $6,180 million in 2014 . Net sales decreased due primarily to unfavorable foreign currency translation of $957 million, unfavorable price and product mix of $108 million, driven by the impact of lower raw material costs on pricing, and our exit from the farm tire business in the fourth quarter of 2014, which negatively impacted net sales by $73 million. These unfavorable items were partially offset by higher tire volume of $85 million.
Operating income in 2015 was $435 million , decreasing $3 million , or 0.7% , compared to $438 million in 2014 . Operating income decreased primarily due to unfavorable foreign currency translation of $96 million and higher conversion costs of $2 million. The decrease in operating income was partially offset by a decline in raw material costs of $197 million, which more than offset the effect of lower price and product mix of $175 million, lower pension costs of $25 million and a decrease in SAG of $22 million, primarily driven by lower advertising expense. Operating income also benefited from higher volume of $21 million. Conversion costs and SAG included savings from rationalization plans of $14 million and $6 million, respectively, primarily related to the closure of one of our manufacturing facilities in Amiens, France and our exit from the farm tire business.
Operating income in 2015 excluded net rationalization charges of $95 million, primarily related to the closure of our Wolverhampton, U.K. mixing and retreading facility and one of our Amiens, France manufacturing facilities, and charges for accelerated depreciation and asset write-offs of $8 million. Operating income in 2015 also excluded charges of $4 million related to labor claims with respect to a previously closed facility in Greece and net losses on asset sales of $14 million, primarily related to the sales of certain sub-Saharan Africa retail businesses. Operating income in 2014 excluded net rationalization charges of $89 million, primarily related to the closure of one of our Amiens, France manufacturing facilities, charges of $22 million related to

32

labor claims with respect to a previously closed facility in Greece, net losses on asset sales of $7 million, and charges for accelerated depreciation and asset write-offs of $7 million.
EMEA’s results are highly dependent upon Germany, which accounted for approximately 37% of EMEA’s net sales in 2015 and 2014. Accordingly, results of operations in Germany are expected to continue to have a significant impact on EMEA’s future performance.
2014 Compared to 2013
Europe, Middle East and Africa unit sales in 2014 decreased 0.3 million units, or 0.5%, to 60.5 million units. Replacement tire volume decreased 0.5 million units, or 1.2%, while OE tire volume increased 0.2 million units, or 1.1%. These changes were primarily related to the consumer business. Decreased unit volumes in the consumer replacement business primarily reflect the negative impact of unusually warm weather on seasonal winter tire sales, challenging economic conditions and increased competition.
Net sales in 2014 were $6,180 million, decreasing $387 million, or 5.9%, compared to $6,567 million in 2013. Net sales decreased due primarily to unfavorable price and product mix of $240 million, driven by the impact of lower raw material costs on pricing. Net sales were also negatively impacted by unfavorable foreign currency translation of $113 million and lower tire volume of $39 million.
Operating income in 2014 was $438 million, increasing $140 million, or 47.0%, compared to $298 million in 2013. Operating income increased due primarily to a decline in raw material costs of $250 million, which more than offset the effect of lower price and product mix of $194 million. Operating income was also positively impacted by lower conversion costs of $81 million, net savings of $55 million from the closure of one of our Amiens, France manufacturing facilities and our exit from the farm tire business in 2014, and higher income from our other tire-related businesses of $11 million, primarily in our motorcycle business. Decreased conversion costs included lower under-absorbed overhead of $86 million resulting from higher production volumes. Operating income was negatively impacted by higher SAG of $37 million, driven primarily by higher advertising and marketing costs, lower tire volume of $21 million and a charge related to a commercial tire customer satisfaction program of $12 million. Conversion costs and SAG included net savings from rationalization plans of $8 million and $7 million, respectively.
Operating income in 2014 excluded net rationalization charges of $89 million, primarily related to the closure of one of our Amiens, France manufacturing facilities, charges of $22 million related to labor claims with respect to a previously closed facility in Greece, net losses on asset sales of $7 million, and charges for accelerated depreciation and asset write-offs of $7 million. Operating income in 2013 excluded net rationalization charges of $26 million and charges for accelerated depreciation and asset write-offs of $23 million, primarily related to the closure of one of our Amiens, France manufacturing facilities, charges of $6 million related to labor claims with respect to a previously closed facility in Greece, and net gains on asset sales of $1 million.
Asia Pacific
 
Year Ended December 31,
(In millions)
2015
 
2014
 
2013
Tire Units
26.0

 
23.0

 
21.9

Net Sales
$
1,958

 
$
2,077

 
$
2,226

Operating Income
319

 
301

 
308

Operating Margin
16.3
%
 
14.5
%
 
13.8
%

2015 Compared to 2014
Asia Pacific unit sales in 2015 increased 3.0 million units, or 13.3%, to 26.0 million units. Replacement tire volume increased 1.6 million units, or 13.0%, primarily in the consumer business, due to the fourth quarter acquisition of NGY in Japan in conjunction with the dissolution of the global alliance with SRI. OE tire volume increased 1.4 million units, or 13.7%, primarily in the consumer business, which reflected growth in China and India, partially offset by a decline in Australia.
Net sales in 2015 were $ 1,958 million , decreasing $119 million , or 5.7% , from $2,077 million in 2014 . Net sales decreased due to unfavorable foreign currency translation of $164 million, primarily related to the strong U.S. dollar against all Asian currencies, and lower price and product mix of $139 million, driven primarily by the impact of lower raw material costs on pricing. These decreases were partially offset by higher tire volume of $183 million.
Operating income in 2015 was $319 million , increasing $18 million , or 6.0% , from $301 million in 2014 . The increase in operating income was due primarily to lower raw material costs of $114 million, which more than offset the effect of lower price and product mix of $102 million, higher volume of $45 million, lower conversion costs of $9 million, and higher income from other tire-related

33

businesses of $2 million. These increases were partially offset by higher SAG of $32 million, driven by increased wages and benefits and advertising expenses, and unfavorable foreign currency translation of $21 million.
Operating income in 2015 excluded net gains on asset sales of $5 million and net rationalization charges of $4 million. Operating income in 2014 excluded net rationalization charges of $9 million, primarily in Australia.
Asia Pacific’s results are highly dependent upon Australia and China. Australia accounted for approximately 31% and 36% of Asia Pacific’s net sales in 2015 and 2014 , respectively. China accounted for approximately 30% and 27% of Asia Pacific's net sales in 2015 and 2014, respectively. Accordingly, results of operations in Australia and China are expected to continue to have a significant impact on Asia Pacific's future performance.
2014 Compared to 2013
Asia Pacific unit sales in 2014 increased 1.1 million units, or 5.0%, to 23.0 million units. OE tire volume increased 0.8 million units, or 8.0%, and replacement tire volume increased 0.3 million units, or 2.8%. The increase in unit volume was primarily due to growth in China and India, partially offset by a decline in Australia as a result of a continued weak economic environment.
Net sales in 2014 were $2,077 million, decreasing $149 million, or 6.7%, from $2,226 million in 2013. Net sales decreased due to lower price and product mix of $157 million, driven primarily by the impact of lower raw material costs on pricing and unfavorable product mix due to lower OTR sales, unfavorable foreign currency translation of $73 million, primarily driven by the depreciation of the Australian dollar and Indian rupee, and lower sales in other tire-related businesses of $13 million, primarily in our retail operations. These decreases were partially offset by higher volumes of $95 million.
Operating income in 2014 was $301 million, decreasing $7 million, or 2.3%, from $308 million in 2013. Operating income decreased due primarily to lower price and product mix of $107 million, driven primarily by the impact of lower raw material costs on pricing and unfavorable product mix due to lower OTR sales. Lower price and product mix was partially offset by the effect of lower raw material costs of $90 million. Operating income was also negatively impacted by unfavorable foreign currency translation of $17 million, lower insurance recoveries of $7 million related to the fourth quarter 2011 Thailand flood and higher conversion costs of $7 million. The decreases were partially offset by lower start-up expenses for our manufacturing facility in Pulandian, China of $23 million and higher volume of $23 million. CGS included savings from rationalization plans of $1 million.
In 2013, on a consolidated basis, we recorded a $9 million net benefit ($6 million after-tax), which included $7 million in Asia Pacific, due to insurance recoveries for the fourth quarter 2011 flood in Thailand.
Operating income in 2014 and 2013 excluded net rationalization charges of $9 million and $16 million, respectively, primarily in Australia. Operating income in 2013 also excluded net gains on asset sales of $2 million.
Latin America
 
Year Ended December 31,
(In millions)
2015
 
2014
 
2013
Tire Units
17.5

 
17.4

 
17.9

Net Sales
$
1,596

 
$
1,796

 
$
2,063

Operating Income
160

 
170

 
283

Operating Margin
10.0
%
 
9.5
%
 
13.7
%

2015 Compared to 2014
Latin America unit sales in 2015 increased 0.1 million units, or 0.1%, to 17.5 million units. Replacement tire volume increased 0.8 million units, or 5.6%, driven by our consumer business, as our volume improvement exceeded increased industry volumes. OE tire volume decreased 0.7 million units, or 18.4%, driven primarily by weaker OE vehicle production in Brazil.
Net sales in 2015 were $1,596 million , decreasing $200 million , or 11.1% , from $1,796 million in 2014 . Net sales decreased due to unfavorable foreign currency translation of $389 million in all markets, and lower sales in other tire-related businesses of $62 million, primarily due to ceasing tire component sales to certain customers. These decreases were partially offset by improved price and product mix of $268 million, including a favorable shift from OE to replacement products.
Operating income in 2015 was $160 million , decreasing $10 million , or 5.9% , from $170 million in 2014 . Operating income decreased due primarily to higher conversion costs of $183 million, driven by significant inflation on wages and benefits and other costs, primarily in Venezuela and Brazil, partially offset by lower under-absorbed fixed overhead costs of $8 million. Operating income was also negatively impacted by increased SAG of $34 million, driven by inflation including wages and benefits, increased transportation expenses of $12 million, higher research and development expenditures of $11 million, higher pension expenses of $7 million, unfavorable foreign currency translation of $6 million, net charges of $5 million for labor-related and indirect tax

34

matters in Brazil and decreased profits in other-tire-related businesses of $2 million. These decreases were partially offset by improved price and product mix of $305 million, which more than offset the impact of higher raw material costs of $45 million, primarily related to Venezuela.
Operating income in 2015 excluded a net gain on asset sales of $1 million. Operating income in 2015 and 2014 excluded net rationalization charges of $6 million and $3 million, respectively. In addition, foreign currency exchange losses in 2014 of $200 million related to changes in the exchange rate of the Venezuelan bolivar fuerte against the U.S. dollar were excluded from Latin America and total company segment operating income.
In 2014, on a consolidated basis, we recorded a net benefit of $5 million (net charge of $3 million after-tax), which included the recovery of interest of $16 million, of which $10 million is included in interest income in Other (Income) Expense and $6 million is included in Interest Expense, offset by a charge of $11 million in Latin America segment operating income related to indirect tax claims.
Latin America’s results are highly dependent upon Brazil, which accounted for 39% and 55% of Latin America’s net sales in 2015 and 2014, respectively. Venezuela also contributed a significant portion of Latin America’s sales and operating income in 2015 and 2014. Venezuela’s sales accounted for 33% and 16% of Latin America's net sales in 2015 and 2014, respectively. Venezuela contributed operating income of $119 million in 2015, increasing $59 million compared to 2014, due to improved price and product mix exceeding the effect of cost inflation. Excluding the favorable impact of results from our Venezuelan operations, Latin America’s operating income declined by $69 million in 2015, due primarily to the recessionary environment in Brazil driving lower OE volumes, which unfavorably impacted conversion costs, and to increased SAG.
Effective December 31, 2015, we concluded that we do not meet the accounting criteria for control over our Venezuelan subsidiary. We deconsolidated the operations of our Venezuelan subsidiary and began reporting their results using the cost method of accounting. In future reporting periods, our financial results will not include the operating results of our Venezuelan subsidiary. We will record income from sales of inventory or raw materials or from dividends or royalties to the extent cash is received from our Venezuelan subsidiary.
For further information regarding Venezuela refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Overview” and the Note to the Consolidated Financial Statements No. 1, Accounting Policies.
2014 Compared to 2013
Latin America unit sales in 2014 decreased 0.5 million units, or 2.8%, to 17.4 million units. OE tire volume decreased 1.6 million units, or 28.8%, driven primarily by weaker consumer OE vehicle production in Brazil and our selective fitment strategy in the consumer OE business. Replacement tire volume increased 1.1 million units, or 8.9%, primarily in our consumer business driven by volume growth of 1.4 million units, or 13.7%, across Latin America, partially offset by a decline of 0.3 million units in Venezuela.
Net sales in 2014 were $1,796 million, decreasing $267 million, or 12.9%, from $2,063 million in 2013. Net sales decreased due primarily to unfavorable foreign currency translation of $320 million, mainly in Venezuela and Brazil, and lower tire volume of $53 million. These decreases were partially offset by improved price and product mix of $113 million, including a favorable shift from OE to replacement products.
Operating income in 2014 was $170 million, decreasing $113 million, or 39.9%, from $283 million in 2013. Operating income decreased primarily due to higher conversion costs of $66 million, unfavorable foreign currency translation of $51 million, increased SAG of $26 million, increased costs of $18 million associated with the expansion of one of our Brazilian manufacturing facilities, lower tire volume of $14 million and charges of $11 million related to indirect tax claims. These decreases were partially offset by improved price and product mix of $61 million and lower raw material costs of $22 million. Conversion costs were negatively impacted by higher under-absorbed fixed overhead costs of $27 million due primarily to lower production volume in Venezuela and Brazil and overall inflation, including wages and benefits. The increase in SAG was due primarily to overall inflation, including wages and benefits, and higher system implementation costs. SAG included savings from rationalization plans of $5 million.
In 2014, on a consolidated basis, we recorded a net benefit of $5 million (net charge of $3 million after-tax), which included the recovery of interest of $16 million, of which $10 million is included in interest income in Other Expense and $6 million is included in Interest Expense, offset by a charge of $11 million in Latin America segment operating income related to indirect tax claims. In 2013, on a consolidated basis, we recorded a net benefit of $15 million ($10 million after-tax), which included $5 million in Latin America's segment operating income, earned on favorable tax judgments.
Operating income in 2014 and 2013 excluded net rationalization charges of $3 million and $4 million, respectively. In addition, foreign currency exchange losses in 2014 and 2013 of $200 million and $115 million, respectively, related to changes in the exchange rate of the Venezuelan bolivar fuerte against the U.S. dollar and were excluded from Latin America and total company segment operating income.

35


CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. On an ongoing basis, management reviews its estimates, based on currently available information. Changes in facts and circumstances may alter such estimates and affect our results of operations and financial position in future periods. Our critical accounting policies relate to:
•
general and product liability and other litigation,
•
workers’ compensation,
•
recoverability of goodwill,
•
deferred tax asset valuation allowances and uncertain income tax positions, and
•
pensions and other postretirement benefits.
General and Product Liability and Other Litigation.   We have recorded liabilities totaling $315 million , including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at December 31, 2015 . General and product liability and other litigation liabilities are recorded based on management’s assessment that a loss arising from these matters is probable. If the loss can be reasonably estimated, we record the amount of the estimated loss. If the loss is estimated within a range and no point within the range is more probable than another, we record the minimum amount in the range. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Loss ranges are based upon the specific facts of each claim or class of claims and are determined after review by counsel. Court rulings on our cases or similar cases may impact our assessment of the probability and our estimate of the loss, which may have an impact on our reported results of operations, financial position and liquidity. We record receivables for insurance recoveries related to our litigation claims when it is probable that we will receive reimbursement from the insurer. Specifically, we are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to asbestos in certain products manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in Federal and state courts.
A significant assumption in our estimated asbestos liability is the period over which the liability can be reasonably estimated, which we have determined to be the next ten year period. Due to the difficulties in making these estimates, analysis based on new data and/or changed circumstances arising in the future may result in an increase in the recorded obligation in an amount that cannot be reasonably estimated, and that increase may be significant. We had recorded gross liabilities for both asserted and unasserted asbestos claims, inclusive of defense costs, totaling $171 million at December 31, 2015 .
We maintain certain primary and excess insurance coverage under coverage-in-place agreements, and also have additional excess liability insurance with respect to asbestos liabilities. We record a receivable with respect to such policies when we determine that recovery is probable and we can reasonably estimate the amount of a particular recovery. This determination is based on consultation with our outside legal counsel and taking into consideration agreements with certain of our insurance carriers, the financial viability and legal obligations of our insurance carriers and other relevant factors.
As of December 31, 2015 , we recorded a receivable related to asbestos claims of $117 million , and we expect that approximately 70% of asbestos claim related losses would be recoverable through insurance through the period covered by the estimated liability. Of this amount, $12 million was included in Current Assets as part of Accounts Receivable at December 31, 2015 . The recorded receivable consists of an amount we expect to collect under coverage-in-place agreements with certain primary and excess insurance carriers as well as an amount we believe is probable of recovery from certain of our other excess insurance carriers. The expected recovery percentage and related receivable from insurance carriers increased during 2015 due to current year activity leading to changes in assumptions for probable insurance recoveries in future periods. Although we believe these amounts are collectible under primary and certain excess policies today, future disputes with insurers could result in significant charges to operations.
Workers’ Compensation.   We had recorded liabilities, on a discounted basis, of $264 million for anticipated costs related to U.S. workers’ compensation claims at December 31, 2015 . The costs include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on our assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and current cost trends. The amount of our ultimate liability in respect of these matters may differ from these estimates. We periodically, and at least annually, update our loss development factors based on actuarial analyses. The liability is discounted using the risk-free rate of return.
For further information on general and product liability and other litigation, and workers’ compensation, refer to the Note to the Consolidated Financial Statements No. 19, Commitments and Contingent Liabilities.

36

Recoverability of Goodwill.   Goodwill is tested for impairment annually or more frequently if an indicator of impairment is present. Goodwill totaled $555 million at December 31, 2015 .
We have determined our reporting units to be consistent with our operating segments comprised of four strategic business units: North America, Europe, Middle East and Africa, Asia Pacific and Latin America. Goodwill is allocated to these reporting units based on the original purchase price allocation for acquisitions within the various reporting units. No goodwill has been allocated to our Latin America reporting unit. There have been no changes to our reporting units or in the manner in which goodwill was allocated in 2015 .
We test goodwill for impairment on at least an annual basis, with the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured.
As a result of the length of time since the last quantitative assessment was performed for all reporting units, management elected to perform a quantitative assessment as of October 31, 2015, the date of our annual goodwill impairment testing.  Based upon the results of our analysis, there were no reporting units with goodwill that were at risk of failing the impairment test as the fair value of each reporting unit was determined to significantly exceed its respective carrying amount. 
Deferred Tax Asset Valuation Allowances and Uncertain Income Tax Positions.   At December 31, 2015 , we had valuation allowances aggregating $621 million against certain of our U.S. Federal, state and local and foreign net deferred tax assets.
U.S. GAAP standards of accounting for income taxes require a reduction of the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (defined as a likelihood of more than 50%) such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing future profitability and the tax consequences of events that have been recognized in either our financial statements or tax returns.
We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. We give operating results during the most recent three-year period a significant weight in our analysis. We typically only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (tax loss carryforwards and tax credits) prior to their expiration. We consider tax planning strategies available to accelerate taxable amounts if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that in our judgment positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including those for transfer pricing. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize income tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. We derecognize income tax benefits when, based on new information, we determine that it is no longer more likely than not that our position will be sustained. To the extent we prevail in matters for which liabilities have been established, or determine we need to derecognize tax benefits recorded in prior periods, our results of operations and effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash, and lead to recognition of expense to the extent the settlement amount exceeds recorded liabilities, resulting in an increase in our effective tax rate in the period of resolution. To reduce our risk of an unfavorable transfer price settlement, the Company applies consistent transfer pricing policies and practices globally, supports pricing with economic studies and seeks advance pricing agreements and joint audits to the extent possible. A favorable tax settlement would be recognized as a reduction of expense to the extent the settlement amount is lower than recorded liabilities and, in the case of an income tax settlement, would result in a reduction in our effective tax rate in the period of resolution. We report interest and penalties related to uncertain income tax positions as income taxes.
For additional information regarding uncertain income tax positions and valuation allowances, refer to the Note to the Consolidated Financial Statements No. 6, Income Taxes.

37

Pensions and Other Postretirement Benefits.   We have recorded liabilities for pension and other postretirement benefits of $642 million and $288 million, respectively, at December 31, 2015. Our recorded liabilities and net periodic costs for pensions and other postretirement benefits are based on a number of assumptions, including:
•
life expectancies,
•
retirement rates,
•
discount rates,
•
long term rates of return on plan assets,
•
inflation rates,
•
future compensation levels,
•
future health care costs, and
•
maximum company-covered benefit costs.
Certain of these assumptions are determined with the assistance of independent actuaries. Assumptions about life expectancies, retirement rates, future compensation levels and future health care costs are based on past experience and anticipated future trends. The discount rate for our U.S. plans is based on a yield curve derived from a portfolio of corporate bonds from issuers rated AA or higher as of December 31 and is reviewed annually. Our expected benefit payment cash flows are discounted based on spot rates developed from the yield curve. The mortality assumption for our U.S. plans is based on actual historical experience and an assumed long term rate of future improvement, based on published actuarial tables. The long term rate of return on U.S. plan assets is based on estimates of future long term rates of return similar to the target allocation of substantially all fixed income securities. Actual U.S. pension fund asset allocations are reviewed on a monthly basis and the pension fund is rebalanced to target ranges on an as-needed basis. These assumptions are reviewed regularly and revised when appropriate. Changes in one or more of them may affect the amount of our recorded liabilities and net periodic costs for these benefits. Other assumptions involving demographic factors such as retirement age and turnover are evaluated periodically and are updated to reflect our experience and expectations for the future. If the actual experience differs from expectations, our financial position, results of operations and liquidity in future periods may be affected.
The weighted average discount rate used in estimating the total liability for our U.S. pension and other postretirement benefit plans was 4.20% and 3.86% , respectively, at December 31, 2015 , compared to 3.89% and 3.59% , respectively, at December 31, 2014. The increase in the discount rate at December 31, 2015 was due primarily to higher yields on highly rated corporate bonds. Interest cost included in our U.S. net periodic pension cost was $238 million in 2015 , compared to $256 million in 2014 and $243 million in 2013. Interest cost included in our worldwide net periodic other postretirement benefits cost was $15 million in 2015 , compared to $19 million in 2014 and 2013.
Effective January 1, 2016, we changed the method we will use to determine the service and interest cost components of pension and other postretirement benefits' periodic cost for plans that utilize a yield curve approach. For 2015, we measured service and interest costs for plans that utilize a yield curve approach by using a single weighted average discount rate derived from the yield curve to measure the plan obligations. For 2016, we elected to measure service and interest cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. We believe this new approach provides a more precise measurement of service and interest costs by aligning the timing of projected benefit cash flows to the corresponding rates on the yield curve. This change is expected to reduce our 2016 net periodic pension cost by approximately $50 million to $75 million compared to the previous method and does not affect the measurement of plan benefit obligations.

38

The following table presents the sensitivity of our U.S. projected pension benefit obligation, accumulated other postretirement benefits obligation, and annual expense to the indicated increase/decrease in key assumptions:
 
 
 
+ / − Change at December 31, 2015
(Dollars in millions)
Change
 
PBO/ABO
 
Annual Expense
Pensions:
 
 
 
 
 
Assumption:
 
 
 
 
 
Discount rate
+/- 0.5%
 
$297
 
$6
 
 
 
 
 
 
Other Postretirement Benefits:
 
 
 
 
 
Assumption:
 
 
 
 
 
Discount rate
+/- 0.5%
 
$6
 
$—
Health care cost trends — total cost
+/- 1.0%
 
2
 
—
Changes in general interest rates and corporate (AA or better) credit spreads impact our discount rate and thereby our U.S. pension benefit obligation. Our U.S. pension plans are invested in a portfolio of substantially all fixed income securities designed to offset the impact of future discount rate movements on liabilities for these plans. If corporate (AA or better) interest rates increase or decrease in parallel (i.e., across all maturities), the investment portfolio described above is designed to mitigate a substantial portion of the expected change in our U.S. pension benefit obligation. For example, if corporate (AA or better) interest rates increased or decreased by 0.50%, the actions described above would be expected to mitigate more than 85% of the expected change in our U.S. pension benefit obligation.
A significant portion of the net actuarial loss included in AOCL of $2,643 million in our U.S. pension plans as of December 31, 2015 is a result of declines in U.S. discount rates and plan asset losses that occurred prior to 2015, plus the impact of prior increases in estimated life expectancies. For purposes of determining our 2015 U.S. net periodic pension cost, we recognized $106 million of the net actuarial losses in 2015 . We will recognize approximately $108 million of net actuarial losses in 2016 . If our future experience is consistent with our assumptions as of December 31, 2015 , actuarial loss recognition over the next few years will remain at an amount near that to be recognized in 2016 before it begins to gradually decline. In addition, if annual lump sum payments from a pension plan exceed annual service and interest cost for that plan, accelerated recognition of net actuarial losses will be required through a settlement in total benefits cost.
The actual rate of return on our U.S. pension fund was (2.1%), 12.8% and 2.6% in 2015 , 2014 and 2013, respectively, as compared to the expected rate of 5.00% , 5.47% and 7.16% in 2015, 2014 and 2013, respectively. We use the fair value of our pension assets in the calculation of pension expense for all of our U.S. pension plans.
The weighted average amortization period for our U.S. pension plans is approximately 20 years.
Net periodic pension costs are recorded in CGS, as part of the cost of inventory sold during the period, or SAG in our Consolidated Statements of Operations, based on the specific roles (i.e., manufacturing vs. non-manufacturing) of employee groups covered by each of our pension plans. In 2015, approximately 60% and 40% of net periodic pension costs are included in CGS and SAG, respectively, compared to approximately 70% and 30% in 2014 and 80% and 20% in 2013. The decrease in the net periodic pension costs in CGS is the result of overall lower net periodic pension costs in conjunction with the freezing of our hourly U.S. pension plans.
Although we experienced an increase in our U.S. discount rate at the end of 2015 , a large portion of the net actuarial loss included in AOCL of $74 million in our worldwide other postretirement benefit plans as of December 31, 2015 is a result of the overall decline in U.S. discount rates over time. For purposes of determining 2015 worldwide net periodic other postretirement benefits cost, we recognized $7 million  of net actuarial losses in 2015 . We will recognize approximately $6 million of net actuarial losses in 2016 . If our future experience is consistent with our assumptions as of December 31, 2015 , actuarial loss recognition over the next few years will remain at an amount near that to be recognized in 2016 before it begins to gradually decline.
For further information on pensions and other postretirement benefits, refer to the Note to the Consolidated Financial Statements No. 17, Pension, Other Postretirement Benefits and Savings Plans.


39

LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
Our primary sources of liquidity are cash generated from our operating and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements and our cash flows from financing activities are dependent upon our ability to access credit or other capital.
Our 2014-2016 capital allocation plan, which we have periodically updated, is intended to increase shareholder value by investing in high-return growth capital projects, providing for returns to shareholders and strengthening our balance sheet. The updated capital allocation plan provides for:
•
Growth capital expenditures of approximately $900 million, including our new plant in San Luis Potosi, Mexico to capture growth in the Americas.
•
A quarterly cash dividend on our common stock of $0.07 per share beginning on December 1, 2015. The payout represents an annual rate of $0.25 per share for 2015 and $0.28 per share for 2016.
•
A share repurchase program that allows us to acquire up to $1.1 billion of our common stock.
•
Approximately $900 million of debt repayments and pension funding, further strengthening our leverage metrics and advancing our objective of achieving an investment grade credit rating.
•
Approximately $700 million of restructuring payments.
In May 2015, we amended and restated our European revolving credit facility. Significant changes to the facility included extending the maturity to May 12, 2020, increasing the available commitments thereunder from €400 million to €550 million, and decreasing the interest rate by 75 basis points and the annual commitment fee by 20 basis points. Amounts drawn under the facility now bear interest at LIBOR plus 175 basis points for loans denominated in U.S. dollars or pounds sterling and EURIBOR plus 175 basis points for loans denominated in euros, and undrawn amounts under the facility are subject to an annual commitment fee of 30 basis points.
In June 2015, we amended our U.S. second lien term loan facility to reduce the current interest rate by 100 basis points. As a result of the amendment, the term loan now bears interest at LIBOR plus 300 basis points, subject to a minimum LIBOR rate of 75 basis points. On February 3, 2015, we repaid $200 million and on December 30, 2015 we repaid $400 million of the borrowings under this facility. Repayments are not able to be redrawn.
In November 2015, we issued $1.0 billion in aggregate principal amount of 5.125% senior notes due 2023. In December 2015, we used the proceeds of this offering, together with current cash and cash equivalents, to redeem in full our $1.0 billion 8.25% senior notes due 2020.
In December 2015, GDTE issued €250 million in aggregate principal amount of 3.75% senior notes due 2023. In January 2016, we used the proceeds of this offering, together with current cash and cash equivalents, to redeem in full GDTE's €250 million 6.75% senior notes due 2019.
On October 1, 2015, we completed the previously announced dissolution of the global alliance with SRI in accordance with the terms and conditions set forth in the Framework Agreement, dated as of June 4, 2015, by and between us and SRI. As a result of the completion of certain of the transactions contemplated by the Framework Agreement, we paid to SRI a net amount of $271 million and delivered a promissory note to GDTNA in the initial principal amount of $56 million at an interest rate of LIBOR plus 0.1% and with a maturity date three years following the date of dissolution. Refer to "Item 1. Business - Dissolution of Global Alliance with Sumitomo Rubber Industries" for further information.
For further information on the other strategic initiatives we pursued in 2015 , refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.”
At December 31, 2015 , we had $1,476 million in Cash and Cash Equivalents, compared to $2,161 million at December 31, 2014 . The decrease in cash and cash equivalents of $685 million was primarily due to cash used for investing activities of $1,262 million, primarily related to capital expenditures of $983 million and the derecognition of $320 million of cash related to the deconsolidation of our Venezuelan subsidiary; cash used for financing activities of $985 million, primarily related to net debt repayments of $477 million, payments related to the dissolution of the global alliance with SRI of $271 million, common stock repurchases of $180 million and common stock dividends of $68 million; partially offset by cash flows from operating activities of $1,687 million, comprised of net income of $376 million, non-cash depreciation and amortization of $698 million and a non-cash charge of $646 million due to the deconsolidation of our Venezuelan subsidiary.

40

At December 31, 2015 and 2014 we had $2,676 million and $2,317 million , respectively, of unused availability under our various credit agreements. The table below provides unused availability by our significant credit facilities as of December 31:
(In millions)
2015
 
2014
First lien revolving credit facility
$
1,149

 
$
1,138

European revolving credit facility
598

 
485

Chinese credit facilities
66

 
—

Pan-European accounts receivable facility
151

 
—

Other domestic and international debt
294

 
277

Notes payable and overdrafts
418

 
417

 
$
2,676

 
$
2,317

We have deposited our cash and cash equivalents and entered into various credit agreements and derivative contracts with financial institutions that we considered to be substantial and creditworthy at the time of such transactions. We seek to control our exposure to these financial institutions by diversifying our deposits, credit agreements and derivative contracts across multiple financial institutions, by setting deposit and counterparty credit limits based on long term credit ratings and other indicators of credit risk such as credit default swap spreads, and by monitoring the financial strength of these financial institutions on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to financial institutions in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a financial institution. However, we cannot provide assurance that we will not experience losses or delays in accessing our deposits or lines of credit due to the nonperformance of a financial institution. Our inability to access our cash deposits or make draws on our lines of credit, or the inability of a counterparty to fulfill its contractual obligations to us, could have a material adverse effect on our liquidity, financial condition or results of operations in the period in which it occurs.
We expect our 2016 cash flow needs to include capital expenditures of approximately $1.0 billion to $1.1 billion. We also expect interest expense to range between $350 million and $375 million, dividends on our common stock to be $75 million, and contributions to our funded non-U.S. pension plans to be approximately $50 million to $75 million . We expect working capital to be a use of cash of approximately $50 million in 2016. We intend to operate the business in a way that allows us to address these needs with our existing cash and available credit if they cannot be funded by cash generated from operations.
We believe that our liquidity position is adequate to fund our operating and investing needs and debt maturities in 2016 and to provide us with flexibility to respond to further changes in the business environment.
Our ability to service debt and operational requirements is also dependent, in part, on the ability of our subsidiaries to make distributions of cash to various other entities in our consolidated group, whether in the form of dividends, loans or otherwise. In certain countries where we operate, such as China, South Africa and Argentina, transfers of funds into or out of such countries by way of dividends, loans, advances or payments to third-party or affiliated suppliers are generally or periodically subject to certain requirements, such as obtaining approval from the foreign government and/or currency exchange board before net assets can be transferred out of the country. In addition, certain of our credit agreements and other debt instruments limit the ability of foreign subsidiaries to make distributions of cash. Thus, we would have to repay and/or amend these credit agreements and other debt instruments in order to use this cash to service our consolidated debt. Because of the inherent uncertainty of satisfactorily meeting these requirements or limitations, we do not consider the net assets of our subsidiaries, including our Chinese, South African and Argentinian subsidiaries, that are subject to such requirements or limitations to be integral to our liquidity or our ability to service our debt and operational requirements. At December 31, 2015 , approximately $551 million of net assets, including $175 million of cash and cash equivalents, were subject to such requirements. The requirements we must comply with to transfer funds out of China, South Africa and Argentina have not adversely impacted our ability to make transfers out of those countries.
Our wholly-owned subsidiary, C.A. Goodyear de Venezuela, manufactures, markets and distributes consumer and commercial tires throughout Venezuela. A substantial portion of the raw materials used in the production of the tires it manufactures, including natural and synthetic rubber, are imported from other Goodyear facilities and from third parties.  Certain finished tires are also imported from other Goodyear manufacturing facilities.  In addition, our Venezuelan subsidiary is a party to various service and licensing agreements with other Goodyear companies.
Since Venezuela's economy is considered to be highly inflationary under U.S. generally accepted accounting principles, the U.S. dollar is the functional currency of our Venezuelan subsidiary. All gains and losses resulting from the remeasurement of its financial statements are reported in Other (Income) Expense. Effective February 13, 2013, Venezuela's official exchange rate changed from 4.3 to 6.3 bolivares fuertes to the U.S. dollar for substantially all goods. As a result of the devaluation, we recorded a $115 million remeasurement loss on bolivar fuerte-denominated net monetary assets and liabilities, including deferred taxes, primarily related to cash deposits in Venezuela, in the first quarter of 2013.

41

Through December 31, 2013, substantially all of our transactions in Venezuela were subject to the approval of the Commission for the Administration of Currency Exchange ("CADIVI"). In January 2014, the Venezuelan government announced the formation of the National Center of Foreign Trade ("CENCOEX") to replace CADIVI. In addition, effective January 24, 2014, Venezuela’s exchange rate applicable to the settlement of certain transactions, including payments of dividends and royalties, changed to an auction-based floating rate, the Complementary System of Foreign Currency Administration (“SICAD”) rate, which was 12.0 and 13.5 bolivares fuertes to the U.S. dollar at December 31, 2014 and December 31, 2015, respectively.
We were required to remeasure our bolivar-denominated monetary assets and liabilities at the rate expected to be available for future dividend remittances by our Venezuelan subsidiary. Therefore, we recorded net remeasurement losses of $200 million in 2014 on bolivar fuerte-denominated net monetary assets and liabilities, including deferred taxes, primarily related to cash deposits in Venezuela, using the then-applicable SICAD rate.
During 2015, the official exchange rate for settling certain transactions, including imports of essential goods, remained at 6.3 bolivares fuertes to the U.S. dollar. Our Venezuelan subsidiary settled $21 million of U.S. dollar-denominated intercompany payables, primarily at the SICAD rate of 12.8 bolivares fuertes to the U.S. dollar in effect at the date of those settlements.
Evolving conditions in Venezuela, including currency exchange control regulations and continued reductions in access to U.S. dollars through official currency exchange mechanisms, have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar fuerte and the U.S. dollar, and have restricted the ability of our Venezuelan subsidiary to pay dividends and royalties and to settle liabilities. This lack of currency exchangeability, combined with other operating restrictions, have significantly limited our Venezuelan subsidiary's ability to maintain normal production and control over its operations. We expect these conditions to continue for the foreseeable future.
As a result of these conditions, we concluded that effective as of December 31, 2015, we do not meet the accounting criteria for control over our Venezuelan subsidiary and began reporting the results of our Venezuelan subsidiary using the cost method of accounting. This change resulted in a pre-tax charge of $646 million in the fourth quarter of 2015. The pre-tax charge includes the derecognition of the carrying amounts of our Venezuelan subsidiary's assets and liabilities, including $320 million of Cash and Cash Equivalents, that are no longer reported in the Consolidated Balance Sheet as of December 31, 2015. The pre-tax charge also includes $248 million of foreign currency translation losses and pension losses previously included in AOCL in the Company’s Consolidated Balance Sheet. Following the deconsolidation, the remaining value of our investment in our Venezuelan subsidiary included in the Consolidated Balance Sheet is not significant.
In future reporting periods, our financial results will not include the operating results of our Venezuelan subsidiary. We will record income from sales of inventory or raw materials or from dividends or royalties to the extent cash is received from our Venezuelan subsidiary.
Cash Position
At December 31, 2015 , significant concentrations of cash and cash equivalents held by our international subsidiaries included the following amounts:
•
$513 million or 35% in Europe, Middle East and Africa, primarily Belgium ( $517 million or 24% at December 31, 2014),
•
$415 million or 28% in Asia, primarily China, India and Australia ( $462 million or 21% at December 31, 2014), and
•
$114 million or 8% in Latin America, primarily Brazil ( $409 million or 19% at December 31, 2014, which primarily related to Venezuela and Brazil).
Operating Activities
Net cash provided by operating activities was $1,687 million in 2015 , compared to $340 million in 2014 and $938 million in 2013 . The increase in cash provided by operating activities in 2015 versus 2014 was primarily due to decreased pension contributions and direct payments of $1,235 million. In 2014, we made discretionary contributions of $907 million to fully fund our hourly U.S. pension plans.
The decrease in cash provided by operating activities in 2014 versus 2013 was primarily due to working capital being neither a source nor use of cash in 2014, versus a source of cash of $415 million in 2013, and higher pension contributions of $176 million. Pension contributions in both 2014 and 2013 were primarily due to discretionary contributions of $907 million and $834 million, respectively, to fully fund our U.S. pension plans.
Investing Activities
Net cash used in investing activities was $1,262 million in 2015 , compared to $851 million in 2014 and $1,136 million in 2013 . Capital expenditures were $983 million in 2015 , compared to $923 million in 2014 and $1,168 million in 2013 . Beyond expenditures

42

required to sustain our facilities, capital expenditures in 2015 primarily related to the modernization and expansion of manufacturing capacity in the United States, Brazil, Germany and China and to the construction of a new manufacturing facility in Mexico. Capital expenditures in 2014 primarily related to the expansion of manufacturing capacity in the United States, Brazil, Germany and China and in 2013 primarily related to the expansion of manufacturing capacity in Japan, Brazil and Chile. Proceeds from asset sales were $62 million in 2015, primarily related to the sale of our investment in shares of SRI, compared to $18 million in 2014 and $25 million in 2013. In addition to the increase in capital expenditures noted above, the increase in cash used in investing activities in 2015 was primarily driven by a $320 million reduction in cash due to the deconsolidation of our Venezuelan subsidiary.
Financing Activities
Net cash used in financing activities was $985 million in 2015 , compared to net cash used of $11 million in 2014 and net cash provided of $1,082 million in 2013 . Financing activities in 2015 included net debt repayments of $477 million and a payment related to the dissolution of the global alliance with SRI of $271 million. Financing activities in 2014 included net borrowings of $309 million used to fund working capital needs and capital expenditures. Financing activities in 2013 included net borrowings of $1,143 million used to fully fund our frozen U.S. pension plans and for capital expenditures. In 2015, we paid dividends on our common stock of $68 million and repurchased $180 million of our common stock, as compared to dividend payments of $60 million and common stock share repurchases of $234 million in 2014.
Credit Sources
In aggregate, we had total credit arrangements of $8,699 million available at December 31, 2015 , of which $2,676 million were unused, compared to $9,029 million available at December 31, 2014 , of which $2,317 million were unused. At December 31, 2015 , we had long term credit arrangements totaling $8,232 million , of which $2,258 million were unused, compared to $8,582 million and $1,900 million, respectively, at December 31, 2014 . At December 31, 2015 , we had short term committed and uncommitted credit arrangements totaling $467 million , of which $418 million were unused, compared to $447 million and $417 million, respectively, at December 31, 2014 . The continued availability of the short term uncommitted arrangements is at the discretion of the relevant lender and may be terminated at any time.
Outstanding Notes
At December 31, 2015 , we had $3,565 million of outstanding notes, compared to $3,318 million at December 31, 2014 .
$2.0 Billion Amended and Restated First Lien Revolving Credit Facility due 2017
Our amended and restated $2.0 billion first lien revolving credit facility is available in the form of loans or letters of credit, with letter of credit availability limited to $800 million. Loans under this facility bear interest at LIBOR plus 150 basis points, based on our current liquidity. Availability under the facility is subject to a borrowing base, which is based on eligible accounts receivable and inventory of The Goodyear Tire & Rubber Company and certain of its U.S. and Canadian subsidiaries. To the extent that our eligible accounts receivable and inventory decline, our borrowing base will decrease and the availability under the facility may decrease below $2.0 billion. In addition, if the amount of outstanding borrowings and letters of credit under the facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess. As of December 31, 2015 , our borrowing base, and therefore our availability, under the facility was $536 million below the facility's stated amount of $2.0 billion.
At December 31, 2015 , we had no borrowings and $315 million of letters of credit issued under the revolving credit facility. At December 31, 2014 , we had no borrowings and $377 million of letters of credit issued under the revolving credit facility.
$1.2 Billion Amended and Restated Second Lien Term Loan Facility due 2019
The term loan bears interest at LIBOR plus 300 basis points, subject to a minimum LIBOR rate of 75 basis points. At December 31, 2015 and 2014, the amounts outstanding under this facility were $598 million and $1,196 million, respectively. On February 3, 2015, we repaid $200 million and on December 30, 2015 we repaid $400 million of the borrowings under this facility. Repayments are not able to be redrawn.
€550 Million Amended and Restated Senior Secured European Revolving Credit Facility due 2020
Our amended and restated €550 million European revolving credit facility consists of (i) a €125 million German tranche that is available only to Goodyear Dunlop Tires Germany GmbH ("GDTG") and (ii) a €425 million all-borrower tranche that is available to GDTE, GDTG and Goodyear Dunlop Tires Operations S.A. Up to €150 million of swingline loans and €50 million in letters of credit are available for issuance under the all-borrower tranche. Amounts drawn under the facility will bear interest at LIBOR plus 175 basis points for loans denominated in U.S. dollars or pounds sterling and EURIBOR plus 175 basis points for loans denominated in euros.
At December 31, 2015 and 2014, we had no borrowings and no letters of credit issued under the European revolving credit facility.

43

Each of our first lien revolving credit facility and our European revolving credit facility have customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our financial condition since December 31, 2011 under the first lien facility and December 31, 2014 under the European facility.
Accounts Receivable Securitization Facilities (On-Balance Sheet)
GDTE and certain of its subsidiaries are parties to a pan-European accounts receivable securitization facility that provides the flexibility to designate annually the maximum amount of funding available under the facility in an amount of not less than €45 million and not more than €450 million. For the period beginning October 16, 2014 to October 15, 2015, the designated maximum amount of the facility was €380 million. For the period beginning October 16, 2015 to October 15, 2016, the designated maximum amount of the facility is €340 million .
The facility involves an ongoing daily sale of substantially all of the trade accounts receivable of certain GDTE subsidiaries. Utilization under the facility is based on eligible receivable balances.
The funding commitments under the facility will expire upon the earliest to occur of: (a) September 25, 2019, (b) the non-renewal and expiration (without substitution) of all of the back-up liquidity commitments, (c) the early termination of the facility according to its terms (generally upon an Early Amortisation Event (as defined in the facility), which includes, among other things, events similar to the events of default under our senior secured credit facilities; certain tax law changes; or certain changes to law, regulation or accounting standards), or (d) our request for early termination of the facility. The facility’s current back-up liquidity commitments will expire on October 15, 2016.
At December 31, 2015 , the amounts available and utilized under this program totaled $276 million ( €254 million ) and $125 million ( €115 million ), respectively. At December 31, 2014 , the amounts available and utilized under this program totaled $343 million ( €283 million ). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Capital Leases.
In addition to the pan-European accounts receivable securitization facility discussed above, subsidiaries in Australia have an accounts receivable securitization program that provides up to $62 million ( 85 million Australian dollars) of funding. The terms of the facility provide the flexibility to designate semi-annually the maximum amount of funding available under the facility in an amount of not less than 60 million Australian dollars and not more than 85 million Australian dollars. At December 31, 2015 , the amounts available and utilized under this program were $34 million and $19 million , respectively. At December 31, 2014 , the amounts available and utilized under this program were $43 million and $23 million , respectively. The receivables sold under this program also serve as collateral for the related facility. We retain the risk of loss related to these receivables in the event of non-payment. These amounts are included in Long Term Debt and Capital Leases.
Accounts Receivable Factoring Facilities (Off-Balance Sheet)
Various subsidiaries sold certain of their trade receivables under off-balance sheet programs during 2015 and 2014 . For these programs, we have concluded that there is generally no risk of loss to us from non-payment of the sold receivables. At December 31, 2015 and 2014 , the gross amount of receivables sold was $299 million and $365 million , respectively.
Supplier Financing
We have entered into payment processing agreements with several financial institutions. Under these agreements, the financial institution acts as our paying agent with respect to accounts payable due to our suppliers. These agreements also allow our suppliers to sell their receivables to the financial institutions at the sole discretion of both the supplier and the financial institution on terms that are negotiated between them. We are not always notified when our suppliers sell receivables under these programs. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our suppliers' decisions to sell their receivables under the program. Agreements for such supplier financing programs totaled up to $500 million at December 31, 2015 and 2014 .
Further Information
For a further description of the terms of our outstanding notes, first lien revolving credit facility, second lien term loan facility, European revolving credit facility and pan-European accounts receivable securitization facility, refer to the Note to the Consolidated Financial Statements No. 15, Financing Arrangements and Derivative Financial Instruments.

44

Covenant Compliance
Our first and second lien credit facilities and some of the indentures governing our notes contain certain covenants that, among other things, limit our ability to incur additional debt or issue redeemable preferred stock, pay dividends, repurchase shares or make certain other restricted payments or investments, incur liens, sell assets, incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, enter into affiliate transactions, engage in sale and leaseback transactions, and consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. Our first and second lien credit facilities and the indentures governing our notes also have customary defaults, including cross-defaults to material indebtedness of Goodyear and its subsidiaries.
We have additional financial covenants in our first and second lien credit facilities that are currently not applicable. We only become subject to these financial covenants when certain events occur. These financial covenants and related events are as follows:
•
We become subject to the financial covenant contained in our first lien revolving credit facility when the aggregate amount of our Parent Company (The Goodyear Tire & Rubber Company) and guarantor subsidiaries cash and cash equivalents (“Available Cash”) plus our availability under our first lien revolving credit facility is less than $200 million. If this were to occur, our ratio of EBITDA to Consolidated Interest Expense may not be less than 2.0 to 1.0 for any period of four consecutive fiscal quarters. As of December 31, 2015 , our availability under this facility of $1,149 million, plus our Available Cash of $424 million, totaled $1,573 million, which is in excess of $200 million.
•
We become subject to a covenant contained in our second lien credit facility upon certain asset sales. The covenant provides that, before we use cash proceeds from certain asset sales to repay any junior lien, senior unsecured or subordinated indebtedness, we must first offer to use such cash proceeds to prepay borrowings under the second lien credit facility unless our ratio of Consolidated Net Secured Indebtedness to EBITDA (Pro Forma Senior Secured Leverage Ratio) for any period of four consecutive fiscal quarters is equal to or less than 3.0 to 1.0.
In addition, our European revolving credit facility contains non-financial covenants similar to the non-financial covenants in our first and second lien credit facilities that are described above and a financial covenant applicable only to GDTE and its subsidiaries. This financial covenant provides that we are not permitted to allow GDTE’s ratio of Consolidated Net J.V. Indebtedness to Consolidated European J.V. EBITDA for a period of four consecutive fiscal quarters to be greater than 3.0 to 1.0 at the end of any fiscal quarter. Consolidated Net J.V. Indebtedness is determined net of the sum of cash and cash equivalents in excess of $100 million held by GDTE and its subsidiaries, cash and cash equivalents in excess of $150 million held by the Parent Company and its U.S. subsidiaries and availability under our first lien revolving credit facility if the ratio of EBITDA to Consolidated Interest Expense described above is not applicable and the conditions to borrowing under the first lien revolving credit facility are met. Consolidated Net J.V. Indebtedness also excludes loans from other consolidated Goodyear entities. This financial covenant is also included in our pan-European accounts receivable securitization facility. At December 31, 2015 , we were in compliance with this financial covenant.
Our credit facilities also state that we may only incur additional debt or make restricted payments that are not otherwise expressly permitted if, after giving effect to the debt incurrence or the restricted payment, our ratio of EBITDA to Consolidated Interest Expense for the prior four fiscal quarters would exceed 2.0 to 1.0. Certain of our senior note indentures have substantially similar limitations on incurring debt and making restricted payments. Our credit facilities and indentures also permit the incurrence of additional debt through other provisions in those agreements without regard to our ability to satisfy the ratio-based incurrence test described above. We believe that these other provisions provide us with sufficient flexibility to incur additional debt necessary to meet our operating, investing and financing needs without regard to our ability to satisfy the ratio-based incurrence test.
There are no known future changes to, or new covenants in, any of our existing debt obligations other than as described above. Covenants could change based upon a refinancing or amendment of an existing facility, or additional covenants may be added in connection with the incurrence of new debt.
As of December 31, 2015 , we were in compliance with the currently applicable material covenants imposed by our principal credit facilities and indentures.
The terms “Available Cash,” “EBITDA,” “Consolidated Interest Expense,” “Consolidated Net Secured Indebtedness,” “Pro Forma Senior Secured Leverage Ratio,” “Consolidated Net J.V. Indebtedness” and “Consolidated European J.V. EBITDA” have the meanings given them in the respective credit facilities.

45

Potential Future Financings
In addition to our previous financing activities, we may seek to undertake additional financing actions that could include restructuring bank debt or capital markets transactions, possibly including the issuance of additional debt or equity. Given the challenges that we face and the uncertainties of the market conditions, access to the capital markets cannot be assured.
Our future liquidity requirements may make it necessary for us to incur additional debt. However, a substantial portion of our assets are already subject to liens securing our indebtedness. As a result, we are limited in our ability to pledge our remaining assets as security for additional secured indebtedness. In addition, no assurance can be given as to our ability to raise additional unsecured debt.
Dividends and Common Stock Repurchase Program
Under our primary credit facilities and some of our note indentures, we are permitted to pay dividends on and repurchase our capital stock (which constitute restricted payments) as long as no default will have occurred and be continuing, additional indebtedness can be incurred under the credit facilities or indentures following the payment, and certain financial tests are satisfied.
During 2014 and 2013, we paid cash dividends of $15 million and $29 million , respectively, on our mandatory convertible preferred stock. No further dividends will be paid on our preferred stock following the conversion of shares into common stock on April 1, 2014.
During 2015, 2014 and 2013 we paid cash dividends of $68 million , $60 million and $12 million, respectively, on our common stock. On January 15, 2016 , the Company’s Board of Directors (or a duly authorized committee thereof) declared cash dividends of $0.07 per share of our common stock, or approximately $19 million in the aggregate. The cash dividend will be paid on March 1, 2016 to stockholders of record as of the close of business of February 1, 2016 . Future quarterly dividends are subject to Board approval.
On September 18, 2013, the Board of Directors authorized $100 million for use in our common stock repurchase program. On May 27, 2014, the Board of Directors approved an increase in that authorization to $450 million . On February 4, 2016, the Board of Directors approved a further increase in that authorization to $1.1 billion. This program expires on December 31, 2018. We intend to repurchase shares of common stock in open market transactions in order to offset new shares issued under equity compensation programs and to provide for additional shareholder returns. During 2015, we repurchased 5,571,909 shares at an average price, including commissions, of $32.32 per share, or $180 million in the aggregate. Since 2013, we repurchased 14,507,718 shares at an average price, including commissions, of $28.49 per share, or $413 million in the aggregate.
The restrictions imposed by our credit facilities and indentures did not affect our ability to pay the dividends on or repurchase our capital stock as described above, and are not expected to affect our ability to pay similar dividends or make similar repurchases in the future.
Asset Dispositions
The restrictions on asset sales imposed by our material indebtedness have not affected our strategy of divesting non-core businesses, and those divestitures have not affected our ability to comply with those restrictions.


46

COMMITMENTS AND CONTINGENT LIABILITIES
Contractual Obligations
The following table presents our contractual obligations and commitments to make future payments as of December 31, 2015 :
 

(In millions)
Total
 
2016
 
2017
 
2018
 
2019
 
2020
 
Beyond 2020
Debt Obligations (1)
$
5,708

 
$
628

 
$
422

 
$
279

 
$
867

 
$
324

 
$
3,188

Capital Lease Obligations (2)
48

 
8

 
8

 
5

 
2

 
1

 
24

Interest Payments (3)
1,986

 
341

 
305

 
275

 
248

 
230

 
587

Operating Leases (4)
1,163

 
279

 
215

 
158

 
118

 
94

 
299

Pension Benefits (5)
425

 
100

 
100

 
75

 
75

 
75

 
N/A

Other Postretirement Benefits (6)
212

 
24

 
24

 
23

 
22

 
21

 
98

Workers’ Compensation (7)
338

 
54

 
38

 
28

 
22

 
18

 
178

Binding Commitments (8)
4,587

 
1,426

 
1,000

 
819

 
660

 
135

 
547

Uncertain Income Tax Positions (9)
13

 
4

 
3

 
5

 
—

 
—

 
1

 
$
14,480

 
$
2,864

 
$
2,115

 
$
1,667

 
$
2,014

 
$
898

 
$
4,922


(1)
Debt obligations include Notes Payable and Overdrafts.
(2)
The minimum lease payments for capital lease obligations are $80 million.
(3)
These amounts represent future interest payments related to our existing debt obligations and capital leases based on fixed and variable interest rates specified in the associated debt and lease agreements. The amounts provided relate only to existing debt obligations and do not assume the refinancing or replacement of such debt.
(4)
Operating lease obligations have not been reduced by minimum sublease rentals of $26 million, $17 million, $10 million, $6 million, $3 million and $7 million in each of the periods above, respectively, for a total of $69 million. Payments, net of minimum sublease rentals, total $1,094 million. The present value of the net operating lease payments is $886 million. The operating leases relate to, among other things, real estate, vehicles, data processing equipment and miscellaneous other assets. No asset is leased from any related party.
(5)
The obligation related to pension benefits is actuarially determined and is reflective of obligations as of December 31, 2015 . Although subject to change, the amounts set forth in the table represent the midpoint of the range of our expected contributions for funded U.S. and non-U.S. pension plans, plus expected cash funding of direct participant payments to our U.S. and non-U.S. pension plans.
We made significant contributions to fully fund our U.S. pension plans in 2013 and 2014. We have no minimum funding requirements for our funded U.S. pension plans under current ERISA law or the provisions of our USW collective bargaining agreement, which requires us to maintain an annual ERISA funded status for the hourly U.S. pension plan of at least 97%.
Future U.S. pension contributions will be affected by our ability to offset changes in future interest rates with asset returns from our fixed income portfolio, and any changes to ERISA law. For further information on the U.S. pension investment strategy, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Overview — Pension and Benefits" and the Note to the Consolidated Financial Statements No. 17, Pension, Other Postretirement Benefits and Savings Plans.
Future non-U.S. contributions are affected by factors such as:
•
future interest rate levels,
•
the amount and timing of asset returns, and
•
how contributions in excess of the minimum requirements could impact the amount and timing of future contributions.
(6)
The payments presented above are expected payments for the next 10 years. The payments for other postretirement benefits reflect the estimated benefit payments of the plans using the provisions currently in effect. Under the relevant summary plan descriptions or plan documents we have the right to modify or terminate the plans. The obligation related

47

to other postretirement benefits is actuarially determined on an annual basis. The estimated payments have been reduced to reflect the provisions of the Medicare Prescription Drug Improvement and Modernization Act of 2003.
(7)
The payments for workers’ compensation obligations are based upon recent historical payment patterns on claims. The present value of anticipated claims payments for workers’ compensation is $264 million.
(8)
Binding commitments are for raw materials, capital expenditures, utilities, and various other types of contracts. The obligations to purchase raw materials include supply contracts at both fixed and variable prices. Those with variable prices are based on index rates for those commodities at December 31, 2015 .
(9)
These amounts primarily represent expected payments with interest for uncertain tax positions as of December 31, 2015 . We have reflected them in the period in which we believe they will be ultimately settled based upon our experience with these matters.
Additional other long term liabilities include items such as general and product liabilities, environmental liabilities and miscellaneous other long term liabilities. These other liabilities are not contractual obligations by nature. We cannot, with any degree of reliability, determine the years in which these liabilities might ultimately be settled. Accordingly, these other long term liabilities are not included in the above table.
In addition, pursuant to certain long term agreements, we will purchase varying amounts of certain raw materials and finished goods at agreed upon base prices that may be subject to periodic adjustments for changes in raw material costs and market price adjustments, or in quantities that may be subject to periodic adjustments for changes in our or our suppliers' production levels. These contingent contractual obligations, the amounts of which cannot be estimated, are not included in the table above.
We do not engage in the trading of commodity contracts or any related derivative contracts. We generally purchase raw materials and energy through short term, intermediate and long term supply contracts at fixed prices or at formula prices related to market prices or negotiated prices. We may, however, from time to time, enter into contracts to hedge our energy costs.
Off-Balance Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has:
•
made guarantees,
•
retained or held a contingent interest in transferred assets,
•
undertaken an obligation under certain derivative instruments, or
•
undertaken any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company.
We have entered into certain arrangements under which we have provided guarantees that are off-balance sheet arrangements. Those guarantees totaled approximately $49 million at December 31, 2015 . For further information about our guarantees, refer to the Note to the Consolidated Financial Statements No. 19, Commitments and Contingent Liabilities.
We concluded that effective as of December 31, 2015, we do not meet the accounting criteria for control of our Venezuelan subsidiary, and its assets and liabilities are no longer reported in the Consolidated Balance Sheet as of December 31, 2015. Subsequent to its deconsolidation, we maintained a variable interest in our Venezuelan subsidiary. Our exposure to future losses resulting from our Venezuelan subsidiary is limited to the extent that we decide to provide raw materials or finished goods to, or make future investments in, our Venezuelan subsidiary. For further information, refer to the Note the the Consolidated Financial Statements No. 1, Accounting Policies.
FORWARD-LOOKING INFORMATION — SAFE HARBOR STATEMENT
Certain information in this Annual Report on Form 10-K (other than historical data and information) may constitute forward-looking statements regarding events and trends that may affect our future operating results and financial position. The words “estimate,” “expect,” “intend” and “project,” as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including:
•
if we do not successfully implement our strategic initiatives, our operating results, financial condition and liquidity may be materially adversely affected;
•
we face significant global competition and our market share could decline;

48

•
deteriorating economic conditions in any of our major markets, or an inability to access capital markets or third-party financing when necessary, may materially adversely affect our operating results, financial condition and liquidity;
•
our international operations have certain risks that may materially adversely affect our operating results, financial condition and liquidity;
•
we have foreign currency translation and transaction risks that may materially adversely affect our operating results, financial condition and liquidity;
•
if we experience a labor strike, work stoppage or other similar event our business, results of operations, financial condition and liquidity could be materially adversely affected;
•
our long term ability to meet our obligations, to repay maturing indebtedness or to implement strategic initiatives may be dependent on our ability to access capital markets in the future and to improve our operating results;
•
financial difficulties, work stoppages, supply disruptions or economic conditions affecting our major OE customers, dealers or suppliers could harm our business;
•
our capital expenditures may not be adequate to maintain our competitive position and may not be implemented in a timely or cost-effective manner;
•
raw material and energy costs may materially adversely affect our operating results and financial condition;
•
we have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise materially adversely affect our financial health;
•
any failure to be in compliance with any material provision or covenant of our debt instruments, or a material reduction in the borrowing base under our revolving credit facility, could have a material adverse effect on our liquidity and operations;
•
our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly;
•
we have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales;
•
we may incur significant costs in connection with our contingent liabilities and tax matters;
•
our reserves for contingent liabilities and our recorded insurance assets are subject to various uncertainties, the outcome of which may result in our actual costs being significantly higher than the amounts recorded;
•
we are subject to extensive government regulations that may materially adversely affect our operating results;
•
we may be adversely affected by any disruption in, or failure of, our information technology systems due to computer viruses, unauthorized access, cyber attack, natural disasters or other similar disruptions;
• if we are unable to attract and retain key personnel, our business could be materially adversely affected; and
•
we may be impacted by economic and supply disruptions associated with events beyond our control, such as war, acts of terror, political unrest, public health concerns, labor disputes or natural disasters.
It is not possible to foresee or identify all such factors. We will not revise or update any forward-looking statement or disclose any facts, events or circumstances that occur after the date hereof that may affect the accuracy of any forward-looking statement.

ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We utilize derivative financial instrument contracts and nonderivative instruments to manage interest rate, foreign exchange and commodity price risks. We have established a control environment that includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. We do not hold or issue derivative financial instruments for trading purposes.
Commodity Price Risk
The raw materials costs to which our operations are principally exposed include the cost of natural rubber, synthetic rubber, carbon black, fabrics, steel cord and other petrochemical-based commodities. Approximately two-thirds of our raw materials are oil-based derivatives, the cost of which may be affected by fluctuations in the price of oil. We currently do not hedge commodity prices. We do, however, use various strategies to partially offset cost increases for raw materials, including centralizing purchases of raw materials through our global procurement organization in an effort to leverage our purchasing power, expanding our capabilities to substitute lower-cost raw materials and reducing the amount of material required in each tire.

49
Table of Contents

Interest Rate Risk
We carefully monitor our fixed and floating rate debt mix. Within defined limitations, we manage the mix using refinancing. At December 31, 2015 , 31% of our debt was at variable interest rates averaging 6.55% compared to 42% at an average rate of 5.78% at December 31, 2014 .
The following table presents information about long term fixed rate debt, excluding capital leases, at December 31:
(In millions)
2015
 
2014
Carrying amount — liability
$
3,890

 
$
3,680

Fair value — liability
4,065

 
3,773

Pro forma fair value — liability
4,170

 
3,889

The pro forma information assumes a 100 basis point decrease in market interest rates at December 31 of each year, and reflects the estimated fair value of fixed rate debt outstanding at that date under that assumption. The sensitivity of our fixed rate debt to changes in interest rates was determined using current market pricing models.
Foreign Currency Exchange Risk
We will enter into foreign currency contracts in order to manage the impact of changes in foreign exchange rates on our consolidated results of operations and future foreign currency-denominated cash flows. These contracts reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted transactions resulting primarily from trade purchases and sales, equipment acquisitions, intercompany loans and royalty agreements. Contracts hedging short term trade receivables and payables normally have no hedging designation.
The following table presents foreign currency derivative information at December 31:
(In millions)
2015
 
2014
Fair value — asset (liability)
$
4

 
$
26

Pro forma decrease in fair value
(108
)
 
(83
)
Contract maturities
1/16 - 12/16

 
1/15 - 12/15

The pro forma decrease in fair value assumes a 10% adverse change in underlying foreign exchange rates at December 31 of each year, and reflects the estimated change in the fair value of positions outstanding at that date under that assumption. The sensitivity of our foreign currency positions to changes in exchange rates was determined using current market pricing models.
Fair values are recognized on the Consolidated Balance Sheets at December 31 as follows:
(In millions)
2015
 
2014
Asset (liability):
 
 
 
Accounts Receivable
$
15

 
$
30

Other Current Liabilities
(11
)
 
(4
)
For further information on foreign currency contracts, refer to the Note to the Consolidated Financial Statements No. 15, Financing Arrangements and Derivative Financial Instruments.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for a discussion of our management of counterparty risk.

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Table of Contents

ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
Page
 
 
Management's Report on Internal Control over Financial Reporting
52

53

Consolidated Financial Statements of The Goodyear Tire & Rubber Company:
 
54

55

Consolidated Balance Sheets at December 31, 2015 and December 31, 2014
56

57

61

62

117

Financial Statement Schedules:
 

The following consolidated financial statement schedule of The Goodyear Tire & Rubber Company is filed as part of this Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements of The Goodyear Tire & Rubber Company:
 
FS-2


Schedules not listed above have been omitted since they are not applicable or are not required, or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto.

51
Table of Contents

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined under Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the Company’s internal control over financial reporting as of December 31, 2015 using the framework specified in Internal Control — Integrated Framework (2013) , published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2015 .
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is presented in this Annual Report on Form 10-K.

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Shareholders of The Goodyear Tire & Rubber Company
In our opinion, the accompanying consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of The Goodyear Tire & Rubber Company and its subsidiaries at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it presents deferred income taxes in 2015.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
 
 
 
PRICEWATERHOUSECOOPERS LLP
 
 
 
Cleveland, Ohio
 
February 9, 2016
 


53

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

 
Year Ended December 31,
(In millions, except per share amounts)
2015
 
2014
 
2013
Net Sales
$
16,443

 
$
18,138

 
$
19,540

Cost of Goods Sold
12,164

 
13,906

 
15,422

Selling, Administrative and General Expense
2,614

 
2,720

 
2,758

Rationalizations (Note 2)
114

 
95

 
58

Interest Expense (Note 3)
412

 
428

 
392

Loss on Deconsolidation of Venezuelan Subsidiary (Note 1)
646

 
—

 
—

Other (Income) Expense (Note 4)
(115
)
 
302

 
97

Income before Income Taxes
608

 
687

 
813

United States and Foreign Tax (Benefit) Expense (Note 6)
232

 
(1,834
)
 
138

Net Income
376

 
2,521

 
675

Less: Minority Shareholders’ Net Income
69

 
69

 
46

Goodyear Net Income
307

 
2,452

 
629

Less: Preferred Stock Dividends
—

 
7

 
29

Goodyear Net Income available to Common Shareholders
$
307

 
$
2,445

 
$
600

Goodyear Net Income available to Common Shareholders — Per Share of Common Stock
 

 
 

 
 
Basic
$
1.14

 
$
9.13

 
$
2.44

Weighted Average Shares Outstanding (Note 7)
269

 
268

 
246

Diluted
$
1.12

 
$
8.78

 
$
2.28

Weighted Average Shares Outstanding (Note 7)
273

 
279

 
277

 
 
 
 
 
 
Cash Dividends Declared Per Common Share
$
0.25

 
$
0.22

 
$
0.05


The accompanying notes are an integral part of these consolidated financial statements.


54
Table of Contents

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 
Year Ended December 31,
(In millions)
2015
 
2014
 
2013
Net Income
$
376

 
$
2,521

 
$
675

Other Comprehensive Income (Loss):

 
 
 
 
Foreign currency translation net of tax of $(52) in 2015 ($(46) in 2014, $0 in 2013)
(315
)
 
(298
)
 
(151
)
Reclassification adjustment for amounts recognized in income net of tax of $0 in all periods
16

 
3

 
1

Defined benefit plans:
 
 
 
 
 
Amortization of prior service cost and unrecognized gains and losses included in total benefit cost net of tax of $34 in 2015 ($36 in 2014, $10 in 2013)
69

 
79

 
232

Decrease (Increase) in net actuarial losses net of tax of $(19) in 2015 ($(135) in 2014, $34 in 2013)
(68
)
 
(82
)
 
519

Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures (net of tax of $67 in 2015 ($13 in 2014, $1 in 2013)
259

 
35

 
2

Prior service credit (cost) from plan amendments net of tax of $0 in in all periods
—

 
—

 
31

Deferred derivative gains (losses) net of tax of $3 in 2015 ($1 in 2014, $1 in 2013)
17

 
16

 
1

Reclassification adjustment for amounts recognized in income net of tax $(3) in 2015 ($(1) in 2014, $0 in 2013)
(25
)
 
1

 
2

Unrealized investment gains net of tax of $(2) in 2015 ($1 in 2014, $0 in 2013)
(4
)
 
2

 
8

Reclassification adjustment for amounts recognized in income net of tax $2 in 2015 ($0 in 2014, $0 in 2013)
(32
)
 
—

 
—

Deconsolidation of Venezuelan subsidiary net of tax of $0 (Notes 1 and 21)

248

 
—

 
—

Other Comprehensive Income (Loss)
165

 
(244
)
 
645

Comprehensive Income (Loss)
541

 
2,277

 
1,320

Less: Comprehensive Income (Loss) Attributable to Minority Shareholders
6

 
20

 
78

Goodyear Comprehensive Income (Loss)
$
535

 
$
2,257

 
$
1,242

The accompanying notes are an integral part of these consolidated financial statements.


55
Table of Contents

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
December 31,
(In millions, except share data)
2015
 
2014
Assets
 

 
 

Current Assets:
 

 
 

Cash and Cash Equivalents (Note 1)
$
1,476

 
$
2,161

Accounts Receivable (Note 9)
2,033

 
2,126

Inventories (Note 10)
2,464

 
2,671

Prepaid Expenses and Other Current Assets
168

 
201

Total Current Assets
6,141

 
7,159

Goodwill (Note 11)
555

 
601

Intangible Assets (Note 11)
138

 
138

Deferred Income Taxes (Note 6)
2,141

 
2,253

Other Assets (Note 12)
687

 
740

Property, Plant and Equipment (Note 13)
6,777

 
7,153

Total Assets
$
16,439

 
$
18,044

Liabilities
 

 
 

Current Liabilities:
 

 
 

Accounts Payable-Trade
$
2,769

 
$
2,878

Compensation and Benefits (Notes 17 and 18)
666

 
724

Other Current Liabilities
886

 
950

Notes Payable and Overdrafts (Note 15)
49

 
30

Long Term Debt and Capital Leases due Within One Year (Note 15)
587

 
148

Total Current Liabilities
4,957

 
4,730

Long Term Debt and Capital Leases (Note 15)
5,120

 
6,216

Compensation and Benefits (Notes 17 and 18)
1,468

 
1,676

Deferred Income Taxes (Note 6)
91

 
90

Other Long Term Liabilities
661

 
905

Total Liabilities
12,297

 
13,617

Commitments and Contingent Liabilities (Note 19)


 


Minority Shareholders’ Equity (Note 1)
—

 
582

Shareholders’ Equity
 

 
 

Goodyear Shareholders’ Equity
 

 
 

Common Stock, no par value:
 

 
 

Authorized, 450 million shares, Outstanding shares — 267 million (269 million in 2014)
267

 
269

Capital Surplus
3,093

 
3,141

Retained Earnings
4,570

 
4,331

Accumulated Other Comprehensive Loss (Note 21)
(4,010
)
 
(4,131
)
Goodyear Shareholders’ Equity
3,920

 
3,610

Minority Shareholders’ Equity — Nonredeemable
222

 
235

Total Shareholders’ Equity
4,142

 
3,845

Total Liabilities and Shareholders’ Equity
$
16,439

 
$
18,044

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
Minority
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
Goodyear
 
Shareholders'
 
Total
 
Preferred Stock
 
Common Stock
 
Capital
 
Retained
 
Comprehensive
 
Shareholders'
 
Equity - Non-
 
Shareholders'
(Dollars in millions)
Shares
 
Amount
 
Shares
 
Amount
 
Surplus
 
Earnings
 
Loss
 
Equity
 
Redeemable
 
Equity
Balance at December 31, 2012 as reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(after deducting 5,648,930 common treasury shares)
10,000,000

 
$
500

 
245,240,762

 
$
245

 
$
2,815

 
$
1,370

 
$
(4,560
)
 
$
370

 
$
255

 
$
625

Adjustment to fair value method for Canadian pension assets (Note 1)
 
 
 
 
 
 
 
 
 
 
(12
)
 
12

 
 
 
 
 
 
Balance at December 31, 2012 as restated
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

(after deducting 5,648,930 common treasury shares)
10,000,000

 
$
500

 
245,240,762

 
$
245

 
$
2,815

 
$
1,358

 
$
(4,548
)
 
$
370

 
$
255

 
$
625

Comprehensive income (loss):
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Net income
 
 
 
 
 

 
 

 
 

 
629

 
 

 
629

 
45

 
674

Foreign currency translation (net of tax of $0)
 
 
 
 
 

 
 

 
 

 
 

 
(153
)
 
(153
)
 
(21
)
 
(174
)
Reclassification adjustment for amounts recognized in income (net of tax of $0)
 
 
 
 
 
 
 
 
 
 
 
 
1

 
1

 
 
 
1

Amortization of prior service cost and unrecognized gains and losses included in net periodic benefit cost (net of tax of $9)
 
 
 
 
 
 
 
 
 
 
 
 
224

 
224

 
 
 
224

Decrease in net actuarial losses (net of tax of $33)
 
 
 
 
 
 
 
 
 
 
 
 
498

 
498

 
 
 
498

Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures (net of tax of $1)
 
 
 
 
 
 
 
 
 
 
 
 
2

 
2

 
 
 
2

Prior service credit from plan amendments (net of tax of $0)
 
 
 
 
 
 
 
 
 
 
 
 
30

 
30

 
 
 
30

Deferred derivative gains (net of tax of $1)
 
 
 
 
 
 
 
 
 
 
 
 
1

 
1

 
 
 
1

Reclassification adjustment for amounts recognized in income (net of tax of $0)
 
 
 
 
 
 
 
 
 
 
 
 
2

 
2

 
 
 
2

Unrealized investment gains (net of tax of $0)
 
 
 
 
 
 
 
 
 
 
 
 
8

 
8

 
 
 
8

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
613

 
(21
)
 
592

Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,242

 
24

 
1,266

Purchase of subsidiary shares from minority interest
 
 
 
 
 
 
 
 
(2
)
 
 
 


 
(2
)
 
(2
)
 
(4
)
Dividends declared to minority shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(11
)
 
(11
)
Stock-based compensation plans
 
 
 
 
 
 
 
 
15

 
 
 
 
 
15

 
 
 
15

Dividends declared (Note 20)
 
 
 
 
 
 
 
 
 
 
(41
)
 
 
 
(41
)
 
 
 
(41
)
Common stock issued from treasury (Note 18)
 
 
 
 
2,512,267

 
3

 
19

 
 
 
 
 
22

 
 
 
22

Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4
)
 
(4
)
Balance at December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(after deducting 3,136,663 common treasury shares)
10,000,000

 
$
500

 
247,753,029

 
$
248

 
$
2,847

 
$
1,946

 
$
(3,935
)
 
$
1,606

 
$
262

 
$
1,868

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY — (Continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
Minority
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
Goodyear
 
Shareholders'
 
Total
 
Preferred Stock
 
Common Stock
 
Capital
 
Retained
 
Comprehensive
 
Shareholders'
 
Equity - Non-
 
Shareholders'
(Dollars in millions)
Shares
 
Amount
 
Shares
 
Amount
 
Surplus
 
Earnings
 
Loss
 
Equity
 
Redeemable
 
Equity
Balance at December 31, 2013
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

(after deducting 3,136,663 common treasury shares)
10,000,000

 
$
500

 
247,753,029

 
$
248

 
$
2,847

 
$
1,946

 
$
(3,935
)
 
$
1,606

 
$
262

 
$
1,868

Comprehensive income (loss):
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Net income
 
 
 
 
 

 
 

 
 

 
2,452

 
 

 
2,452

 
23

 
2,475

Foreign currency translation (net of tax of $(46))
 
 
 
 
 

 
 

 
 

 
 

 
(206
)
 
(206
)
 
(18
)
 
(224
)
Reclassification adjustment for amounts recognized in income (net of tax of $0)
 
 
 
 
 
 
 
 
 
 
 
 
3

 
3

 
 
 
3

Amortization of prior service cost and unrecognized gains and losses included in total benefit cost (net of tax of $36)
 
 
 
 
 

 
 

 
 

 
 

 
74

 
74

 
 
 
74

Increase in net actuarial losses (net of tax of $(129))
 
 
 
 
 

 
 

 
 

 
 

 
(112
)
 
(112
)
 
 
 
(112
)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures (net of tax of $13)
 
 
 
 
 

 
 

 
 

 
 

 
31

 
31

 
 
 
31

Deferred derivative gains (net of tax of $1)
 
 
 
 
 
 
 
 
 
 
 
 
13

 
13

 
 
 
13

Unrealized investment gains (net of tax of $1)
 
 
 
 
 
 
 
 
 
 
 
 
2

 
2

 
 
 
2

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(195
)
 
(18
)
 
(213
)
Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,257

 
5

 
2,262

Purchase of subsidiary shares from minority interest
 
 
 
 
 
 
 
 
(4
)
 
 
 
(1
)
 
(5
)
 
(16
)
 
(21
)
Dividends declared to minority shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(16
)
 
(16
)
Stock-based compensation plans
 
 
 
 
 
 
 
 
20

 
 
 
 
 
20

 
 
 
20

Repurchase of common stock (Note 20)
 
 
 
 
(8,955,107
)
 
(9
)
 
(225
)
 
 
 
 
 
(234
)
 
 
 
(234
)
Dividends declared (Note 20)
 
 
 
 
 
 
 
 
 
 
(67
)
 
 
 
(67
)
 
 
 
(67
)
Common stock issued from treasury (Note 18)
 
 
 
 
3,111,843

 
2

 
31

 
 
 
 
 
33

 
 
 
33

Preferred stock conversion
(10,000,000
)
 
(500
)
 
27,573,735

 
28

 
472

 
 
 
 
 
 
 
 
 
—

Balance at December 31, 2014
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

(after deducting 8,979,927 common treasury shares)
—

 
$
—

 
269,483,500

 
$
269

 
$
3,141

 
$
4,331

 
$
(4,131
)
 
$
3,610

 
$
235

 
$
3,845

The accompanying notes are an integral part of these consolidated financial statements.

58

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY — (Continued)
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
Minority
 
 
 
 
 
 
 
 
 
 
 
Other
 
Goodyear
 
Shareholders'
 
Total
 
Common Stock
 
Capital
 
Retained
 
Comprehensive
 
Shareholders'
 
Equity - Non-
 
Shareholders'
(Dollars in millions)
Shares
 
Amount
 
Surplus
 
Earnings
 
Loss
 
Equity
 
Redeemable
 
Equity
Balance at December 31, 2014
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

(after deducting 8,979,927 common treasury shares)
269,483,500

 
$
269

 
$
3,141

 
$
4,331

 
$
(4,131
)
 
$
3,610

 
$
235

 
$
3,845

Comprehensive income (loss):
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Net income
 

 
 

 
 

 
307

 
 

 
307

 
22

 
329

Foreign currency translation (net of tax of $(52))
 

 
 

 
 

 
 

 
(251
)
 
(251
)
 
(26
)
 
(277
)
Reclassification adjustment for amounts recognized in income (net of tax of $0)
 
 
 
 
 
 
 
 
16

 
16

 
 
 
16

Amortization of prior service cost and unrecognized gains and losses included in total benefit cost (net of tax of $34)
 

 
 

 
 

 
 

 
66

 
66

 
 

 
66

Increase in net actuarial losses (net of tax of $(19))
 

 
 

 
 

 
 

 
(68
)
 
(68
)
 
 

 
(68
)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures (net of tax of $67)
 

 
 

 
 

 
 

 
259

 
259

 
 

 
259

Deferred derivative gains (net of tax of $3)
 
 
 
 
 
 
 
 
15

 
15

 
 
 
15

Reclassification adjustment for amounts recognized in income (net of tax of $(3))
 
 
 
 
 
 
 
 
(21
)
 
(21
)
 
 
 
(21
)
Unrealized investment gains (losses) (net of tax of $(2))
 
 
 
 
 
 
 
 
(4
)
 
(4
)
 
 
 
(4
)
Reclassification adjustment for amounts recognized in income (net of tax of $2)
 
 
 
 
 
 
 
 
(32
)
 
(32
)
 
 
 
(32
)
Deconsolidation of Venezuelan subsidiary (net of tax of $0) (Notes 1 and 21)
 
 
 
 
 
 
 
 
248

 
248

 
 
 
248

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
228


(26
)

202

Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
535

 
(4
)
 
531

Purchase of subsidiary shares from minority interest (Note 5)
 
 
 
 
60

 
 
 
(107
)
 
(47
)
 
—

 
(47
)
Dividends declared to minority shareholders
 
 
 
 
 
 
 
 
 
 
 
 
(9
)
 
(9
)
Stock-based compensation plans
 
 
 
 
19

 
 
 
 
 
19

 
 
 
19

Repurchase of common stock (Note 20)
(5,647,429
)
 
(5
)
 
(175
)
 
 
 
 
 
(180
)
 
 
 
(180
)
Dividends declared (Note 20)
 
 
 
 
 
 
(68
)
 
 
 
(68
)
 
 
 
(68
)
Common stock issued from treasury (Note 18)
3,181,911

 
3

 
48

 
 
 
 
 
51

 


 
51

Balance at December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(after deducting 11,445,445 common treasury shares)
267,017,982

 
$
267

 
$
3,093

 
$
4,570

 
$
(4,010
)
 
$
3,920

 
$
222

 
$
4,142

The accompanying notes are an integral part of these consolidated financial statements.


59

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY — (Continued)
The following table presents changes in Minority Equity presented outside of Shareholders’ Equity:

(In millions)
2015
 
2014
 
2013
Balance at beginning of year
$
582

 
$
577

 
$
534

Comprehensive income (loss):
 
 
 
 
 
Net income (loss)
47

 
46

 
1

Foreign currency translation (net of tax of $0 in all periods)
(38
)
 
(74
)
 
23

Amortization of prior service cost and unrecognized gains and losses included in total benefit cost net of tax of $0 in 2015 ($0 in 2014, $1 in 2013)
3

 
5

 
8

Decrease (increase) in net actuarial losses net of tax of $0 in 2015 ($(6) in 2014, $1 in 2013)
—

 
30

 
21

Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures (net of tax of $0 in all periods)
—

 
4

 
—

Prior service credit (cost) from defined benefit plan amendment (net of tax of $0 in all periods)
—

 
—

 
1

Deferred derivative gains (losses) (net of tax of $0 in all periods)
2

 
3

 
—

Reclassification adjustment for amounts recognized in income net of tax of $0 in 2015 ($(1) in 2014, $0 in 2013)
(4
)
 
1

 
—

Other comprehensive income (loss)
(37
)
 
(31
)
 
53

Total comprehensive income (loss)
10

 
15

 
54

Dividends declared to minority shareholders
—

 
(10
)
 
(11
)
Dissolution of global alliance (Note 5)

(592
)
 
—

 
—

Balance at end of year
$
—

 
$
582

 
$
577


The accompanying notes are an integral part of these consolidated financial statements.


60

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Year Ended December 31,
(In millions)
2015
 
2014
 
2013
Cash Flows from Operating Activities:
 

 
 

 
 

Net Income
$
376

 
$
2,521

 
$
675

Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
698

 
732

 
722

Amortization and Write-Off of Debt Issuance Costs
23

 
14

 
18

Provision for Deferred Income Taxes
79

 
(1,970
)
 
(34
)
Loss on Deconsolidation of Venezuelan Subsidiary (Note 1)
646

 
—

 
—

Net Pension Curtailments and Settlements (Note 17)
139

 
39

 
—

Net Rationalization Charges (Note 2)
114

 
95

 
58

Rationalization Payments
(144
)
 
(226
)
 
(72
)
Net Gains on Asset Sales (Note 4)
(71
)
 
(3
)
 
(8
)
Pension Contributions and Direct Payments
(103
)
 
(1,338
)
 
(1,162
)
Net Venezuela Currency Loss (Note 4)
—

 
200

 
115

Gain on Recognition of Deferred Royalty Revenue (Note 4)
(155
)
 
—

 
—

Changes in Operating Assets and Liabilities, Net of Asset Acquisitions and Dispositions:
 
 
 
 
 
Accounts Receivable
(31
)
 
75

 
79

Inventories
(89
)
 
(35
)
 
366

Accounts Payable — Trade
78

 
(41
)
 
(30
)
Compensation and Benefits
66

 
223

 
243

Other Current Liabilities
(28
)
 
(40
)
 
(28
)
Other Assets and Liabilities
89

 
94

 
(4
)
Total Cash Flows from Operating Activities
1,687

 
340

 
938

Cash Flows from Investing Activities:
 
 
 
 
 
Capital Expenditures
(983
)
 
(923
)
 
(1,168
)
Asset Dispositions (Note 4)
62

 
18

 
25

Decrease in Cash Due to Deconsolidation of Venezuelan Subsidiary (Note 1)
(320
)
 
—

 
—

(Increase) Decrease in Restricted Cash
(6
)
 
5

 
14

Short Term Securities Acquired
(77
)
 
(72
)
 
(105
)
Short Term Securities Redeemed
69

 
95

 
89

Other Transactions (Note 12)
(7
)
 
26

 
9

Total Cash Flows from Investing Activities
(1,262
)
 
(851
)
 
(1,136
)
Cash Flows from Financing Activities:
 
 
 
 
 
Short Term Debt and Overdrafts Incurred
103

 
46

 
31

Short Term Debt and Overdrafts Paid
(84
)
 
(24
)
 
(120
)
Long Term Debt Incurred
2,819

 
1,842

 
1,913

Long Term Debt Paid
(3,315
)
 
(1,555
)
 
(681
)
Common Stock Issued (Note 18)
53

 
39

 
26

Common Stock Repurchased (Note 20)
(180
)
 
(234
)
 
(4
)
Common Stock Dividends Paid (Note 20)
(68
)
 
(60
)
 
(12
)
Preferred Stock Dividends Paid (Note 20)
—

 
(15
)
 
(29
)
Transactions with Minority Interests in Subsidiaries
(9
)
 
(49
)
 
(26
)
Debt Related Costs and Other Transactions
(33
)
 
(1
)
 
(16
)
Dissolution of Global Alliance (Note 5)
(271
)
 
—

 
—

Total Cash Flows from Financing Activities
(985
)
 
(11
)
 
1,082

Effect of Exchange Rate Changes on Cash and Cash Equivalents
(125
)
 
(313
)
 
(169
)
Net Change in Cash and Cash Equivalents
(685
)
 
(835
)
 
715

Cash and Cash Equivalents at Beginning of the Year
2,161

 
2,996

 
2,281

Cash and Cash Equivalents at End of the Year
$
1,476

 
$
2,161

 
$
2,996

The accompanying notes are an integral part of these consolidated financial statements.

61
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1. Accounting Policies
A summary of the significant accounting policies used in the preparation of the accompanying consolidated financial statements follows:
Basis of Presentation
Recently Adopted Accounting Standards
In November 2015, the Financial Accounting Standards Board ("FASB") issued an accounting standards update with new guidance on simplifying the presentation of deferred income taxes that requires deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. We adopted the standards update effective October 1, 2015, electing to apply it retrospectively to all periods presented.  The adoption of this standards update affects balance sheet presentation, and as of December 31, 2014 it resulted in an increase in noncurrent deferred income tax assets of $500 million , a reduction of current deferred income tax assets of $565 million , a reduction of noncurrent deferred income tax liabilities of $60 million and a reduction of current deferred income tax liabilities of $5 million .
Effective January 1, 2015, we adopted an accounting standards update providing new guidance on the requirements for reporting a discontinued operation. The standards update allows only those disposals representing a strategic shift in operations with a major effect on the entity's operations and financial results to be reported as a discontinued operation. It also allows companies to have significant continuing involvement and continuing cash flows with the discontinued operations. Additional disclosures are also required for discontinued operations and individually material disposal transactions that do not meet the definition of a discontinued operation. The adoption of this standards update did not impact our consolidated financial statements.
Recently Issued Accounting Standards
In September 2015, the FASB issued an accounting standards update with new guidance that eliminates the requirement in a business combination to restate prior period financial statements for measurement period adjustments. Instead, measurement period adjustments will be recognized in the reporting period in which the adjustment is identified. The standards update is effective for fiscal years and interim periods beginning after December 15, 2015. The amendments should be applied prospectively to measurement period adjustments that occur after the effective date of this update with early adoption permitted for financial statements that have not been issued. We will adopt this standards update as required and recognize any such future adjustments accordingly.
In July 2015, the FASB issued an accounting standards update with new guidance on simplifying the measurement of inventory. Inventory within the scope of this update is required to be measured at the lower of its cost or net realizable value, with net realizable value being the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The standards update is effective prospectively for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. We are currently assessing the impact of adopting this standards update on our consolidated financial statements.
In April 2015, the FASB issued an accounting standards update with new guidance on whether a cloud computing arrangement includes a software license and the accounting for such an arrangement. If a cloud computing arrangement includes a software license, then the software license element of the arrangement should be accounted for consistently with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the agreement should be accounted for as a service contract. The standards update is effective for fiscal years and interim periods beginning after December 15, 2015, with early adoption permitted. The adoption of this standards update will not have a material impact on our consolidated financial statements.
In April 2015, the FASB issued an accounting standards update with new guidance on the presentation of debt issuance costs that requires all costs incurred to issue debt to be presented on the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued an accounting standards update that allows debt issuance costs incurred in connection with line of credit arrangements to be presented as an asset. The standards updates are effective for fiscal years and interim periods beginning after December 15, 2015 on a retrospective basis, with early adoption permitted. The adoption of these standards updates affects presentation only and is not expected to have a material impact on our consolidated financial statements.
In August 2014, the FASB issued an accounting standards update with new guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management must evaluate whether it is probable that known conditions or events, considered in the aggregate, would raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. If such conditions or events are identified, the standard requires management's mitigation plans to alleviate the doubt

62
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

or a statement of the substantial doubt about the entity’s ability to continue as a going concern to be disclosed in the financial statements. The standards update is effective for the first annual period ending after December 15, 2016, with early adoption permitted. The adoption of this standards update is not expected to impact our consolidated financial statements.
In May 2014, the FASB issued an accounting standards update with new guidance on recognizing revenue from contracts with customers. The standards update outlines a single comprehensive model for entities to utilize to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that will be received in exchange for the goods and services. Additional disclosures will also be required to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB deferred the effective date of this standards update to fiscal years beginning after December 15, 2017, with early adoption permitted on the original effective date of fiscal years beginning after December 15, 2016. We are currently evaluating our significant contracts and assessing any impact of adopting this standards update on our consolidated financial statements.
Other
We were a party to shareholder agreements concerning certain of our less-than-wholly-owned consolidated subsidiaries. Under the terms of certain of these agreements, the minority shareholders had the right to require us to purchase their ownership interests in the respective subsidiaries if there was a change in control of the Company, a bankruptcy of the Company, or other circumstances. Accordingly, we have reported the minority equity in those subsidiaries outside of shareholders’ equity. On October 1, 2015, we completed the dissolution of our global alliance with Sumitomo Rubber Industries, Ltd. ("SRI"). Refer to Note 5.
During the fourth quarter of 2015, the value of pension assets used in the calculation of pension expense for our Canadian plans was changed from market-related value to fair value. This change is considered preferable because it better reflects recent gains or losses from pension assets in pension expense. As a result, all of our pension plans now use fair value in the calculation of pension expense. The change to the fair value method for these plans was retrospectively applied by restating all periods presented. The impact on the consolidated financial statements for the prior periods presented was insignificant.
Principles of Consolidation
The consolidated financial statements include the accounts of all legal entities in which we hold a controlling financial interest. A controlling financial interest generally arises from our ownership of a majority of the voting shares of our subsidiaries. We would also hold a controlling financial interest in variable interest entities if we are considered to be the primary beneficiary. Investments in companies in which we do not own a majority interest and we have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. Investments in other companies are carried at cost. All intercompany balances and transactions have been eliminated in consolidation.
Deconsolidation of Venezuelan Subsidiary
Our wholly-owned subsidiary, C.A. Goodyear de Venezuela, manufactures, markets and distributes consumer and commercial tires throughout Venezuela. Evolving conditions in Venezuela, including currency exchange control regulations and continued reductions in access to U.S. dollars through official currency exchange mechanisms, have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar fuerte and the U.S. dollar, and have restricted the ability of our Venezuelan subsidiary to pay dividends and royalties and to settle liabilities. These currency exchange regulations, combined with other government regulations such as price and profit margin controls and strict labor laws, have increasingly limited our ability to make and execute operational decisions at our Venezuelan subsidiary. This lack of currency exchangeability, combined with these other operating restrictions, have significantly limited our Venezuelan subsidiary's ability to maintain normal production and control over its operations. We expect these conditions to continue for the foreseeable future.
As a result of these conditions, we concluded that effective as of December 31, 2015, we do not meet the accounting criteria for control over our Venezuelan subsidiary and began reporting the results of our Venezuelan subsidiary using the cost method of accounting. This change resulted in a pre-tax charge of $646 million in the fourth quarter of 2015. The pre-tax charge includes the derecognition of the carrying amounts of our Venezuelan subsidiary's assets and liabilities, including $320 million of Cash and Cash Equivalents, that are no longer reported in the Consolidated Balance Sheet as of December 31, 2015. The pre-tax charge also includes $248 million of foreign currency translation losses and pension losses previously included in Accumulated Other Comprehensive Loss ("AOCL") in the Company’s Consolidated Balance Sheet. We have determined the fair value of our investment in, and receivables from, our Venezuelan subsidiary to be insignificant based on our expectations of dividend payments and settlements of such receivables in future periods.
In future reporting periods, our financial results will not include the operating results of our Venezuelan subsidiary. We will record income from sales of inventory and raw materials or from dividends or royalties to the extent cash is received from our Venezuelan subsidiary. Our exposure to future losses resulting from our Venezuelan subsidiary is limited to the extent that we decide to provide raw materials or finished goods to, or make future investments in, our Venezuelan subsidiary.

63
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the consolidated financial statements. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to:
•
recoverability of intangibles and other long-lived assets,
•
deferred tax asset valuation allowances and uncertain income tax positions,
•
workers’ compensation,
•
general and product liabilities and other litigation,
•
pension and other postretirement benefits, and
•
various other operating allowances and accruals, based on currently available information.
Changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.
Revenue Recognition and Accounts Receivable Valuation
Revenues are recognized when finished products are shipped to unaffiliated customers, both title and the risks and rewards of ownership are transferred or services have been rendered and accepted, and collectability is reasonably assured. A provision for sales returns, discounts and allowances is recorded at the time of sale. Appropriate provisions are made for uncollectible accounts based on historical loss experience, portfolio duration, economic conditions and credit risk. The adequacy of the allowances are assessed quarterly.
Shipping and Handling Costs
Costs incurred for transportation of products to customers are recorded as a component of Cost of Goods Sold (“CGS”).
Research and Development Costs
Research and development costs include, among other things, materials, equipment, compensation and contract services. These costs are expensed as incurred and included as a component of CGS. Research and development expenditures were $382 million , $399 million and $390 million in 2015 , 2014 and 2013 , respectively.
Warranty
Warranties are provided on the sale of certain of our products and services and an accrual for estimated future claims is recorded at the time revenue is recognized. Tire replacement under most of the warranties we offer is on a prorated basis. Warranty reserves are based on past claims experience, sales history and other considerations. Refer to Note  19 .
Environmental Cleanup Matters
We expense environmental costs related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. We determine our liability on a site by site basis and record a liability at the time when it is probable and can be reasonably estimated. Our estimated liability is reduced to reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. Our estimated liability is not discounted or reduced for possible recoveries from insurance carriers. Refer to Note  19 .
Legal Costs
We record a liability for estimated legal and defense costs related to pending general and product liability claims, environmental matters and workers’ compensation claims. Refer to Note  19 .
Advertising Costs
Costs incurred for producing and communicating advertising are generally expensed when incurred as a component of Selling, Administrative and General Expense (“SAG”). Costs incurred under our cooperative advertising programs with dealers and franchisees are generally recorded as reductions of sales as related revenues are recognized. Advertising costs, including costs for

64
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

our cooperative advertising programs with dealers and franchisees, were $385 million , $430 million and $408 million in 2015 , 2014 and 2013 , respectively.
Rationalizations
We record costs for rationalization actions implemented to reduce excess and high-cost manufacturing capacity and operating and administrative costs. Associate-related costs include severance, supplemental unemployment compensation and benefits, medical benefits, pension curtailments, postretirement benefits, and other termination benefits. For ongoing benefit arrangements, a liability is recognized when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated. These conditions are generally met when the restructuring plan is approved by management. For one-time benefit arrangements, a liability is incurred and must be accrued at the date the plan is communicated to employees, unless they will be retained beyond a minimum retention period. In this case, the liability is calculated at the date the plan is communicated to employees and is accrued ratably over the future service period. Other costs generally include non-cancelable lease costs, contract terminations, and relocation costs. A liability for these costs is recognized in the period in which the liability is incurred. Rationalization charges related to accelerated depreciation and asset impairments are recorded in CGS or SAG. Refer to Note  2 .
Income Taxes
Income taxes are recognized during the year in which transactions enter into the determination of financial statement income, with deferred taxes being provided for temporary differences between carrying values of assets and liabilities for financial reporting purposes and such carrying values as measured under applicable tax laws. The effect on deferred tax assets or liabilities of a change in the tax law or tax rate is recognized in the period the change is enacted. Valuation allowances are recorded to reduce net deferred tax assets to the amount that is more likely than not to be realized. The calculation of our tax liabilities also involves considering uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain income tax positions based on our estimate of whether it is more likely than not that additional taxes will be required and we report related interest and penalties as income taxes. Refer to Note  6 .
Cash and Cash Equivalents / Consolidated Statements of Cash Flows
Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less. Substantially all of our cash and short-term investment securities are held with investment grade-rated counterparties. At December 31, 2015 , our cash investments with any single counterparty did not exceed $306 million .
Cash flows associated with derivative financial instruments designated as hedges of identifiable transactions or events are classified in the same category as the cash flows from the related hedged items. Cash flows associated with derivative financial instruments not designated as hedges are classified as operating activities. Bank overdrafts are recorded within Notes Payable and Overdrafts. Cash flows associated with bank overdrafts are classified as financing activities.
Customer prepayments for products and government grants received that are related to operations are reported as operating activities. Government grants received that are solely related to capital expenditures are reported as investing activities. The Consolidated Statements of Cash Flows are presented net of capital leases of $3 million , $12 million and $19 million originating in the years ended December 31, 2015 , 2014 and 2013 , respectively, and net of capitalized costs related to the Global and North America Headquarters facility and parking deck of $18 million for the year ended December 31, 2013 . Cash flows from investing activities in 2015 exclude $254 million of accrued capital expenditures remaining unpaid at December 31, 2015, and include payment for $212 million of capital expenditures that were accrued and unpaid at December 31, 2014.
Restricted Net Assets
In certain countries where we operate, transfers of funds into or out of such countries by way of dividends, loans or advances are generally or periodically subject to various governmental regulations. In addition, certain of our credit agreements and other debt instruments limit the ability of foreign subsidiaries to make cash distributions. At December 31, 2015 , approximately $551 million of net assets were subject to such regulations or limitations.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out or the average cost method. Costs include direct material, direct labor and applicable manufacturing and engineering overhead. We allocate fixed manufacturing overheads based on normal production capacity and recognize abnormal manufacturing costs as period costs. We determine a provision for excess and obsolete inventory based on management’s review of inventories on hand compared to estimated future usage and sales. Refer to Note  10 .

65
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Goodwill and Other Intangible Assets
Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Goodwill and intangible assets with indefinite useful lives are not amortized but are assessed for impairment annually with the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of the reporting unit or indefinite-lived intangible to its carrying amount. Under the qualitative assessment, an entity is not required to calculate the fair value unless the entity determines that it is more likely than not that the fair value is less than the carrying amount. If under the quantitative assessment the fair value is less than the carrying amount, then the amount of the impairment loss, if any, must be measured.
In addition to annual testing, impairment testing is conducted when events occur or circumstances change that would more likely than not reduce the fair value of the asset below its carrying amount. Goodwill and intangible assets with indefinite useful lives would be written down to fair value if considered impaired. Intangible assets with finite useful lives are amortized to their estimated residual values over such finite lives, and reviewed for impairment whenever events or circumstances warrant such a review. Refer to Note 11 .
Investments
Investments in marketable securities are stated at fair value. Fair value is determined using quoted market prices at the end of the reporting period and, when appropriate, exchange rates at that date. Unrealized gains and losses on marketable securities classified as available-for-sale are recorded in AOCL, net of tax. We regularly review our investments to determine whether a decline in fair value below the cost basis is other than temporary. If the decline in fair value is judged to be other than temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in the Consolidated Statements of Operations. Refer to Notes  12 and 21 .
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method. Additions and improvements that substantially extend the useful life of property, plant and equipment, and interest costs incurred during the construction period of major projects are capitalized. Government grants to us that are solely related to capital expenditures are recorded as reductions of the cost of the associated assets. Repair and maintenance costs are expensed as incurred. Property, plant and equipment are depreciated to their estimated residual values over their estimated useful lives, and reviewed for impairment whenever events or circumstances warrant such a review. Depreciation expense for property, plant and equipment was $697 million , $730 million and $719 million in 2015 , 2014 and 2013 , respectively. Refer to Notes  3 and 13 .
Foreign Currency Translation
The functional currency for most subsidiaries outside the United States is the local currency. Financial statements of these subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses. The U.S. dollar is used as the functional currency in countries with a history of high inflation and in countries that predominantly sell into the U.S. dollar export market. For all operations, gains or losses from remeasuring foreign currency transactions into the functional currency are included in Other (Income) Expense. Translation adjustments are recorded in AOCL. Income taxes are generally not provided for foreign currency translation adjustments.
Derivative Financial Instruments and Hedging Activities
To qualify for hedge accounting, hedging instruments must be designated as hedges and meet defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or changes in fair value of the hedging instrument substantially offset those of the position being hedged.
Derivative contracts are reported at fair value on the Consolidated Balance Sheets as Accounts Receivable or Other Current Liabilities. Deferred gains and losses on contracts designated as cash flow hedges are recorded net of tax in AOCL. Ineffectiveness in hedging relationships is recorded in Other (Income) Expense in the current period.
Interest Rate Contracts — Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in AOCL. Amounts are transferred from AOCL and recognized in income as Interest Expense in the same period that the hedged item is recognized in income. Gains and losses on contracts designated as fair value hedges are recognized in income in the current period as Interest Expense. Gains and losses on contracts with no hedging designation are recorded in the current period in Other (Income) Expense.

66
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Foreign Currency Contracts — Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in AOCL. Amounts are transferred from AOCL and recognized in income in the same period and on the same line that the hedged item is recognized in income. Gains and losses on contracts designated as fair value hedges, excluding premiums and discounts, are recorded in Other Expense in the current period. Gains and losses on contracts with no hedging designation are also recorded in Other Expense in the current period. We do not include premiums or discounts on forward currency contracts in our assessment of hedge effectiveness. Premiums and discounts on contracts designated as hedges are recognized in Other (Income) Expense over the life of the contract.
Net Investment Hedging — Nonderivative instruments denominated in foreign currencies are used from time to time to hedge net investments in foreign subsidiaries. Gains and losses on these instruments are deferred and recorded in AOCL as Foreign Currency Translation Adjustments. These gains and losses are only recognized in income upon the complete or partial sale of the related investment or the complete liquidation of the investment.
Termination of Contracts — Gains and losses (including deferred gains and losses in AOCL) are recognized in Other (Income) Expense when contracts are terminated concurrently with the termination of the hedged position. To the extent that such position remains outstanding, gains and losses are amortized to Interest Expense or to Other Expense over the remaining life of that position. Gains and losses on contracts that we temporarily continue to hold after the early termination of a hedged position, or that otherwise no longer qualify for hedge accounting, are recognized in Other (Income) Expense. Refer to Note  15 .
Stock-Based Compensation
We measure compensation cost arising from the grant of stock-based awards to employees at fair value and recognize such cost in income over the period during which the service is provided, usually the vesting period. We recognize compensation expense using the straight-line approach.
Stock-based awards to employees include grants of performance share units, restricted stock units and stock options. We measure the fair value of grants of performance share units and restricted stock units based primarily on the closing market price of a share of our common stock on the date of the grant, modified as appropriate to take into account the features of such grants.
We estimate the fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows:
•
Expected term represents the period of time that options granted are expected to be outstanding based on our historical experience of option exercises;
•
Expected volatility is measured using the weighted average of historical daily changes in the market price of our common stock over the expected term of the award and implied volatility calculated for our exchange traded options with an expiration date greater than one year;
•
Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and
•
Forfeitures are based substantially on the history of cancellations of similar awards granted in prior years.
Refer to Note 18.
Earnings Per Share of Common Stock
Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share primarily reflects the dilutive impact of outstanding stock options, mandatory convertible preferred stock and related dividends. All earnings per share amounts in these notes to the consolidated financial statements are diluted, unless otherwise noted. Refer to Note  7 .
Fair Value Measurements
Valuation Hierarchy
Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.
•
Level  1  — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.
•
Level  2  — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•
Level  3  — Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

67
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. Valuation methodologies used for assets and liabilities measured at fair value are as follows:
Investments
Where quoted prices are available in an active market, investments are classified within Level  1 of the valuation hierarchy. Level  1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices are not available, fair values are estimated using quoted prices of securities with similar characteristics or inputs other than quoted prices that are observable for the security, and would be classified within Level  2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities would be classified within Level  3 of the valuation hierarchy.
Derivative Financial Instruments
Exchange-traded derivative financial instruments that are valued using quoted prices would be classified within Level  1 of the valuation hierarchy. Derivative financial instruments valued using internally-developed models that use as their basis readily observable market parameters are classified within Level  2 of the valuation hierarchy. Derivative financial instruments that are valued based upon models with significant unobservable market parameters, and that are normally traded less actively, would be classified within Level  3 of the valuation hierarchy. Refer to Notes  15 and 16 .
Reclassifications
Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.

Note 2. Costs Associated with Rationalization Programs
In order to maintain our global competitiveness, we have implemented rationalization actions over the past several years to reduce excess and high-cost manufacturing capacity and to reduce associate headcount.
The following table presents the roll-forward of the liability balance between periods:
(In millions)
Associate-related Costs
 
Other Costs
 
Total
Balance at December 31, 2012
$
229

 
$
23

 
$
252

2013 charges
58

 
17

 
75

Incurred, Net of Foreign Currency Translation of $7 million and $0 million, respectively
(42
)
 
(31
)
 
(73
)
Reversed to the Statement of Operations
(13
)
 
(4
)
 
(17
)
Balance at December 31, 2013
$
232

 
$
5

 
$
237

2014 charges (1)
76

 
52

 
128

Incurred, Net of Foreign Currency Translation of $(18) million and $0 million, respectively (2)
(186
)
 
(49
)
 
(235
)
Reversed to the Statement of Operations
(5
)
 
(6
)
 
(11
)
Balance at December 31, 2014
$
117

 
$
2

 
$
119

2015 charges (1)
86

 
30

 
116

Incurred, Net of Foreign Currency Translation of $(12) million and $0 million, respectively (2)
(106
)
 
(25
)
 
(131
)
Reversed to the Statement of Operations
(1
)
 
—

 
(1
)
Balance at December 31, 2015
$
96

 
$
7

 
$
103

(1)    Charges in 2015 of $116 million exclude $1 million , and charges in 2014 of $128 million exclude $22 million , of pension     curtailment gains recorded in Rationalizations in the Statement of Operations.
(2)    Incurred in 2015 of $131 million excludes $25 million , and incurred in 2014 of $235 million excludes $20 million , of         rationalization payments for labor claims relating to a previously closed facility in Greece.

68
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Significant rationalization actions initiated in 2015 included a plan to close our Wolverhampton, U.K. mixing and retreading facility and to transfer the production to other manufacturing facilities in EMEA and a plan to transfer consumer tire production from our manufacturing facility in Wittlich, Germany to other manufacturing facilities in EMEA. We also initiated plans for SAG headcount reductions in EMEA, North America and Latin America.
The accrual balance of $103 million at December 31, 2015 is expected to be substantially utilized within the next 12 months and includes $36 million related to the plan to close our Wolverhampton, U.K. mixing and retreading facility and the plan to transfer consumer tire production from our manufacturing facility in Wittlich, Germany to other manufacturing facilities in EMEA, as well as $27 million related to the plan to exit the farm tire business in EMEA and the closure of one of our manufacturing facilities in Amiens, France.
The net rationalization charges included in Income before Income Taxes are as follows:
(In millions)
 
2015
 
2014
 
2013
Current Year Plans
 
 
 
 
 
 
Associate Severance and Other Related Costs
 
$
66

 
$
22

 
$
42

Other Exit and Non-Cancelable Lease Costs
 
7

 
1

 
3

    Current Year Plans - Net Charges
 
$
73

 
$
23

 
$
45

 
 
 
 
 
 
 
Prior Year Plans
 
 
 
 
 
 
Associate Severance and Other Related Costs
 
$
19

 
$
49

 
$
3

Pension Curtailment Gain
 
(1
)
 
(22
)
 
—

Other Exit and Non-Cancelable Lease Costs
 
23

 
45

 
10

    Prior Year Plans - Net Charges
 
41

 
72

 
13

        Total Net Charges
 
$
114

 
$
95

 
$
58

Asset Write-off and Accelerated Depreciation Charges
 
$
8

 
$
7

 
$
23

Rationalization activities initiated in 2015 consisted primarily of charges of $38 million related to the plan to close our Wolverhampton, U.K. mixing and retreading facility and a plan to transfer consumer tire production from our manufacturing facility in Wittlich, Germany to other manufacturing facilities in EMEA. Additional charges for the year ended December 31, 2015 primarily related to plans to reduce manufacturing and SAG headcount in EMEA, North America and Latin America. Substantially all of the new charges related to future cash outflows.
Net prior year plan charges recognized in the year ended December 31, 2015 include charges of $33 million for associate severance and idle plant costs related to the closure of one of our manufacturing facilities in Amiens, France and our exit from the farm tire business in EMEA.
Approximately 800 associates will be released under plans initiated in 2015 , of which approximately 200 associates have been released as of December 31, 2015 . In 2015, approximately 200 associates were released under plans initiated in prior years, primarily related to the plan to exit the farm tire business in EMEA and the closure of one of our manufacturing facilities in Amiens, France. In total, approximately 700 associates remain to be released under rationalization plans. At December 31, 2015 , approximately 800 former associates of the closed Amiens, France manufacturing facility have asserted wrongful termination or other claims against us.  Refer to Note 19.
Accelerated depreciation charges in 2015 primarily related to the plan to close our Wolverhampton, U.K. mixing and retreading facility. Asset write-off and accelerated depreciation charges for all periods were recorded in CGS.
Rationalization activities initiated in 2014 consisted primarily of manufacturing headcount reductions related to EMEA's plans to improve operating efficiency. In addition, EMEA, Latin America and Asia Pacific also initiated plans to reduce SAG headcount. Net prior year plan charges for the year ended December 31, 2014 of $72 million include charges of $74 million for associate severance and idle plant costs, partially offset by a pension curtailment gain of $22 million , related to the closure of one of our manufacturing facilities in Amiens, France.
Asset write-off and accelerated depreciation charges of $7 million in 2014 related to property and equipment in one of our manufacturing facilities in the U.K and property and equipment in one of our manufacturing facilities in Amiens, France.
Rationalization activities initiated in 2013 consisted primarily of manufacturing headcount reductions related to EMEA's plans to improve efficiency and reduce manufacturing capacity in certain Western European countries. In addition, Asia Pacific also initiated plans primarily relating to SAG headcount reductions and the closure of retail facilities in Australia and New Zealand.

69
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Other rationalization actions in 2013 related to plans to reduce manufacturing and SAG through headcount reductions in all of our strategic business units.
Asset write-off and accelerated depreciation charges of $23 million in 2013 related to property and equipment in one of our manufacturing facilities in Amiens, France.

Note 3. Interest Expense
Interest expense includes interest and amortization of debt discounts, less amounts capitalized, as follows:
(In millions)
2015
 
2014
 
2013
Interest expense before capitalization
$
431

 
$
452

 
$
431

Capitalized interest
(19
)
 
(24
)
 
(39
)
 
$
412

 
$
428

 
$
392

Cash payments for interest, net of amounts capitalized were $445 million , $419 million and $353 million in 2015 , 2014 and 2013 , respectively. In 2014, interest expense was favorably impacted by $6 million related to interest recovered on the settlement of certain indirect tax claims in Latin America.

Note 4. Other (Income) Expense
(In millions)
2015
 
2014
 
2013
Royalty income
$
(192
)
 
$
(35
)
 
$
(51
)
Financing fees and financial instruments
111

 
77

 
64

Net foreign currency exchange losses
77

 
239

 
118

Net gains on asset sales
(71
)
 
(3
)
 
(8
)
General and product liability — discontinued products (gains) losses
(25
)
 
25

 
15

Interest income
(22
)
 
(28
)
 
(41
)
Miscellaneous
7

 
27

 
—

 
$
(115
)
 
$
302

 
$
97

Royalty income in 2015 was $192 million , compared to income of $35 million and $51 million in 2014 and 2013 , respectively. Royalty income in 2015 included a one-time pre-tax gain of $155 million on the recognition of deferred income resulting from the termination of a licensing agreement associated with the sale of our former Engineered Products business ("Veyance"). The licensing agreement was terminated following the acquisition of Veyance by Continental AG in January 2015. Royalty income in 2013 included a one-time royalty of $11 million related to our chemical operations. Royalty income is derived primarily from licensing arrangements related to divested businesses.
Financing fees and financial instruments expense was $111 million in 2015 , compared to $77 million in 2014 and $64 million in 2013 . Financing fees and financial instruments expense consists of the amortization of deferred financing fees, commitment fees and charges incurred in connection with financing transactions. Financing fees in 2015 included a $41 million redemption premium and $14 million of expense for the write-off of deferred financing fees and unamortized discount related to the redemption of the $1.0 billion 8.25% senior notes due 2020.
Net foreign currency exchange losses in 2015 were $77 million , compared to losses of $239 million and $118 million in 2014 and 2013 , respectively. Net foreign currency exchange losses in 2014 and 2013 included net charges of $200 million and $115 million , respectively, resulting from the devaluation of the Venezuelan bolivar fuerte against the U.S. dollar. Foreign currency exchange in all periods reflected net gains and losses resulting from the effect of exchange rate changes on various foreign currency transactions worldwide, including $34 million of losses in 2015 related to changes in the SICAD exchange rate in Venezuela.
Prior to the deconsolidation of our Venezuelan subsidiary, we were required to remeasure our bolivar-denominated monetary assets and liabilities at the rate expected to be available for future dividend remittances by our Venezuelan subsidiary. Effective February 13, 2013, Venezuela's official exchange rate changed from 4.3 to 6.3 bolivares fuertes to the U.S. dollar for substantially all goods. In the first quarter of 2013, we recorded a $115 million remeasurement loss on bolivar-denominated net monetary assets and liabilities, including deferred taxes, primarily related to cash deposits in Venezuela.
Effective January 24, 2014, Venezuela’s exchange rate applicable to the settlement of certain transactions, including payments of dividends and royalties, changed to an auction-based floating rate, the Complementary System of Foreign Currency Administration (“SICAD”) rate, which was 11.4 , 12.0 and 13.5 bolivares fuertes to the U.S. dollar at January 24, 2014, December 31, 2014 and December 31, 2015, respectively.

70
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

We expected that future remittances of dividends by our Venezuelan subsidiary would be transacted at the SICAD rate and, therefore, in 2014 we recorded net foreign currency exchange losses of $200 million related to the remeasurement of our bolivar-denominated monetary assets and liabilities using the SICAD rate.
Net gains on asset sales in 2015 were $71 million and included a gain of $48 million related to the dissolution of the global alliance with SRI and a gain of $30 million on the sale of our investment in shares of SRI. Refer to Note 5. Net gains on asset sales in 2015 also included losses of $14 million in EMEA, primarily related to the sales of certain sub-Saharan Africa retail businesses.
General and product liability — discontinued products includes charges for claims against us related primarily to asbestos personal injury claims, net of probable insurance recoveries. General and product liability — discontinued products for the year ended December 31, 2015 included a benefit of $25 million for the recovery of past costs from one of our asbestos insurers and a benefit of $21 million related to changes in assumptions for probable insurance recoveries for asbestos claims in future periods. The benefits were partially offset by an $8 million increase in the net asbestos liability based on updated assumptions for defense and indemnity costs in future periods based on historical cost data and trends.
Interest income consists primarily of amounts earned on cash deposits. Interest income in 2014 also included $10 million earned on the settlement of indirect tax claims and in 2013 also included $11 million earned on favorable tax judgments, both in Latin America.
Miscellaneous expense in 2015, 2014 and 2013 includes $4 million , $22 million and $ 6 million , respectively, of charges for labor claims relating to a previously closed facility in Greece. These claims have been settled and we do not expect any additional charges. Miscellaneous expense in 2014 also includes a charge of $16 million related to a government investigation involving our compliance with the U.S. Foreign Corrupt Practices Act in certain countries in Africa.
Note 5. Dissolution of Global Alliance with Sumitomo Rubber Industries
On October 1, 2015, the Company completed the previously announced dissolution of its global alliance with SRI in accordance with the terms and conditions set forth in the Framework Agreement, dated as of June 4, 2015, by and between the Company and SRI.
Prior to the dissolution, the Company owned 75% and SRI owned 25% of two companies, Goodyear Dunlop Tires Europe B.V. (“GDTE”) and Goodyear Dunlop Tires North America, Ltd. (“GDTNA”). GDTE owns and operates substantially all of the Company’s tire businesses in Western Europe. GDTNA had rights to the Dunlop brand and operated certain related businesses in North America. In Japan, the Company owned 25% , and SRI owned 75% , of two companies, one, Nippon Goodyear Ltd. (“NGY”), for the sale of Goodyear-brand passenger and truck tires for replacement in Japan and the other, Dunlop Goodyear Tires Ltd. (“DGT”), for the sale of Goodyear-brand and Dunlop-brand tires to vehicle manufacturers in Japan.
Pursuant to the Framework Agreement, the Company has sold to SRI its 75% interest in GDTNA, 25% interest in DGT and Huntsville, Alabama test track used by GDTNA. Accordingly, the Company no longer has any remaining ownership interests in GDTNA, DGT or the Huntsville, Alabama test track. With the sale of GDTNA, SRI obtained full ownership of the Dunlop motorcycle tire business in North America and the rights to sell Dunlop-brand tires to Japanese vehicle manufacturers in the United States, Canada and Mexico. The Company retained exclusive rights to sell Dunlop-brand tires in both the consumer and commercial replacement markets of the United States, Canada and Mexico as well as to non-Japanese vehicle manufacturers in those countries.
The Company also has acquired from SRI its 75% interest in NGY and 25% interest in GDTE. Accordingly, the Company now has full ownership interests in NGY and GDTE. In addition, SRI obtained exclusive rights to sell Dunlop-brand tires in those countries that were previously non-exclusive under the global alliance, including Russia, Turkey and certain countries in Africa.
We paid SRI a net amount of $271 million upon closing of the transactions described above. In addition, we delivered a promissory note to GDTNA in an initial principal amount of $56 million , with a maturity date three years following the date of dissolution, and at an interest rate of LIBOR plus 0.1% .
The Framework Agreement also provides that we and SRI will conduct an orderly sale of the SRI common stock held by us and the Goodyear common stock held by SRI. As of December 31, 2015, the Company has sold all of its common stock in SRI resulting in total proceeds of $47 million and a pre-tax gain of $30 million recorded within Other (Income) Expense.
In addition to the gain recognized on the sale of SRI common stock, the Company recognized a pre-tax gain of $48 million on the transactions described above, recorded in Other (Income) Expense. The net gain on the transaction, after taxes, was $38 million . The net gain on the transaction primarily resulted from the sale of GDTNA and DGT as well as the fair value of the rights acquired by SRI from the Company to sell Dunlop-brand tires in those countries that were previously non-exclusive under the global alliance, net of transaction costs. Included in the net gain on the transaction is a pre-tax loss of $28 million for the difference between the general and product liabilities retained by the Company resulting from GDTNA’s historical operations and the amount recorded for the indemnification of those liabilities provided by SRI to the Company under the Framework Agreement.

71
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Prior to October 1, 2015, GDTE’s assets and liabilities were included in our consolidated balance sheets and GDTE’s results of operations were included in our consolidated statements of operations, which also reflected SRI’s minority interest in GDTE. Subsequent to October 1, 2015, we continue to include GDTE in our consolidated balance sheets and consolidated statements of operations; however, there is no minority interest impact to our results of operations related to GDTE. Additionally, prior to October 1, 2015, we accounted for NGY under the equity method as we did not have a controlling financial interest in NGY. Subsequent to October 1, 2015, we have a controlling interest in NGY and, accordingly, NGY’s assets and liabilities are included in our consolidated balance sheet as of December 31, 2015, and NGY’s results of operations for the fourth quarter of 2015 are included in our consolidated statements of operations. The effects of the acquisition of NGY were not material to our consolidated balance sheet or results of operations as of and for the year ended December 31, 2015.
The assets and liabilities of GDTNA, the Huntsville, Alabama test track, and our investment in DGT were classified as held for sale as of September 30, 2015 and are no longer included in our consolidated balance sheet as of December 31, 2015. 
The Company has classified the closing payment of $271 million as cash flows from financing activities as the acquisition of the minority shareholder’s equity in GDTE represents the predominant use of these proceeds.
The Company and SRI entered into various supply agreements, licenses, transition services agreements, releases and other ancillary agreements in connection with the Framework Agreement to give effect to the dissolution and/or to set forth arrangements between the Company and SRI following the dissolution. The Company and SRI also each agreed to indemnify the other for certain losses arising out of breaches of representations and warranties, covenants and other specified matters, including product liability matters. The Company has recorded an indemnification asset within Accounts Receivable of $6 million and within Other Assets of $26 million for SRI’s obligation to reimburse the Company for certain general and product liability claims related to periods prior to the dissolution, subject to certain caps and restrictions. The range of possible outcomes for the indemnification receivable is not material to the Company’s financial statements.
As a result of the sale of GDTNA and the acquisition of the minority interest in GDTE, we recognized a net decrease in AOCL of $77 million , comprised of a reduction of $184 million for GDTNA accumulated pension-related losses that were recognized in the net gain on sale for the transaction, partially offset by an increase of $107 million primarily for GDTE pension-related losses that were reclassified from minority shareholders’ equity into AOCL. We also recognized an increase in our capital surplus of $60 million related to our acquisition of the minority interest in GDTE.


72
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 6. Income Taxes
The components of Income before Income Taxes follow:
(In millions)
2015
 
2014
 
2013
U.S. 
$
284

 
$
400

 
$
396

Foreign
324

 
287

 
417

 
$
608

 
$
687

 
$
813

A reconciliation of income taxes at the U.S. statutory rate to United States and Foreign Tax (Benefit) Expense follows:
(In millions)
2015
 
2014
 
2013
U.S. Federal income tax expense (benefit) at the statutory rate of 35%
$
213

 
$
240

 
$
284

Deconsolidation of Venezuelan subsidiary
157

 
—

 
—

U.S. credits (R&D, foreign tax credits) and benefits offset to OCI
(72
)
 
—

 
—

Adjustment for foreign income taxed at different rates
(39
)
 
(37
)
 
(2
)
Net foreign losses (income) with no tax benefit due to valuation allowances
(19
)
 
49

 
42

Net (resolution) establishment of uncertain tax positions
(13
)
 
3

 
10

State income taxes, net of U.S. Federal benefit
10

 
12

 
—

Release of U.S. valuation allowance
(8
)
 
(2,318
)
 
—

Net establishment (release) of foreign valuation allowances
4

 
51

 
(8
)
Deferred tax impact of enacted tax rate and law changes
(2
)
 
33

 
(13
)
Provision for undistributed foreign earnings
—

 
131

 
—

U.S. (income) with no tax due to valuation allowance
—

 
—

 
(136
)
Poland special enterprise zone tax credit
—

 
—

 
(42
)
Other
1

 
2

 
3

United States and Foreign Tax (Benefit) Expense
$
232

 
$
(1,834
)
 
$
138

The components of United States and Foreign Tax (Benefit) Expense by taxing jurisdiction, follow:
(In millions)
2015
 
2014
 
2013
Current:
 

 
 

 
 

Federal
$
—

 
$
—

 
$
(6
)
Foreign
154

 
135

 
176

State
(1
)
 
1

 
2

 
153

 
136

 
172

Deferred:
 

 
 

 
 

Federal
74

 
(2,103
)
 
2

Foreign
5

 
84

 
(36
)
State
—

 
49

 
—

 
79

 
(1,970
)
 
(34
)
United States and Foreign Tax (Benefit) Expense
$
232

 
$
(1,834
)
 
$
138

In 2015, income tax expense included net discrete tax benefits of $18 million unrelated to current year income, due primarily to a $9 million benefit from the conclusion of non-U.S. tax claims and an $8 million benefit from the release of a valuation allowance related to certain state deferred tax assets. Our tax expense for 2015 also included a U.S. tax benefit of $69 million related to the pre-tax loss of $646 million on the deconsolidation of our Venezuelan subsidiary (Refer to Note 1), and a current year benefit of $10 million related to recently enacted U.S. legislation extending the research and development credit.
At December 31, 2014, our U.S. operations were in a position of cumulative profits for the most recent three-year period. We concluded that as a consequence of our three-year cumulative profits, achieving full year profitability in 2013 and 2014, our successful completion of labor negotiations with the United Steelworkers in 2013, our full funding of our U.S. pension plans during 2013 and 2014, and our business plan for 2015 and beyond showing continued profitability, that it was more likely than

73
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

not that a significant portion of our U.S. deferred tax assets would be realized. In 2014, income tax benefit of $1,834 million was favorably impacted by net discrete tax adjustments of $1,980 million , due primarily to a net tax benefit of $2,179 million from the December 31, 2014 release of substantially all of the valuation allowance on our net U.S. deferred tax assets and a charge of $131 million to establish a provision for potential U.S. Federal taxation of certain undistributed earnings of certain foreign subsidiaries. The 2014 income tax benefit also included charges of $37 million to establish valuation allowances on the net deferred tax assets of our Venezuelan and Brazilian subsidiaries, due to continuing operating losses and currency devaluations in Venezuela, a charge of $9 million to establish a valuation allowance on the net deferred tax assets of a Luxembourg subsidiary and a charge of $11 million due to an enacted law change in Chile.
In 2013, income tax expense included net discrete tax benefits of $43 million unrelated to current year income, due primarily to a $33 million benefit from a Poland special enterprise zone tax credit and a $13 million benefit related to enacted law changes.
Temporary differences and carryforwards giving rise to deferred tax assets and liabilities at December 31 follow:
(In millions)
2015
 
2014
Tax loss carryforwards and credits
$
1,415

 
$
1,550

Capitalized research and development expenditures
655

 
622

Accrued expenses deductible as paid
501

 
583

Postretirement benefits and pensions
288

 
388

Investment and receivables related to Venezuelan deconsolidation
157

 
—

Alternative minimum tax credit carryforwards (1)
78

 
85

Rationalizations and other provisions
22

 
49

Vacation and sick pay
37

 
36

Other
121

 
100

 
3,274

 
3,413

Valuation allowance
(621
)
 
(632
)
Total deferred tax assets
2,653

 
2,781

Property basis differences
(459
)
 
(448
)
Tax on undistributed earnings of subsidiaries
(144
)
 
(170
)
Total net deferred tax assets
$
2,050

 
$
2,163


(1)
Unlimited carryforward period.

At December 31, 2015 , we had $519 million of tax assets for net operating loss, capital loss and tax credit carryforwards related to certain foreign subsidiaries. These carryforwards are primarily from countries with unlimited carryforward periods, but include $15 million of special enterprise zone tax credits subject to expiration in 2017. A valuation allowance totaling $523 million has been recorded against these and other deferred tax assets where recovery of the asset or carryforward is uncertain. In addition, we had $795 million of Federal and $101 million of state tax assets for net operating loss and tax credit carryforwards. The Federal carryforwards consist of $38 million of Federal tax assets for net operating losses that expire from 2029 to 2034, $686 million of foreign tax credits that are subject to expiration from 2016 to 2025 and $71 million of tax assets related to research and development credits that are subject to expiration from 2027 to 2034. The amount of deferred tax assets reflected in the table above has been reduced by $57 million related to unrealized stock option deductions. The state carryforwards are subject to expiration from 2016 to 2034. A valuation allowance of $98 million has been recorded against Federal and state deferred tax assets where recovery is uncertain.
Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of our net foreign deferred tax assets. However, it is reasonably possible that sufficient positive evidence required to release all, or a portion, of certain valuation allowances will exist during 2016. This may result in a reduction of the valuation allowance by up to $275 million .
At December 31, 2015 , we had unrecognized tax benefits of $54 million that if recognized, would have a favorable impact on our tax expense of $40 million . We had accrued interest of $5 million as of December 31, 2015 . If not favorably settled, $9 million of the unrecognized tax benefits and all of the accrued interest would require the use of our cash. We do not expect changes during 2016 to our unrecognized tax benefits to have a significant impact on our financial position or results of operations.

74
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Reconciliation of Unrecognized Tax Benefits
 
 
 
 
 
(In millions)
2015
 
2014
 
2013
Balance at January 1
$
81

 
$
88

 
$
82

Increases related to prior year tax positions
10

 
15

 
27

Decreases related to prior year tax positions
(10
)
 
(12
)
 
(6
)
Settlements
(14
)
 
(6
)
 
(9
)
Foreign currency impact
(15
)
 
(4
)
 
(6
)
Increases related to current year tax positions
2

 
—

 
1

Lapse of statute of limitations
—

 
—

 
(1
)
Balance at December 31
$
54

 
$
81

 
$
88

Generally, years from 2010 onward are still open to examination by foreign taxing authorities. We are open to examination in Germany from 2011 onward and in the United States for 2015.
We have undistributed earnings of foreign subsidiaries of approximately $1.4 billion for which deferred taxes have not been provided, including a portion of which has already been subject to U.S. Federal income taxation. No provision for Federal income or foreign withholding tax on any of these undistributed earnings is required because such earnings have been or will be reinvested in property, plant and equipment and working capital. Quantification of the deferred tax liability net of applicable foreign tax credits, if any, associated with these undistributed earnings is not practicable. We have not recorded deferred tax assets for the excess of tax basis over book basis in our foreign subsidiaries as it is not expected to reverse in the foreseeable future.
Net cash payments for income taxes were $113 million , $127 million and $186 million in 2015 , 2014 and 2013 , respectively.

Note 7.  Earnings Per Share
Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share are calculated to reflect the potential dilution that could occur if securities or other contracts were exercised or converted into common stock.
Basic and diluted earnings per common share are calculated as follows:
(In millions, except per share amounts)
2015
 
2014
 
2013
Earnings per share — basic:
 
 
 
 
 
Goodyear net income
$
307

 
$
2,452

 
$
629

Less: Preferred stock dividends
—

 
7

 
29

Goodyear net income available to common shareholders
$
307

 
$
2,445

 
$
600

Weighted average shares outstanding
269

 
268

 
246

Earnings per common share — basic
$
1.14

 
$
9.13

 
$
2.44

 
 
 
 
 
 
Earnings per share — diluted:
 
 
 
 
 
Goodyear net income
$
307

 
$
2,452

 
$
629

Less: Preferred stock dividends
—

 
—

 
—

Goodyear net income available to common shareholders
$
307

 
$
2,452

 
$
629

Weighted average shares outstanding
269

 
268

 
246

Dilutive effect of mandatory convertible preferred stock
—

 
7

 
28

Dilutive effect of stock options and other dilutive securities
4

 
4

 
3

Weighted average shares outstanding — diluted
273

 
279

 
277

Earnings per common share — diluted
$
1.12

 
$
8.78

 
$
2.28

Weighted average shares outstanding — diluted for 2014 and 2013 excludes approximately 2 million and 3 million equivalent shares, respectively, related to options with exercise prices greater than the average market price of our common stock (i.e., “underwater” options).

75
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On April 1, 2014, all outstanding shares of mandatory convertible preferred stock automatically converted into 27,573,735 shares of common stock, net of fractional shares, at a conversion rate of 2.7574 shares of common stock per share of preferred stock.

Note 8. Business Segments
Segment information reflects our strategic business units (“SBUs”), which are organized to meet customer requirements and global competition. Through December 31, 2015, we operated our business through four operating segments representing our regional tire businesses: North America; Europe, Middle East and Africa; Asia Pacific; and Latin America. Segment information is reported on the basis used for reporting to our Chief Executive Officer. Each of the four regional business segments is involved in the development, manufacture, distribution and sale of tires. Certain of the business segments also provide related products and services, which include retreads, automotive and commercial truck repair services and merchandise purchased for resale. Each segment also exports tires to other segments.
North America manufactures and sells tires for automobiles, trucks, buses, earthmoving and mining equipment, commercial and military aviation, and industrial equipment in the United States and Canada. North America also provides related products and services including retread tires, tread rubber, automotive and commercial truck maintenance and repair services, as well as sells chemical and natural rubber products to our other business segments and to unaffiliated customers.
Europe, Middle East and Africa manufactures and sells tires for automobiles, trucks, buses, aircraft, motorcycles, earthmoving and mining equipment and industrial equipment throughout Europe, the Middle East and Africa. EMEA also sells retreaded aviation tires, retreading and related services for commercial truck and construction and mining equipment, and automotive maintenance and repair services.
Asia Pacific manufactures and sells tires for automobiles, trucks, aircraft, and farm, earthmoving and mining equipment throughout the Asia Pacific region. Asia Pacific also provides related products and services including retreaded truck and aviation tires, tread rubber, and automotive maintenance and repair services.
Latin America manufactures and sells tires for automobiles, trucks, and earthmoving and mining equipment throughout Central and South America and in Mexico. Latin America also provides related products and services including retreaded tires and tread rubber for trucks. Latin America's 2015 segment sales and operating income include the results of our Venezuelan subsidiary, which was deconsolidated on December 31, 2015. Refer to Note 1. The deconsolidation of our Venezuelan subsidiary did not have an impact on segment sales or operating income for any of the periods presented.
Effective January 1, 2016, we combined our North America and Latin America strategic business units into one Americas strategic business unit. We have combined the North America and Latin America reportable segments effective on this date to align with the new organizational structure and the basis used for reporting to our Chief Executive Officer beginning in 2016. Our first quarter 2016 Form 10-Q will reflect the new segment structure with prior periods recast for comparable disclosure.

76
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents segment sales and operating income, and the reconciliation of segment operating income to Income before Income Taxes:
(In millions)
2015
 
2014
 
2013
Sales
 

 
 

 
 

North America
$
7,774

 
$
8,085

 
$
8,684

Europe, Middle East and Africa
5,115

 
6,180

 
6,567

Asia Pacific
1,958

 
2,077

 
2,226

Latin America
1,596

 
1,796

 
2,063

Net Sales
$
16,443

 
$
18,138

 
$
19,540

Segment Operating Income
 

 
 

 
 

North America
$
1,108

 
$
803

 
$
691

Europe, Middle East and Africa
435

 
438

 
298

Asia Pacific
319

 
301

 
308

Latin America
160

 
170

 
283

Total Segment Operating Income
2,022

 
1,712

 
1,580

Less:
 
 
 
 
 
Rationalizations
114

 
95

 
58

Interest expense
412

 
428

 
392

Other (income) expense (1)
(115
)
 
302

 
97

Asset write-offs and accelerated depreciation
8

 
7

 
23

Corporate incentive compensation plans
103

 
97

 
108

Corporate pension curtailments/settlements (2)
137

 
33

 
—

Intercompany profit elimination
3

 
(4
)
 
(4
)
Loss on deconsolidation of Venezuelan subsidiary
646

—

—

—

—

Retained expenses of divested operations
14

 
16

 
24

Other (3)
92

 
51

 
69

Income before Income Taxes
$
608

 
$
687

 
$
813

(1) Refer to Note 4.
(2) Substantially all of the pension settlement charges of $137 million for the year ended December 31, 2015 and pension curtailment charges of $33 million for the year ended December 31, 2014 noted above related to our North America SBU; however, such costs were not included in North America segment operating income for purposes of management's assessment of SBU operating performance.
(3) Primarily represents unallocated corporate costs including, in 2015, certain costs for one-time strategic global initiatives. Also includes the elimination of $25 million , $24 million and $39 million for the years ended December 31, 2015, 2014 and 2013, respectively, of royalty income attributable to the strategic business units.

77
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents segment assets at December 31:
(In millions)
2015
 
2014
 
2013
Assets
 
 
 
 
 
North America
$
4,808

 
$
4,929

 
$
4,977

Europe, Middle East and Africa
4,383

 
4,957

 
5,532

Asia Pacific
2,559

 
2,594

 
2,613

Latin America  (1)
1,469

 
2,090

 
2,384

Total Segment Assets
13,219

 
14,570

 
15,506

Corporate (2)
3,220

 
3,474

 
1,931

 
$
16,439

 
$
18,044

 
$
17,437


(1)
Decrease in Latin America segment assets at December 31, 2015 was due primarily to the deconsolidation of our Venezuelan subsidiary on December 31, 2015. Refer to Note 1.
(2)
Corporate includes substantially all of our U.S. net deferred tax assets.   Corporate assets increased in 2014 by $2,080 million due primarily to the release of substantially all of the valuation allowance on our net U.S. deferred tax assets.
Results of operations are measured based on net sales to unaffiliated customers and segment operating income. Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions. Segment operating income is computed as follows: Net sales less CGS (excluding asset write-offs and accelerated depreciation charges) and SAG (including certain allocated corporate administrative expenses). Segment operating income also includes certain royalties and equity in earnings of most affiliates. Segment operating income does not include net rationalization charges, asset sales and certain other items.
The following table presents geographic information. Net sales by country were determined based on the location of the selling subsidiary. Long-lived assets consisted of property, plant and equipment. Besides Germany, management did not consider the net sales of any other individual countries outside the United States to be significant to the consolidated financial statements. For long-lived assets only China and Germany were considered to be significant.
(In millions)
2015
 
2014
 
2013
Net Sales
 

 
 

 
 

United States
$
7,338

 
$
7,558

 
$
7,820

Germany
1,905

 
2,288

 
2,372

Other international
7,200

 
8,292

 
9,348

 
$
16,443

 
$
18,138

 
$
19,540

Long-Lived Assets
 

 
 

 
 

United States
$
2,468

 
$
2,464

 
$
2,389

China
766

 
809

 
821

Germany
778

 
833

 
891

Other international
2,765

 
3,047

 
3,219

 
$
6,777

 
$
7,153

 
$
7,320


At December 31, 2015 , significant concentrations of cash and cash equivalents held by our international subsidiaries included the following amounts:
•
$513 million or 35% in Europe, Middle East and Africa, primarily Belgium ( $517 million or 24% at December 31, 2014),
•
$415 million or 28% in Asia, primarily China, India and Australia ( $462 million or 21% at December 31, 2014), and
•
$114 million or 8% in Latin America, primarily Brazil ( $409 million or 19% at December 31, 2014, which primarily related to Venezuela and Brazil).

78
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Rationalizations, as described in Note 2, Costs Associated with Rationalization Programs, Net (gains) losses on asset sales, as described in Note 4, Other (Income) Expense, and Asset write-offs and accelerated depreciation were not charged (credited) to the SBUs for performance evaluation purposes but were attributable to the SBUs as follows:

(In millions)
2015
 
2014
 
2013
Rationalizations
 

 
 

 
 

North America
$
9

 
$
(6
)
 
$
12

Europe, Middle East and Africa
95

 
89

 
26

Asia Pacific
4

 
9

 
16

Latin America
6

 
3

 
4

Total Segment Rationalizations
$
114

 
$
95

 
$
58


(In millions)
2015
 
2014
 
2013
Net (Gains) Losses on Asset Sales
 

 
 

 
 

North America
$
(1
)
 
$
(8
)
 
$
(4
)
Europe, Middle East and Africa
14

 
7

 
(1
)
Asia Pacific
(5
)
 
—

 
(2
)
Latin America
(1
)
 
—

 
(1
)
Total Segment Asset Sales
7

 
(1
)
 
(8
)
Corporate (1)
(78
)
 
(2
)
 
—

 
$
(71
)
 
$
(3
)
 
$
(8
)
(1)
Corporate gain on asset sales in 2015 included a $48 million gain on the dissolution of our global alliance with SRI and a $30 million gain on the sale of our investment in shares of SRI. Refer to Note 5.
(In millions)
2015
 
2014
 
2013
Asset Write-offs and Accelerated Depreciation
 

 
 

 
 

Europe, Middle East and Africa
$
8

 
$
7

 
$
23

Total Segment Asset Write-offs and Accelerated Depreciation
$
8

 
$
7

 
$
23


The following tables present segment capital expenditures, depreciation and amortization:
(In millions)
2015
 
2014
 
2013
Capital Expenditures
 
 
 

 
 

North America
$
353

 
$
282

 
$
262

Europe, Middle East and Africa
223

 
266

 
332

Asia Pacific
124

 
154

 
257

Latin America
125

 
152

 
243

Total Segment Capital Expenditures
825

 
854

 
1,094

Corporate (1)
158

 
69

 
74

 
$
983

 
$
923

 
$
1,168

(1)
Corporate capital expenditures in 2015 include approximately $140 million related to the construction of our new manufacturing facility in San Luis Potosi, Mexico.

79
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In millions)
2015
 
2014
 
2013
Depreciation and Amortization
 

 
 

 
 

North America
$
270

 
$
274

 
$
275

Europe, Middle East and Africa
186

 
220

 
228

Asia Pacific
114

 
105

 
93

Latin America
94

 
102

 
84

Total Segment Depreciation and Amortization
664

 
701

 
680

Corporate
34

 
31

 
42

 
$
698

 
$
732

 
$
722


The following table presents segment equity in the net income of investees accounted for by the equity method:
(In millions)
2015
 
2014
 
2013
Equity in (Income)
 

 
 

 
 

North America
$
(3
)
 
$
(5
)
 
$
(8
)
Europe, Middle East and Africa
(1
)
 
—

 
—

Asia Pacific  (1)
(12
)
 
(23
)
 
(23
)
Total Segment Equity in (Income)
$
(16
)
 
$
(28
)
 
$
(31
)
(1)
Substantially all of the Asia Pacific segment equity in income related to 25% interests in NGY and DGT which ceased to be recognized effective October 1, 2015 following the dissolution of the global alliance with SRI. Refer to Note 5.

Note 9. Accounts Receivable
(In millions)
2015
 
2014
Accounts receivable
$
2,138

 
$
2,215

Allowance for doubtful accounts
(105
)
 
(89
)
 
$
2,033

 
$
2,126


Note 10. Inventories
(In millions)
2015
 
2014
Raw materials
$
419

 
$
535

Work in process
138

 
149

Finished goods
1,907

 
1,987

 
$
2,464

 
$
2,671


Note 11. Goodwill and Intangible Assets
The following table presents the net carrying amount of goodwill allocated by reporting unit, and changes during 2015 :
(In millions)
Balance at December 31, 2014
 
Acquisitions
 
Divestitures
 
Translation
 
Balance at December 31, 2015
North America
$
93

 
$
—

 
$
(2
)
 
$
—

 
$
91

Europe, Middle East and Africa
448

 
—

 
(2
)
 
(45
)
 
401

Asia Pacific
60

 
6

 
—

 
(3
)
 
63

 
$
601

 
$
6

 
$
(4
)
 
$
(48
)
 
$
555



80
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents the net carrying amount of goodwill allocated by reporting unit, and changes during 2014 :
(In millions)
Balance at December 31, 2013
 
Acquisitions
 
Divestitures
 
Translation
 
Balance at December 31, 2014
North America
$
93

 
$
—

 
$
—

 
$
—

 
$
93

Europe, Middle East and Africa
511

 
—

 
—

 
(63
)
 
448

Asia Pacific
64

 
—

 
—

 
(4
)
 
60

 
$
668

 
$
—

 
$
—

 
$
(67
)
 
$
601


The following table presents information about intangible assets:
 
2015
 
2014
(In millions)
Gross Carrying Amount (1)
 
Accumulated Amortization (1)
 
Net Carrying Amount
 
Gross Carrying Amount (1)
 
Accumulated Amortization (1)
 
Net Carrying Amount
Intangible assets with indefinite lives
$
128

 
$
(6
)
 
$
122

 
$
127

 
$
(6
)
 
$
121

Trademarks and patents
12

 
(8
)
 
4

 
15

 
(10
)
 
5

Other intangible assets
21

 
(9
)
 
12

 
21

 
(9
)
 
12

 
$
161

 
$
(23
)
 
$
138

 
$
163

 
$
(25
)
 
$
138


(1)
Includes impact of foreign currency translation.
Intangible assets primarily comprise the rights to use the Dunlop brand name and related trademarks and certain other brand names and trademarks.
Amortization expense for intangible assets totaled $1 million , $2 million and $3 million in 2015 , 2014 and 2013 , respectively. We estimate that annual amortization expense related to intangible assets will be approximately $1 million in 2016 through 2020, and the weighted average remaining amortization period is approximately 29 years .
Our annual impairment analyses for 2015 , 2014 and 2013 indicated no impairment of goodwill or intangible assets with indefinite lives. In addition, there were no events or circumstances that indicated the impairment tests should be re-performed for goodwill or for intangible assets with indefinite lives for any segment at December 31, 2015 .

Note 12. Other Assets and Investments
We owned 3,421,306  shares of SRI at December 31, 2014 (the “Sumitomo Investment”). The fair value of the Sumitomo Investment was $51 million at December 31, 2014 and was included in Other Assets as we had classified the Sumitomo Investment as available-for-sale. At December 31, 2014 , AOCL included gross unrealized holding gains on the Sumitomo Investment of $35 million ( $36 million after-tax). During the fourth quarter of 2015, we sold 100% of the Sumitomo Investment resulting in a gain of $30 million included in Other (Income) Expense. Refer to Note 5.
Dividends received from our consolidated subsidiaries were $46 million , $273 million and $88 million in 2015 , 2014 and 2013 , respectively. Dividends received from our affiliates accounted for using the equity method were $24 million , $24 million and $21 million in 2015 , 2014 and 2013 , respectively.


81
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 13. Property, Plant and Equipment
 
2015
 
2014
(In millions)
Owned
 
Capital Leases
 
Total
 
Owned
 
Capital Leases
 
Total
Property, plant and equipment, at cost:
 

 
 

 
 

 
 

 
 

 
 

Land
$
387

 
$
—

 
$
387

 
$
413

 
$
—

 
$
413

Buildings
2,230

 
32

 
2,262

 
2,375

 
36

 
2,411

Machinery and equipment
11,719

 
68

 
11,787

 
12,322

 
70

 
12,392

Construction in progress
783

 
—

 
783

 
733

 
—

 
733

 
15,119

 
100

 
15,219

 
15,843

 
106

 
15,949

Accumulated depreciation
(8,605
)
 
(32
)
 
(8,637
)
 
(9,002
)
 
(27
)
 
(9,029
)
 
6,514

 
68

 
6,582

 
6,841

 
79

 
6,920

Spare parts
195

 
—

 
195

 
233

 
—

 
233

 
$
6,709

 
$
68

 
$
6,777

 
$
7,074

 
$
79

 
$
7,153


The range of useful lives of property used in arriving at the annual amount of depreciation are as follows: buildings and improvements, 3 to 45  years; machinery and equipment, 3 to 40  years.


82
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 14. Leased Assets
Net rental expense comprised the following:
(In millions)
2015
 
2014
 
2013
Gross rental expense
$
324

 
$
387

 
$
400

Sublease rental income
(33
)
 
(40
)
 
(43
)
 
$
291

 
$
347

 
$
357


We enter into leases primarily for our wholesale distribution facilities, administrative offices, retail stores, vehicles and data processing equipment under varying terms and conditions. Many of the leases require us to pay taxes assessed against leased property and the cost of insurance and maintenance. A portion of our retail distribution network is sublet to independent dealers.
While substantially all subleases and some operating leases are cancelable for periods beyond 2016 , management expects that in the normal course of its business nearly all of its independent dealer distribution network will be actively operated. As leases and subleases for existing locations expire, we would normally expect to evaluate such leases and either renew the leases or substitute another more favorable retail location.
The following table presents minimum future lease payments:
 
 
 
 
 
 
 
 
 
 
 
2021 and
 
 
(In millions)
2016
 
2017
 
2018
 
2019
 
2020
 
Beyond
 
Total
Capital Leases
 

 
 

 
 

 
 

 
 
 
 

 
 

Minimum lease payments
$
12

 
$
11

 
$
8

 
$
5

 
$
3

 
$
41

 
$
80

Imputed interest
(4
)
 
(3
)
 
(3
)
 
(3
)
 
(2
)
 
(17
)
 
(32
)
Present value
$
8

 
$
8

 
$
5

 
$
2

 
$
1

 
$
24

 
$
48

Operating Leases
 

 
 

 
 

 
 

 
 
 
 

 
 

Minimum lease payments
$
279

 
$
215

 
$
158

 
$
118

 
$
94

 
$
299

 
$
1,163

Minimum sublease rentals
(26
)
 
(17
)
 
(10
)
 
(6
)
 
(3
)
 
(7
)
 
(69
)
 
$
253

 
$
198

 
$
148

 
$
112

 
$
91

 
$
292

 
$
1,094

Imputed interest
 

 
 

 
 

 
 

 
 
 
 

 
(208
)
Present value
 

 
 

 
 

 
 

 
 
 
 

 
$
886


Note 15. Financing Arrangements and Derivative Financial Instruments
At December 31, 2015 , we had total credit arrangements of $8,699 million , of which $2,676 million were unused. At that date, 31% of our debt was at variable interest rates averaging 6.55% .
Notes Payable and Overdrafts, Long Term Debt and Capital Leases due Within One Year and Short Term Financing Arrangements
At December 31, 2015 , we had short term committed and uncommitted credit arrangements totaling $467 million , of which $418 million were unused. These arrangements are available primarily to certain of our foreign subsidiaries through various banks at quoted market interest rates.
The following table presents amounts due within one year:
 
December 31,
 
December 31,
(In millions)
2015
 
2014
Notes payable and overdrafts:
$
49

 
$
30

Weighted average interest rate
9.42
%
 
10.63
%
Long term debt and capital leases due within one year:
 
 
 
Other domestic and foreign debt (including capital leases) (1)
$
587

 
$
148

Weighted average interest rate
6.68
%
 
7.75
%
Total obligations due within one year
$
636

 
$
178

(1)
The increase in long term debt and capital leases due within one year was due primarily to the €250 million 6.75% senior notes due 2019 being classified as current at December 31, 2015 in connection with the irrevocable call for their redemption in January 2016.

83

Long Term Debt and Capital Leases and Financing Arrangements
At December 31, 2015 , we had long term credit arrangements totaling $8,232 million , of which $2,258 million were unused.
The following table presents long term debt and capital leases, net of unamortized discounts, and interest rates:
 
December 31, 2015
 
December 31, 2014
 
 
 
Interest
 
 
 
Interest
(In millions)
Amount
 
Rate
 
Amount
 
Rate
Notes:
 
 
 
 
 
 
 
6.75% Euro Notes due 2019
$
272

 
 
 
$
303

 
 
8.25% due 2020
—

 
 
 
996

 
 
8.75% due 2020
271

 
 
 
269

 
 
6.5% due 2021
900

 
 
 
900

 
 
7% due 2022
700

 
 
 
700

 
 
5.125% due 2023
1,000

 
 
 
—

 
 
3.75% Euro Notes due 2023
272

 
 
 
—

 
 
7% due 2028
150

 
 
 
150

 
 
Credit Facilities:
 
 
 
 
 
 
 
$2.0 billion first lien revolving credit facility due 2017
—

 
—

 
—

 
—

$1.2 billion second lien term loan facility due 2019
598

 
3.75
%
 
1,196

 
4.75
%
€550 million revolving credit facility due 2020
—

 
—

 
—

 
—

Pan-European accounts receivable facility
125

 
1.35
%
 
343

 
1.54
%
Chinese credit facilities
465

 
5.22
%
 
535

 
5.65
%
Other foreign and domestic debt (1)
906

 
9.42
%
 
913

 
8.70
%
 
5,659

 
 
 
6,305

 
 
Capital lease obligations
48

 
 
 
59

 
 
 
5,707

 
 
 
6,364

 
 
Less portion due within one year
(587
)
 
 
 
(148
)
 
 
 
$
5,120

 
 
 
$
6,216

 
 

(1)
Interest rates are weighted average interest rates related to various foreign credit facilities with customary terms and conditions and domestic debt related to our Global and North America Headquarters.
NOTES
€250 million 6.75% Senior Notes due 2019 of Goodyear Dunlop Tires Europe B.V. (“GDTE”)
At December 31, 2015 , €250 million aggregate principal amount of GDTE's 6.75% senior notes due 2019 were outstanding. On January 14, 2016, we redeemed all of the outstanding notes at a redemption price of 103.375% of the principal amount of the notes redeemed plus accrued and unpaid interest to the redemption date.
$1.0 billion 8.25% Senior Notes due 2020
On December 7, 2015, we redeemed all of our outstanding $1.0 billion aggregate principal amount of 8.25% senior notes due 2020 including a $41 million redemption premium plus accrued and unpaid interest to the redemption date. We also recorded $14 million of expense for the write-off of deferred financing fees and unamortized discount as a result of the redemption.
$282 million 8.75% Senior Notes due 2020
At December 31, 2015 , $282 million aggregate principal amount of 8.75% notes due 2020 were outstanding. These notes had an effective yield of 9.20% at issuance. These notes are unsecured senior obligations, are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior secured credit facilities described below, and will mature on August 15, 2020 .
We have the option to redeem these notes, in whole or in part, at any time at a redemption price equal to the greater of 100% of the principal amount of these notes or the sum of the present values of the remaining scheduled payments on these notes, discounted using a defined treasury rate plus 50 basis points, plus in either case accrued and unpaid interest to the redemption date.

84

The terms of the indenture for these notes, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur secured debt, (ii) engage in sale and leaseback transactions, and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications.
$900 million 6.5% Senior Notes due 2021
At December 31, 2015 , $900 million aggregate principal amount of 6.5% senior notes due 2021 were outstanding. These notes were sold at 100% of the principal amount and will mature on March 1, 2021 . These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior secured credit facilities described below.
We have the option to redeem these notes, in whole or in part, at any time on or after March 1, 2016 at a redemption price of 104.875% , 103.25% , 101.625% and 100% during the 12-month periods commencing on March 1, 2016, 2017, 2018 and 2019 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to March 1, 2016, we may redeem these notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date. In addition, prior to March 1, 2016, we may redeem up to 35% of the original aggregate principal amount of these notes from the net cash proceeds of certain equity offerings at a redemption price equal to 106.5% of the principal amount plus accrued and unpaid interest to the redemption date.
The terms of the indenture for these notes, among other things, limit the ability of the Company and certain of its subsidiaries, including GDTE, to (i) incur additional debt or issue redeemable preferred stock, (ii) pay dividends, repurchase shares or make certain other restricted payments or investments, (iii) incur liens, (iv) sell assets, (v) incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, (vi) enter into affiliate transactions, (vii) engage in sale and leaseback transactions, and (viii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. For example, if these notes are assigned an investment grade rating by Moody’s and Standard & Poor's and no default has occurred and is continuing, certain covenants will be suspended and we may elect to suspend the subsidiary guarantees. The indenture has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
$700 million 7% Senior Notes due 2022
At December 31, 2015 , $700 million aggregate principal amount of 7% senior notes due 2022 were outstanding. These notes were sold at 100% of the principal amount and will mature on May 15, 2022 . These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior secured credit facilities described below.
We have the option to redeem these notes, in whole or in part, at any time on or after May 15, 2017 at a redemption price of 103.5% , 102.333% , 101.167% and 100% during the 12-month periods commencing on May 15, 2017 , 2018 , 2019 and 2020 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to May 15, 2017, we may redeem these notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date.
The indenture for these notes includes covenants that are substantially similar to those contained in the indenture governing our 6.5% senior notes due 2021, described above.
$1.0 billion 5.125% Senior Notes due 2023
At December 31, 2015, $1.0 billion aggregate principal amount of 5.125% senior notes due 2023 were outstanding. These notes were sold at 100% of the principal amount and will mature on November 15, 2023. These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior secured credit facilities described below.
We have the option to redeem these notes, in whole or in part, at any time on or after November 15, 2018 at a redemption price of 102.563% , 101.281% and 100% during the 12-month periods commencing on November 15, 2018, 2019 and 2020 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to November 15, 2018, we may redeem these notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date. In addition, prior to November 15, 2018, we may redeem up to 35% of the original aggregate principal amount of these notes from the net cash proceeds of certain equity offerings at a redemption price equal to 105.125% of the principal amount plus accrued and unpaid interest to the redemption date.
The indenture for these notes includes covenants that are substantially similar to those contained in the indenture governing our 6.5% senior notes due 2021, described above.

85

€250 million 3.75% Senior Notes due 2023 of GDTE
At December 31, 2015, € 250 million aggregate principal amount of GDTE’s 3.75% senior notes due 2023 were outstanding. These notes were sold at 100% of the principal amount and will mature on December 15, 2023. These notes are unsecured senior obligations of GDTE and are guaranteed, on an unsecured senior basis, by the Company and our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior secured credit facilities described below.
We have the option to redeem these notes, in whole or in part, at any time on or after December 15, 2018 at a redemption price of 101.875% , 100.938% and 100% during the 12-month periods commencing on December 15, 2018, 2019 and 2020 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to December 15, 2018, we may redeem these notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date. In addition, prior to December 15, 2018, we may redeem up to 35% of the original aggregate principal amount of these notes from the net cash proceeds of certain equity offerings at a redemption price equal to 103.75% of the principal amount plus accrued and unpaid interest to the redemption date.
The indenture for these notes includes covenants that are substantially similar to those contained in the indenture governing our 6.5% senior notes due 2021, described above.
$150 million 7% Senior Notes due 2028
At December 31, 2015 , $150 million aggregate principal amount of our 7% notes due 2028 were outstanding. These notes are unsecured senior obligations and will mature on March 15, 2028 .
We have the option to redeem these notes, in whole or in part, at any time at a redemption price equal to the greater of 100% of the principal amount thereof or the sum of the present values of the remaining scheduled payments thereon, discounted using a defined treasury rate plus 15 basis points, plus in either case accrued and unpaid interest to the redemption date.
The terms of the indenture for these notes, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur secured debt, (ii) engage in sale and leaseback transactions, and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications.
CREDIT FACILITIES
$2.0 billion Amended and Restated First Lien Revolving Credit Facility due 2017
Our amended and restated first lien revolving credit facility is available in the form of loans or letters of credit, with letter of credit availability limited to $800 million . Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to $250 million . Amounts drawn under this facility bear interest at LIBOR plus 150 basis points , based on our current liquidity as described below.
Our obligations under the facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries. Our obligations under the facility and our subsidiaries' obligations under the related guarantees are secured by first priority security interests in collateral that includes, subject to certain exceptions:
•
U.S. and Canadian accounts receivable and inventory;
•
certain of our U.S. manufacturing facilities;
•
equity interests in our U.S. subsidiaries and up to 65% of the equity interests in our directly owned foreign subsidiaries, excluding GDTE and its subsidiaries; and
•
substantially all other tangible and intangible assets, including equipment, contract rights and intellectual property.
Availability under the facility is subject to a borrowing base, which is based on eligible accounts receivable and inventory of The Goodyear Tire & Rubber Company and certain of its U.S. and Canadian subsidiaries, after adjusting for customary factors that are subject to modification from time to time by the administrative agent or the majority lenders at their discretion (not to be exercised unreasonably). Modifications are based on the results of periodic collateral and borrowing base evaluations and appraisals. To the extent that our eligible accounts receivable and inventory decline, our borrowing base will decrease and the availability under the facility may decrease below $2.0 billion. In addition, if the amount of outstanding borrowings and letters of credit under the facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess. As of December 31, 2015 , our borrowing base, and therefore our availability, under this facility was $536 million below the facility's stated amount of $2.0 billion .
The facility, which matures on April 30, 2017 , contains certain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur additional debt or issue redeemable preferred stock, (ii) pay dividends, repurchase shares or make certain other restricted payments or investments, (iii) incur liens, (iv) sell assets, (v) incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, (vi) enter into affiliate transactions, (vii) engage in sale and

86

leaseback transactions, and (viii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. In addition, in the event that the availability under the facility plus the aggregate amount of our Available Cash is less than $200 million , we will not be permitted to allow our ratio of EBITDA to Consolidated Interest Expense to be less than 2.0 to 1.0 for any period of four consecutive fiscal quarters. “Available Cash,” “EBITDA” and “Consolidated Interest Expense” have the meanings given them in the facility.
The facility has customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2011. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
If Available Cash (as defined in the facility) plus the availability under the facility is greater than $1.0 billion , amounts drawn under the facility will bear interest, at our option, at (i) 150 basis points over LIBOR or (ii) 50 basis points over an alternative base rate (the higher of the prime rate, the federal funds rate plus 50 basis points or LIBOR plus 100 basis points), and undrawn amounts under the facility will be subject to an annual commitment fee of 37.5 basis points. If Available Cash plus the availability under the facility is equal to or less than $1.0 billion , then amounts drawn under the facility will bear interest, at our option, at (i) 175 basis points over LIBOR or (ii) 75 basis points over an alternative base rate, and undrawn amounts under the facility will be subject to an annual commitment fee of 25 basis points.
At December 31, 2015 , we had no borrowings and $315 million of letters of credit issued under the revolving credit facility. At December 31, 2014 , we had no borrowings and $377 million of letters of credit issued under the revolving credit facility.
$1.2 billion Amended and Restated Second Lien Term Loan Facility due 2019
In June 2015, we amended our second lien term loan facility. As a result of the amendment, the term loan now bears interest, at our option, at (i) 300 basis points over LIBOR (subject to a minimum LIBOR rate of 75 basis points) or (ii) 200 basis points over an alternative base rate (the higher of the prime rate, the federal funds rate plus 50 basis points or LIBOR plus 100 basis points). After June 16, 2015 and prior to June 16, 2016 , (i) loans under the facility may not be prepaid or repaid with the proceeds of term loan indebtedness, or converted into or replaced by new term loans, bearing interest at an effective interest rate that is less than the effective interest rate then applicable to such loans and (ii) no amendment of the facility may be made that, directly or indirectly, reduces the effective interest rate applicable to the loans under the facility, in each case unless we pay a fee equal to 1.0% of the principal amount of the loans so affected.
Our obligations under our second lien term loan facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries and are secured by second priority security interests in the same collateral securing the $2.0 billion first lien revolving credit facility. This facility may be increased by up to $300 million at our request, subject to the consent of the lenders making such additional term loans.
At December 31, 2015 and 2014, the amounts outstanding under this facility were $598 million and $1,196 million , respectively. On February 3, 2015, we repaid $200 million and on December 30, 2015 we repaid $400 million of the borrowings under this facility. Repayments are not able to be redrawn.
€550 million Amended and Restated Senior Secured European Revolving Credit Facility due 2020
In May 2015, we amended and restated our existing €400 million European revolving credit facility. Significant changes to the facility included extending the maturity to May 12, 2020 , increasing the available commitments thereunder from €400 million to €550 million and decreasing the annual commitment fee by 20 basis points to 30 basis points. Loans will bear interest at LIBOR plus 175 basis points for loans denominated in U.S. dollars or pounds sterling and EURIBOR plus 175 basis points for loans denominated in euros.
Our amended and restated €550 million European revolving credit facility consists of (i) a €125 million German tranche that is available only to Goodyear Dunlop Tires Germany GmbH ("GDTG") and (ii) a €425 million all-borrower tranche that is available to GDTE, GDTG and Goodyear Dunlop Tires Operations S.A. Up to €150 million of swingline loans and €50 million in letters of credit are available for issuance under the all-borrower tranche.

87

GDTE and certain of its subsidiaries in the United Kingdom, Luxembourg, France and Germany provide guarantees to support the facility. GDTE’s obligations under the facility and the obligations of its subsidiaries under the related guarantees are secured by security interests in collateral that includes, subject to certain exceptions:
•
the capital stock of the principal subsidiaries of GDTE; and
•
a substantial portion of the tangible and intangible assets of GDTE and certain of its subsidiaries in the United Kingdom, Luxembourg, France and Germany, including real property, equipment, inventory, contract rights, intercompany receivables and cash accounts, but excluding accounts receivable and certain cash accounts in subsidiaries that are or may become parties to securitization or factoring transactions.
The German guarantors secure the German tranche on a first-lien basis and the all-borrower tranche on a second-lien basis. GDTE and its other subsidiaries that provide guarantees secure the all-borrower tranche on a first-lien basis and generally do not provide collateral support for the German tranche. The Company and its U.S. subsidiaries and primary Canadian subsidiary that guarantee our U.S. senior secured credit facilities described above also provide unsecured guarantees in support of the facility.
The facility contains covenants similar to those in our first lien revolving credit facility, with additional limitations applicable to GDTE and its subsidiaries. In addition, under the facility, GDTE’s ratio of Consolidated Net J.V. Indebtedness to Consolidated European J.V. EBITDA for a period of four consecutive fiscal quarters is not permitted to be greater than 3.0 to 1.0 at the end of any fiscal quarter. “Consolidated Net J.V. Indebtedness” and “Consolidated European J.V. EBITDA” have the meanings given them in the facility.
The facility has customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2014. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
At December 31, 2015 and December 31, 2014 , we had no borrowings and no letters of credit issued under the European revolving credit facility.
Accounts Receivable Securitization Facilities (On-Balance Sheet)
GDTE and certain other of our European subsidiaries are parties to a pan-European accounts receivable securitization facility that expires in 2019. The terms of the facility provide the flexibility to designate annually the maximum amount of funding available under the facility in an amount of not less than €45 million and not more than €450 million . For the period beginning October 16, 2014 to October 15, 2015, the designated maximum amount of the facility was €380 million . For the period beginning October 16, 2015 to October 15, 2016, the designated maximum amount of the facility is €340 million .
The facility involves an ongoing daily sale of substantially all of the trade accounts receivable of certain GDTE subsidiaries to a bankruptcy-remote French company controlled by one of the liquidity banks in the facility. These subsidiaries retain servicing responsibilities. Utilization under this facility is based on eligible receivable balances.
The funding commitments under the facility will expire upon the earliest to occur of: (a) September 25, 2019 , (b) the non-renewal and expiration (without substitution) of all of the back-up liquidity commitments, (c) the early termination of the facility according to its terms (generally upon an Early Amortisation Event (as defined in the facility), which includes, among other things, events similar to the events of default under our senior secured credit facilities; certain tax law changes; or certain changes to law, regulation or accounting standards), or (d) our request for early termination of the facility. The facility’s current back-up liquidity commitments will expire on October 15, 2016 .
At December 31, 2015 , the amounts available and utilized under this program totaled $276 million ( €254 million ) and $125 million ( €115 million ), respectively. At December 31, 2014 , the amounts available and utilized under this program totaled $343 million ( €283 million ). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Capital Leases.
In addition to the pan-European accounts receivable securitization facility discussed above, subsidiaries in Australia have an accounts receivable securitization program that provides up to $62 million ( 85 million Australian dollars) of funding. The terms of the facility provide the flexibility to designate semi-annually the maximum amount of funding available under the facility in an amount of not less than 60 million Australian dollars and not more than 85 million Australian dollars. At December 31, 2015 , the amounts available and utilized under this program were $34 million and $19 million , respectively. At December 31, 2014 , the amounts available and utilized under this program were $43 million and $23 million , respectively. The receivables sold under this program also serve as collateral for the related facility. We retain the risk of loss related to these receivables in the event of non-payment. These amounts are included in Long Term Debt and Capital Leases.

88

Accounts Receivable Factoring Facilities (Off-Balance Sheet)
Various subsidiaries sold certain of their trade receivables under off-balance sheet programs during 2015 and 2014 . For these programs, we have concluded that there is generally no risk of loss to us from non-payment of the sold receivables. At December 31, 2015 and 2014 , the gross amount of receivables sold was $299 million and $365 million , respectively.
Other Foreign Credit Facilities
A Chinese subsidiary has several financing arrangements in China. At December 31, 2015 , these non-revolving credit facilities had total unused availability of $66 million and can only be used to finance the expansion of our manufacturing facility in China. At December 31, 2015 and 2014, the amounts outstanding under these facilities were $465 million and $535 million , respectively. The facilities ultimately mature in 2023 and principal amortization began in 2015. The facilities contain covenants relating to the Chinese subsidiary and have customary representations and warranties and defaults relating to the Chinese subsidiary’s ability to perform its obligations under the facilities. At December 31, 2015 and 2014 , restricted cash related to funds obtained under these credit facilities was $11 million and $4 million , respectively.
Other Domestic Debt
In 2011, we entered into agreements for the construction of our Global and North America Headquarters facility in Akron, Ohio. We concurrently entered into an agreement to occupy the facility under a 27 -year lease, including the two -year construction period, with multiple renewal options available at our discretion. Additionally, we entered into similar agreements for the construction and lease of a new parking deck adjacent to the Headquarters facility. Due to our continuing involvement with the financing during construction of the Headquarters facility and the parking deck, we recorded a non-cash increase to fixed assets and financing liabilities on our Consolidated Balance Sheets as costs were incurred during the construction period. The total financing liability of approximately $151 million , including capitalized interest, has been recorded in Long Term Debt and Capital Leases at December 31, 2015 .
Debt Maturities

The annual aggregate maturities of our debt and capital leases for the five years subsequent to December 31, 2015 are presented below. Maturities of debt credit agreements have been reported on the basis that the commitments to lend under these agreements will be terminated effective at the end of their current terms.
(In millions)
2016
 
2017
 
2018
 
2019
 
2020
U.S.
$
6

 
$
5

 
$
59

 
$
599

 
$
271

Foreign
630

 
425

 
225

 
270

 
54

 
$
636

 
$
430

 
$
284

 
$
869

 
$
325

DERIVATIVE FINANCIAL INSTRUMENTS
We utilize derivative financial instrument contracts and nonderivative instruments to manage interest rate, foreign exchange and commodity price risks. We have established a control environment that includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. We do not hold or issue derivative financial instruments for trading purposes.
Foreign Currency Contracts
We enter into foreign currency contracts in order to manage the impact of changes in foreign exchange rates on our consolidated results of operations and future foreign currency-denominated cash flows. These contracts may be used to reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted transactions resulting primarily from trade purchases and sales, equipment acquisitions, intercompany loans and royalty agreements. Contracts hedging short term trade receivables and payables normally have no hedging designation.
The following table presents fair values for foreign currency contracts not designated as hedging instruments:
 
December 31,
 
December 31,
(In millions)
2015
 
2014
Fair Values — asset (liability):
 
 
 
Accounts receivable
$
10

 
$
20

Other current liabilities
(10
)
 
(4
)


89

At December 31, 2015 and 2014 , these outstanding foreign currency derivatives had notional amounts of $1,094 million and $878 million , respectively, and were primarily related to intercompany loans. Other (Income) Expense included net transaction gains of $79 million and $54 million in 2015 and 2014 , respectively, on foreign currency derivatives. These amounts were substantially offset in Other (Income) Expense by the effect of changing exchange rates on the underlying currency exposures.
The following table presents fair values for foreign currency contracts designated as cash flow hedging instruments:
 
December 31,
 
December 31,
(In millions)
2015
 
2014
Fair Values — asset (liability):
 
 
 
Accounts receivable
$
5

 
$
10

Other current liabilities
(1
)
 
—


At December 31, 2015 and 2014 , these outstanding foreign currency derivatives had notional amounts of $168 million and $157 million , respectively, and primarily related to U.S. dollar denominated intercompany transactions.
We enter into master netting agreements with counterparties. The amounts eligible for offset under the master netting agreements are not material and we have elected a gross presentation of foreign currency contracts in the Consolidated Balance Sheets.
The following table presents the classification of changes in fair values of foreign currency contracts designated as cash flow hedging instruments (before tax and minority):
 
Year Ended
 
December 31,
(In millions) (Income) Expense
2015
 
2014
Amounts deferred to AOCL
$
(20
)
 
$
(17
)
Amount of deferred loss (gain) reclassified from AOCL into CGS
(28
)
 
—

Amounts excluded from effectiveness testing
1

 
1


The estimated net amount of the deferred gains at December 31, 2015 that is expected to be reclassified to earnings within the next twelve months is $6 million .
The counterparties to our foreign currency contracts were considered by us to be substantial and creditworthy financial institutions that are recognized market makers at the time we entered into those contracts. We seek to control our credit exposure to these counterparties by diversifying across multiple counterparties, by setting counterparty credit limits based on long term credit ratings and other indicators of counterparty credit risk such as credit default swap spreads, and by monitoring the financial strength of these counterparties on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to counterparties in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a counterparty. However, the inability of a counterparty to fulfill its contractual obligations to us could have a material adverse effect on our liquidity, financial position or results of operations in the period in which it occurs.

90
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 16. Fair Value Measurements
The following table presents information about assets and liabilities recorded at fair value on the Consolidated Balance Sheet at December 31, 2015 and December 31, 2014 :
 
Total Carrying Value in the
Consolidated
Balance Sheet
 
Quoted Prices in Active Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant Unobservable
Inputs
(Level 3)
(In millions)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments
$
7

 
$
56

 
$
7

 
$
56

 
$
—

 
$
—

 
$
—

 
$
—

Foreign Exchange Contracts
15

 
30

 
—

 
—

 
15

 
30

 
—

 
—

Total Assets at Fair Value
$
22

 
$
86

 
$
7

 
$
56

 
$
15

 
$
30

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign Exchange Contracts
$
11

 
$
4

 
$
—

 
$
—

 
$
11

 
$
4

 
$
—

 
$
—

Total Liabilities at Fair Value
$
11

 
$
4

 
$
—

 
$
—

 
$
11

 
$
4

 
$
—

 
$
—


The following table presents supplemental fair value information about long term fixed rate and variable rate debt, excluding capital leases, at December 31, 2015 and December 31, 2014. Long term debt with a fair value of $4,337 million and $4,603 million at December 31, 2015 and December 31, 2014, respectively, was estimated using quoted Level 1 market prices.  The carrying value of the remaining long term debt approximates fair value since the terms of the financing arrangements are similar to terms that could be obtained under current lending market conditions .

 
December 31,
 
December 31,
(In millions)
2015
 
2014
Fixed Rate Debt:
 
 
 
Carrying amount — liability
$
3,890

 
$
3,680

Fair value — liability
4,065

 
3,773

 
 
 
 
Variable Rate Debt:
 
 
 
Carrying amount — liability
$
1,769

 
$
2,625

Fair value — liability
1,767

 
2,622

In the third quarter of 2015, we corrected the presentation of both the carrying amount and fair value of certain variable rate debt that had previously been disclosed as fixed rate debt, resulting in a revision of $452 million between fixed rate debt and variable rate debt at December 31, 2014. This revision did not impact the Consolidated Balance Sheet. We do not consider the change in presentation to be material to any previously issued financial statements.

Note 17. Pension, Other Postretirement Benefits and Savings Plans
We provide employees with defined benefit pension or defined contribution savings plans. Our hourly U.S. pension plans are frozen and provide benefits based on length of service. The principal salaried U.S. pension plans are frozen and provide benefits based on final five-year average earnings formulas. Salaried employees who made voluntary contributions to these plans receive higher benefits. We also provide certain U.S. employees and employees at certain non-U.S. subsidiaries with health care benefits or life insurance benefits upon retirement. Substantial portions of the health care benefits for U.S. salaried retirees are not insured and are funded from operations.
During 2015, we offered lump sum payments over a limited time to certain former employees in our U.S. pension plans. Payments of $190 million related to this offer were made from existing plan assets in the fourth quarter of 2015. As a result, total lump sum payments from these plans exceeded annual service and interest cost in 2015, and we recognized a pre-tax corporate pension settlement charge of $137 million in the fourth quarter of 2015.

91
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

During the first quarter of 2014, we made contributions of $1,167 million , including discretionary contributions of $907 million , to fully fund our hourly U.S. pension plans. As a result, and in accordance with our master collective bargaining agreement with the United Steelworkers, the hourly U.S. pension plans were frozen to future accruals effective April 30, 2014. As a result of the accrual freezes to pension plans related to our North America SBU, we recognized curtailment charges of $33 million in the first quarter of 2014.
In the first quarter of 2014, we ceased production at one of our manufacturing facilities in Amiens, France and recorded curtailment gains of $22 million during 2014, which is included in rationalization charges, related to the termination of employees at that facility who were participants in France's retirement indemnity plan.
During the first quarter of 2013, we made contributions of $868 million , including discretionary contributions of $834 million , to fully fund our salaried U.S. pension plans.
Total benefits cost and amounts recognized in other comprehensive (income) loss follows:
 
Pension Plans
 
 
 
 
 
 
 
U.S.
 
Non-U.S.
 
Other Postretirement Benefits
(In millions)
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Benefits cost:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Service cost
$
4

 
$
15

 
$
45

 
$
43

 
$
34

 
$
39

 
$
3

 
$
4

 
$
6

Interest cost
238

 
256

 
243

 
113

 
131

 
131

 
15

 
19

 
19

Expected return on plan assets
(295
)
 
(311
)
 
(335
)
 
(107
)
 
(118
)
 
(111
)
 
—

 
(1
)
 
(1
)
Amortization of prior service cost (credit)
—

 
1

 
17

 
1

 
1

 
1

 
(45
)
 
(45
)
 
(45
)
Amortization of net losses
106

 
114

 
205

 
32

 
35

 
50

 
7

 
8

 
12

Net periodic cost
53

 
75

 
175

 
82

 
83

 
110

 
(20
)
 
(15
)
 
(9
)
Curtailments/settlements
137

 
32

 
—

 
2

 
(13
)
 
4

 
—

 
—

 
—

Total benefits cost
$
190

 
$
107

 
$
175

 
$
84

 
$
70

 
$
114

 
$
(20
)
 
$
(15
)
 
$
(9
)
Recognized in other comprehensive (income) loss before tax and minority:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Prior service (credit) cost from plan amendments
$
—

 
$
(1
)
 
$
(30
)
 
$
—

 
$
1

 
$
(1
)
 
$
—

 
$
—

 
$
—

Increase (decrease) in net actuarial losses
150

 
292

 
(374
)
 
(45
)
 
(78
)
 
(128
)
 
(19
)
 
3

 
(51
)
Amortization of prior service (cost) credit in net periodic cost
—

 
(1
)
 
(17
)
 
(1
)
 
(1
)
 
(1
)
 
45

 
45

 
47

Amortization of net losses in net periodic cost
(106
)
 
(114
)
 
(205
)
 
(34
)
 
(36
)
 
(53
)
 
(7
)
 
(8
)
 
(13
)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements, and divestitures
(386
)
 
(32
)
 
—

 
(5
)
 
(16
)
 
(3
)
 
4

 
—

 
—

Deconsolidation of Venezuelan subsidiary (Note 1)
—

 
—

 
—

 
(62
)
 
—

 
—

 
—

 
—

 
—

Total recognized in other comprehensive loss (income) before tax and minority
(342
)
 
144

 
(626
)
 
(147
)
 
(130
)
 
(186
)
 
23

 
40

 
(17
)
Total recognized in total benefits cost and other comprehensive loss (income) before tax and minority
$
(152
)
 
$
251

 
$
(451
)
 
$
(63
)
 
$
(60
)
 
$
(72
)
 
$
3

 
$
25

 
$
(26
)
We use the fair value of pension assets in the calculation of pension expense for all plans.
Total benefits (credit) cost for our other postretirement benefits was $(28) million , $(24) million and $(24) million for our U.S. plans in 2015 , 2014 and 2013 , respectively, and $8 million , $9 million and $15 million for our non-U.S. plans in 2015 , 2014 and 2013 , respectively.
The estimated net actuarial loss for the defined benefit pension plans that will be amortized from AOCL into benefits cost in 2016 is $108 million for our U.S. plans and $27 million for our non-U.S. plans.
The estimated prior service credit and net actuarial loss for the other postretirement benefit plans that will be amortized from AOCL into benefits cost in 2016 are a benefit of $44 million and expense of $6 million , respectively.

92
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Medicare Prescription Drug Improvement and Modernization Act provides plan sponsors a federal subsidy for certain qualifying prescription drug benefits covered under the sponsor’s postretirement health care plans. Our other postretirement benefits cost is presented net of this subsidy.
The change in benefit obligation and plan assets for 2015 and 2014 and the amounts recognized in our Consolidated Balance Sheet at December 31, 2015 and 2014 are as follows:
 
Pension Plans
 
 
 
 
 
U.S.
 
Non-U.S.
 
Other Postretirement Benefits
(In millions)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Change in benefit obligation:
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
$
(6,507
)
 
$
(5,981
)
 
$
(3,178
)
 
$
(3,129
)
 
$
(361
)
 
(388
)
Newly adopted plans
—

 
—

 
(9
)
 
(3
)
 
—

 
—

Service cost — benefits earned
(4
)
 
(15
)
 
(43
)
 
(34
)
 
(3
)
 
(4
)
Interest cost
(238
)
 
(256
)
 
(113
)
 
(131
)
 
(15
)
 
(19
)
Plan amendments
—

 
1

 
—

 
(2
)
 
—

 
—

Actuarial gain (loss)
262

 
(693
)
 
(5
)
 
(394
)
 
22

 
—

Participant contributions
—

 
—

 
(2
)
 
(2
)
 
(15
)
 
(16
)
Curtailments/settlements
285

 
1

 
19

 
69

 
—

 
—

Divestitures
500

 
—

 
—

 
—

 
6

 
—

Deconsolidation of Venezuelan subsidiary (Note 1)
—

 
—

 
80

 
—

 
—

 
—

Foreign currency translation
—

 
—

 
303

 
284

 
35

 
17

Benefit payments
364

 
436

 
140

 
164

 
40

 
49

Ending balance
$
(5,338
)
 
$
(6,507
)
 
$
(2,808
)
 
$
(3,178
)
 
$
(291
)
 
$
(361
)
Change in plan assets:
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
$
6,250

 
$
4,800

 
$
2,721

 
$
2,455

 
$
5

 
$
5

Newly adopted plans
—

 
—

 
9

 
—

 
—

 
—

Actual return on plan assets
(117
)
 
711

 
60

 
505

 
—

 
—

Company contributions to plan assets
—

 
1,167

 
60

 
118

 
2

 
2

Cash funding of direct participant payments
7

 
9

 
36

 
44

 
23

 
31

Participant contributions
—

 
—

 
2

 
2

 
15

 
16

Settlements
(285
)
 
(1
)
 
(18
)
 
(39
)
 
—

 
—

Divestitures
(480
)
 
—

 
—

 
—

 
—

 
—

Foreign currency translation
—

 
—

 
(237
)
 
(200
)
 
(2
)
 
—

Benefit payments
(364
)
 
(436
)
 
(140
)
 
(164
)
 
(40
)
 
(49
)
Ending balance
$
5,011

 
$
6,250

 
$
2,493

 
$
2,721

 
$
3

 
$
5

Funded status at end of year
$
(327
)
 
$
(257
)
 
$
(315
)
 
$
(457
)
 
$
(288
)
 
$
(356
)

Other postretirement benefits funded status was $(164) million and $(190) million for our U.S. plans at December 31, 2015 and 2014 , respectively, and $(124) million and $(166) million for our non-U.S. plans at December 31, 2015 and 2014 , respectively.


93
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The funded status recognized in the Consolidated Balance Sheets consists of:
 
Pension Plans
 
 
 
 
 
U.S.
 
Non-U.S.
 
Other Postretirement Benefits
(In millions)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Noncurrent assets
$
—

 
$
9

 
$
249

 
$
274

 
$
—

 
$
—

Current liabilities
(12
)
 
(10
)
 
(19
)
 
(24
)
 
(23
)
 
(28
)
Noncurrent liabilities
(315
)
 
(256
)
 
(545
)
 
(707
)
 
(265
)
 
(328
)
Net amount recognized
$
(327
)
 
$
(257
)
 
$
(315
)
 
$
(457
)
 
$
(288
)
 
$
(356
)

The amounts recognized in AOCL, net of tax, consist of:
 
Pension Plans
 
 
 
 
 
U.S.
 
Non-U.S.
 
Other Postretirement Benefits
(In millions)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Prior service (credit) cost
$
(4
)
 
$
(4
)
 
$
2

 
$
4

 
$
(104
)
 
$
(152
)
Net actuarial loss
2,643

 
2,985

 
693

 
838

 
74

 
99

Gross amount recognized
2,639

 
2,981

 
695

 
842

 
(30
)
 
(53
)
Deferred income taxes
(128
)
 
(177
)
 
(96
)
 
(137
)
 
(9
)
 
(1
)
Minority shareholders’ equity
—

 
(62
)
 
—

 
(109
)
 
—

 
1

Net amount recognized
$
2,511

 
$
2,742

 
$
599

 
$
596

 
$
(39
)
 
$
(53
)

The following table presents significant weighted average assumptions used to determine benefit obligations at December 31:
 
Pension Plans
 
Other
Postretirement
Benefits
 
2015
 
2014
 
2015
 
2014
Discount rate:
 

 
 

 
 

 
 

— U.S.
4.20
%
 
3.89
%
 
3.86
%
 
3.59
%
— Non-U.S.
3.47

 
3.31

 
5.30

 
4.89

Rate of compensation increase:
 

 
 

 
 

 
 

— U.S.
N/A

 
N/A

 
N/A

 
N/A

— Non-U.S.
2.63

 
2.88

 
N/A

 
N/A



94
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


The following table presents significant weighted average assumptions used to determine benefits cost for the years ended December 31:
 
Pension Plans
 
Other Postretirement Benefits
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Discount rate:
 

 
 

 
 

 
 

 
 

 
 

— U.S.
3.89
%
 
4.40
%
 
3.77
%
 
3.59
%
 
4.06
%
 
3.30
%
— Non-U.S.
3.31

 
4.36

 
4.12

 
4.89

 
6.62

 
5.64

Expected long term return on plan assets:
 

 
 

 
 

 
 

 
 

 
 
— U.S.
5.00

 
5.47

 
7.16

 
N/A

 
N/A

 
N/A

— Non-U.S.
4.12

 
5.12

 
5.01

 
N/A

 
N/A

 
N/A

Rate of compensation increase:
 

 
 

 
 

 
 

 
 

 
 
— U.S.
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 
N/A

— Non-U.S.
2.88

 
3.11

 
3.23

 
N/A

 
N/A

 
N/A


For 2015 , a weighted average discount rate of 3.89% was used for the U.S. pension plans. This rate was developed from a portfolio of bonds from issuers rated AA or higher by established rating agencies as of December 31, 2014, with cash flows similar to the timing of our expected benefit payment cash flows. For our non-U.S. locations, a weighted average discount rate of 3.31 % was used. This rate was developed based on the nature of the liabilities and local environments, using available bond indices, yield curves, and long term inflation.
Effective January 1, 2016, we changed the method used to measure the service and interest components of net periodic cost for pension and other postretirement benefits for plans that utilize a yield curve approach. We elected to utilize a full yield curve approach in the measurement of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. We believe this new approach provides a more precise measurement of service and interest costs by aligning the timing of projected benefit cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan benefit obligations. We have accounted for this change as a change in accounting estimate.
For 2015 , an assumed weighted average long term rate of return of 5.00% was used for the U.S. pension plans. In developing the long term rate of return, we evaluated input from our pension fund consultant on asset class return expectations, including determining the appropriate rate of return for our plans, which are primarily invested in fixed income securities. For our non-U.S. locations, an assumed weighted average long term rate of return of 4.12% was used. Input from local pension fund consultants concerning asset class return expectations and long term inflation form the basis of this assumption.
The U.S. pension plan mortality assumption is based on our actual historical experience and expected future mortality improvements based on published actuarial tables. For our non-U.S. locations, mortality assumptions are based on published actuarial tables which include projections of future mortality improvements.
The following table presents estimated future benefit payments from the plans as of December 31, 2015 . Benefit payments for other postretirement benefits are presented net of retiree contributions:
 
Pension Plans
 
Other Postretirement Benefits
(In millions)
U.S.
 
Non-U.S.
 
Without Medicare Part D Subsidy
 
Medicare Part D Subsidy Receipts
2016
$
421

 
$
134

 
$
25

 
$
1

2017
405

 
128

 
25

 
1

2018
394

 
131

 
24

 
1

2019
384

 
135

 
23

 
1

2020
376

 
138

 
22

 
1

2021-2025
1,767

 
742

 
103

 
5



95
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents selected information on our pension plans:
 
U.S.
 
Non-U.S.
(In millions)
2015
 
2014
 
2015
 
2014
All plans:
 

 
 

 
 

 
 

Accumulated benefit obligation
$
5,329

 
$
6,495

 
$
2,722

 
$
3,040

Plans not fully-funded:
 

 
 

 
 

 
 

Projected benefit obligation
$
5,336

 
$
5,087

 
$
876

 
$
1,112

Accumulated benefit obligation
5,327

 
5,076

 
811

 
994

Fair value of plan assets
5,009

 
4,822

 
316

 
384


Certain non-U.S. subsidiaries maintain unfunded pension plans consistent with local practices and requirements. At December 31, 2015 , these plans accounted for $233 million of our accumulated pension benefit obligation, $256 million of our projected pension benefit obligation, and $68 million of our AOCL adjustment. At December 31, 2014 , these plans accounted for $288 million of our accumulated pension benefit obligation, $348 million of our projected pension benefit obligation, and $132 million of our AOCL adjustment.
We expect to contribute approximately $50 million to $75 million to our funded non-U.S. pension plans in 2016.
Assumed health care cost trend rates at December 31 follow:
 
2015
 
2014
Health care cost trend rate assumed for the next year
6.5
%
 
7.0
%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
5.0

 
5.0

Year that the rate reaches the ultimate trend rate
2022

 
2022

A 1% change in the assumed health care cost trend would have increased (decreased) the accumulated other postretirement benefits obligation at December 31, 2015 and the aggregate service and interest cost for the year then ended as follows:
(In millions)
1% Increase
 
1% Decrease
Accumulated other postretirement benefits obligation
$
15

 
$
(13
)
Aggregate service and interest cost
1

 
(1
)
Our pension plan weighted average investment allocation at December 31, by asset category, follows:
 
U.S.
 
Non-U.S.
 
2015
 
2014
 
2015
 
2014
Cash and short term securities
5
%
 
4
%
 
1
%
 
1
%
Equity securities
6

 
6

 
12

 
15

Debt securities
89

 
90

 
74

 
73

Alternatives
—

 
—

 
13

 
11

Total
100
%
 
100
%
 
100
%
 
100
%
Our pension investment policy recognizes the long term nature of pension liabilities, the benefits of diversification across asset classes and the effects of inflation. The portfolio for plans that are fully funded is designed to offset the future impact of discount rate movements on the funded status for those plans. The diversified portfolio for plans that are not fully funded is designed to maximize returns consistent with levels of liquidity and investment risk that are prudent and reasonable. All assets are managed externally according to target asset allocation guidelines we have established. Manager guidelines prohibit the use of any type of investment derivative without our prior approval. Portfolio risk is controlled by having managers comply with guidelines, establishing the maximum size of any single holding in their portfolios and by using managers with different investment styles. We periodically undertake asset and liability modeling studies to determine the appropriateness of the investments.
The portfolio of our U.S. pension plan assets includes holdings of global high quality and high yield fixed income securities, short term interest bearing deposits, and private equities. The target asset allocation of our U.S. pension plans is 94% in duration-matched fixed income securities and 6% in equity securities. Actual U.S. pension fund asset allocations are reviewed on a periodic basis and the pension funds are rebalanced to target ranges on an as needed basis.

96
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The portfolios of our non-U.S. pension plans include holdings of U.S. and non-U.S. equities, global high quality and high yield fixed income securities, hedge funds, currency derivatives, insurance contracts, repurchase agreements, and short term interest bearing deposits. The weighted average target asset allocation of the non-U.S. pension funds is approximately 10% equities, 80% fixed income, and 10% alternative investments.
The fair values of our pension plan assets at December 31, 2015 , by asset category are as follows:
 
U.S.
 
Non-U.S.
(In millions)
Total
 
Quoted
Prices
in Active
Markets
for Identical
Assets (Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Other
Unobservable
Inputs (Level 3)
 
Total
 
Quoted
Prices in
Active
Markets for
Identical
Assets (Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Other
Unobservable
Inputs (Level 3)
Cash and Short Term Securities
$
240

 
$
237

 
$
3

 
$
—

 
$
30

 
$
28

 
$
2

 
$
—

Equity Securities
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
Common and Preferred Stock:
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
Non-U.S. Companies
—

 
—

 
—

 
—

 
19

 
19

 
—

 
—

Commingled Funds
6

 
—

 
6

 
—

 
231

 
17

 
214

 
—

Mutual Funds
—

 
—

 
—

 
—

 
61

 
3

 
58

 
—

Partnership Interests
295

 
—

 
75

 
220

 
—

 
—

 
—

 
—

Debt Securities
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
Corporate Bonds
2,413

 
—

 
2,413

 
—

 
151

 
14

 
137

 
—

Government Bonds
1,091

 
—

 
1,091

 
—

 
2,097

 
67

 
2,030

 
—

Repurchase Agreements
—

 
—

 
—

 
—

 
(719
)
 
—

 
(719
)
 
—

Asset Backed Securities
158

 
—

 
158

 
—

 
11

 
2

 
2

 
7

Commingled Funds
714

 
—

 
714

 
—

 
342

 
—

 
342

 
—

Mutual Funds
86

 
—

 
86

 
—

 
8

 
3

 
5

 
—

Alternatives
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
Commingled Funds
—

 
—

 
—

 
—

 
125

 
—

 
6

 
119

Real Estate
—

 
—

 
—

 
—

 
143

 
—

 
2

 
141

Other Investments
—

 
—

 
(2
)
 
2

 
68

 
1

 
6

 
61

Total Investments
5,003

 
$
237

 
$
4,544

 
$
222

 
2,567

 
$
154

 
$
2,085

 
$
328

Other
8

 
 

 
 

 
 

 
(74
)
 
 

 
 

 
 

Total Plan Assets
$
5,011

 
 

 
 

 
 

 
$
2,493

 
 

 
 

 
 


97
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The fair values of our pension plan assets at December 31, 2014 , by asset category are as follows:
 
U.S.
 
Non-U.S.
(In millions)
Total
 
Quoted
Prices
in Active
Markets
for Identical
Assets (Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Other
Unobservable
Inputs (Level 3)
 
Total
 
Quoted
Prices in
Active
Markets for
Identical
Assets (Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Other
Unobservable
Inputs (Level 3)
Cash and Short Term Securities
$
229

 
$
218

 
$
11

 
$
—

 
$
32

 
$
27

 
$
5

 
$
—

Equity Securities
 

 
 

 
 

 
 
 
 

 
 
 
 
 
 
Common and Preferred Stock:
 

 
 

 
 

 
 
 
 

 
 
 
 
 
 
Non-U.S. Companies
—

 
—

 
—

 
—

 
19

 
19

 
—

 
—

Commingled Funds
12

 
—

 
12

 
—

 
328

 
19

 
309

 
—

Mutual Funds
—

 
—

 
—

 
—

 
70

 
7

 
63

 
—

Partnership Interests
362

 
—

 
133

 
229

 
—

 
—

 
—

 
—

Debt Securities
 

 
 

 
 
 
 
 
 

 
 
 
 
 
 
Corporate Bonds
2,678

 
—

 
2,678

 
—

 
179

 
17

 
162

 
—

Government Bonds
1,401

 
—

 
1,401

 
—

 
616

 
57

 
559

 
—

Asset Backed Securities
123

 
—

 
123

 
—

 
4

 
2

 
2

 
—

Commingled Funds
960

 
—

 
960

 
—

 
1,204

 
—

 
1,204

 
—

Mutual Funds
468

 
—

 
468

 
—

 
28

 
23

 
5

 
—

Alternatives
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 Commingled Funds
—

 
—

 
—

 
—

 
129

 
—

 
7

 
122

Real Estate
—

 
—

 
—

 
—

 
136

 
—

 
2

 
134

Other Investments
2

 
—

 
—

 
2

 
24

 
3

 
—

 
21

Total Investments
6,235

 
$
218

 
$
5,786

 
$
231

 
2,769

 
$
174

 
$
2,318

 
$
277

Other
15

 
 

 
 

 
 

 
(48
)
 
 

 
 

 
 

Total Plan Assets
$
6,250

 
 

 
 

 
 

 
$
2,721

 
 

 
 

 
 


At December 31, 2015 and 2014 , the Plans did not directly hold any of our common stock.
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. Valuation methodologies used for assets and liabilities measured at fair value are as follows:
•
Cash and Short Term Securities:   Cash and cash equivalents consist of U.S. and foreign currencies. Foreign currencies are reported in U.S. dollars based on currency exchange rates readily available in active markets. Short term securities are valued at the net asset value of units held at year end, as determined by the investment manager.
•
Equity Securities:   Common and preferred stock are valued at the closing price reported on the active market on which the individual securities are traded. Commingled funds are valued at the net asset value of units held at year end, as determined by a pricing vendor or the fund family. Mutual funds are valued at the net asset value of shares held at year end, as determined by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the fund family if an active market is not available. Partnership interests are priced based on valuations using the partnership’s available financial statements coinciding with our year end, adjusted for any cash transactions which occurred between the date of those financial statements and our year end.
•
Debt Securities:   Corporate and government bonds, including asset backed securities, are valued at the closing price reported on the active market on which the individual securities are traded, or based on institutional bid evaluations using proprietary models if an active market is not available. Repurchase agreements are valued at the contract price plus accrued interest. These secured borrowings are collateralized by government bonds held by the non-U.S. plans and have maturities less than one year. Commingled funds are valued at the net asset value of units held at year end, as determined by a pricing vendor or the fund family. Mutual funds are valued at the net asset value of shares held at year end, as determined by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the fund family if an active market is not available.

98
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

•
Alternatives:   Commingled funds are invested in hedge funds and currency derivatives, which are valued at the net asset value as determined by the fund manager based on the most recent financial information available, which typically represents significant unobservable data. Real estate held in real estate investment trusts are valued at the closing price reported on the active market on which the individual securities are traded. Participation in real estate funds are valued at the net asset value as determined by the fund manager based on the most recent financial information available, which typically represents significant unobservable data. Other investments include derivative financial instruments, which are primarily valued using independent pricing sources which utilize industry standard derivative valuation models and directed insurance contracts, which are valued as reported by the issuer.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following table sets forth a summary of changes in fair value of the pension plan investments classified as Level  3 for the year ended December 31, 2015 :
 
U.S.
 
Non-U.S.
(In millions)
Partnership Interests
 
Other
 
Commingled Funds
 
Real Estate
 
Asset Backed Securities
 
Other
Balance, beginning of year
$
229

 
$
2

 
$
122

 
$
134

 
$
—

 
$
21

Realized gains (losses)
21

 
—

 
—

 
—

 
—

 
—

Unrealized (losses) gains relating to instruments still held at the reporting date
(12
)
 
—

 
2

 
12

 
—

 
—

Purchases, sales, issuances and settlements (net)
(18
)
 
—

 
1

 
2

 
7

 
44

Foreign currency translation
—

 
—

 
(6
)
 
(7
)
 
—

 
(4
)
Balance, end of year
$
220

 
$
2

 
$
119

 
$
141

 
$
7

 
$
61


The following table sets forth a summary of changes in fair value of the pension plan investments classified as Level  3 for the year ended December 31, 2014 :
 
U.S.
 
Non-U.S.
(In millions)
Partnership Interests
 
Other
 
Commingled Funds
 
Real Estate
 
Other
Balance, beginning of year
$
209

 
$
6

 
$
163

 
$
170

 
$
19

Realized gains (losses)
31

 
—

 
1

 
1

 
—

Unrealized (losses) gains relating to instruments still held at the reporting date
(15
)
 
—

 
7

 
18

 
—

Purchases, sales, issuances and settlements (net)
4

 
(4
)
 
(42
)
 
(47
)
 
5

Foreign currency translation
—

 
—

 
(7
)
 
(8
)
 
(3
)
Balance, end of year
$
229

 
$
2

 
$
122

 
$
134

 
$
21


Other postretirement benefits plan assets at December 31, 2015 and 2014 , which relate to a non-U.S. plan, are invested primarily in mutual funds and are considered a Level 1 investment.
Savings Plans
Substantially all employees in the U.S. and employees of certain non-U.S. locations are eligible to participate in a defined contribution savings plan. Expenses recognized for contributions to these plans were $125 million , $112 million and $106 million for 2015 , 2014 and 2013 , respectively.


99
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 18. Stock Compensation Plans
Our stock compensation plans (collectively, the “Plans”) permit the grant of stock options, stock appreciation rights (“SARs”), performance share units, restricted stock, restricted stock units and other stock-based awards to employees and directors. Our current stock compensation plan, the 2013 Performance Plan, was adopted on April 15, 2013 and expires on April 14, 2023. A total of 11,000,000  shares of our common stock may be issued in respect of grants made under the 2013 Performance Plan. Any shares of common stock that are subject to awards of stock options or SARs will be counted as one share for each share granted for purposes of the aggregate share limit and any shares of common stock that are subject to any other awards will be counted as 1.61  shares for each share granted for purposes of the aggregate share limit. In addition, shares of common stock that are subject to awards issued under the 2013 Performance Plan or certain prior stock compensation plans that expire according to their terms or are forfeited, terminated, canceled or surrendered or are settled, or can be paid, only in cash, or are surrendered in payment of taxes associated with such awards (other than stock options or SARs) will be available for issuance pursuant to a new award under the 2013 Performance Plan. Shares issued under our stock compensation plans are usually issued from shares of our common stock held in treasury.
Stock Options
Grants of stock options and SARs (collectively referred to as “options”) under the Plans generally have a graded vesting period of four years whereby one-fourth of the awards vest on each of the first four anniversaries of the grant date, an exercise price equal to the fair market value of one share of our common stock on the date of grant (calculated as the average of the high and low price or the closing market price on that date depending on the terms of the related Plan) and a contractual term of ten years. The exercise of tandem SARs cancels an equivalent number of stock options and conversely, the exercise of stock options cancels an equivalent number of tandem SARs. Option grants are cancelled on, or 90 days following, termination of employment unless termination is due to retirement, death or disability under certain circumstances, in which case, all outstanding options vest fully and remain outstanding for a term set forth in the related grant agreement.
With respect to stock options granted prior to 2008, the exercise of those stock options through a share swap, whereby the employee exercising the stock options tenders shares of our common stock then owned by such employee towards the exercise price plus taxes, if any, due from such employee, results in an immediate grant of new options (hereinafter referred to as “reload” options) equal to the number of shares so tendered plus any shares tendered to satisfy the employee’s income tax obligations on the transaction. Each such grant of reload options vests on the first anniversary of its respective grant date, has an exercise price equal to the fair market value of one share of our common stock on the date of grant (calculated as the average of the high and low price on that date) and a contractual term equal to the remaining contractual term of the original option. The subsequent exercise of such reload options through a share swap does not result in the grant of any additional reload options. The 2013 Performance Plan does not permit the grant of reload options.
The following table summarizes the activity related to options during 2015 :
 
Options
 
Weighted Average
Exercise Price
 
Weighted Average
Remaining
Contractual Term
(Years)
 
Aggregate Intrinsic
Value (In millions)
Outstanding at January 1
10,350,633

 
$
16.75

 
 
 
 

Options granted
802,871

 
27.32

 
 
 
 

Options exercised
(3,028,112
)
 
18.35

 
 
 
$
40

Options expired
(52,687
)
 
17.15

 
 
 
 

Options cancelled
(290,009
)
 
18.67

 
 
 
 

Outstanding at December 31
7,782,696

 
17.15

 
5.8
 
121

Vested and expected to vest at December 31
7,493,529

 
17.03

 
5.7
 
119

Exercisable at December 31
5,153,908

 
15.55

 
4.7
 
89

Available for grant at December 31
8,645,222

 
 

 
 
 
 


In addition, the aggregate intrinsic value of options exercised in 2014 and 2013 was $37 million and $23 million , respectively.

100
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Significant option groups outstanding at December 31, 2015 and related weighted average exercise price and remaining contractual term information follows:
Grant Date
 
Options Outstanding
 
Options Exercisable
 
Exercise Price
 
Remaining Contractual Term (Years)
2/23/2015
 
719,164

 
—

 
$
27.16

 
9.2

2/24/2014
 
502,513

 
111,397

 
26.44

 
8.2

2/28/2013
 
1,512,308

 
695,216

 
12.98

 
7.2

2/27/2012
 
1,139,048

 
805,963

 
12.94

 
6.2

2/22/2011
 
729,512

 
729,512

 
13.91

 
5.2

2/23/2010
 
547,334

 
547,334

 
12.74

 
4.2

2/26/2009
 
489,562

 
489,562

 
4.81

 
3.2

2/21/2008
 
486,390

 
486,390

 
26.74

 
2.2

2/27/2007
 
477,584

 
477,584

 
24.71

 
1.2

All other
 
1,179,281

 
810,950

 
(1
)
 
(1
)
 
 
7,782,696

 
5,153,908

 
 

 
 


(1)
Options in the “All other” category had exercise prices ranging from $6.22 to $36.25 . The weighted average exercise price for options outstanding and exercisable in that category was $18.65 and $16.63 , respectively, while the remaining weighted average contractual term was 6.1 and 5.0 , respectively.
Weighted average grant date fair values of stock options and the assumptions used in estimating those fair values are as follows:
 
2015
 
2014
 
2013
Weighted average grant date fair value
$
11.51

 
$
11.48

 
$
6.28

Black-Scholes model assumptions (1) :
 

 
 

 
 

Expected term (years)
7.30

 
7.40

 
6.25

Interest rate
1.83
%
 
2.10
%
 
1.11
%
Volatility
42.00
%
 
43.45
%
 
46.66
%
Dividend yield
0.88
%
 
0.81
%
 
—


(1)
We review the assumptions used in our Black-Scholes model in conjunction with estimating the grant date fair value of the annual grants of options by our Board of Directors.
Performance Share Units
Performance share units granted under the Plans are earned over a three-year period beginning January 1 of the year of grant. Total units earned for grants made in 2015, 2014 and 2013, may vary between 0% and 200% of the units granted based on the attainment of performance targets during the related three -year period and continued service. The performance targets are established by the Board of Directors. All of the units earned will be settled through the issuance of an equivalent number of shares of our common stock and are equity classified.
The following table summarizes the activity related to performance share units during 2015 :
 
Units
 
Weighted Average Grant Date Fair Value
Unvested at January 1
322,098

 
$
20.47

Units granted
225,392

 
28.44

Units vested
(157,989
)
 
12.29

Units forfeited
(71,231
)
 
23.93

Unvested at December 31
318,270

 
28.64

We measure the fair value of grants of performance share units based primarily on the closing market price of a share of our common stock on the date of the grant, modified as appropriate to take into account the features of such grants.

101
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Restricted Stock Units
Restricted stock units granted under the Plans typically vest over a three-year period beginning on the date of grant. Restricted stock units will be settled through the issuance of an equivalent number of shares of our common stock and are equity classified.
The following table summarizes the activity related to restricted stock units during 2015 :
 
Units
 
Weighted Average Grant Date Fair Value
Unvested at January 1
482,177

 
$
22.36

Units granted
330,388

 
28.43

Units vested and settled
(87,972
)
 
13.60

Units forfeited
(51,500
)
 
26.33

Unvested at December 31
673,093

 
26.16

We measure the fair value of grants of restricted stock units based on the closing market price of a share of our common stock on the date of the grant.
Other Information
Stock-based compensation expense, cash payments made to settle SARs and cash received from the exercise of stock options follows:
(In millions)
2015
 
2014
 
2013
Stock-based compensation expense recognized
$
19

 
$
20

 
$
18

Tax benefit
(7
)
 
(7
)
 
—

After-tax stock-based compensation expense
$
12

 
$
13

 
$
18

Cash payments to settle SARs
$
2

 
$
2

 
$
1

Cash received from stock option exercises
$
53

 
$
39

 
$
22

As of December 31, 2015 , unearned compensation cost related to the unvested portion of all stock-based awards was approximately $32 million and is expected to be recognized over the remaining vesting period of the respective grants, through October 2020.

Note 19. Commitments and Contingent Liabilities
Environmental Matters
We have recorded liabilities totaling $50 million and $46 million at December 31, 2015 and December 31, 2014 , respectively, for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by us. Of these amounts, $12 million and $9 million were included in Other Current Liabilities at December 31, 2015 and December 31, 2014 , respectively. The costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities, and will be paid over several years. The amount of our ultimate liability in respect of these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute. We have limited potential insurance coverage for future environmental claims.
Since many of the remediation activities related to environmental matters vary substantially in duration and cost from site to site and the associated costs for each vary depending on the mix of unique site characteristics, in some cases we cannot reasonably estimate a range of possible losses. Although it is not possible to estimate with certainty the outcome of all of our environmental matters, management believes that potential losses in excess of current reserves for environmental matters, individually and in the aggregate, will not have a material adverse effect on our financial position, cash flows or results of operations.
Workers’ Compensation
We have recorded liabilities, on a discounted basis, totaling $264 million and $306 million for anticipated costs related to workers’ compensation at December 31, 2015 and December 31, 2014 , respectively. Of these amounts, $54 million and $71 million were included in Current Liabilities as part of Compensation and Benefits at December 31, 2015 and December 31, 2014 , respectively. The costs include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on our assessment of potential liability using an analysis of available information with

102
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

respect to pending claims, historical experience, and current cost trends. The decrease in liability from December 31, 2014 to December 31, 2015 reflects the dissolution of the global alliance with SRI and actuarial adjustments, which were partially offset by increased claim activity related to a previously closed facility. The amount of our ultimate liability in respect of these matters may differ from these estimates. We periodically, and at least annually, update our loss development factors based on actuarial analyses. At December 31, 2015 and December 31, 2014 , the liability was discounted using a risk-free rate of return. At December 31, 2015, we estimate that it is reasonably possible that the liability could exceed our recorded amounts by approximately $31 million .
General and Product Liability and Other Litigation
We have recorded liabilities totaling $315 million and $324 million , including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at December 31, 2015 and December 31, 2014 , respectively. Of these amounts, $45 million and $46 million were included in Other Current Liabilities at December 31, 2015 and December 31, 2014 , respectively. The amounts recorded were estimated based on an assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and, where available, recent and current trends. Based upon that assessment, at December 31, 2015 , we do not believe that estimated reasonably possible losses associated with general and product liability claims in excess of the amounts recorded will have a material adverse effect on our financial position, cash flows or results of operations. However, the amount of our ultimate liability in respect of these matters may differ from these estimates. We have recorded an indemnification asset within Accounts Receivable of $6 million and within Other Assets of $26 million for SRI's obligation to indemnify us for certain product liability claims related to products manufactured by GDTNA during the existence of the global alliance with SRI, subject to certain caps.
Asbestos. We are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to asbestos in certain products manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in state and Federal courts. To date, we have disposed of approximately 117,800 claims by defending and obtaining the dismissal thereof or by entering into a settlement. The sum of our accrued asbestos-related liability and gross payments to date, including legal costs, by us and our insurers totaled approximately $497 million and $458 million through December 31, 2015 and December 31, 2014 , respectively.
A summary of recent approximate asbestos claims activity follows. Because claims are often filed and disposed of by dismissal or settlement in large numbers, the amount and timing of settlements and the number of open claims during a particular period can fluctuate significantly.
(Dollars in millions)
2015
 
2014
 
2013
Pending claims, beginning of year
73,800

 
74,000

 
73,200

New claims filed during the year
1,900

 
1,900

 
2,600

Claims settled/dismissed during the year
(8,300
)
 
(2,100
)
 
(1,800
)
Pending claims, end of year
67,400

 
73,800

 
74,000

Payments (1)
$
19

 
$
20

 
$
19


(1)
Represents amount spent by us and our insurers on asbestos litigation defense and claim resolution.
We periodically, and at least annually, review our existing reserves for pending claims, including a reasonable estimate of the liability associated with unasserted asbestos claims, and estimate our receivables from probable insurance recoveries. We recorded gross liabilities for both asserted and unasserted claims, inclusive of defense costs, totaling $171 million and $151 million at December 31, 2015 and December 31, 2014 , respectively. The increase in the liability during 2015 is based on updated assumptions for defense costs and indemnity costs in future periods based on historical cost data and trends. The recorded liability represents our estimated liability over the next ten years, which represents the period over which the liability can be reasonably estimated. Due to the difficulties in making these estimates, analysis based on new data and/or a change in circumstances arising in the future could result in an increase in the recorded obligation in an amount that cannot be reasonably estimated, and that increase could be significant.
We maintain certain primary and excess insurance coverage under coverage-in-place agreements, and also have additional excess liability insurance with respect to asbestos liabilities. After consultation with our outside legal counsel and giving consideration to agreements with certain of our insurance carriers, the financial viability and legal obligations of our insurance carriers and other relevant factors, we determine an amount we expect is probable of recovery from such carriers. We record a receivable with respect to such policies when we determine that recovery is probable and we can reasonably estimate the amount of a particular recovery.
We recorded a receivable related to asbestos claims of $117 million at December 31, 2015 and $71 million at December 31, 2014 . The increase in the receivable is related to changes in assumptions for probable insurance recoveries for asbestos claims in future

103
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

periods which positively impacted the receivable by $21 million , as well as an increase in anticipated insurance recoveries corresponding to the increase in the gross liability. We expect that approximately 70% of asbestos claim related losses would be recoverable through insurance during the ten-year period covered by the estimated liability. Of these amounts, $12 million and $13 million were included in Current Assets as part of Accounts Receivable at December 31, 2015 and December 31, 2014 , respectively. The recorded receivable consists of an amount we expect to collect under coverage-in-place agreements with certain primary carriers and excess insurance carriers as well as an amount we believe is probable of recovery from certain of our other excess insurance carriers.
We believe that, at December 31, 2015 , we had approximately $410 million in excess level policy limits applicable to indemnity and defense costs for asbestos products claims under coverage-in-place agreements, which increased as a result of recent changes in assumptions for insurance recoveries. We also had additional unsettled excess level policy limits potentially applicable to such costs. We also had coverage under certain primary policies for indemnity and defense costs for asbestos products claims under remaining aggregate limits pursuant to a coverage-in-place agreement, as well as coverage for indemnity and defense costs for asbestos premises claims pursuant to coverage-in-place agreements.
We believe that our reserve for asbestos claims, and the receivable for recoveries from insurance carriers recorded in respect of these claims, reflects reasonable and probable estimates of these amounts, subject to the exclusion of claims for which it is not feasible to make reasonable estimates. The estimate of the assets and liabilities related to pending and expected future asbestos claims and insurance recoveries is subject to numerous uncertainties, including, but not limited to, changes in:

• the litigation environment,

• Federal and state law governing the compensation of asbestos claimants,

• recoverability of receivables due to potential insolvency of carriers,

• our approach to defending and resolving claims, and

• the level of payments made to claimants from other sources, including other defendants and 524(g) trusts.

As a result, with respect to both asserted and unasserted claims, it is reasonably possible that we may incur a material amount of cost in excess of the current reserve; however, such amounts cannot be reasonably estimated. Coverage under insurance policies is subject to varying characteristics of asbestos claims including, but not limited to, the type of claim (premise vs. product exposure), alleged date of first exposure to our products or premises and disease alleged. Depending upon the nature of these characteristics, as well as the resolution of certain legal issues, some portion of the insurance may not be accessible by us.
Amiens Labor Claims
Approximately 800 former employees of the closed Amiens, France manufacturing facility have asserted wrongful termination or other claims totaling €111 million ( $121 million ) against Goodyear Dunlop Tires France. We intend to vigorously defend ourselves against these claims, and any additional claims that may be asserted against us, and cannot estimate the amounts, if any, that we may ultimately pay in respect of such claims.
Other Actions
We are currently a party to various claims, indirect tax assessments and legal proceedings in addition to those noted above. If management believes that a loss arising from these matters is probable and can reasonably be estimated, we record the amount of the loss, or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more probable than another. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Based on currently available information, management believes that the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on our financial position or overall trends in results of operations.
Our recorded liabilities and estimates of reasonably possible losses for the contingent liabilities described above are based on our assessment of potential liability using the information available to us at the time and, where applicable, any past experience and recent and current trends with respect to similar matters. Our contingent liabilities are subject to inherent uncertainties, and unfavorable judicial or administrative decisions could occur which we did not anticipate. Such an unfavorable decision could include monetary damages, fines or other penalties or an injunction prohibiting us from taking certain actions or selling certain products. If such an unfavorable decision were to occur, it could result in a material adverse impact on our financial position and results of operations in the period in which the decision occurs, or in future periods.

104
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Income Tax Matters
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize income tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. We derecognize income tax benefits when based on new information we determine that it is no longer more likely than not that our position will be sustained. To the extent we prevail in matters for which liabilities have been established, or determine we need to derecognize tax benefits recorded in prior periods, our results of operations and effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash, and lead to recognition of expense to the extent the settlement amount exceeds recorded liabilities and, in the case of an income tax settlement, result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement would be recognized as a reduction of expense to the extent the settlement amount is lower than recorded liabilities and, in the case of an income tax settlement, result in a reduction in our effective tax rate in the period of resolution.
While the Company applies consistent transfer pricing policies and practices globally, supports transfer prices through economic studies, seeks advance pricing agreements and joint audits to the extent possible and believes its transfer prices to be appropriate, such transfer prices, and related interpretations of tax laws, are occasionally challenged by various taxing authorities globally. We have received various tax assessments challenging our interpretations of applicable tax laws in various jurisdictions. Although we believe we have complied with applicable tax laws, have strong positions and defenses and have historically been successful in defending such claims, our results of operations could be materially adversely affected in the case we are unsuccessful in the defense of existing or future claims.
Binding Commitments and Guarantees
At December 31, 2015 , we had binding commitments for raw materials, capital expenditures, utilities and various other types of contracts. Total commitments on contracts that extend beyond 2016 are expected to total approximately $4,000 million . In addition, we have other contractual commitments, the amounts of which cannot be estimated, pursuant to certain long term agreements under which we will purchase varying amounts of certain raw materials and finished goods at agreed upon base prices that may be subject to periodic adjustments for changes in raw material costs and market price adjustments, or in quantities that may be subject to periodic adjustments for changes in our or our suppliers' production levels.
We have off-balance sheet financial guarantees and other commitments totaling approximately $49 million and $7 million at December 31, 2015 and December 31, 2014 , respectively. We issue guarantees to financial institutions or other entities on behalf of certain of our affiliates, lessors or customers. Normally there is no separate premium received by us as consideration for the issuance of guarantees. In 2015, as a result of the dissolution of the global alliance with SRI, we issued a guarantee of approximately $46 million to an insurance company related to SRI's obligation to pay GDTNA's outstanding workers' compensation claims arising during the existence of the global alliance. We have concluded the probability of our performance to be remote and, therefore, have not recorded a liability for this guarantee. While there is no fixed duration of this guarantee, we expect the amount of this guarantee to decrease over time as GDTNA pays its outstanding claims. If our performance under these guarantees is triggered by non-payment or another specified event, we would be obligated to make payment to the financial institution or the other entity, and would typically have recourse to the affiliate, lessor, customer, or SRI. Except for the workers' compensation guarantee described above, the guarantees expire at various times through 2020. We are unable to estimate the extent to which our affiliates’, lessors’, customers’, or SRI's assets would be adequate to recover any payments made by us under the related guarantees.
Indemnifications
At December 31, 2015 , we were a party to various agreements under which we had assumed obligations to indemnify the counterparties from certain potential claims and losses. These agreements typically involve standard commercial activities undertaken by us in the normal course of business; the sale of assets by us; the formation or dissolution of joint venture businesses to which we had contributed assets in exchange for ownership interests; and other financial transactions. Indemnifications provided by us pursuant to these agreements relate to various matters including, among other things, environmental, tax and shareholder matters; intellectual property rights; government regulations and employment-related matters; and dealer, supplier and other commercial matters.
Certain indemnifications expire from time to time, and certain other indemnifications are not subject to an expiration date. In addition, our potential liability under certain indemnifications is subject to maximum caps, while other indemnifications are not subject to caps. Although we have been subject to indemnification claims in the past, we cannot reasonably estimate the number, type and size of indemnification claims that may arise in the future. Due to these and other uncertainties associated with the indemnifications, our maximum exposure to loss under these agreements cannot be estimated.

105
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

We have determined that there are no indemnifications or guarantees other than liabilities for which amounts are already recorded or reserved in our consolidated financial statements under which it is probable that we have incurred a liability.
Warranty
We recorded $17 million and $22 million for potential claims under warranties offered by us at December 31, 2015 and 2014 , respectively, the majority of which is recorded in Other Current Liabilities.
The following table presents changes in the warranty reserve during 2015 and 2014 :
(in millions)
 
2015
 
2014
Balance at January 1
 
$
22

 
$
21

   Payments made during the period
 
(37
)
 
(39
)
   Expense recorded during the period
 
33

 
41

   Translation adjustment
 
(1
)
 
(1
)
Balance at December 31
 
$
17

 
$
22


Note 20. Capital Stock
Mandatory Convertible Preferred Stock
On April 1, 2014, all outstanding shares of mandatory convertible preferred stock automatically converted into 27,573,735 shares of common stock, net of fractional shares, at a conversion rate of 2.7574 shares of common stock per share of preferred stock.
Dividends
During 2014 and 2013, we paid cash dividends of $15 million and $29 million , respectively, on our mandatory convertible preferred stock. No further dividends will be paid on our preferred stock following the conversion of shares into common stock on April 1, 2014.
During 2015, 2014 and 2013 we paid cash dividends of $68 million , $60 million and $12 million , respectively, on our common stock. On January 15, 2016 , the Company’s Board of Directors (or a duly authorized committee thereof) declared cash dividends of $0.07 per share on our common stock, or approximately $19 million in the aggregate. The cash dividend will be paid on March 1, 2016 to stockholders of record as of the close of business of February 1, 2016 . Future quarterly dividends are subject to Board approval.
Common Stock Repurchases
On September 18, 2013, the Board of Directors authorized $100 million for use in our common stock repurchase program. On May 27, 2014, the Board of Directors approved an increase in that authorization to $450 million . On February 4, 2016, the Board of Directors approved a further increase in that authorization to $1.1 billion . This program expires on December 31, 2018. We intend to repurchase shares of common stock in open market transactions in order to offset new shares issued under equity compensation programs and to provide for additional shareholder returns. During 2015, we repurchased 5,571,909 shares at an average price, including commissions, of $32.32 per share, or $180 million in the aggregate. Since 2013, we repurchased 14,507,718 shares at an average price, including commissions, of $28.49 per share, or $413 million in the aggregate.
In addition, we repurchase shares delivered to us by employees as payment for the exercise price of stock options and the withholding taxes due upon the exercise of stock options or the vesting or payment of stock awards. During 2015, we repurchased 75,520 shares from employees.


106
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 21. Reclassifications out of Accumulated Other Comprehensive Loss
The following table presents changes in Accumulated Other Comprehensive Loss (AOCL) by component, for the year ended December 31, 2015 and 2014:
(In millions)
Foreign Currency Translation Adjustment
 
Unrecognized Net Actuarial Losses and Prior Service Costs
 
Deferred Derivative Gains (Losses)
 
Unrealized Investment Gains
 
Total
Balance at December 31, 2013
$
(690
)
 
$
(3,278
)
 
$
(1
)
 
$
34

 
$
(3,935
)
Other comprehensive income (loss) before reclassifications
(206
)
 
(112
)
 
13

 
2

 
(303
)
Amounts reclassified from accumulated other comprehensive loss
3

 
105

 
—

 
—

 
108

Purchase of subsidiary shares from minority interest
(1
)
 
—

 
—

 
—

 
(1
)
Balance at December 31, 2014
$
(894
)
 
$
(3,285
)
 
$
12

 
$
36

 
$
(4,131
)
Other comprehensive income (loss) before reclassifications
(251
)
 
(68
)
 
15

 
(4
)
 
(308
)
Amounts reclassified from accumulated other comprehensive loss
16

 
325

 
(21
)
 
(32
)
 
288

Purchase of subsidiary shares from minority interest
(3
)
 
(105
)
 
1

 
—

 
(107
)
Deconsolidation of Venezuelan subsidiary (Note 1)
186

 
62

 
—

 
—

 
248

Balance at December 31, 2015
$
(946
)
 
$
(3,071
)
 
$
7

 
$
—

 
$
(4,010
)

107
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents reclassifications out of AOCL for the year ended December 31, 2015 and 2014:
 
 
Year Ended
December 31,
 
 
(In millions)
 
2015
 
2014
 
 
Component of AOCL
 
Amount Reclassified from AOCL
 
Affected Line Item in the Consolidated Statements of Operations
Foreign Currency Translation Adjustment, before tax
 
$
16

 
$
3

 
Other (Income) Expense
Deconsolidation of Venezuelan subsidiary (Note 1)

 
186

 
—

 
Loss on Deconsolidation of Venezuelan Subsidiary
Tax effect
 
—

 
—

 
United States and Foreign Taxes
Minority interest
 
—

 
—

 
Minority Shareholders' Net Income
Net of tax
 
$
202

 
$
3

 
Goodyear Net Income
 
 
 
 
 
 
 
Amortization of prior service cost and unrecognized gains and losses
 
$
103

 
$
115

 
Total Benefit Cost
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments and settlements
 
142

 
48

 
Total Benefit Cost
Immediate recognition of prior service cost and unrecognized gains and losses due to divestitures

 
184

 
—

 
Other (Income) Expense
Deconsolidation of Venezuelan subsidiary (Note 1)
 
62

 
—

 
Loss on Deconsolidation of Venezuelan Subsidiary
Unrecognized Net Actuarial Losses and Prior Service Costs, before tax
 
$
491

 
$
163

 
 
Tax effect
 
(101
)
 
(49
)
 
United States and Foreign Taxes
Minority interest
 
(3
)
 
(9
)
 
Minority Shareholders' Net Income
Net of tax
 
$
387

 
$
105

 
Goodyear Net Income
 
 
 
 
 
 
 
Deferred Derivative (Gains) Losses, before tax
 
$
(28
)
 
$
—

 
Cost of Goods Sold
Tax effect
 
3

 
1

 
United States and Foreign Taxes
Minority interest
 
4

 
(1
)
 
Minority Shareholders' Net Income
Net of tax
 
$
(21
)
 
$
—

 
Goodyear Net Income
 
 
 
 
 
 
 
Unrealized Investment (Gains), before tax
 
$
(30
)
 
$
—

 
Other (Income) Expense
Tax effect
 
(2
)
 
—

 
United States and Foreign Taxes
Minority interest
 
—

 
—

 
Minority Shareholders' Net Income
Net of tax
 
$
(32
)
 
$
—

 
Goodyear Net Income
 
 
 
 
 
 
 
Total reclassifications
 
$
536

 
$
108

 
Goodyear Net Income


108
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 22. Consolidating Financial Information
Certain of our subsidiaries have guaranteed our obligations under the $282 million outstanding principal amount of 8.75% notes due 2020 , the $900 million outstanding principal amount of 6.5% senior notes due 2021 , the $700 million outstanding principal amount of 7% senior notes due 2022 and the $1.0 billion outstanding principal amount of 5.125% senior notes due 2023 (collectively, the “notes”). The following presents the condensed consolidating financial information separately for:
(i)
The Goodyear Tire & Rubber Company (the “Parent Company”), the issuer of the guaranteed obligations;
(ii)
Guarantor subsidiaries, on a combined basis, as specified in the indentures related to Goodyear’s obligations under the notes;
(iii)
Non-guarantor subsidiaries, on a combined basis;
(iv)
Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate the investments in our subsidiaries, and (c) record consolidating entries; and
(v)
The Goodyear Tire & Rubber Company and Subsidiaries on a consolidated basis.
Each guarantor subsidiary is 100% owned by the Parent Company at the date of each balance sheet presented. The notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use by the Parent Company and guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation. Changes in intercompany receivables and payables related to operations, such as intercompany sales or service charges, are included in cash flows from operating activities. Intercompany transactions reported as investing or financing activities include the sale of the capital stock of various subsidiaries, loans and other capital transactions between members of the consolidated group. In 2015, the Parent Company acquired the common shares of a non-guarantor subsidiary from another non-guarantor subsidiary at a cost of $145 million. The transaction was settled by the cancellation of intercompany balances between the Parent Company and the transferring non-guarantor subsidiary. In addition, in 2015 the Parent Company capitalized approximately $90 million of intercompany receivables from a non-guarantor subsidiary with a corresponding increase in equity of the subsidiary.
Certain non-guarantor subsidiaries of the Parent Company are limited in their ability to remit funds to it by means of dividends, advances or loans due to required foreign government and/or currency exchange board approvals or limitations in credit agreements or other debt instruments of those subsidiaries.

109
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


 
Condensed Consolidating Balance Sheet
 
December 31, 2015
(In millions)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidating Entries and Eliminations
 
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
354

 
$
70

 
$
1,052

 
$
—

 
$
1,476

Accounts Receivable
814

 
136

 
1,083

 
—

 
2,033

Accounts Receivable From Affiliates
—

 
609

 
—

 
(609
)
 
—

Inventories
1,199

 
157

 
1,152

 
(44
)
 
2,464

Prepaid Expenses and Other Current Assets
51

 
3

 
111

 
3

 
168

Total Current Assets
2,418

 
975

 
3,398

 
(650
)
 
6,141

Goodwill
—

 
24

 
407

 
124

 
555

Intangible Assets
118

 
—

 
20

 
—

 
138

Deferred Income Taxes
2,049

 
19

 
73

 
—

 
2,141

Other Assets
246

 
81

 
353

 
7

 
687

Investments in Subsidiaries
4,088

 
383

 
—

 
(4,471
)
 
—

Property, Plant and Equipment
2,377

 
216

 
4,213

 
(29
)
 
6,777

Total Assets
$
11,296

 
$
1,698

 
$
8,464

 
$
(5,019
)
 
$
16,439

Liabilities:
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Accounts Payable-Trade
$
1,002

 
$
189

 
$
1,578

 
$
—

 
$
2,769

Accounts Payable to Affiliates
540

 
—

 
69

 
(609
)
 
—

Compensation and Benefits
411

 
29

 
226

 
—

 
666

Other Current Liabilities
328

 
16

 
547

 
(5
)
 
886

Notes Payable and Overdrafts
—

 
—

 
49

 
—

 
49

Long Term Debt and Capital Leases Due Within One Year
6

 
—

 
581

 
—

 
587

Total Current Liabilities
2,287

 
234

 
3,050

 
(614
)
 
4,957

Long Term Debt and Capital Leases
3,835

 
—

 
1,285

 
—

 
5,120

Compensation and Benefits
725

 
97

 
646

 
—

 
1,468

Deferred Income Taxes
—

 
1

 
92

 
(2
)
 
91

Other Long Term Liabilities
529

 
15

 
119

 
(2
)
 
661

Total Liabilities
7,376

 
347

 
5,192

 
(618
)
 
12,297

Commitments and Contingent Liabilities

 

 

 

 

Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
Goodyear Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
Common Stock
267

 
—

 
—

 
—

 
267

Other Equity
3,653

 
1,351

 
3,050

 
(4,401
)
 
3,653

Goodyear Shareholders’ Equity
3,920

 
1,351

 
3,050

 
(4,401
)
 
3,920

Minority Shareholders’ Equity — Nonredeemable
—

 
—

 
222

 
—

 
222

Total Shareholders’ Equity
3,920

 
1,351

 
3,272

 
(4,401
)
 
4,142

Total Liabilities and Shareholders’ Equity
$
11,296

 
$
1,698

 
$
8,464

 
$
(5,019
)
 
$
16,439



110
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 
Condensed Consolidating Balance Sheet
 
December 31, 2014
(In millions)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidating Entries and Eliminations
 
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
674

 
$
89

 
$
1,398

 
$
—

 
$
2,161

Accounts Receivable
833

 
166

 
1,127

 
—

 
2,126

Accounts Receivable From Affiliates
—

 
623

 
—

 
(623
)
 
—

Inventories
1,151

 
148

 
1,410

 
(38
)
 
2,671

Prepaid Expenses and Other Current Assets
39

 
2

 
160

 
—

 
201

Total Current Assets
2,697

 
1,028

 
4,095

 
(661
)
 
7,159

Goodwill
—

 
24

 
462

 
115

 
601

Intangible Assets
114

 
—

 
24

 
—

 
138

Deferred Income Taxes
2,126

 
31

 
95

 
1

 
2,253

Other Assets
234

 
86

 
411

 
9

 
740

Investments in Subsidiaries
4,054

 
416

 
—

 
(4,470
)
 
—

Property, Plant and Equipment
2,329

 
132

 
4,721

 
(29
)
 
7,153

Total Assets
$
11,554

 
$
1,717

 
$
9,808

 
$
(5,035
)
 
$
18,044

Liabilities:
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Accounts Payable-Trade
$
910

 
$
191

 
$
1,777

 
$
—

 
$
2,878

Accounts Payable to Affiliates
557

 
—

 
66

 
(623
)
 
—

Compensation and Benefits
392

 
31

 
301

 
—

 
724

Other Current Liabilities
350

 
23

 
581

 
(4
)
 
950

Notes Payable and Overdrafts
—

 
—

 
30

 
—

 
30

Long Term Debt and Capital Leases Due Within One Year
6

 
—

 
142

 
—

 
148

Total Current Liabilities
2,215

 
245

 
2,897

 
(627
)
 
4,730

Long Term Debt and Capital Leases
4,375

 
—

 
1,841

 
—

 
6,216

Compensation and Benefits
666

 
127

 
883

 
—

 
1,676

Deferred Income Taxes
—

 
1

 
91

 
(2
)
 
90

Other Long Term Liabilities
688

 
35

 
188

 
(6
)
 
905

Total Liabilities
7,944

 
408

 
5,900

 
(635
)
 
13,617

Commitments and Contingent Liabilities
 
 
 
 
 
 
 
 
 
Minority Shareholders’ Equity
—

 
—

 
392

 
190

 
582

Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
Goodyear Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
Common Stock
269

 
—

 
—

 
—

 
269

Other Equity
3,341

 
1,309

 
3,281

 
(4,590
)
 
3,341

Goodyear Shareholders’ Equity
3,610

 
1,309

 
3,281

 
(4,590
)
 
3,610

Minority Shareholders’ Equity — Nonredeemable
—

 
—

 
235

 
—

 
235

Total Shareholders’ Equity
3,610

 
1,309

 
3,516

 
(4,590
)
 
3,845

Total Liabilities and Shareholders’ Equity
$
11,554

 
$
1,717

 
$
9,808

 
$
(5,035
)
 
$
18,044




111
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 
Consolidating Statements of Operations
 
Year Ended December 31, 2015
(In millions)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidating Entries and Eliminations
 
Consolidated
Net Sales
$
7,566

 
$
2,129

 
$
10,308

 
$
(3,560
)
 
$
16,443

Cost of Goods Sold
5,804

 
1,915

 
8,090

 
(3,645
)
 
12,164

Selling, Administrative and General Expense
1,053

 
172

 
1,392

 
(3
)
 
2,614

Rationalizations
13

 
—

 
101

 
—

 
114

Interest Expense
317

 
22

 
131

 
(58
)
 
412

Loss on Deconsolidation of Venezuelan Subsidiary
374

 
—

 
272

 
—

 
646

Other (Income) Expense
(433
)
 
(13
)
 
177

 
154

 
(115
)
Income (Loss) before Income Taxes and Equity in Earnings of Subsidiaries
438

 
33

 
145

 
(8
)
 
608

United States and Foreign Tax Expense
104

 
10

 
112

 
6

 
232

Equity in Earnings (Loss) of Subsidiaries
(27
)
 
19

 
—

 
8

 
—

Net Income (Loss)
307

 
42

 
33

 
(6
)
 
376

Less: Minority Shareholders’ Net Income
—

 
—

 
69

 
—

 
69

Goodyear Net Income (Loss)
$
307

 
$
42

 
$
(36
)
 
$
(6
)
 
$
307

Comprehensive Income (Loss)
$
535

 
$
54

 
$
46

 
$
(94
)
 
$
541

Less: Comprehensive Income (Loss) Attributable to Minority Shareholders
—

 
—

 
32

 
(26
)
 
6

Goodyear Comprehensive Income (Loss)
$
535

 
$
54

 
$
14

 
$
(68
)
 
$
535


 
Year Ended December 31, 2014
(In millions)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidating Entries and Eliminations
 
Consolidated
Net Sales
$
7,915

 
$
2,487

 
$
12,051

 
$
(4,315
)
 
$
18,138

Cost of Goods Sold
6,457

 
2,237

 
9,622

 
(4,410
)
 
13,906

Selling, Administrative and General Expense
916

 
166

 
1,645

 
(7
)
 
2,720

Rationalizations
(6
)
 
—

 
101

 
—

 
95

Interest Expense
332

 
26

 
133

 
(63
)
 
428

Other (Income) Expense
(91
)
 
(11
)
 
228

 
176

 
302

Income (Loss) before Income Taxes and Equity in Earnings of Subsidiaries
307

 
69

 
322

 
(11
)
 
687

United States and Foreign Tax (Benefit) Expense
(2,026
)
 
14

 
174

 
4

 
(1,834
)
Equity in Earnings of Subsidiaries
119

 
28

 
—

 
(147
)
 
—

Net Income (Loss)
2,452

 
83

 
148

 
(162
)
 
2,521

Less: Minority Shareholders’ Net Income
—

 
—

 
69

 
—

 
69

Goodyear Net Income (Loss)
2,452

 
83

 
79

 
(162
)
 
2,452

Less: Preferred Stock Dividends
7

 
—

 
—

 
—

 
7

Goodyear Net Income (Loss) available to Common Shareholders
$
2,445

 
$
83

 
$
79

 
$
(162
)
 
$
2,445

Comprehensive Income (Loss)
$
2,257

 
$
89

 
$
(11
)
 
$
(58
)
 
$
2,277

Less: Comprehensive Income (Loss) Attributable to Minority Shareholders
—

 
—

 
46

 
(26
)
 
20

Goodyear Comprehensive Income (Loss)
$
2,257

 
$
89

 
$
(57
)
 
$
(32
)
 
$
2,257


112
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


 
Consolidating Statements of Operations
 
Year Ended December 31, 2013
(In millions)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidating Entries and Eliminations
 
Consolidated
Net Sales
$
8,324

 
$
2,690

 
$
12,721

 
$
(4,195
)
 
$
19,540

Cost of Goods Sold
7,001

 
2,415

 
10,399

 
(4,393
)
 
15,422

Selling, Administrative and General Expense
946

 
171

 
1,658

 
(17
)
 
2,758

Rationalizations
6

 
3

 
49

 
—

 
58

Interest Expense
315

 
29

 
114

 
(66
)
 
392

Other (Income) Expense
(251
)
 
5

 
83

 
260

 
97

Income (Loss) before Income Taxes and Equity in Earnings of Subsidiaries
307

 
67

 
418

 
21

 
813

United States and Foreign Tax (Benefit) Expense
22

 
43

 
88

 
(15
)
 
138

Equity in Earnings of Subsidiaries
344

 
5

 
—

 
(349
)
 
—

Net Income (Loss)
629

 
29

 
330

 
(313
)
 
675

Less: Minority Shareholders’ Net Income
—

 
—

 
46

 
—

 
46

Goodyear Net Income (Loss)
629

 
29

 
284

 
(313
)
 
629

Less: Preferred Stock Dividends
29

 
—

 
—

 
—

 
29

Goodyear Net Income (Loss) available to Common Shareholders
$
600

 
$
29

 
$
284

 
$
(313
)
 
$
600

Comprehensive Income (Loss)
$
1,242

 
$
107

 
$
353

 
$
(382
)
 
$
1,320

Less: Comprehensive Income (Loss) Attributable to Minority Shareholders
—

 
—

 
69

 
9

 
78

Goodyear Comprehensive Income (Loss)
$
1,242

 
$
107

 
$
284

 
$
(391
)
 
$
1,242





113
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 
Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2015
(In millions)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidating Entries and Eliminations
 
Consolidated
Cash Flows from Operating Activities:
 
 
 
 
 
 
 
 
 
Total Cash Flows from Operating Activities
$
979

 
$
149

 
$
612

 
$
(53
)
 
$
1,687

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
Capital Expenditures
(315
)
 
(119
)
 
(558
)
 
9

 
(983
)
Asset Dispositions
48

 
—

 
14

 
—

 
62

Decrease in Cash Due to Deconsolidation of Venezuelan Subsidiary
—

 
—

 
(320
)
 
—

 
(320
)
Decrease (Increase) in Restricted Cash
—

 
—

 
(6
)
 
—

 
(6
)
Short Term Securities Acquired
—

 
—

 
(77
)
 
—

 
(77
)
Short Term Securities Redeemed
—

 
—

 
69

 
—

 
69

Capital Contributions Received and Loans Incurred
(70
)
 
—

 
(90
)
 
160

 
—

Capital Redemptions and Loans Paid
122

 
—

 
125

 
(247
)
 
—

Other Transactions
—

 
—

 
(7
)
 
—

 
(7
)
Total Cash Flows from Investing Activities
(215
)
 
(119
)
 
(850
)
 
(78
)
 
(1,262
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
Short Term Debt and Overdrafts Incurred
55

 
—

 
118

 
(70
)
 
103

Short Term Debt and Overdrafts Paid
(15
)
 
(16
)
 
(123
)
 
70

 
(84
)
Long Term Debt Incurred
1,736

 
—

 
1,083

 
—

 
2,819

Long Term Debt Paid
(2,341
)
 
—

 
(974
)
 
—

 
(3,315
)
Common Stock Issued
53

 
—

 
—

 
—

 
53

Common Stock Repurchased
(180
)
 
—

 
—

 
—

 
(180
)
Common Stock Dividends Paid
(68
)
 
—

 
—

 
—

 
(68
)
Capital Contributions Received and Loans Incurred
90

 
12

 
58

 
(160
)
 
—

Capital Redemptions and Loans Paid
(125
)
 
(15
)
 
(107
)
 
247

 
—

Intercompany Dividends Paid
—

 
(17
)
 
(27
)
 
44

 
—

Transactions with Minority Interests in Subsidiaries
—

 
—

 
(9
)
 
—

 
(9
)
Debt Related Costs and Other Transactions
(18
)
 
—

 
(15
)
 
—

 
(33
)
Dissolution of Global Alliance
(271
)
 
—

 
—

 
—

 
(271
)
Total Cash Flows from Financing Activities
(1,084
)
 
(36
)
 
4

 
131

 
(985
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
—

 
(13
)
 
(112
)
 
—

 
(125
)
Net Change in Cash and Cash Equivalents
(320
)
 
(19
)
 
(346
)
 
—

 
(685
)
Cash and Cash Equivalents at Beginning of the Year
674

 
89

 
1,398

 
—

 
2,161

Cash and Cash Equivalents at End of the Year
$
354

 
$
70

 
$
1,052

 
$
—

 
$
1,476


114
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


 
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2014
(In millions)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidating Entries and Eliminations
 
Consolidated
Cash Flows from Operating Activities:
 
 
 
 
 
 
 
 
 
    Total Cash Flows from Operating Activities
$
(334
)
 
$
195

 
$
758

 
$
(279
)
 
$
340

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
Capital Expenditures
(303
)
 
(19
)
 
(607
)
 
6

 
(923
)
Asset Dispositions
9

 
2

 
7

 
—

 
18

Decrease (Increase) in Restricted Cash
(1
)
 
—

 
6

 
—

 
5

Short Term Securities Acquired
—

 
—

 
(72
)
 
—

 
(72
)
Short Term Securities Redeemed
—

 
—

 
95

 
—

 
95

Capital Contributions Received and Loans Incurred
(382
)
 
—

 
(457
)
 
839

 
—

Capital Redemptions and Loans Paid
459

 
—

 
244

 
(703
)
 
—

Other Transactions
13

 
—

 
13

 
—

 
26

Total Cash Flows from Investing Activities
(205
)
 
(17
)
 
(771
)
 
142

 
(851
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
Short Term Debt and Overdrafts Incurred
22

 
—

 
60

 
(36
)
 
46

Short Term Debt and Overdrafts Paid
(14
)
 
(22
)
 
(24
)
 
36

 
(24
)
Long Term Debt Incurred
601

 
—

 
1,241

 
—

 
1,842

Long Term Debt Paid
(608
)
 
—

 
(947
)
 
—

 
(1,555
)
Common Stock Issued
39

 
—

 
—

 
—

 
39

Common Stock Repurchased
(234
)
 
—

 
—

 
—

 
(234
)
Common Stock Dividends Paid
(60
)
 
—

 
—

 
—

 
(60
)
Preferred Stock Dividends Paid
(15
)
 
—

 
—

 
—

 
(15
)
Capital Contributions Received and Loans Incurred
457

 
47

 
335

 
(839
)
 
—

Capital Redemptions and Loans Paid
(244
)
 
—

 
(459
)
 
703

 
—

Intercompany Dividends Paid
—

 
(203
)
 
(70
)
 
273

 
—

Transactions with Minority Interests in Subsidiaries
—

 
—

 
(49
)
 
—

 
(49
)
Debt Related Costs and Other Transactions
—

 
—

 
(1
)
 
—

 
(1
)
Total Cash Flows from Financing Activities
(56
)
 
(178
)
 
86

 
137

 
(11
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
—

 
(5
)
 
(308
)
 
—

 
(313
)
Net Change in Cash and Cash Equivalents
(595
)
 
(5
)
 
(235
)
 
—

 
(835
)
Cash and Cash Equivalents at Beginning of the Year
1,269

 
94

 
1,633

 
—

 
2,996

Cash and Cash Equivalents at End of the Year
$
674

 
$
89

 
$
1,398

 
$
—

 
$
2,161



115
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2013
(In millions)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidating Entries and Eliminations
 
Consolidated
Cash Flows from Operating Activities:
 
 
 
 
 
 
 
 
 
Total Cash Flows from Operating Activities
$
17

 
$
16

 
$
1,009

 
$
(104
)
 
$
938

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
Capital Expenditures
(220
)
 
(19
)
 
(940
)
 
11

 
(1,168
)
Asset Dispositions
2

 
—

 
23

 
—

 
25

Decrease (Increase) in Restricted Cash
—

 
—

 
14

 
—

 
14

Short Term Securities Acquired
—

 
—

 
(105
)
 
—

 
(105
)
Short Term Securities Redeemed
—

 
—

 
89

 
—

 
89

Capital Contributions Received and Loans Incurred
(91
)
 
(11
)
 
(170
)
 
272

 
—

Capital Redemptions and Loans Paid
214

 
—

 
403

 
(617
)
 
—

Other Transactions
—

 
—

 
9

 
—

 
9

Total Cash Flows from Investing Activities
(95
)
 
(30
)
 
(677
)
 
(334
)
 
(1,136
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
Short Term Debt and Overdrafts Incurred
14

 
—

 
121

 
(104
)
 
31

Short Term Debt and Overdrafts Paid
(90
)
 
(14
)
 
(120
)
 
104

 
(120
)
Long Term Debt Incurred
900

 
—

 
1,013

 
—

 
1,913

Long Term Debt Paid
(11
)
 
—

 
(670
)
 
—

 
(681
)
Common Stock Issued
26

 
—

 
—

 
—

 
26

Common Stock Repurchased
(4
)
 
—

 
—

 
—

 
(4
)
Common Stock Dividends Paid
(12
)
 
—

 
—

 
—

 
(12
)
Preferred Stock Dividends Paid
(29
)
 
—

 
—

 
—

 
(29
)
Capital Contributions Received and Loans Incurred
170

 
58

 
44

 
(272
)
 
—

Capital Redemptions and Loans Paid
(403
)
 
—

 
(214
)
 
617

 
—

Intercompany Dividends Paid
—

 
—

 
(93
)
 
93

 
—

Transactions with Minority Interests in Subsidiaries
—

 
—

 
(26
)
 
—

 
(26
)
Debt Related Costs and Other Transactions
(16
)
 
—

 
—

 
—

 
(16
)
Total Cash Flows from Financing Activities
545

 
44

 
55

 
438

 
1,082

Effect of Exchange Rate Changes on Cash and Cash Equivalents
—

 
(4
)
 
(165
)
 
—

 
(169
)
Net Change in Cash and Cash Equivalents
467

 
26

 
222

 
—

 
715

Cash and Cash Equivalents at Beginning of the Year
802

 
68

 
1,411

 
—

 
2,281

Cash and Cash Equivalents at End of the Year
$
1,269

 
$
94

 
$
1,633

 
$
—

 
$
2,996



116

Supplementary Data
(Unaudited)
Quarterly Data and Market Price Information
 
Quarter
 
 
(In millions, except per share amounts)
First
 
Second
 
Third
 
Fourth
 
Year
2015
 

 
 

 
 

 
 

 
 

Net Sales
$
4,024

 
$
4,172

 
$
4,184

 
$
4,063

 
$
16,443

Gross Profit
958

 
1,145

 
1,184

 
992

 
4,279

Net Income (Loss)
236

 
208

 
305

 
(373
)
 
376

Less: Minority Shareholders’ Net Income (Loss)
12

 
16

 
34

 
7

 
69

Goodyear Net Income (Loss)
224

 
192

 
271

 
(380
)
 
307

Goodyear Net Income (Loss) available to Common Shareholders
$
224

 
$
192

 
$
271

 
$
(380
)
 
$
307

Goodyear Net Income (Loss) available to Common Shareholders - Per Share of Common Stock:
 

 
 

 
 

 
 

 
 

— Basic
$
0.83

 
$
0.71

 
$
1.01

 
$
(1.42
)
 
$
1.14

— Diluted *
$
0.82

 
$
0.70

 
$
0.99

 
$
(1.42
)
 
$
1.12

 
 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding — Basic
270

 
270

 
269

 
269

 
269

— Diluted
274

 
274

 
274

 
269

 
273

 
 
 
 
 
 
 
 
 
 
Dividends Declared per Share of Common Stock
$
0.06

 
$
0.06

 
$
0.06

 
$
0.07

 
$
0.25

 
 
 
 
 
 
 
 
 
 
Price Range of Common Stock: High
$
28.98

 
$
32.74

 
$
32.95

 
$
35.30

 
$
35.30

   Low
23.74

 
26.38

 
25.50

 
28.61

 
23.74

Selected Balance Sheet Items at Quarter-End:
 

 
 

 
 

 
 

 
 

Total Assets
$
17,280

 
$
17,456

 
$
17,456

 
$
16,439

 
 

Total Debt and Capital Leases
6,226

 
6,103

 
6,000

 
5,756

 
 

Goodyear Shareholders’ Equity
3,792

 
3,970

 
4,143

 
3,920

 
 

Total Shareholders’ Equity
4,019

 
4,196

 
4,362

 
4,142

 
 


*
Due to the anti-dilutive impact of potentially dilutive securities, the quarterly earnings per share amounts do not add to the full year.
All numbers presented below are after-tax and minority.
The first quarter of 2015 included the recognition of royalty income of $99 million resulting from the termination of a licensing agreement associated with the sale of our former Engineered Products business. Net charges included rationalization charges of $12 million primarily relating to the closure of one of our manufacturing facilities in Amiens, France, charges of $5 million primarily relating to a foreign tax audit, charges of $4 million related to a previously closed facility in Greece, accelerated depreciation and asset write-offs of $2 million, and net losses on asset sales of $1 million.
The second quarter of 2015 included rationalization charges of $32 million primarily related to the plan to close our Wolverhampton, U.K. mixing and retreading facility and to transfer the production to other manufacturing facilities in EMEA and the plan to transfer consumer tire production from our manufacturing facility in Wittlich, Germany to other manufacturing facilities in EMEA. The second quarter of 2015 also included charges of $2 million relating to asset sale transaction costs, charges of $2 million relating to discrete tax items, and net losses on asset sales of $1 million.
The third quarter of 2015 included a benefit of $16 million relating to the recovery of past costs from one of our asbestos insurers, discrete tax benefits of $8 million, and a benefit of $5 million primarily relating to indirect tax claims in Brazil. Net charges included rationalization charges of $14 million primarily related to plans to reduce manufacturing and SAG headcount in EMEA, net losses on asset sales of $11 million, charges of $2 million relating to asset sale transaction costs, and charges of $2 million relating to accelerated depreciation and asset write-offs.

117

The fourth quarter of 2015 included a loss on the deconsolidation of our Venezuelan subsidiary of $577 million, charges relating to pension settlements of $86 million, debt repayment charges of $35 million, rationalization charges of $26 million, and charges relating to accelerated depreciation and asset write-offs of $4 million. Net gains included gains on asset sales of $38 million related to the dissolution of the global alliance with SRI, a gain of $32 million on the sale of our investment in shares of SRI, a net income tax benefit of $18 million, a benefit of $2 million relating to indirect tax assessments in Latin America, and net gains on other asset sales of $1 million.
 
Quarter
 
 
(In millions, except per share amounts)
First
 
Second
 
Third
 
Fourth
 
Year
2014
 

 
 

 
 

 
 

 
 

Net Sales
$
4,469

 
$
4,656

 
$
4,657

 
$
4,356

 
$
18,138

Gross Profit
951

 
1,124

 
1,141

 
1,016

 
4,232

Net Income (Loss)
(38
)
 
232

 
199

 
2,128

 
2,521

Less: Minority Shareholders’ Net Income (Loss)
13

 
19

 
38

 
(1
)
 
69

Goodyear Net Income (Loss)
(51
)
 
213

 
161

 
2,129

 
2,452

   Less: Preferred Stock Dividends
7

 
—

 
—

 
—

 
7

Goodyear Net Income (Loss) available to Common Shareholders
$
(58
)
 
$
213

 
$
161

 
$
2,129

 
$
2,445

Goodyear Net Income (Loss) available to Common Shareholders - Per Share of Common Stock:
 

 
 

 
 

 
 

 
 

— Basic
$
(0.23
)
 
$
0.77

 
$
0.58

 
$
7.82

 
$
9.13

— Diluted*
$
(0.23
)
 
$
0.76

 
$
0.58

 
$
7.68

 
$
8.78

 
 
 
 
 
 
 
 
 
 
Dividends Declared per Share of Common Stock
$
0.05

 
$
0.05

 
0.06

 
$
0.06

 
$
0.22

 
 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding — Basic
248

 
276

 
275

 
272

 
268

— Diluted
248

 
281

 
279

 
277

 
279

 
 
 
 
 
 
 
 
 
 
Price Range of Common Stock: High
$
28.32

 
$
28.48

 
$
28.70

 
$
28.86

 
$
28.86

Low
22.33

 
23.79

 
22.32

 
18.87

 
18.87

Selected Balance Sheet Items at Quarter-End:
 

 
 

 
 

 
 

 
 

Total Assets
$
16,997

 
$
16,851

 
$
16,589

 
$
18,044

 
 

Total Debt and Capital Leases
7,120

 
6,762

 
6,855

 
6,394

 
 

Goodyear Shareholders’ Equity
1,593

 
1,825

 
1,862

 
3,610

 
 

Total Shareholders’ Equity
1,837

 
2,069

 
2,103

 
3,845

 
 


*
Due to the anti-dilutive impact of potentially dilutive securities, the quarterly earnings per share amounts do not add to the full year.
All numbers presented below are after-tax and minority.
The first quarter of 2014 included net charges of $132 million related to a foreign currency remeasurement loss resulting from the devaluation of the Venezuelan bolivar fuerte, a pension curtailment loss of $32 million as a result of the future accrual freezes to pension plans in North America, net rationalization charges of $29 million primarily due to the closure of one of our manufacturing facilities in Amiens, France, charges of $7 million related to a previously closed facility in Greece, a settlement loss of $4 million related to lump sum payments to settle certain liabilities for our U.K. pension plans, net losses on asset sales of $2 million and asset write-offs and accelerated depreciation related to the closure of one of our Amiens, France manufacturing facilities of $1 million.
The second quarter of 2014 included net rationalization charges of $17 million primarily due to the closure of one of our manufacturing facilities in Amiens, France, charges of $10 million related to a previously closed facility in Greece, and asset write-offs and accelerated depreciation related to property and equipment in one of our manufacturing facilities in the United Kingdom of $2 million. Net gains resulting from the settlement of indirect tax claims were $13 million and net gains from asset sales were $4 million.
The third quarter of 2014 included net tax charges of $47 million related to discrete tax items, including the establishment of valuation allowances on the net deferred tax assets of our Venezuelan and Brazilian subsidiaries, charges of $16 million related

118

to a government investigation involving our compliance with the U.S. Foreign Corrupt Practices Act in certain countries in Africa, net rationalization charges of $9 million primarily due to manufacturing headcount reductions related to EMEA's plans to improve operating efficiency and SAG headcount reductions in EMEA, Latin America and Asia Pacific, net losses from asset sales of $6 million, and charges of $3 million related to a previously closed facility in Greece.
The fourth quarter of 2014 included net charges of $45 million related to the write-off of the subsidy receivable in Venezuela, $16 million related to indirect tax charges in Latin America, and net rationalization charges of $9 million and asset write-offs and accelerated depreciation of $3 million, primarily due to the closure of one of our manufacturing facilities in Amiens, France. Net gains from discrete tax items, including the release of substantially all of the valuation allowance on our net deferred U.S. tax assets, were $2,029 million and net gains on assets sales were $7 million.

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

ITEM 9A.
CONTROLS AND PROCEDURES.
Management’s Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” that, consistent with Rule 13a-15(e) under the Securities Exchange Act of 1934, we define to mean controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of December 31, 2015 (the end of the period covered by this Annual Report on Form 10-K).
Assessment of Internal Control Over Financial Reporting
Management’s report on our internal control over financial reporting is presented on page 52 of this Annual Report on Form 10-K. The report of PricewaterhouseCoopers LLP relating to the consolidated financial statements, financial statement schedules, and the effectiveness of internal control over financial reporting is presented on page 53 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the year ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.
OTHER INFORMATION
None.

PART III.

ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this item about Goodyear’s executive officers is included in Part I, “Item 1. Business” of this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant.” All other information required by this item is incorporated herein by reference from the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 11, 2016 to be filed with the SEC pursuant to Regulation 14A (the "Proxy Statement").

119
Table of Contents

Code of Business Conduct and Code of Ethics
Goodyear has adopted a code of business conduct and ethics for directors, officers and employees, known as the Business Conduct Manual. Goodyear also has adopted a conflict of interest policy applicable to directors and executive officers. Both of these documents are available on Goodyear’s website at http://investor.goodyear.com/governance.cfm. Shareholders may request a free copy of these documents from:
The Goodyear Tire & Rubber Company
Attention: Investor Relations
200 Innovation Way
Akron, Ohio 44316-0001
(330) 796-3751
Goodyear’s Code of Ethics for the Chief Executive Officer and Senior Financial Officers (the “Code of Ethics”) is also posted on Goodyear’s website. Amendments to and waivers of the Code of Ethics will be disclosed on the website.
Corporate Governance Guidelines and Certain Committee Charters
Goodyear has adopted Corporate Governance Guidelines as well as charters for its Audit, Compensation and Governance Committees. These documents are available on Goodyear’s website at http://investor.goodyear.com/governance.cfm. Shareholders may request a free copy of any of these documents from the address and phone number set forth above under “Code of Business Conduct and Code of Ethics.”
The information on our website is not incorporated by reference in or considered to be a part of this Annual Report on Form 10-K.

ITEM 11.
EXECUTIVE COMPENSATION.
See Part II, Item 5 for information regarding our equity compensation plans. The other information required by this item is incorporated herein by reference from the Proxy Statement.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this item is incorporated herein by reference from the Proxy Statement.

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this item is incorporated herein by reference from the Proxy Statement.

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this item is incorporated herein by reference from the Proxy Statement.

PART IV.

ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:
(1) Financial Statements :  See Index to Consolidated Financial Statements on page 51 of this Annual Report.

(2)
Financial Statement Schedules :  See Index to Financial Statement Schedules attached to this Annual Report at page FS-1. The Financial Statement Schedule at page FS-2 is incorporated into and made a part of this Annual Report.

(3)
Exhibits required to be filed by Item 601 of Regulation S-K :  See the Index of Exhibits at pages X-1 through X-5 inclusive, which is attached to and incorporated into and made a part of this Annual Report.


120
Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE GOODYEAR TIRE & RUBBER COMPANY
(Registrant)
Date:
February 9, 2016
 
 /s/  R ICHARD  J. K RAMER
 
 
 
Richard J. Kramer, Chairman of the Board,
Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date:
February 9, 2016
 
 /s/  R ICHARD  J. K RAMER
 
 
 
Richard J. Kramer, Chairman of the Board,
Chief Executive Officer,
President and Director
(Principal Executive Officer)
 
 
 
 
Date:
February 9, 2016
 
/s/  L AURA K.   T HOMPSON
 
 
 
Laura K. Thompson, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
Date:
February 9, 2016
 
 /s/  R ICHARD  J. N OECHEL
 
 
 
Richard J. Noechel, Vice President and Controller (Principal Accounting Officer)
 
 
 
 
 
 
WILLIAM J. CONATY,  Director
JAMES A. FIRESTONE, Director
WERNER GEISSLER, Director
PETER S. HELLMAN, Director
LAURETTE T. KOELLNER, Director W. ALAN McCOLLOUGH, Director

/s/  L AURA K.   T HOMPSON
Date:
February 9, 2016
JOHN E. McGLADE, Director
MICHAEL J. MORELL , Director
RODERICK A. PALMORE, Director
STEPHANIE A. STREETER, Director
THOMAS H. WEIDEMEYER, Director
MICHAEL R. WESSEL, Director
   Laura K. Thompson, Signing as
Attorney-in-Fact for the Directors
whose names appear opposite.


121
Table of Contents

FINANCIAL STATEMENT SCHEDULES
ITEMS 8 AND 15(a)(2) OF FORM 10-K
FOR THE COMPANY'S
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2015
_______________________________________________________
INDEX TO FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules:

 
Schedule No.
 
Page Number
Valuation and Qualifying Accounts
II
 
FS-2

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Financial statements relating to 50 percent or less owned companies, the investments in which are accounted for by the equity method, have been omitted as permitted because these companies would not constitute a significant subsidiary.


FS- 1
Table of Contents

 
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Year Ended December 31,
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additions
 
 
 
 
 
 
Description
Balance at beginning of period
 
Charged (credited) to income
 
Charged (credited) to AOCL
 
Deductions from reserves
 
Translation adjustment during period
 
Balance at end of period
2015
Allowance for doubtful accounts
$
89

 
$
32

 
$
—

 
$
(8
)
(a)
$
(8
)
 
$
105

Valuation allowance — deferred tax assets
632

 
31

 
8

 
(4
)
 
(46
)
 
621

 
 
 
 
 
 
 
 
 
 
 
 
2014
Allowance for doubtful accounts
$
99

 
$
19

 
$
—

 
$
(39
)
(a)
$
10

 
$
89

Valuation allowance — deferred tax assets
2,968

 
(2,253
)
 
(32
)
 
—

 
(51
)
 
632

 
 
 
 
 
 
 
 
 
 
 
 
2013
Allowance for doubtful accounts
$
99

 
$
18

 
$
—

 
$
(20
)
(a)
$
2

 
$
99

Valuation allowance — deferred tax assets
3,393

 
(206
)
 
(234
)
 
—

 
15

 
2,968


Note:    (a) Accounts receivable charged off.


FS- 2
Table of Contents

THE GOODYEAR TIRE & RUBBER COMPANY

Annual Report on Form 10-K
For the Year Ended December 31, 2015

INDEX OF EXHIBITS
Exhibit
Table
Item
No.
 
Description of
Exhibit
 
Exhibit Number
2
 
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
 
 
(a)
 
Framework Agreement, dated as of June 4, 2015, by and between the Company and Sumitomo Rubber Industries, Ltd. (incorporated by reference, filed as Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, File No. 1-1927).
 
 
 
 
In accordance with Item 601(b)(2) of Regulation S-K, certain schedules and similar attachments have been omitted. The Company hereby agrees to furnish a copy of any such schedule or similar attachment to the SEC upon request.
 
 
3
 
Articles of Incorporation and By-Laws
 
 
(a)
 
Certificate of Amended Articles of Incorporation of The Goodyear Tire & Rubber Company, dated December 20, 1954, Certificate of Amendment to Amended Articles of Incorporation of the Company, dated April 6, 1993, Certificate of Amendment to Amended Articles of Incorporation of the Company, dated June 4, 1996, Certificate of Amendment to Amended Articles of Incorporation of the Company, dated April 18, 2006, Certificate of Amendment to Amended Articles of Incorporation of the Company, dated April 22, 2009, Certificate of Amendment to Amended Articles of Incorporation of the Company, dated March 30, 2011, and Certificate of Amendment to Amended Articles of Incorporation of the Company, dated April 16, 2015, together comprising the Company's Articles of Incorporation, as amended (incorporated by reference, filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, File No. 1-1927).
 
 
(b)
 
Code of Regulations of The Goodyear Tire & Rubber Company, adopted November 22, 1955, and as most recently amended on April 13, 2015 (incorporated by reference, filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, File No. 1-1927).
 
 
4
 
Instruments Defining the Rights of Security Holders, Including Indentures
 
 
(a)
 
Specimen Nondenominational Certificate for Shares of the Common Stock, Without Par Value, of the Company (incorporated by reference, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed May 9, 2007, File No. 1-1927).
 
 
(b)
 
Indenture, dated as of March 15, 1996, between the Company and Chemical Bank (now Wells Fargo Bank, N.A.), as Trustee, as supplemented on March 16, 1998, in respect of the Company’s 7% Notes due 2028 (incorporated by reference, filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-1927).
 
 
(c)
 
Indenture, dated as of March 1, 1999, between the Company and The Chase Manhattan Bank (now Wells Fargo Bank, N.A.), as Trustee (incorporated by reference, filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, File No. 1-1927), as supplemented by the First Supplemental Indenture thereto, dated as of March 5, 2010, in respect of the Company’s 8.75% Notes due 2020 (incorporated by reference, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed March 8, 2010, File No. 1-1927).
 
 
(d)
 
Indenture, dated as of August 13, 2010, among the Company, the subsidiary guarantors party thereto and Wells Fargo Bank, N.A., as Trustee (incorporated by reference, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed August 13, 2010, File No. 1-1927), as supplemented by the Second Supplemental Indenture thereto, dated as of February 28, 2012, in respect of the Company's 7% Senior Notes due 2022 (incorporated by reference, filed as Exhibit 4.2 to the Company's Current Report on Form 8-K, filed February 28, 2012, File No. 1-1927), as supplemented by the Third Supplemental Indenture thereto, dated as of February 25, 2013, in respect of the Company’s 6.5% Senior Notes due 2021 (incorporated by reference, filed as Exhibit 4.2 to the Company's Current Report on Form 8-K, filed February 25, 2013, File No. 1-1927), and as supplemented by the Fourth Supplemental Indenture thereto, dated as of November 5, 2015, in respect of the Company’s 5.125% Senior Notes due 2023 (incorporated by reference, filed as Exhibit 4.2 to the Company's Current Report on Form 8-K, filed November 5, 2015, File No. 1-1927).
 
 

X-1
Table of Contents

Exhibit
Table
Item
No.
 
Description of
Exhibit
 
Exhibit Number
(e)
 
Indenture, dated as of December 15, 2015, among Goodyear Dunlop Tires Europe B.V., as Issuer, the Company, as Parent Guarantor, the subsidiary guarantors party thereto, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, London Branch, as Principal Paying Agent and Transfer Agent, and Deutsche Bank Luxembourg S.A., as Registar and Luxembourg Paying Agent and Transfer Agent, in respect of GDTE's 3.75% Senior Notes due 2023.
 
4.1
 
 
In accordance with Item 601(b)(4)(iii) of Regulation S-K, certain instruments defining the rights of holders of long term debt of the Company and its consolidated subsidiaries pursuant to which the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis are not filed herewith. The Company hereby agrees to furnish a copy of any such instrument to the SEC upon request.
 
 
10
 
Material Contracts
 
 
(a)
 
Amended and Restated First Lien Credit Agreement, dated as of April 19, 2012, among the Company, the lenders, issuing banks, syndication agents, documentation agents, senior managing agents, managing agents, joint lead arrangers and joint bookrunners party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, File No. 1-1927).
 
 
(b)
 
Amended and Restated Second Lien Credit Agreement, dated as of April 19, 2012, among the Company, the lenders, syndication agents, documentation agents, joint lead arrangers and joint bookrunners party thereto, Deutsche Bank Trust Company Americas, as Collateral Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, File No. 1-1927).
 
 
(c)
 
First Amendment, dated as of June 16, 2015, to the Amended and Restated Second Lien Credit Agreement, dated as of April 19, 2012, among the Company, the lenders party thereto, Deutsche Bank Trust Company Americas, as Collateral Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, File No. 1-1927).
 
 
(d)
 
First Lien Guarantee and Collateral Agreement, dated as of April 8, 2005, among the Company, the subsidiaries of the Company identified therein and JPMorgan Chase Bank, N.A., as Collateral Agent (incorporated by reference, filed as Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-1927).
 
 
(e)
 
Reaffirmation of First Lien Guarantee and Collateral Agreement, dated as of April 19, 2012, among the Company, the subsidiaries of the Company identified therein and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference, filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, File No. 1-1927).

 
 
(f)
 
Second Lien Guarantee and Collateral Agreement, dated as of April 8, 2005, among the Company, the subsidiaries of the Company identified therein and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference, filed as Exhibit 4.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-1927).
 
 
(g)
 
Reaffirmation of Second Lien Guarantee and Collateral Agreement, dated as of April 19, 2012, among the Company, the subsidiaries of the Company identified therein, Deutsche Bank Trust Company Americas, as Collateral Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference, filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, File No. 1-1927).
 
 
(h)
 
Amended and Restated Lenders Lien Subordination and Intercreditor Agreement, dated as of April 19, 2012, among JPMorgan Chase Bank, N.A., as Collateral Agent for the First Lien Secured Parties referred to therein, Deutsche Bank Trust Company Americas, as Collateral Agent for the Second Lien Secured Parties referred to therein, the Company, and the subsidiaries of the Company named therein (incorporated by reference, filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, File No. 1-1927).
 
 
(i)
 
Amended and Restated Revolving Credit Agreement, dated as of May 12, 2015, among the Company, Goodyear Dunlop Tires Europe B.V., Goodyear Dunlop Tires Germany GmbH, Goodyear Dunlop Tires Operations S.A., the lenders party thereto, J.P. Morgan Europe Limited, as Administrative Agent, JPMorgan Chase Bank, N.A., as Collateral Agent, BNP Paribas, as Syndication Agent, and the documentation agents, joint bookrunners and joint lead arrangers identified therein (incorporated by reference, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, File No. 1-1927).

 
 

X-2
Table of Contents

Exhibit
Table
Item
No.
 
Description of
Exhibit
 
Exhibit Number
(j)
 
Amendment and Restatement Agreement, dated as of May 12, 2015, among the Company, Goodyear Dunlop Tires Europe B.V., Goodyear Dunlop Tires Germany GmbH, Goodyear Dunlop Tires Operations S.A., J.P. Morgan Europe Limited, as Administrative Agent, JPMorgan Chase Bank, N.A., as Collateral Agent, BNP Paribas, as Issuing Bank, the subsidiary guarantors party thereto, and the lenders party thereto (incorporated by reference, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, File No. 1-1927).

 
 
(k)
 
Master Guarantee and Collateral Agreement, dated as of March 31, 2003, as amended and restated as of February 20, 2004, and as further amended and restated as of April 8, 2005, among the Company, Goodyear Dunlop Tires Europe B.V., the other subsidiaries of the Company identified therein and JPMorgan Chase Bank, N.A., as Collateral Agent (incorporated by reference, filed as Exhibit 4.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-1927), as amended by the Amendment and Restatement Agreement, dated as of April 20, 2007 (incorporated by reference, filed as Exhibit 4.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, File No. 1-1927), as amended by the Amendment and Restatement Agreement, dated as of April 20, 2011 (incorporated by reference, filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011, File No. 1-1927), and as amended by the Amendment and Restatement Agreement, dated as of May 12, 2015 (incorporated by reference, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, File No. 1-1927).
 
 
(l)
 
Amended and Restated General Master Purchase Agreement dated December 10, 2004, as last amended and restated on September 25, 2014, between Ester Finance Titrisation, as Purchaser, Credit Agricole Leasing & Factoring, as Agent, Credit Agricole Corporate and Investment Bank, as Joint Lead Arranger and as Calculation Agent, Natixis, as Joint Lead Arranger, Dunlop Tyres Limited, as Centralising Unit, and the Sellers listed therein (incorporated by reference, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, File No. 1-1927).
 
 
(m)
 
Master Subordinated Deposit Agreement dated July 23, 2008, as last amended and restated on September 25, 2014, between Credit Agricole Leasing & Factoring, as Agent, Credit Agricole Corporate and Investment Bank, as Calculation Agent, Ester Finance Titrisation, as Purchaser, and Dunlop Tyres Limited, as Subordinated Depositor or Centralising Unit (incorporated by reference, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, File No. 1-1927).
 
 
(n)
 
Master Complementary Deposit Agreement dated July 23, 2008, as last amended and restated on September 25, 2014, between Credit Agricole Leasing & Factoring, as Agent, Credit Agricole Corporate and Investment Bank, as Calculation Agent, Ester Finance Titrisation, as Purchaser, and Dunlop Tyres Limited, as Complementary Depositor or Centralising Unit (incorporated by reference, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, File No. 1-1927).
 
 
(o)*
 
2013 Performance Plan of the Company (incorporated by reference, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed April 19, 2013, File No. 1-1927).
 
 
(p)*
 
Form of Non-Qualified Stock Option Grant Agreement (incorporated by reference, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 6, 2013, File No. 1-1927).
 
 
(q)*
 
Form of Non-Qualified Stock Option with Tandem Stock Appreciation Right Grant Agreement (incorporated by reference, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed June 6, 2013, File No. 1-1927).
 
 
(r)*
 
Form of Incentive Stock Option Grant Agreement (incorporated by reference, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed August 12, 2013, File No. 1-1927).
 
 
(s)*
 
Form of Performance Share Grant Agreement (incorporated by reference, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed August 12, 2013, File No. 1-1927).
 
 
(t)*
 
Form of Executive Performance Unit Grant Agreement (incorporated by reference, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed August 12, 2013, File No. 1-1927).
 
 
(u)*
 
Form of Restricted Stock Unit Grant Agreement (incorporated by reference, filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed August 12, 2013, File No. 1-1927).
 
 
(v)*
 
Form of Restricted Stock Grant Agreement (incorporated by reference, filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed August 12, 2013, File No. 1-1927).
 
 
(w)*
 
2008 Performance Plan of the Company (incorporated by reference, filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010, File No. 1-1927).
 
 
(x)*
 
2005 Performance Plan of the Company (incorporated by reference, filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010, File No. 1-1927).
 
 

X-3
Table of Contents

Exhibit
Table
Item
No.
 
Description of
Exhibit
 
Exhibit Number
(y)*
 
Performance Recognition Plan of the Company, as amended and restated on October 7, 2008 (incorporated by reference, filed as Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-1927).
 
 
(z)*
 
The Goodyear Tire & Rubber Company Management Incentive Plan (incorporated by reference, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed April 11, 2008, File No. 1-1927).
 
 
(aa)*
 
Executive Performance Plan of the Company effective January 1, 2004 (incorporated by reference, filed as Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-1927).
 
 
(bb)*
 
Form of Grant Agreement for Executive Performance Plan (incorporated by reference, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, File No. 1-1927).
 
 
(cc)*
 
Form of Amendment to Grant Agreement for Executive Performance Plan (incorporated by reference, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 1-1927).
 
 
(dd)*
 
Goodyear Supplementary Pension Plan (October 7, 2008 Restatement) (incorporated by reference, filed as Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-1927).
 
 
(ee)*
 
Defined Benefit Excess Benefit Plan of the Company, as amended and restated as of October 7, 2008, effective as of January 1, 2005 (incorporated by reference, filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-1927).
 
 
(ff)*
 
Defined Contribution Excess Benefit Plan of the Company, adopted October 7, 2008, effective as of January 1, 2005, as further amended September 7, 2012 (incorporated by reference, filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012, File No. 1-1927).

 
 
(gg)*
 
Deferred Compensation Plan for Executives, as amended and restated effective October 1, 2013 (incorporated by reference, filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-1927).
 
 
(hh)*
 
Outside Directors’ Equity Participation Plan, as adopted February 2, 1996 and last amended as of October 1, 2015.
 
10.1
(ii)*
 
The Goodyear Tire & Rubber Company Executive Severance and Change in Control Plan, adopted February 28, 2013 (incorporated by reference, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed March 6, 2013, File No. 1-1927).
 
 
12
 
Statement re Computation of Ratios
 
 
(a)
 
Statement setting forth the Computation of Ratio of Earnings to Fixed Charges.
 
12.1
21
 
Subsidiaries
 
 
(a)
 
List of Subsidiaries of the Company at December 31, 2015.
 
21.1
23
 
Consents
 
 
(a)
 
Consent of PricewaterhouseCoopers LLP.
 
23.1
24
 
Powers of Attorney
 
 
(a)
 
Powers of Attorney of Officers and Directors signing this report.
 
24.1
31
 
302 Certifications
 
 
(a)
 
Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.1
(b)
 
Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2
32
 
906 Certifications
 
 
(a)
 
Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.1
99
 
Additional Exhibits
 
 
(a)
 
Unaudited pro forma consolidated statement of operations for the fiscal year ended December 31, 2015.
 
99.1

X-4
Table of Contents

Exhibit
Table
Item
No.
 
Description of
Exhibit
 
Exhibit Number
101
 
Interactive Data File
 
 
 
 
 
 
 
(a)
 
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, formatted in XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income (Loss), (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.
 
101

*
 
Indicates management contract or compensatory plan or arrangement

X-5

Exhibit 4.1

EXECUTION VERSION

 

 

 

Goodyear Dunlop Tires Europe B.V.,

as Issuer

The Goodyear Tire & Rubber Company,

as Parent Guarantor

and

The Subsidiary Guarantors from time to time party hereto,

as Subsidiary Guarantors

3.750% Senior Notes due 2023

 

 

INDENTURE

Dated as of December 15, 2015

 

 

Deutsche Trustee Company Limited,

as Trustee

Deutsche Bank AG, London Branch,

as Principal Paying Agent and Transfer Agent

Deutsche Bank Luxembourg S.A.,

as Registrar and Luxembourg Paying Agent and Transfer Agent

 

 

 

TABLE OF CONTENTS

 

          Page  
ARTICLE 1   
Definitions and Incorporation by Reference   

SECTION 1.01.

  

Definitions

     1   

SECTION 1.02.

  

Other Definitions

     34   

SECTION 1.03.

  

Rules of Construction

     35   
ARTICLE 2   
The Notes   

SECTION 2.01.

  

Form and Dating

     36   

SECTION 2.02.

  

Execution and Authentication

     36   

SECTION 2.03.

  

Registrar, Transfer Agent and Paying Agent

     37   

SECTION 2.04.

  

Deposits of Money; Paying Agent To Hold Money

     38   

SECTION 2.05.

  

Lists of Holders of Notes

     39   

SECTION 2.06.

  

Transfer and Exchange

     39   

SECTION 2.07.

  

Replacement Notes

     40   

SECTION 2.08.

  

Outstanding Notes

     40   

SECTION 2.09.

  

Temporary Notes

     40   

SECTION 2.10.

  

Cancellation

     41   

SECTION 2.11.

  

Defaulted Interest

     41   

SECTION 2.12.

  

Common Codes and ISINs

     41   

SECTION 2.13.

  

Issuance of Additional Notes

     41   

SECTION 2.14.

  

Agents Interest

     42   
ARTICLE 3   
Redemption   

SECTION 3.01.

  

Notices to Trustee

     42   

SECTION 3.02.

  

Selection of Notes to Be Redeemed

     43   

SECTION 3.03.

  

Notice of Redemption

     43   

SECTION 3.04.

  

Effect of Notice of Redemption

     44   

SECTION 3.05.

  

Deposit of Redemption Price

     45   

SECTION 3.06.

  

Notes Redeemed in Part

     45   
ARTICLE 4   
Covenants   

SECTION 4.01.

  

Payment of Notes

     45   

SECTION 4.02.

  

SEC Reports

     45   

 

i

SECTION 4.03.

  

Limitation on Indebtedness

     46   

SECTION 4.04.

  

Limitation on Restricted Payments

     50   

SECTION 4.05.

  

Limitation on Restrictions on Distributions from Restricted Subsidiaries

     53   

SECTION 4.06.

  

Limitation on Sales of Assets and Subsidiary Stock

     55   

SECTION 4.07.

  

Limitation on Transactions with Affiliates

     59   

SECTION 4.08.

  

Change of Control

     61   

SECTION 4.09.

  

Limitation on Liens

     62   

SECTION 4.10.

  

Limitation on Sale/Leaseback Transactions

     63   

SECTION 4.11.

  

Future Subsidiary Guarantors

     63   

SECTION 4.12.

  

Fall Away of Certain Covenants

     63   

SECTION 4.13.

  

Compliance Certificate

     65   

SECTION 4.14.

  

Further Instruments and Acts

     65   

SECTION 4.15.

  

Maintenance of Listing

     65   

SECTION 4.16.

  

Payment of Additional Amounts

     66   
ARTICLE 5   
Successor Company   

SECTION 5.01.

  

When Issuer and Note Guarantors May Merge or Transfer Assets

     68   
ARTICLE 6   
Defaults and Remedies   

SECTION 6.01.

  

Events of Default

     70   

SECTION 6.02.

  

Acceleration

     72   

SECTION 6.03.

  

Other Remedies

     73   

SECTION 6.04.

  

Waiver of Past Defaults

     73   

SECTION 6.05.

  

Control by Majority

     73   

SECTION 6.06.

  

Limitation on Suits

     74   

SECTION 6.07.

  

Rights of Holders to Receive Payment

     74   

SECTION 6.08.

  

Collection Suit by Trustee

     74   

SECTION 6.09.

  

Trustee May File Proofs of Claim

     74   

SECTION 6.10.

  

Priorities

     75   

SECTION 6.11.

  

Undertaking for Costs

     75   

SECTION 6.12.

  

Waiver of Stay or Extension Laws

     75   
ARTICLE 7   
Trustee   

SECTION 7.01.

  

Duties of Trustee

     76   

SECTION 7.02.

  

Rights of Trustee

     77   

SECTION 7.03.

  

Individual Rights of Trustee

     78   

SECTION 7.04.

  

Trustee’s Disclaimer

     78   

 

ii

SECTION 7.05.

  

Notice of Defaults

     79   

SECTION 7.06.

  

[Reserved]

     79   

SECTION 7.07.

  

Compensation and Indemnity

     79   

SECTION 7.08.

  

Replacement of Trustee

     80   

SECTION 7.09.

  

Successor Trustee by Merger

     81   

SECTION 7.10.

  

Eligibility; Disqualification

     81   
ARTICLE 8   
Discharge of Indenture; Defeasance   

SECTION 8.01.

  

Discharge of Liability on Notes; Defeasance

     81   

SECTION 8.02.

  

Conditions to Defeasance

     82   

SECTION 8.03.

  

Application of Trust Money

     84   

SECTION 8.04.

  

Repayment to Issuer

     84   

SECTION 8.05.

  

Indemnity for Government Obligations

     84   

SECTION 8.06.

  

Reinstatement

     84   
ARTICLE 9   
Amendments   

SECTION 9.01.

  

Without Consent of Holders

     85   

SECTION 9.02.

  

With Consent of Holders

     86   

SECTION 9.03.

  

Revocation and Effect of Consents and Waivers

     87   

SECTION 9.04.

  

Notation on or Exchange of Notes

     87   

SECTION 9.05.

  

Trustee To Sign Amendments

     87   

SECTION 9.06.

  

Payment for Consent

     88   
ARTICLE 10   
Guarantees   

SECTION 10.01.

  

Guarantees

     88   

SECTION 10.02.

  

Limitation on Liability

     89   

SECTION 10.03.

  

Successors and Assigns

     90   

SECTION 10.04.

  

No Waiver

     90   

SECTION 10.05.

  

Modification

     90   

SECTION 10.06.

  

Release of Subsidiary Guarantor

     90   

SECTION 10.07.

  

Contribution

     91   
ARTICLE 11   
Miscellaneous   

SECTION 11.01.

  

[Reserved]

     91   

SECTION 11.02.

  

Notices

     92   

SECTION 11.03.

  

[Reserved]

     94   

 

iii

SECTION 11.04.

  

Certificate and Opinion as to Conditions Precedent

     94   

SECTION 11.05.

  

Statements Required in Certificate or Opinion

     94   

SECTION 11.06.

  

When Notes Disregarded

     94   

SECTION 11.07.

  

Rules by Trustee and Agents

     95   

SECTION 11.08.

  

Legal Holidays

     95   

SECTION 11.09.

  

Governing Law; Jury Trial Waiver; Submission to Jurisdiction; Service

     95   

SECTION 11.10.

  

Judgment Currency

     95   

SECTION 11.11.

  

No Recourse Against Others

     96   

SECTION 11.12.

  

Successors

     96   

SECTION 11.13.

  

Multiple Originals

     96   

SECTION 11.14.

  

Table of Contents; Headings

     97   

 

Appendix A

    

Provisions Relating to Notes

Exhibit 1

 

–

  

Form of Note

Exhibit 2

 

–

  

Form of Certificate of Transfer

Exhibit 3

 

–

  

Form of Supplemental Indenture

 

iv

INDENTURE dated as of December 15, 2015, among Goodyear Dunlop Tires Europe B.V., a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), The Goodyear Tire & Rubber Company, an Ohio corporation, the Subsidiary Guarantors listed on the signature pages hereto, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, London Branch, as Principal Paying Agent and Transfer Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Luxembourg Paying Agent and Transfer Agent.

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Notes:

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01. Definitions . For all purposes of this Indenture, the following terms shall have the following meanings:

 

     “Additional Assets” means:

 

  (1) any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary;

 

  (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or

 

  (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary;

provided , however , that any such Restricted Subsidiary described in clauses (2) or (3) above is primarily engaged in a Permitted Business.

“Additional Notes” means Notes issued under this Indenture after the Closing Date and in compliance with Sections 2.13, 4.03 and 4.09, it being understood that any Notes issued in exchange for or replacement of any Note issued on the Closing Date shall not be an Additional Note.

“Affiliate” of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any Person 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 the terms “controlling” and “controlled” have meanings correlative to the foregoing. For purposes of Section 4.06 and Section 4.07 only,

“Affiliate” shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof.

“Agent” means any one of the Registrar, co-registrar, Transfer Agent, Paying Agent or additional paying agent and “Agents” shall mean all of them.

“Asset Disposition” means any sale, lease, transfer or other disposition (or series of sales, leases, transfers or dispositions that are part of a common plan) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation, or similar transaction (each referred to for the purposes of this definition as a “disposition”), of:

 

  (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary),

 

  (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary, or

 

  (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary,

other than, in the case of clauses (1), (2) and (3) above,

 

  (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;

 

  (B) for purposes of Section 4.06 only, a disposition subject to Section 4.04;

 

  (C) a disposition of assets with a Fair Market Value of less than $20,000,000;

 

  (D) a transfer of accounts receivable and related assets of the type specified in the definition of “Qualified Receivables Transaction” (or a fractional undivided interest therein) to a Receivables Entity;

 

  (E) a transfer of accounts receivable and related assets of the type specified in the definition of “Qualified Receivables Transaction” (or a fractional undivided interest therein) by a Receivables Entity in a Qualified Receivables Transaction;

 

2

  (F) a disposition of all or substantially all the Company’s assets (as determined on a Consolidated basis) in accordance with Section 5.01; and

 

  (G) any Specified Asset Sale.

“Attributable Debt” means, with respect to any Sale/Leaseback Transaction that does not result in a Capitalized Lease Obligation, the present value (computed in accordance with GAAP) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). In the case of any lease which is terminable by the lessee upon payment of a penalty, the Attributable Debt shall be the lesser of:

 

  (1) the Attributable Debt determined assuming termination upon the first date such lease may be terminated (in which case the Attributable Debt shall also include the amount of the penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated), and

 

  (2) the Attributable Debt determined assuming no such termination.

“Average Life” means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing:

 

  (1) the sum of the products of the number of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by

 

  (2) the sum of all such payments.

“Bank Indebtedness” means all obligations under the U.S. Bank Indebtedness and European Bank Indebtedness.

“Board of Directors” means the board of directors of the Company or any committee thereof duly authorized to act on behalf of the board of directors of the Company.

“Business Day” means each day which is not a Legal Holiday.

“Capital Markets Indebtedness” means Indebtedness (other than Refinancing Indebtedness in respect of European Bank Indebtedness or any Qualified Receivables Transaction of the Issuer or any of its Subsidiaries) in aggregate principal amount in excess of €100 million in the form of, or represented by, bonds (other than surety bonds, indemnity bonds, performance bonds or bonds of a similar nature) or other securities that is, or is of the type that is, quoted, listed or purchased and sold on any

 

3

stock exchange, automated securities trading system or over-the-counter securities market or other similar securities market (including, without prejudice to the generality of the foregoing, the market for securities eligible for resale pursuant to Rule 144A or Regulation S under the Securities Act).

“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

“Capitalized Lease Obligations” means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP.

“Change of Control” means the occurrence of any of the following events:

 

  (1) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (1) such person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company;

 

  (2) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election by such board of directors of the Company or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of the Company then in office;

 

  (3) the adoption of a plan relating to the liquidation or dissolution of the Company or the Issuer;

 

  (4)

the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company (as determined on a Consolidated basis) to another Person, and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such

 

4

  transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person or transferee that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person or transferee; or

 

  (5) the Company ceases to own, directly or indirectly, at least a majority of each of the Capital Stock and the aggregate voting power of the Voting Stock of the Issuer.

“Clearstream” means Clearstream Banking, société anonyme, or any successor securities clearing agency.

“Closing Date” means December 15, 2015.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means The Goodyear Tire & Rubber Company, an Ohio corporation, until a successor replaces it and, thereafter, means the successor.

“Consolidated Coverage Ratio” as of any date of determination means the ratio of:

 

  (1) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which financial statements have been filed with the SEC to

 

  (2) Consolidated Interest Expense for such four fiscal quarters;

provided , however , that:

 

  (A) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period;

 

  (B)

if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any

 

5

  Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary had not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness;

 

  (C) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);

 

  (D) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit, division or line of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and

 

6

  (E) if since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period.

For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, Asset Disposition or other Investment, the amount of income, EBITDA or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible Financial Officer of the Company and shall comply with the requirements of Rule 11-02 of Regulation S-X, as it may be amended or replaced from time to time, promulgated by the SEC.

If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). If any Indebtedness is Incurred or repaid under a revolving credit facility and is being given pro forma effect, the interest on such Indebtedness shall be calculated based on the average daily balance of such Indebtedness for the four fiscal quarters subject to the pro forma calculation.

“Consolidated Interest Expense” means, for any period, the total interest expense of the Company and its Consolidated Restricted Subsidiaries, plus, to the extent Incurred by the Company and its Consolidated Restricted Subsidiaries in such period but not included in such interest expense, without duplication:

 

  (1) interest expense attributable to Capitalized Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction that does not result in a Capitalized Lease Obligation;

 

  (2) amortization of debt discount and debt issuance costs;

 

  (3) capitalized interest;

 

7

  (4) non-cash interest expense;

 

  (5) commissions, discounts and other fees and charges attributable to letters of credit and bankers’ acceptance financing;

 

  (6) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary and such Indebtedness is in default under its terms or any payment is actually made in respect of such Guarantee;

 

  (7) net payments made pursuant to Hedging Obligations in respect of interest expense (including amortization of fees);

 

  (8) dividends paid in cash or Disqualified Stock in respect of (A) all Preferred Stock of Restricted Subsidiaries and (B) all Disqualified Stock of the Company, in each case held by Persons other than the Company or a Restricted Subsidiary;

 

  (9) interest Incurred in connection with investments in discontinued operations; and

 

  (10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust;

and less, to the extent included in such total interest expense, the amortization during such period of capitalized financing costs; provided , however , that, for any financing consummated after the Closing Date, the aggregate amount of amortization relating to any such capitalized financing costs in respect of any such financing that is deducted in calculating Consolidated Interest Expense shall not exceed 5% of the aggregate amount of such financing.

“Consolidated Net Income” means, for any period, the net income of the Company and its Consolidated Subsidiaries for such period; provided , however , that there shall not be included in such Consolidated Net Income:

 

  (1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that:

 

  (A) subject to the limitations contained in clause (4) below, the Company’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to a Restricted Subsidiary, to the limitations contained in clause (3) below) and

 

8

  (B) the Company’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary;

 

  (2) any net income (or loss) of any Person acquired by the Company or a Subsidiary of the Company in a pooling of interests transaction for any period prior to the date of such acquisition;

 

  (3) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company (but, in the case of any Foreign Subsidiary, only to the extent cash equal to such net income (or a portion thereof) for such period is not readily procurable by the Company from such Foreign Subsidiary (with the amount of cash readily procurable from such Foreign Subsidiary being determined in good faith by a Financial Officer of the Company) pursuant to intercompany loans, repurchases of Capital Stock or otherwise), except that:

 

  (A) subject to the limitations contained in clause (4) below, the Company’s equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to another Restricted Subsidiary, to the limitation contained in this clause) and

 

  (B) the net loss of any such Restricted Subsidiary for such period shall not be excluded in determining such Consolidated Net Income;

 

  (4) any gain (or loss) realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person;

 

  (5) any extraordinary gain or loss; and

 

  (6) the cumulative effect of a change in accounting principles.

Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under Section 4.04(a)(3)(iv).

 

9

“Consolidation” means, unless the context otherwise requires, the consolidation of (1) in the case of the Company, the accounts of each of the Restricted Subsidiaries with those of the Company and (2) in the case of a Restricted Subsidiary, the accounts of each Subsidiary of such Restricted Subsidiary that is a Restricted Subsidiary with those of such Restricted Subsidiary, in each case in accordance with GAAP consistently applied; provided , however , that “Consolidation” will not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will be accounted for as an investment. The term “Consolidated” has a correlative meaning.

“Credit Agreements” means the U.S. Credit Agreements and the European Credit Agreement.

“Currency Agreement” means with respect to any Person any foreign exchange contract, currency swap agreements or other similar agreement or arrangement to which such Person is a party or of which it is a beneficiary.

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Designated Non-cash Consideration” means non-cash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is designated by the Company as Designated Non-cash Consideration, less the amount of cash or cash equivalents received in connection with a subsequent sale of such Designated Non-cash Consideration, which cash and cash equivalents shall be considered Net Available Cash received as of such date and shall be applied pursuant to Section 4.06.

“Disqualified Stock” means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event:

 

  (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise;

 

  (2) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary; provided , however , that any such conversion or exchange shall be deemed an Incurrence of Indebtedness or Disqualified Stock, as applicable); or

 

  (3) is redeemable at the option of the holder thereof, in whole or in part;

 

10

in the case of each of clauses (1), (2) and (3), on or prior to 180 days after the Stated Maturity of the Notes; provided , however , that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” occurring on or prior to the date that is 180 days after the Stated Maturity of the Notes shall not constitute Disqualified Stock if the “asset sale” or “change of control” provisions applicable to such Capital Stock are not more favorable in any material respect to the holders of such Capital Stock than the provisions of Section 4.06 and Section 4.08; provided further , however , that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, retirement, death or disability.

The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to this Indenture; provided , however , that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Stock as reflected in the most recent financial statements of such Person.

“EBITDA” for any period means the Consolidated Net Income for such period, plus, without duplication, the following to the extent deducted in calculating such Consolidated Net Income:

 

  (1) income tax expense of the Company and its Consolidated Restricted Subsidiaries;

 

  (2) Consolidated Interest Expense;

 

  (3) depreciation expense of the Company and its Consolidated Restricted Subsidiaries;

 

  (4) amortization expense of the Company and its Consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid cash item that was paid in a prior period); and

 

  (5) all other non-cash charges of the Company and its Consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent it represents an accrual of or reserve for cash expenditures in any future period) less all non-cash items of income of the Company and its Consolidated Restricted Subsidiaries in each case for such period (other than normal accruals in the ordinary course of business).

 

11

Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if (A) a corresponding amount would be permitted at the date of determination to be paid as a dividend to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its shareholders or (B) in the case of any Foreign Subsidiary, a corresponding amount of cash is readily procurable by the Company from such Foreign Subsidiary (as determined in good faith by a Financial Officer of the Company) pursuant to intercompany loans, repurchases of Capital Stock or otherwise, provided that to the extent cash of such Foreign Subsidiary provided the basis for including the net income of such Foreign Subsidiary in Consolidated Net Income pursuant to clause (3) of the definition of “Consolidated Net Income”, such cash shall not be taken into account for the purposes of determining readily procurable cash under this clause (B).

“Equity Offering” means a public or private offering of Capital Stock (other than Disqualified Stock) of the Company.

“euro” or “€” means the single currency of participating member states of the European Monetary Union.

“Euro Equivalent” means with respect to any monetary amount in a currency other than euros, at any time of determination thereof, the amount of euros obtained by converting such foreign currency involved in such computation into euros at the spot rate for the purchase of euros with the applicable foreign currency as published in The Wall Street Journal in the “Exchange Rates” column under the heading “Currency Trading” on the date two Business Days prior to such determination.

“Euro MTF” means the alternative market of the Luxembourg Stock Exchange.

“Euroclear” means the Euroclear Bank S.A./N.V. or any successor securities clearing agency.

“European Bank Indebtedness” means any and all amounts payable under or in respect of the European Credit Agreement and any Refinancing Indebtedness with respect thereto or with respect to such Refinancing Indebtedness, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations and all other amounts payable thereunder or in respect thereof.

 

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“European Credit Agreement” means the Amended and Restated Revolving Credit Agreement, dated as of May 12, 2015, among the Company, the Issuer, Goodyear Dunlop Tires Germany GmbH, Goodyear Dunlop Tires Operations S.A., the lenders party thereto, J.P. Morgan Europe Limited, as Administrative Agent, and JPMorgan Chase Bank, N.A., as Collateral Agent, as amended, restated, supplemented, waived, replaced (whether or not upon termination, and whether with the original lenders or otherwise), refinanced, restructured or otherwise modified from time to time (except to the extent that any such amendment, restatement, supplement, waiver, replacement, refinancing, restructuring or other modification thereto would be prohibited by the terms of this Indenture, unless otherwise agreed to by the Holders of at least a majority in aggregate principal amount of Notes at the time outstanding).

“European Government Obligations” means any security that is (i) a direct obligation of Belgium, the Netherlands, France, Germany, Ireland or any other country that is a member of the European Monetary Union, for the payment of which the full faith and credit of such country is pledged or (ii) an obligation of a person controlled or supervised by and acting as an agency or instrumentality of any such country the payment of which is unconditionally guaranteed as a full faith and credit obligation by such country, which, in either case under the preceding clause (i) or (ii), is not callable or redeemable at the option of the issuer thereof.

“European Union” means the European Union, including the countries of Austria, Belgium, Denmark, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom, but not including any country which becomes a member of the European Union after the Closing Date.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fair Market Value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction as such price is, unless specified otherwise in this Indenture, determined in good faith by a Financial Officer of the Company or by the Board of Directors.

“Farm Tires Sale” means any sale or sales of all or a portion of the farm tires business or assets of the Company and its Subsidiaries.

“FATCA” means Sections 1471 through 1474 of the Code, as in effect on the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any intergovernmental agreements with respect thereto.

“Financial Officer” means the Chief Financial Officer, the Treasurer, any Assistant Treasurer or the Chief Accounting Officer of the Company, or any Senior Vice President or higher ranking executive to whom any of the foregoing report. “Financial Officer” of the Issuer has a correlative meaning for those positions performing these functional responsibilities for the Company’s European business.

 

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“Fitch” means Fitch Ratings, Inc., and any successor thereto.

“Foreign Subsidiary” means any Restricted Subsidiary of the Company that is not organized under the laws of the United States of America or any state thereof or the District of Columbia, other than Goodyear Canada.

“GAAP” means generally accepted accounting principles in the United States of America as in effect as of the Closing Date set forth in:

 

  (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants,

 

  (2) statements and pronouncements of the Financial Accounting Standards Board,

 

  (3) such other statements by such other entities as approved by a significant segment of the accounting profession, and

 

  (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC.

All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP.

“Goodyear Canada” means Goodyear Canada Inc., an Ontario corporation, and its successors and permitted assigns.

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person:

 

  (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or

 

  (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);

 

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provided , however , that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning. The term “Guarantor” shall mean any Person Guaranteeing any obligation.

“Guaranteed Obligations” means the principal of and interest, if any, on the Notes when due, whether at Stated Maturity, by acceleration or otherwise, and all other obligations, monetary or otherwise, of the Issuer under this Indenture and the Notes (including expenses and indemnification).

“Hedging Obligations” of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement or raw materials hedge agreement.

“Holder” means the Person in whose name a Note is registered on the Registrar’s books.

“Incur” means issue, assume, Guarantee, incur or otherwise become liable for; provided , however , that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary. The term “Incurrence” when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall not be deemed the Incurrence of Indebtedness.

“Indebtedness” means, with respect to any Person on any date of determination, without duplication:

 

  (1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money;

 

  (2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

 

  (3) all obligations of such Person for the reimbursement of any obligor on any letter of credit, bank guarantee, bankers’ acceptance or similar credit transaction (other than obligations with respect to letters of credit, bank guarantees, bankers’ acceptances or similar credit transactions securing obligations (other than obligations described in clauses (1), (2) and (5)) entered into in the ordinary course of business of such Person to the extent such letters of credit, bank guarantees, bankers’ acceptances or similar credit transactions are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit, bank guarantee, bankers’ acceptance or similar credit transaction);

 

  (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services;

 

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  (5) all Capitalized Lease Obligations and all Attributable Debt of such Person;

 

  (6) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued and unpaid dividends);

 

  (7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided , however , that the amount of Indebtedness of such Person shall be the lesser of:

 

  (A) the Fair Market Value of such asset at such date of determination and

 

  (B) the amount of such Indebtedness of such other Persons;

 

  (8) Hedging Obligations of such Person; and

 

  (9) all obligations of the type referred to in clauses (1) through (8) of other Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee.

Notwithstanding the foregoing, in connection with the purchase by the Company or any Restricted Subsidiary of any business, the term “Indebtedness” shall exclude post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing; provided , however , that, at the time of closing, the amount of any such payment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 30 days thereafter.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above; provided , however , that in the case of Indebtedness sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof at such time.

“Indenture” means this Indenture, dated as of December 15, 2015, as amended or supplemented from time to time in accordance with the terms hereof.

“Interest Rate Agreement” means, with respect to any Person, any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement to which such Person is party or of which it is a beneficiary.

 

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“Investment” in any Person means any direct or indirect advance, loan or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by, such Person. For purposes of the definition of “Unrestricted Subsidiary” and Section 4.04:

 

  (1) “Investment” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided , however , that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to:

 

  (A) the Company’s “Investment” in such Subsidiary at the time of such redesignation less

 

  (B) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and

 

  (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer.

In the event that the Company sells Capital Stock of a Restricted Subsidiary such that after giving effect to such sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, any Investment in such Person remaining after giving effect to such sale shall be deemed to constitute an Investment made on the date of such sale of Capital Stock.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s, BBB- (or the equivalent) by Standard & Poor’s and BBB- (or the equivalent) by Fitch, or an equivalent rating by any other Rating Agency.

“Issuer” means Goodyear Dunlop Tires Europe B.V., a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), until a successor replaces it and, thereafter, means the successor.

“Legal Holiday” means a Saturday, Sunday or other day on which the Trustee or banking institutions are not required by law or regulation to be open in the State of New York, London, Luxembourg, Belgium or any city in which a Paying Agent maintains its office.

 

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“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge in the nature of an encumbrance of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof).

“Moody’s” means Moody’s Investors Service, Inc., and any successor thereto.

“Net Available Cash” from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, in each case only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of:

 

  (1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition;

 

  (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition;

 

  (3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition; and

 

  (4) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition (but only for so long as such reserve is maintained).

“Net Cash Proceeds”, with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

“Note Guarantee” means each of the Parent Guarantee and the Subsidiary Guarantees.

 

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“Note Guarantor” means the Company and each of the Subsidiary Guarantors.

“Notes” means the 3.750% Senior Notes due 2023 issued pursuant to this Indenture.

“Obligations” means with respect to any Indebtedness, all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, and other amounts payable pursuant to the documentation governing such Indebtedness.

“Offering Memorandum” means the Offering Memorandum, dated December 9, 2015, relating to the offering of the Notes, as supplemented or amended and including all documents incorporated by reference therein.

“Officer” means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. “Officer” of a Subsidiary Guarantor has a correlative meaning. “Officer” of the Issuer means a director ( bestuurder ) of the Issuer.

“Officers’ Certificate” means (1) for the Issuer, a certificate signed by two Officers or, alternatively, signed by a duly authorized attorney-in-fact and (2) for any other Person, a certificate signed by two Officers.

“Opinion of Counsel” means a written opinion from legal counsel who may be an employee of or counsel to the Company, the Issuer or a Subsidiary Guarantor, or other counsel who is acceptable to the Trustee.

“Parent Guarantee” means the Guarantee of the Obligations with respect to the Notes issued by the Company pursuant to the terms of this Indenture.

“Permitted Business” means any business engaged in by the Company or any Restricted Subsidiary on the Closing Date and any Related Business.

“Permitted Investment” means an Investment by the Company or any Restricted Subsidiary in:

 

  (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary;

 

  (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary;

 

  (3) Temporary Cash Investments;

 

  (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided , however , that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;

 

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  (5) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

 

  (6) loans and advances to officers and employees made in the ordinary course of business of the Company or such Restricted Subsidiary;

 

  (7) stock, obligations or securities received in settlement of disputes with customers or suppliers or debts (including pursuant to any plan of reorganization or similar arrangement upon insolvency of a debtor) created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments;

 

  (8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition that was made pursuant to and in compliance with Section 4.06;

 

  (9) a Receivables Entity or any Investment by a Receivables Entity in any other Person in connection with a Qualified Receivables Transaction, including Investments of funds held in accounts permitted or required by the arrangements governing such Qualified Receivables Transaction or any related Indebtedness; provided , however , that any Investment in a Receivables Entity is in the form of a Purchase Money Note, contribution of additional receivables or an equity interest;

 

  (10) any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility, workers’ compensation, performance and other similar deposits made in the ordinary course of business by the Company or any Restricted Subsidiary;

 

  (11) any Person to the extent such Investments consist of Hedging Obligations otherwise permitted under Section 4.03;

 

  (12) any Person to the extent such Investment in such Person existed on the Closing Date and any Investment that replaces, refinances or refunds such an Investment, provided that the new Investment is in an amount that does not exceed that amount replaced, refinanced or refunded and is made in the same Person as the Investment replaced, refinanced or refunded;

 

  (13) advances to, and Guarantees for the benefit of, customers, dealers, lessees, lessors or suppliers made in the ordinary course of business and consistent with past practice; and

 

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  (14) any Person to the extent such Investment, when taken together with all other Investments made pursuant to this clause (14) and then outstanding on the date such Investment is made, does not exceed the greater of (A) the sum of (i) $500,000,000 and (ii) any amounts under Section 4.04(a)(3)(iv)(x) that were excluded by operation of the proviso in Section 4.04(a)(3)(iv)and which excluded amounts are not otherwise included in Consolidated Net Income or intended to be permitted under any of clauses (1) through (13) of this definition and (B) 5.0% of Consolidated assets of the Company as of the end of the most recent fiscal quarter for which financial statements of the Company have been filed with the SEC.

“Permitted Liens” means, with respect to any Person:

 

  (1) Liens to secure Indebtedness permitted pursuant to Section 4.03(b)(1);

 

  (2) Liens to secure Indebtedness permitted pursuant to Sections 4.03(b)(11) and 4.03(b)(12);

 

  (3) pledges or deposits by such Person under workers’ compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business;

 

  (4) Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review;

 

  (5) Liens for taxes, assessments or other governmental charges not yet due or payable or subject to penalties for non-payment or which are being contested in good faith by appropriate proceedings;

 

  (6) Liens in favor of issuers of surety or performance bonds or letters of credit, bank guarantees, bankers’ acceptances or similar credit transactions issued pursuant to the request of and for the account of such Person in the ordinary course of its business; provided , however , that such letters of credit, bank guarantees, bankers’ acceptances and similar credit transactions do not constitute Indebtedness;

 

  (7)

survey exceptions, encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and

 

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  telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness for borrowed money and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

 

  (8) Liens securing Indebtedness Incurred to finance the construction, purchase or lease of, or repairs, improvements or additions to, property of such Person (including Indebtedness Incurred under Section 4.03(b)(6)); provided , however , that the Lien may not extend to any other property (other than property related to the property being financed) owned by such Person or any of its Subsidiaries at the time the Lien is Incurred, and the Indebtedness (other than any interest thereon) secured by the Lien may not be Incurred more than 180 days after the later of the acquisition, completion of construction, repair, improvement, addition or commencement of full operation of the property subject to the Lien;

 

  (9) Liens existing on the Closing Date (other than Liens referred to in the foregoing clause (1));

 

  (10) Liens on property or shares of stock of another Person at the time such other Person becomes a Subsidiary of such Person; provided , however , that such Liens are not created, Incurred or assumed in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided further , however , that such Liens do not extend to any other property owned by such Person or any of its Subsidiaries, except pursuant to after-acquired property clauses existing in the applicable agreements at the time such Person becomes a Subsidiary which do not extend to property transferred to such Person by the Company or a Restricted Subsidiary;

 

  (11) Liens on property at the time such Person or any of its Subsidiaries acquires the property, including any acquisition by means of a merger or consolidation with or into such Person or any Subsidiary of such Person; provided , however , that such Liens are not created, Incurred or assumed in connection with, or in contemplation of, such acquisition; provided further , however , that the Liens do not extend to any other property owned by such Person or any of its Subsidiaries;

 

  (12) Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a Restricted Subsidiary of such Person;

 

  (13) Liens securing Hedging Obligations so long as such Hedging Obligations are permitted to be Incurred under this Indenture;

 

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  (14) Liens on assets of Foreign Subsidiaries securing Indebtedness Incurred under Section 4.03(b)(10);

 

  (15) Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (8), (9), (10) and (11); provided , however , that:

 

  (A) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements, accessions, proceeds, dividends or distributions in respect thereof) and

 

  (B) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of:

 

  (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness secured by Liens described under clauses (8), (9), (10) or (11) hereof at the time the original Lien became a Permitted Lien under this Indenture; and

 

  (ii) an amount necessary to pay any fees and expenses, including premiums, related to such Refinancings;

 

  (16) Liens on accounts receivables and related assets of the type specified in the definition of “Qualified Receivables Transaction” Incurred in connection with a Qualified Receivables Transaction;

 

  (17) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

 

  (18) Liens arising from uniform commercial code financing statement filings regarding leases that do not otherwise constitute Indebtedness and that are entered into in the ordinary course of business;

 

  (19) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Company and its Subsidiaries;

 

  (20) Liens which constitute bankers’ Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with any bank or other financial institution, whether arising by operation of law or pursuant to contract;

 

  (21) Liens on specific items of inventory or other goods (and proceeds thereof) of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

 

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  (22) Liens on specific items of inventory or other goods and related documentation (and proceeds thereof) securing reimbursement obligations in respect of trade letters of credit issued to ensure payment of the purchase price for such items of inventory or other goods; and

 

  (23) other Liens to secure Indebtedness as long as the amount of outstanding Indebtedness secured by Liens Incurred pursuant to this clause (23) does not exceed 7.5% of Consolidated assets of the Company, as determined based on the consolidated balance sheet of the Company as of the end of the most recent fiscal quarter for which financial statements have been filed with the SEC; provided , however , notwithstanding whether this clause (23) would otherwise be available to secure Indebtedness, Liens securing Indebtedness originally secured pursuant to this clause (23) may secure Refinancing Indebtedness in respect of such Indebtedness and such Refinancing Indebtedness shall be deemed to have been secured pursuant to this clause (23).

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Preferred Stock”, as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

“principal” of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time.

“Purchase Money Indebtedness” means Indebtedness:

 

  (1) consisting of the deferred purchase price of property, plant or equipment, conditional purchase obligations, obligations under any title retention agreement and other obligations Incurred in connection with the acquisition, construction or improvement of such asset, in each case where the amount of such Indebtedness does not exceed the greater of (A) the cost of the asset being financed and (B) the Fair Market Value of such asset; and

 

  (2) Incurred to finance such acquisition, construction or improvement by the Company or a Restricted Subsidiary of such asset;

 

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provided , however , that such Indebtedness is Incurred within 180 days after such acquisition or the completion of such construction or improvement.

“Purchase Money Note” means a promissory note of a Receivables Entity evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company to a Receivables Entity in connection with a Qualified Receivables Transaction, which note

 

  (1) shall be repaid from cash available to the Receivables Entity, other than

 

  (A) amounts required to be established as reserves;

 

  (B) amounts paid to investors in respect of interest;

 

  (C) principal and other amounts owing to such investors; and

 

  (D) amounts paid in connection with the purchase of newly generated receivables and

 

  (2) may be subordinated to the payments described in clause (1).

“Qualified Receivables Transaction” means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer to:

 

  (1) a Receivables Entity (in the case of a transfer by the Company or any of its Subsidiaries) or

 

  (2) any other Person (in the case of a transfer by a Receivables Entity),

or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all Guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable; provided , however , that the financing terms, covenants, termination events and other provisions thereof shall be market terms (as determined in good faith by a Financial Officer of the Company).

The grant of a security interest in any accounts receivable of the Company or any of its Restricted Subsidiaries to secure Bank Indebtedness shall not be deemed a Qualified Receivables Transaction.

“Rating Agency” means Moody’s, Standard & Poor’s and Fitch or, if any one or more of Moody’s, Standard & Poor’s or Fitch shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of the Board of Directors) which shall be substituted for any one or more of Moody’s, Standard & Poor’s or Fitch, as the case may be.

 

25

“Receivables Entity” means a (a) Wholly Owned Subsidiary of the Company which is designated by the Board of Directors (as provided below) as a Receivables Entity or (b) another Person engaging in a Qualified Receivables Transaction with the Company or a Subsidiary of the Company which Person engages in the business of the financing of accounts receivable, and in either of clause (a) or (b):

 

  (1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which

 

  (A) is Guaranteed by the Company or any Subsidiary of the Company (excluding Guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings);

 

  (B) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings; or

 

  (C) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings;

 

  (2) which is not an Affiliate of the Company or with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms which the Company reasonably believes to be no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company; and

 

  (3) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results.

Any such designation by the Board of Directors shall be evidenced to the Trustee by furnishing to the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing conditions.

“Reference Date” means May 11, 2009.

“Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness, including, in any such case from time to time, after the discharge of the Indebtedness being Refinanced. “Refinanced” and “Refinancing” shall have correlative meanings.

 

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“Refinancing Indebtedness” means Indebtedness that is Incurred to Refinance (including pursuant to any defeasance or discharge mechanism) any Indebtedness of the Company or any Restricted Subsidiary existing on the Closing Date or Incurred in compliance with this Indenture (including Indebtedness of the Company or any Restricted Subsidiary that Refinances Refinancing Indebtedness); provided , however , that:

 

  (1) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced,

 

  (2) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced,

 

  (3) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount of the Indebtedness being refinanced (or if issued with original issue discount, the aggregate accreted value) then outstanding (or that would be outstanding if the entire committed amount of any credit facility being Refinanced were fully drawn (other than any such amount that would have been prohibited from being drawn pursuant to Section 4.03)) (plus fees and expenses, including any premium and defeasance costs), and

 

  (4) if the Indebtedness being Refinanced is subordinated in right of payment to the Notes, such Refinancing Indebtedness is subordinated in right of payment to the Notes at least to the same extent as the Indebtedness being Refinanced;

provided further , however , that Refinancing Indebtedness shall not include:

 

  (A) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that Refinances Indebtedness of the Company or

 

  (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.

“Related Business” means any business reasonably related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the Closing Date.

“Restricted Payment” in respect of any Person means:

 

  (1)

the declaration or payment of any dividend, any distribution on or in respect of its Capital Stock or any similar payment (including any

 

27

  payment in connection with any merger or consolidation involving the Company or any Restricted Subsidiary) to the direct or indirect holders of its Capital Stock in their capacity as such, except (A) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock or, in the case of a Restricted Subsidiary, Preferred Stock) and (B) dividends or distributions payable to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary has Capital Stock held by Persons other than the Company or other Restricted Subsidiaries, to such other Persons on no more than a pro rata basis),

 

  (2) the purchase, repurchase, redemption, retirement or other acquisition (“Purchase”) for value of any Capital Stock of the Company held by any Person (other than Capital Stock held by the Company or a Restricted Subsidiary) or any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than Capital Stock held by a Restricted Subsidiary) (other than in exchange for Capital Stock of the Company that is not Disqualified Stock),

 

  (3) the Purchase for value, prior to scheduled maturity, any scheduled repayment or any scheduled sinking fund payment, of any Subordinated Obligations (other than the Purchase for value of Subordinated Obligations acquired in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such Purchase), or

 

  (4) any Investment (other than a Permitted Investment) in any Person.

“Restricted Subsidiary” means (i) the Issuer and (ii) any other Subsidiary of the Company other than an Unrestricted Subsidiary. The Issuer may never be designated as an Unrestricted Subsidiary.

“Sale/Leaseback Transaction” means an arrangement relating to property, plant or equipment now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than (i) leases between the Company and a Restricted Subsidiary or between Restricted Subsidiaries or (ii) any such transaction entered into with respect to any property, plant or equipment or any improvements thereto at the time of, or within 180 days after, the acquisition or completion of construction of such property, plant or equipment or such improvements (or, if later, the commencement of commercial operation of any such property, plant or equipment), as the case may be, to finance the cost of such property, plant or equipment or such improvements, as the case may be.

“SEC” means the Securities and Exchange Commission.

“Secured Indebtedness” means any Indebtedness secured by a Lien.

“Securities” means the securities issued under this Indenture.

 

28

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Senior Indebtedness” of the Company, the Issuer or any Subsidiary Guarantor, as the case may be, means the principal of, premium (if any) and accrued and unpaid interest, if any, on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company, the Issuer or any Subsidiary Guarantor, as applicable, regardless of whether or not a claim for post-filing interest is allowed in such proceedings), and fees and other amounts owing in respect of, Bank Indebtedness, the Notes (in the case of the Issuer), the Note Guarantees (in the case of the Note Guarantors) and all other Indebtedness of the Company, the Issuer or any Subsidiary Guarantor, as applicable, whether outstanding on the Closing Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are subordinated in right of payment to the Notes or such Note Guarantor’s Note Guarantee, as applicable; provided , however , that Senior Indebtedness of the Company, the Issuer or any Subsidiary Guarantor shall not include:

 

  (1) any obligation of the Company to any Subsidiary of the Company, any obligation of such Subsidiary Guarantor to the Company, the Issuer or any other Subsidiary of the Company or any obligation of the Issuer to the Company or any Subsidiary of the Company, as applicable;

 

  (2) any liability for Federal, state, local or other taxes owed or owing by the Company, the Issuer or such Subsidiary Guarantor, as applicable;

 

  (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities);

 

  (4) any Indebtedness or obligation (and any accrued and unpaid interest in respect thereof) of the Company, the Issuer or such Subsidiary Guarantor, as applicable, that by its terms is subordinate or junior in right of payment to any other Indebtedness or obligation of the Company, the Issuer or such Subsidiary Guarantor, as applicable, including any Subordinated Obligations of the Company, the Issuer or such Subsidiary Guarantor, as applicable;

 

  (5) any obligations with respect to any Capital Stock; or

 

  (6) any Indebtedness Incurred in violation of this Indenture.

“Significant Subsidiary” means any Restricted Subsidiary that would be a “Significant Subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.

“Specified Asset Sale” means (i) a Farm Tires Sale or (ii) the sale of all or a portion of the Company’s properties in Akron, Summit County, Ohio.

 

29

“Standard & Poor’s” means Standard & Poor’s Ratings Services, a division of McGraw Hill Financial, Inc., and any successor thereto.

“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which, taken as a whole, are customary in an accounts receivable transaction.

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).

“Subordinated Obligation” means any Indebtedness of the Company (whether outstanding on the Closing Date or thereafter Incurred) that by its terms is subordinate or junior in right of payment to the Note Guarantee of the Company. “Subordinated Obligation” of a Subsidiary Guarantor has a correlative meaning. “Subordinated Obligation” of the Issuer means any Indebtedness of the Issuer (whether outstanding on the Closing Date or thereafter Incurred) that by its terms is subordinate or junior in right of payment to the Notes.

“Subsidiary” of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by:

 

  (1) such Person,

 

  (2) such Person and one or more Subsidiaries of such Person or

 

  (3) one or more Subsidiaries of such Person.

“Subsidiary Guarantee” means each Guarantee of the Obligations with respect to the Notes issued by a Subsidiary of the Company pursuant to the terms of this Indenture.

“Subsidiary Guarantor” means any Subsidiary that has issued a Subsidiary Guarantee.

“Temporary Cash Investments” means any of the following:

 

  (1) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America or a member state of the European Union (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America or a member state of the European Union), in each case maturing within one year from the date of acquisition thereof;

 

30

  (2) investments in commercial paper maturing within 270 days from the date of acquisition thereof, and having, at such date of acquisition, not less than two of the following ratings: P2 or higher from Moody’s, A2 or higher from Standard & Poor’s and F2 or higher from Fitch;

 

  (3) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof and issued or guaranteed by or placed with, and money market deposit accounts issued or offered by any commercial bank organized under the laws of the United States of America or any state thereof or a member state of the European Union which has (i) not less than two of the following short-term deposit ratings: P1 from Moody’s, A1 from Standard & Poor’s and F1 from Fitch, and (ii) a combined capital and surplus and undivided profits of not less than $500,000,000;

 

  (4) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (1) above and entered into with a financial institution described in clause (3) above;

 

  (5) money market funds that (A) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, (B) have not less than two of the following ratings: Aaa from Moody’s, AAA from Standard & Poor’s and AAA from Fitch and (C) have portfolio assets of at least $3,000,000,000;

 

  (6) investments of the type and maturity described in clauses (2) through (5) of foreign obligors, which investments or obligors have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies (and with respect to clause (5), are not required to comply with the Rule 2a-7 criteria);

 

  (7) investments of the type and maturity described in clause (3) in any obligor organized under the laws of a jurisdiction other than the United States that:

 

  (A) is a branch or subsidiary of a lender or the ultimate parent company of a lender under any of the Credit Agreements (but only if such lender meets the ratings and capital, surplus and undivided profits requirements of such clause (3)) or

 

  (B) carries a rating at least equivalent to the rating of the sovereign nation in which it is located; and

 

  (8) in the case of any Foreign Subsidiary,

 

31

  (A) marketable direct obligations issued or unconditionally guaranteed by the sovereign nation in which such Foreign Subsidiary is organized and is conducting business or issued by any agency of such sovereign nation and backed by the full faith and credit of such sovereign nation, in each case maturing within one year from the date of acquisition, so long as the indebtedness of such sovereign nation has not less than two of the following ratings: A2 or higher from Moody’s, A or higher from Standard & Poor’s and A or higher from Fitch or carries an equivalent rating from a comparable foreign rating agency,

 

  (B) other investments of the type and maturity described in clause (3) in obligors organized under the laws of a jurisdiction other than the United States in any country in which such Foreign Subsidiary is located; provided that the investments permitted under this subclause (B) shall be made in amounts and jurisdictions consistent with the Company’s policies governing short-term investments.

“Trade Payables” means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services.

“Trust Officer” means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters, and any other officer of the Trustee to whom a matter arising under this Indenture may be referred.

“Trustee” means Deutsche Trustee Company Limited, until a successor replaces it and, thereafter, means the successor.

“2012 Indenture” means the Indenture dated as of August 13, 2010 (the “2010 Indenture”), among the Company, the subsidiary guarantors party thereto and Wells Fargo Bank, N.A., as trustee, as supplemented by the Second Supplemental Indenture dated as of February 28, 2012, among the Company, the subsidiary guarantors party thereto and Wells Fargo Bank, N.A., as trustee.

“2013 Indenture” means the 2010 Indenture as supplemented by the Third Supplemental Indenture dated as of February 25, 2013, among the Company, the subsidiary guarantors party thereto and Wells Fargo Bank, N.A., as trustee.

“2015 Indenture” means the 2010 Indenture as supplemented by the Fourth Supplemental Indenture dated as of November 5, 2015, among the Company, the subsidiary guarantors party thereto and Wells Fargo Bank, N.A., as trustee.

“Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from time to time.

“Unrestricted Subsidiary” means:

 

32

  (1) any Subsidiary of the Company, other than the Issuer, that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and

 

  (2) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company), other than the Issuer, to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided , however , that either:

 

  (A) the Subsidiary to be so designated has total Consolidated assets of $1,000 or less or

 

  (B) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under Section 4.04.

The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided , however , that immediately after giving effect to such designation:

 

  (x) (1) the Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) or (2) the Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries would be greater after giving effect to such designation than before such designation and

 

  (y) no Default shall have occurred and be continuing.

Any such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall be evidenced to the Trustee by promptly furnishing to the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

“U.S. Bank Indebtedness” means any and all amounts payable under or in respect of the U.S. Credit Agreements and any Refinancing Indebtedness with respect thereto or with respect to such Refinancing Indebtedness, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations and all other amounts payable thereunder or in respect thereof.

“U.S. Credit Agreements” means (i) the Amended and Restated First Lien Credit Agreement, dated as of April 19, 2012, among the Company, the lenders party thereto, the issuing banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, and (ii) the Amended and Restated Second

 

33

Lien Credit Agreement, dated as of April 19, 2012 and as amended as of June 16, 2015, among the Company, the lenders party thereto, Deutsche Bank Trust Company Americas, as Collateral Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent, each as amended, restated, supplemented, waived, replaced (whether or not upon termination, and whether with the original lenders or otherwise), refinanced, restructured or otherwise modified from time to time (except to the extent that any such amendment, restatement, supplement, waiver, replacement, refinancing, restructuring or other modification thereto would be prohibited by the terms of this Indenture, unless otherwise agreed to by the Holders of at least a majority in aggregate principal amount of Notes at the time outstanding).

“U.S. Dollar Equivalent” means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the “Exchange Rates” column under the heading “Currency Trading” on the date two Business Days prior to such determination.

“Voting Stock” of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.

“Wholly Owned Subsidiary” means a Restricted Subsidiary of the Company all the Capital Stock of which (other than directors’ qualifying shares) is owned by the Company or another Wholly Owned Subsidiary.

SECTION 1.02. Other Definitions .

 

Term

  

Defined in

Section

“Additional Amounts”

   4.16(b)

“Affiliate Transaction”

   4.07(a)

“Authentication Agent”

   2.02

“Authentication Order”

   2.02

“Bankruptcy Law”

   6.01

“Change of Control Offer”

   4.08(b)

“covenant defeasance option”

   8.01(b)

“Custodian”

   6.01

“Duplicate Register”

   2.03(b)

“Event of Default”

   6.01

“Global Notes”

   Appendix A

“Initial Lien”

   4.09

“Judgment Currency”

   11.10

 

34

Term

  

Defined in

Section

“legal defeasance option”

   8.01(b)

“Luxembourg Paying Agent”

   2.03(b)

“Offer”

   4.06(c)

“Offer Amount”

   4.06(d)(3)

“Offer Period”

   4.06(d)(3)

“Paying Agent”

   2.03(a)

“Principal Paying Agent”

   2.03(b)

“Purchase Date”

   4.06(d)(2)

“Registrar”

   2.03(a)

“Relevant Taxing Jurisdiction”

   4.16(a)

“Reversion Date”

   4.12(b)

“Required Currency”

   11.10

“Successor Company”

   5.01(a)(1)

“Successor Guarantor”

   5.01(d)(1)

“Successor Issuer”

   5.01(b)(1)

“Suspended Covenants”

   4.12(a)

“Suspension Date”

   4.12(a)

“Suspension Period”

   4.12(b)

“Taxes”

   4.16(a)

“Transfer Agent”

   2.03(a)

SECTION 1.03. Rules of Construction . Unless the context otherwise requires:

 

  (1) a term has the meaning assigned to it;

 

  (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

 

  (3) “or” is not exclusive;

 

  (4) “including” means including without limitation;

 

  (5) words in the singular include the plural and words in the plural include the singular;

 

  (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness merely by virtue of its nature as unsecured Indebtedness;

 

  (7) secured Indebtedness shall not be deemed to be subordinate or junior to any other secured Indebtedness merely because it has a junior priority with respect to the same collateral;

 

35

  (8) the principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP;

 

  (9) the principal amount of any Preferred Stock shall be (A) the maximum liquidation value of such Preferred Stock or (B) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and

 

  (10) all references to the date the Notes were originally issued shall refer to the Closing Date.

ARTICLE 2

The Notes

SECTION 2.01. Form and Dating . Provisions relating to the Notes are set forth in Appendix A attached hereto (the “Appendix”) which is hereby incorporated in, and expressly made part of, this Indenture. The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit 1 to this Indenture, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Issuer is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Issuer). Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Appendix A and Exhibit 1 are part of the terms of this Indenture. The Notes shall be issuable only in registered form without interest coupons and only in denominations of €100,000 and integral multiples of €1,000 in excess thereof.

SECTION 2.02. Execution and Authentication . Two Officers or, alternatively, a duly authorized attorney-in-fact shall sign the Notes for the Issuer by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee shall, upon receipt of a written order of the Issuer (an “Authentication Order”), authenticate and make available for delivery Notes as set forth in Appendix A.

 

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The Trustee may appoint an authentication agent (an “Authentication Agent”) reasonably acceptable to the Company to authenticate the Notes. Unless limited by the terms of such appointment, an Authentication Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An Authentication Agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. The Trustee hereby initially appoints Deutsche Bank Luxembourg S.A., who accepts such appointment, as its Authentication Agent. The Issuer confirms that such appointment is acceptable to it.

SECTION 2.03. Registrar, Transfer Agent and Paying Agent . (a) The Issuer shall maintain an office or agency where Notes may be presented for registration (the “Registrar”) and an office or agency where Notes may be presented for transfer or exchange (the “Transfer Agent”) or payment (the “Paying Agent”). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuer may have one or more co-registrars and one or more additional transfer and paying agents. The terms “Paying Agent” and “Transfer Agent” include any additional paying agent or transfer agent, as applicable, and the term “Registrar” includes any co-registrars.

The Issuer shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. Such agreement shall implement the provisions of this Indenture that relate to such agent. The Issuer shall notify the Trustee of the name and address of any such agent. If the Issuer fails to maintain a Registrar, Paying Agent or Transfer Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Issuer, the Company or any Wholly Owned Subsidiary may act as Registrar, Paying Agent or Transfer Agent.

The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by this Indenture. The Registrar need not register transfers or exchanges of any Notes selected for redemption (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) or any Notes for a period of 15 days before a selection of Notes to be redeemed or any Notes during the period after the relevant record date and prior to the relevant interest payment date. The Holder of a Note may be treated as the owner of such Note for all purposes.

(b) The Issuer initially appoints Deutsche Bank AG, London Branch, in London, and Deutsche Bank Luxembourg S.A., in Luxembourg, who each accept such appointments, as (i) principal Paying Agent (the “Principal Paying Agent”) and Luxembourg Paying Agent (the “Luxembourg Paying Agent”), respectively, and (ii) Transfer Agents. The Issuer initially appoints Deutsche Bank Luxembourg S.A., in Luxembourg, who accepts such appointment, as Registrar. In addition, the Issuer undertakes that it will ensure, to the extent practicable, that it maintains a Paying Agent in a member state of the European Union that is not obligated to withhold or deduct tax pursuant to European Council Directive 2003/48/EC (as amended from time to time) or

 

37

any law implementing or complying with, or introduced in order to conform to, such directive. Each time the register is amended or updated, the Registrar shall send a copy of the register to the Issuer who will keep an updated copy of the register at its registered office (the “Duplicate Register”). In the event of inconsistency between the register and the Duplicate Register, the Duplicate Register shall, for purposes of Luxembourg law, prevail.

(c) The Issuer may change any Agent upon written notice to such Agent and to the Trustee, without prior notice to the Holders; provided , however , that no removal of any Agent required under this Indenture shall become effective until (i) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Issuer and such successor Agent and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as the applicable Agent until the appointment of a successor in accordance with clause (i) above. Any Agent may resign by providing 30 days’ written notice to the Issuer and the Trustee. In addition, for so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF and the rules of the Luxembourg Stock Exchange so require, the Issuer shall publish notice of the change in Agent in Luxembourg in a daily newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort ) or, to the extent and in the manner permitted by such rules, post such notice on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

SECTION 2.04. Deposits of Money; Paying Agent To Hold Money . Prior to 5:00 p.m., London time, one Business Day prior to each due date of the principal of and interest on any Note, the Issuer shall deposit with the relevant Paying Agent(s) (or if the Issuer, the Company or a Wholly Owned Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of Holders entitled thereto) a sum sufficient to pay such principal and interest when so becoming due. The Issuer shall require each Paying Agent (other than the Trustee) to agree in writing (and each Paying Agent party to this Indenture agrees) that the relevant Paying Agent(s) shall hold as agent, and not as trustee, all money held by such Paying Agent for the payment of principal of or interest on the Notes and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. If the Issuer, the Company or a Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Subject to actual receipt of such funds as provided by this Section 2.04 by the designated Paying Agent, such Paying Agent shall make payments on the Notes in accordance with the provisions of this Indenture. Upon complying with this Section, the relevant Paying Agent(s) shall have no further liability for the money delivered to the Trustee. For the

 

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avoidance of doubt, each Paying Agent and the Trustee shall be held harmless and have no liability with respect to payments or disbursements to be made by such Paying Agent and Trustee for which payment instructions are not made or that are not otherwise deposited by the due dates set forth in this Section 2.04.

SECTION 2.05. Lists of Holders of Notes . The Registrar shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If neither the Trustee nor an Affiliate of the Trustee is the Registrar, the Issuer shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.

SECTION 2.06. Transfer and Exchange . (a) The Notes shall be issued in registered form and shall be transferable only in compliance with Appendix A and upon the surrender of a Note for registration of transfer. When a Note is presented to the Registrar or a Transfer Agent with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of this Indenture are met. When Notes are presented to the Registrar or a Transfer Agent with a request to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall make the exchange as requested if the same requirements are met.

(b) To permit registration of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrar’s request. The Issuer may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Issuer shall not be required to make and the Registrar need not register transfers or exchanges of any Notes selected for redemption in accordance with the terms of this Indenture (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) or any Notes for a period of 15 days before a selection of Notes to be redeemed or any Notes during the period after the relevant record date and prior to the relevant interest payment date.

Prior to the due presentation for registration of transfer of any Note, the Issuer, the Note Guarantors, the Trustee, the Paying Agent and the Registrar may deem and treat the Person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and (subject to paragraph 2 of the Notes) interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Issuer, any Note Guarantor, the Trustee, any Paying Agent, or the Registrar shall be affected by notice to the contrary.

Any Holder of a beneficial interest in a Global Note shall, by acceptance of such beneficial interest, agree that transfers of beneficial interest in such Global Note

 

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may be effected only through a book-entry system maintained by (a) the Holder of such Global Note (or its agent) or (b) any Holder of a beneficial interest in such Global Note, and that ownership of a beneficial interest in such Global Note shall be required to be reflected in a book entry.

All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same Indebtedness and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

SECTION 2.07. Replacement Notes . If a mutilated Note is surrendered to the Registrar or at the office of a Transfer Agent or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Issuer, such Holder shall furnish an indemnity bond sufficient in the judgment of the Issuer and the Trustee to protect the Issuer, the Note Guarantors, the Trustee and any Agent from any loss which any of them may suffer if a Note is replaced. The Issuer and the Trustee may charge the Holder for their expenses in replacing a Note.

Every replacement Note is an additional Obligation of the Issuer. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.

SECTION 2.08. Outstanding Notes . Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to Section 11.06, a Note does not cease to be outstanding because the Issuer or the Company or an Affiliate of the Issuer or the Company holds the Note.

If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Issuer receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser.

If the Paying Agents hold, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, and are not prohibited from paying such money to the Holders pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

SECTION 2.09. Temporary Notes . Until definitive Notes are ready for delivery, the Issuer may prepare and the Trustee, upon

 

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receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Issuer considers appropriate for temporary Notes. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Notes and deliver them in exchange for temporary Notes upon surrender of such temporary Notes at the office or agency of the Issuer, without charge to the Holder.

SECTION 2.10. Cancellation . The Issuer at any time may deliver Notes to the Trustee for cancellation. Each Agent shall forward to the Trustee any Notes surrendered to it for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, replacement, payment or cancellation and deliver a certificate of such cancellation to the Issuer upon request. The Trustee shall retain all canceled securities in accordance with its standard procedures (subject to the record retention requirements of the Exchange Act). The Issuer may not issue new Notes to replace Notes it has redeemed, paid or delivered to the Trustee for cancellation. The Trustee shall not authenticate Notes in place of cancelled Notes other than pursuant to the terms of this Indenture.

SECTION 2.11. Defaulted Interest . If the Issuer defaults in a payment of interest on the Notes, the Issuer shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Issuer may pay the defaulted interest to the persons who are Holders on a subsequent special record date. The Issuer shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly give notice to each Holder that states the special record date, the payment date and the amount of defaulted interest to be paid.

SECTION 2.12. Common Codes and ISINs . The Issuer in issuing the Notes may use Common Codes and ISINs (if then generally in use) and, if so, the Trustee shall use Common Codes and ISINs in notices as a convenience to Holders; provided , however , that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice (including a notice of redemption) and that reliance may be placed only on the other identification numbers printed on the Notes, and any such notice or notice of redemption shall not be affected by any defect in or omission of such numbers. The Issuer will promptly notify the Trustee of any change in the Common Codes or ISINs.

SECTION 2.13. Issuance of Additional Notes . After the Closing Date, the Issuer shall be entitled, subject to its compliance, at the

 

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time of and after giving effect to such issuance, with Section 4.03 and Section 4.09, to issue Additional Notes under this Indenture, which Notes shall have identical terms as the Notes issued on the Closing Date, other than with respect to the date of issuance and issue price; provided that any such Additional Notes will be treated, for U.S. Federal income tax purposes, as fungible with the Notes. All the Notes issued under this Indenture (including any Additional Notes) shall be treated as a single class for all purposes of this Indenture, including in respect of any amendment, waiver, other modification or optional redemption by the Issuer.

With respect to any Additional Notes, the Issuer shall set forth in an Officers’ Certificate, a copy of which shall be delivered to the Trustee (along with a copy of the resolutions of the board of directors of the Issuer authorizing the Additional Notes), the following information:

(1) the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture and the provision of Section 4.03 that the Issuer is relying on to issue such Additional Notes; and

(2) the issue price, the issue date, the Common Code and ISIN of such Additional Notes.

SECTION 2.14. Agents Interest . The rights, powers, duties and obligations and actions of each Agent under this Indenture are several and not joint or joint and several. The Issuer and the Paying Agents acknowledge and agree that during the continuance of an Event of Default, the Trustee may, by notice in writing to each of the Issuer and the Paying Agents, require that the Paying Agents act as agents of, and take instructions exclusively from, the Trustee.

ARTICLE 3

Redemption

SECTION 3.01. Notices to Trustee. If the Issuer elects to redeem Notes pursuant to paragraphs 6 or 7 of the Notes, it shall notify the Trustee in writing of the redemption date, the principal amount of Notes to be redeemed, the redemption price, the ISIN numbers and Common Codes and the paragraph of the Notes pursuant to which the redemption will occur.

The Issuer shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers’ Certificate to the effect that such redemption will comply with the conditions herein. Any such notice may be cancelled by the Issuer at any time prior to notice of such redemption being given to any Holder and shall thereby be void and of no effect unless the Trustee has sent the notice of redemption pursuant to Section 3.03 below.

 

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In the case of a redemption provided for by paragraph 7 of the Notes, prior to the publication or delivery of any notice of redemption of any series of Notes pursuant to such paragraph, the Issuer shall deliver to the Trustee (a) an Officers’ Certificate to the effect that the Issuer or the Note Guarantors, as the case may be, cannot avoid the obligation to pay Additional Amounts with respect to the Notes or the Guarantees by taking reasonable measures available to it and (b) an opinion of counsel of independent legal counsel of recognized standing stating that such Issuer or Note Guarantor would be obligated to pay Additional Amounts as a result of a change in tax laws or regulations or the application or interpretation of such laws or regulations. The Trustee shall accept such Officers’ Certificate and opinion of counsel as sufficient evidence of the existence and satisfaction of the conditions precedent as described above, in which event it will be conclusive and binding on the Holders. Any such notice may be canceled at any time prior to notice of such redemption being given to any Holder and shall thereby be void and of no effect. For the avoidance of doubt, the implementation of European Council Directive 2003/48/EC (as amended from time to time) or any law implementing or complying with, or introduced in order to conform to, such directive will not be a change or amendment for such purposes.

SECTION 3.02. Selection of Notes to Be Redeemed . If fewer than all the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed pro rata or by lot or by a method (including by pool factor) that complies with applicable legal and securities exchange requirements, if any, and that the Trustee in its sole discretion shall deem to be fair and appropriate, unless otherwise required by applicable law or applicable stock exchange or depositary requirements. The Trustee shall make the selection from outstanding Notes not previously called for redemption. The Trustee may select for redemption portions of the principal amount of Notes that have denominations larger than €100,000. Notes and portions of them the Trustee selects shall be in principal amounts of €100,000 or a whole multiple of €1,000 in excess thereof. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Issuer promptly of the Notes or portions of Notes to be redeemed.

SECTION 3.03. Notice of Redemption . At least 30 days but not more than 60 days before a date for redemption of Notes, the Issuer, or the Trustee (at the direction of the Issuer), shall give notice to each Holder of Notes to be redeemed. For Notes which are represented by global certificates held on behalf of Euroclear or Clearstream, notices may be given by delivery of the relevant notices to Euroclear or Clearstream for communication to entitled account holders. In addition, for so long as any Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF and the rules

 

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of the Luxembourg Stock Exchange so require, any such notice to the Holders of the relevant Notes shall also be published in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort ) or, to the extent and in the manner permitted by such rules, post such notice on the official website of the Luxembourg Stock Exchange (www.bourse.lu), and, in connection with any redemption, the Issuer will notify the Luxembourg Stock Exchange of any change in the principal amount of Notes outstanding. Notwithstanding any other provision of this Indenture or any Note (but subject to the newspaper publication requirement described in this Section 3.03, to the extent applicable), where this Indenture or any Note provides for notice of any event (including any notice of redemption) to a Holder of a Note in global form (whether by mail or otherwise), such notice shall be sufficiently given if given to the depositary for such Note (or its designee) pursuant to the customary procedures of such depositary.

The notice shall identify the Notes to be redeemed and shall state:

(1) the redemption date and the record date;

(2) the redemption price;

(3) the name and address of the relevant Paying Agent(s);

(4) that Notes called for redemption must be surrendered to the relevant Paying Agent(s) to collect the redemption price;

(5) if fewer than all the outstanding Notes are to be redeemed, the identification and principal amounts of the particular Notes to be redeemed;

(6) that, unless the Issuer defaults in making such redemption payment, interest on Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and

(7) that no representation is made as to the correctness or accuracy of the Common Code or ISIN, if any, listed in such notice or printed on the Notes.

At the Issuer’s request, the Trustee shall give the notice of redemption in the Issuer’s name and at the Issuer’s expense. In such event, the Issuer shall provide the Trustee with the information required by this Section.

SECTION 3.04. Effect of Notice of Redemption . Once notice of redemption is given to Holders, Notes called for redemption shall become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to a Paying Agent, such Notes shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on

 

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the related interest payment date if the redemption date is after a regular record date and on or prior to the interest payment date). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

SECTION 3.05. Deposit of Redemption Price . Prior to 11:00 a.m., London time, on the redemption date, the Issuer shall deposit with the relevant Paying Agent(s) (or, if the Issuer, the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes or portions thereof to be redeemed on that date other than Notes or portions of Notes called for redemption which have been delivered by the Issuer to the Trustee for cancellation. Interest shall cease to accrue on Notes or portions thereof called for redemption on and after the date the Issuer has deposited with the relevant Paying Agent(s) funds sufficient to pay the principal of, plus accrued and unpaid interest on, the Notes to be redeemed, unless such Paying Agent(s) is prohibited from making such payment pursuant to the terms of this Indenture. For the avoidance of doubt, each Paying Agent and the Trustee shall be held harmless and have no liability with respect to payments or disbursements to be made by such Paying Agent and Trustee for which payment instructions are not made or that are not otherwise deposited by the date set forth in this Section 3.05.

SECTION 3.06. Notes Redeemed in Part . Upon surrender of a Note that is redeemed in part, the Issuer shall execute and the Trustee shall authenticate for the Holder (at the Issuer’s expense) a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

ARTICLE 4

Covenants

SECTION 4.01. Payment of Notes . The Issuer shall promptly pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the relevant Paying Agent(s) holds in accordance with this Indenture money sufficient to pay all principal and interest then due.

The Issuer shall pay interest on overdue principal at the rate specified therefor in the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

SECTION 4.02. SEC Reports . Notwithstanding that the Company may not be subject to the reporting requirements of Section 13

 

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or 15(d) of the Exchange Act, so long as the Company is a Note Guarantor, the Company shall file with the SEC and provide the Trustee and Holders and prospective Holders (upon request) within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act. In addition, the Company shall furnish to the Trustee and the Holders, promptly upon their becoming available, copies of the annual report to shareholders and any other information provided by the Company to its public shareholders generally. Delivery of such reports, information and documents to the Trustee hereunder is for informational purposes only and the Trustee’s receipt of such does not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates or certificates delivered pursuant to Section 4.13). In addition, the Issuer shall furnish to the Holders of the Notes and to prospective investors (upon request) any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act. Notwithstanding the foregoing, if the Company has filed the reports and information referred to in this Section 4.02 with the SEC via the EDGAR filing system (or any successor thereto) and such reports and information are publicly available, then the Company and the Issuer will be deemed to have provided and furnished such reports and information to the Trustee and the Holders in satisfaction of the requirements to “provide” and “furnish” such applicable reports or information as set forth in this Section 4.02.

SECTION 4.03. Limitation on Indebtedness . (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided , however , that the Company, the Issuer or any Subsidiary Guarantor may Incur Indebtedness if on the date of such Incurrence and after giving effect thereto and the application of the proceeds therefrom the Consolidated Coverage Ratio would be greater than 2.0:1.0.

(b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness:

 

  (1)

(x) U.S. Bank Indebtedness in an aggregate principal amount not to exceed the greater of (A) $3,500,000,000, less the aggregate amount of all prepayments of principal applied to permanently reduce any such Indebtedness in satisfaction of the Company’s or any Restricted Subsidiary’s obligations under Section 4.06 and (B) the sum of (i) 60% of the book value of the inventory of the Company and its Restricted Subsidiaries plus (ii) 80% of the book

 

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  value of the accounts receivable of the Company and its Restricted Subsidiaries (other than any accounts receivable pledged, sold or otherwise transferred or encumbered by the Company or any Restricted Subsidiary in connection with a Qualified Receivables Transaction), in each case, as of the end of the most recent fiscal quarter for which financial statements have been filed with the SEC and (y) European Bank Indebtedness in an aggregate principal amount not to exceed €550,000,000; provided , however , that the amount of Indebtedness that may be Incurred pursuant to this clause (1) shall be reduced by any amount of Indebtedness Incurred and then outstanding pursuant to the election provision of clause (10)(A)(ii) below;

 

  (2) Indebtedness of the Company owed to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or any Restricted Subsidiary; provided , however , that any subsequent event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof;

 

  (3) Indebtedness (A) represented by the Notes (not including any Additional Notes) and the Note Guarantees, (B) outstanding on the Closing Date (other than the Indebtedness described in clauses (1) and (2) above), and (C) consisting of Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (3) (including Indebtedness that is Refinancing Indebtedness) or the foregoing paragraph (a);

 

  (4) (A) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Restricted Subsidiary was acquired by the Company or a Restricted Subsidiary (other than Indebtedness Incurred in contemplation of, in connection with, as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Subsidiary of or was otherwise acquired by the Company); provided , however , that on the date that such Restricted Subsidiary is acquired by the Company, (i) the Company would have been able to Incur $1.00 of additional Indebtedness pursuant to the foregoing paragraph (a) after giving effect to the Incurrence of such Indebtedness pursuant to this clause (4) or (ii) the Consolidated Coverage Ratio immediately after giving effect to such Incurrence and acquisition would be greater than such ratio immediately prior to such transaction and (B) Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause (4);

 

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  (5) Indebtedness (A) in respect of performance bonds, bankers’ acceptances, bank guarantees, letters of credit, surety or appeal bonds or similar credit transactions entered into by the Company or any Restricted Subsidiary in the ordinary course of business, and (B) Hedging Obligations entered into in the ordinary course of business to hedge risks with respect to the Company’s or a Restricted Subsidiary’s interest rate, currency or raw materials pricing exposure and not entered into for speculative purposes;

 

  (6) Purchase Money Indebtedness, Capitalized Lease Obligations and Attributable Debt and Refinancing Indebtedness in respect thereof in an aggregate principal amount on the date of Incurrence that, when added to all other Indebtedness Incurred pursuant to this clause (6) and then outstanding, will not exceed the greater of (A) $800,000,000 and (B) 5.0% of Consolidated assets of the Company as of the end of the most recent fiscal quarter for which financial statements have been filed with the SEC;

 

  (7) Indebtedness Incurred by a Receivables Entity in a Qualified Receivables Transaction;

 

  (8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided , however , that such Indebtedness is extinguished within five Business Days of a Financial Officer’s becoming aware of its Incurrence;

 

  (9) any Guarantee (other than the Note Guarantees) by the Company or a Restricted Subsidiary of Indebtedness or other obligations of the Company or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness or other obligations by the Company or such Restricted Subsidiary is permitted under the terms of this Indenture (other than Indebtedness Incurred pursuant to clause (4) above);

 

  (10)      (A) Indebtedness of Foreign Subsidiaries in an aggregate principal amount that, when added to all other Indebtedness Incurred pursuant to this clause (10)(A) and then outstanding, will not exceed (i) $2,000,000,000 plus (ii) any amount then permitted to be Incurred pursuant to clause (1) above that the Company instead elects to Incur pursuant to this clause (10)(A); and

 

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  (B) Indebtedness of Foreign Subsidiaries Incurred in connection with a Qualified Receivables Transaction in an amount not to exceed €450,000,000 at any one time outstanding;

 

  (11) Indebtedness constituting unsecured Indebtedness or Secured Indebtedness in an amount not to exceed $1,300,000,000 and Refinancing Indebtedness in respect thereof; and

 

  (12) Indebtedness of the Company and the Restricted Subsidiaries in an aggregate principal amount on the date of Incurrence that, when added to all other Indebtedness Incurred pursuant to this clause (12) and then outstanding, will not exceed $150,000,000.

(c) For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this Section 4.03:

 

  (1) Outstanding Indebtedness Incurred pursuant to any of the Credit Agreements prior to or on the Closing Date shall be deemed to have been Incurred pursuant to clause (1) of paragraph (b) above;

 

  (2) Indebtedness permitted by this Section 4.03 need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness; and

 

  (3) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in this Section 4.03, the Company, in its sole discretion, shall classify such Indebtedness (or any portion thereof) as of the time of Incurrence and will only be required to include the amount of such Indebtedness in one of such clauses (provided that any Indebtedness originally classified as Incurred pursuant to Sections 4.03(b)(2) through (b)(12) may later be reclassified as having been Incurred pursuant to Section 4.03(a) or any other of Sections 4.03(b)(2) through (b)(12) to the extent that such reclassified Indebtedness could be Incurred pursuant to Section 4.03(a) or one of Sections 4.03(b)(2) through (b)(12), as the case may be, if it were Incurred at the time of such reclassification).

(d) For purposes of determining compliance with any U.S. dollar or euro denominated restriction on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent or Euro Equivalent, as the case may be, determined on the date of the Incurrence of such Indebtedness; provided , however , that if any such Indebtedness denominated in a different currency is subject to a Currency Agreement

 

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with respect to U.S. dollars or euros, as the case may be, covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars or euros will be as provided in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same currency as the Indebtedness being Refinanced will be the U.S. Dollar Equivalent or Euro Equivalent, as appropriate, of the Indebtedness Refinanced determined on the date of the Incurrence of such Indebtedness, except to the extent that (1) such U.S. Dollar Equivalent or Euro Equivalent was determined based on a Currency Agreement, in which case the Refinancing Indebtedness will be determined in accordance with the immediately preceding sentence, and (2) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent or Euro Equivalent, as appropriate, of such excess will be determined on the date such Refinancing Indebtedness is Incurred.

SECTION 4.04. Limitation on Restricted Payments . (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to make any Restricted Payment if at the time the Company or such Restricted Subsidiary makes any Restricted Payment:

 

  (1) a Default shall have occurred and be continuing (or would result therefrom);

 

  (2) the Company could not Incur at least $1.00 of additional Indebtedness under Section 4.03(a); or

 

  (3) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by a Financial Officer of the Company, whose determination will be conclusive) declared or made subsequent to the Reference Date would exceed the sum, without duplication, of:

 

  (i) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Reference Date occurs to the end of the most recent fiscal quarter for which financial statements have been filed with the SEC prior to the date of such Restricted Payment (or, in case such Consolidated Net Income will be a deficit, minus 100% of such deficit);

 

  (ii) 100% of the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Reference Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) and 100% of any cash capital contribution received by the Company from its shareholders subsequent to the Reference Date;

 

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  (iii) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company’s Consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Reference Date of any Indebtedness of the Company or its Restricted Subsidiaries issued after the Reference Date which is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or the Fair Market Value of other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); and

 

  (iv) an amount equal to the sum of (x) the net reduction in the Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in any Person resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investment and proceeds representing the return of capital (excluding dividends and distributions), in each case realized by the Company or any Restricted Subsidiary, and (y) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided , however , that the foregoing sum shall not exceed, in the case of any such Person or Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary.

 

  (b) The provisions of Section 4.04(a) shall not prohibit:

(1) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees to the extent such sale to such an employee stock ownership plan or

 

51

trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination) or a substantially concurrent cash capital contribution received by the Company from its shareholders; provided , however , that:

 

  (A) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments under Section 4.04(a)(3), and

 

  (B) the Net Cash Proceeds from such sale applied in the manner set forth in Section 4.04(b)(1) shall be excluded from the calculation of amounts under Section 4.04(a)(3)(ii);

(2) any prepayment, repayment or Purchase for value of Subordinated Obligations of the Company, the Issuer or any Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, other Subordinated Obligations or Indebtedness Incurred under Section 4.03(a); provided , however , that such prepayment, repayment or Purchase for value shall be excluded in the calculation of the amount of Restricted Payments;

(3) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividends would have complied with this covenant; provided , however , that such dividends shall be included in the calculation of the amount of Restricted Payments;

(4) any Purchase for value of Capital Stock of the Company or any of its Subsidiaries from employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; provided , however , that the aggregate amount of such Purchases for value will not exceed $10,000,000 in any calendar year; provided further , however , that any of the $10,000,000 permitted to be applied for Purchases under this Section 4.04(b)(4) in a calendar year (and not so applied) may be carried forward for use in the following two calendar years; provided further , however , that such Purchases for value shall be excluded in the calculation of the amount of Restricted Payments;

(5) so long as no Default has occurred and is continuing, payments of dividends on Disqualified Stock issued after the Reference Date pursuant to Section 4.03; provided , however , that such dividends shall be included in the calculation of the amount of Restricted Payments;

(6) repurchases of Capital Stock deemed to occur upon the vesting or exercise of stock options, restricted stock or similar equity awards, if such Capital Stock represents a portion of the exercise price of such stock options, restricted stock or similar equity awards or the withholding tax related thereto; provided , however , that such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments;

 

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(7) so long as no Default has occurred and is continuing, any prepayment, repayment or Purchase for value of Subordinated Obligations of the Company, the Issuer or any Subsidiary Guarantor from Net Available Cash to the extent permitted under Section 4.06; provided , however , that such prepayment, repayment or Purchase for value shall be excluded in the calculation of the amount of Restricted Payments;

(8) so long as no Default has occurred and is continuing, any prepayment, repayment or Purchase for value of Subordinated Obligations of the Company, the Issuer or any Subsidiary Guarantor from Net Available Cash (assuming for purposes of the definition of Net Available Cash as used in this Section 4.04(b)(8) that the Specified Asset Sale was an Asset Disposition) from the Specified Asset Sale set forth in clause (i) of the definition thereof within 180 days after the receipt of such proceeds; provided , however , that such prepayment, repayment or Purchase for value shall be excluded in the calculation of the amount of Restricted Payments;

(9) payments to holders of Capital Stock (or to the holders of Indebtedness that is convertible into or exchangeable for Capital Stock upon such conversion or exchange) in lieu of the issuance of fractional shares; provided , however , that such payments shall be excluded in the calculation of the amount of Restricted Payments; or

(10) any Restricted Payment in an amount which, when taken together with all Restricted Payments made after the Reference Date pursuant to this Section 4.04(b)(10), does not exceed $800,000,000; provided , however , that (A) at the time of each such Restricted Payment, no Default shall have occurred and be continuing (or result therefrom) and (B) such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments.

SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries . The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company;

(2) make any loans or advances to the Company; or

(3) transfer any of its property or assets to the Company,

except:

 

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  (A) any encumbrance or restriction pursuant to applicable law, rule, regulation or order or an agreement in effect at or entered into on the Closing Date;

 

  (B) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company) and outstanding on such date;

 

  (C) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in Section 4.05(3)(A) or Section 4.05(3)(B) or this Section 4.05(3)(C) or contained in any amendment to an agreement referred to in Section 4.05(3)(A) or Section 4.05(3)(B) or this Section 4.05(3)(C); provided , however , that the encumbrances and restrictions contained in any such Refinancing agreement or amendment are no less favorable in any material respect to the Holders than the encumbrances and restrictions contained in such predecessor agreements;

 

  (D) in the case of Section 4.05(3), any encumbrance or restriction:

 

  (i) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any such lease, license or other contract; or

 

  (ii) contained in mortgages, pledges and other security agreements securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements;

 

  (E) with respect to a Restricted Subsidiary, any restriction imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition;

 

  (F)

any encumbrance or restriction existing under or by reason of Indebtedness or other contractual requirements of a Receivables

 

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  Entity or any other party to a Qualified Receivables Transaction in connection with a Qualified Receivables Transaction; provided , however , that such restrictions apply only to such Receivables Entity or such other party, as applicable;

 

  (G) purchase money obligations for property acquired in the ordinary course of business and Capitalized Lease Obligations that impose restrictions on the property purchased or leased of the nature described in Section 4.05(3);

 

  (H) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements;

 

  (I) restrictions on cash or other deposits or net worth imposed by customers, suppliers or, in the ordinary course of business, other third parties; and

 

  (J) with respect to any Foreign Subsidiary, any encumbrance or restriction contained in the terms of any Indebtedness, or any agreement pursuant to which such Indebtedness was issued, if:

 

  (i) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement, or

 

  (ii) at the time such Indebtedness is Incurred, such encumbrance or restriction is not expected to materially affect the Company’s ability to make payments under its Note Guarantee, as determined in good faith by a Financial Officer of the Company, whose determination shall be conclusive.

SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock .

(a) The Company shall not, and shall not permit any Restricted Subsidiary to, make any Asset Disposition unless:

(1) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the Fair Market Value of the shares and assets subject to such Asset Disposition;

(2) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Additional Assets; and

 

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(3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company or such Restricted Subsidiary, as the case may be:

 

  (A) first , to the extent the Company elects (or is required by the terms of any applicable Indebtedness) (i) to prepay, repay, purchase, repurchase, redeem, retire, defease or otherwise acquire for value Senior Indebtedness of the Company, the Issuer or a Subsidiary Guarantor or Indebtedness of a Restricted Subsidiary that is not the Issuer or a Subsidiary Guarantor or (ii) to cause any loan commitment that is available to be drawn under the applicable credit facility and to be Incurred under this Indenture and that when drawn would constitute Secured Indebtedness, to be permanently reduced by the amount of Net Available Cash, in each case, other than Indebtedness owed to the Company or an Affiliate of the Company and other than obligations in respect of Disqualified Stock, within 365 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash;

 

  (B) second , to acquire Additional Assets (or otherwise to make capital expenditures), in each case within 365 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash;

 

  (C) third , to the extent of the balance of such Net Available Cash after application in accordance with Section 4.06(a)(3)(A) and Section 4.06(a)(3)(B), to make an Offer (as defined in Section 4.06(c)) to purchase Notes pursuant to and subject to the conditions set forth in Section 4.06(c); provided , however , that if the Company elects (or is required by the terms of any other Senior Indebtedness), such Offer may be made ratably to purchase the Notes and any Senior Indebtedness of the Company; and

 

  (D) fourth , to the extent of the balance of such Net Available Cash after application in accordance with Sections 4.06(a)(3)(A), 4.06(a)(3)(B) and 4.06(a)(3)(C), for any general corporate purpose permitted by the terms of this Indenture;

provided , however , that in connection with any prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness pursuant to Section 4.06(a)(3)(A) or Section 4.06(a)(3)(C), the Company or such Restricted Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid, purchased, repurchased, redeemed, retired, defeased or otherwise acquired for value.

 

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Notwithstanding the foregoing provisions of this Section 4.06(a)(3), the Company and its Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this Section 4.06 except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this Section 4.06 exceeds $25,000,000. Pending application of Net Available Cash pursuant to this Section 4.06, such Net Available Cash may be used or invested in any manner that is not prohibited by this Indenture.

(b) For the purposes of this covenant, the following are deemed to be cash:

  (1) the assumption of Indebtedness or other obligations of the Company (other than obligations in respect of Disqualified Stock of the Company) or any Restricted Subsidiary (other than obligations in respect of Disqualified Stock and Preferred Stock of a Restricted Subsidiary that is the Issuer or a Subsidiary Guarantor) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness or obligations in connection with such Asset Disposition;

  (2) any Designated Non-cash Consideration having an aggregate Fair Market Value that, when taken together with all other Designated Non-cash Consideration received pursuant to this clause and then outstanding, does not exceed at the time of the receipt of such Designated Non-cash Consideration (with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value) the greater of (1) $200,000,000 and (2) 1.5% of the total Consolidated assets of the Company as shown on the most recent balance sheet of the Company filed with the SEC;

  (3) securities, notes or similar obligations received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash; and

  (4) Temporary Cash Investments.

(c) In the event of an Asset Disposition that requires the purchase of Notes pursuant to Section 4.06(a)(3)(C), the Company (or the Issuer) shall be required (i) to purchase Notes tendered pursuant to an offer for the Notes (the “Offer”) at a purchase price of 100% of their principal amount plus accrued and unpaid interest to the date of purchase (subject to the right of Holders of record on the relevant date to receive interest due on the relevant interest payment date) in accordance with the procedures (including prorating in the event of oversubscription), set forth in Section 4.06(d) and (ii) to purchase other Senior Indebtedness of the Company on the terms and to the extent contemplated thereby; provided that in no event shall the offer to purchase such Senior Indebtedness of the Company be made at a purchase price in excess of 100% of its principal amount (without premium) or, unless otherwise provided for in such Senior

 

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Indebtedness, the accreted amount, if issued with original issue discount, plus accrued and unpaid interest thereon. If the aggregate purchase price of Notes (and Senior Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Notes (and other Senior Indebtedness), the Company (or the Issuer) shall apply the remaining Net Available Cash in accordance with Section 4.06(a)(3)(D). The Company (or the Issuer) shall not be required to make an Offer for Notes (and Senior Indebtedness) pursuant to this covenant if the Net Available Cash available therefor (after application of the proceeds as provided in Section 4.06(a)(3)(A) and Section 4.06(a)(3)(B)) is less than $25,000,000 for any particular Asset Disposition (which lesser amount will be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition).

(d) (1) If the aggregate purchase price of Notes (and other Senior Indebtedness) tendered pursuant to the Offer exceeds the Net Available Cash allotted to their purchase, the Company (or the Issuer) shall select the Notes (and other Senior Indebtedness) to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company (or the Issuer) so that only Notes in denominations of €100,000 and integral multiples of €1,000 in excess thereof and other Senior Indebtedness in denominations of $1,000 and integral multiples thereof, shall be purchased).

(2) Promptly, and in any event within 10 days after the Company (or the Issuer) becomes obligated to make an Offer, the Company (or the Issuer) shall deliver to the Trustee and each Holder notice stating that the Holder may elect to have his Notes purchased by the Company (or the Issuer) either in whole or in part (subject to prorating as described in Section 4.06(d)(1) in the event the Offer is oversubscribed) in denominations of €100,000 and integral multiples of €1,000 in excess thereof of principal amount at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the “Purchase Date”).

(3) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided above, the Company (or the Issuer) shall deliver to the Trustee an Officers’ Certificate as to (A) the amount of the Offer (the “Offer Amount”), including information as to any other Senior Indebtedness included in the Offer for repurchase, (B) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (C) the compliance of such allocation with the provisions of Section 4.06(a) and (c). By 11:00 a.m. London time on the Purchase Date, the Company (or the Issuer) shall irrevocably deposit with the Trustee or with the relevant Paying Agent(s) (or, if the Issuer, the Company or a Wholly Owned Subsidiary is acting as Paying Agent, segregate and hold in trust) in applicable currency or Temporary Cash Investments maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section 4.06. If the Offer includes other Senior Indebtedness, the deposit described in the preceding sentence may be made with any other

 

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paying agent pursuant to arrangements satisfactory to the Trustee. Upon the expiration of the period for which the Offer remains open (the “Offer Period”), the Company (or the Issuer) shall deliver to the Trustee for cancellation the Notes or portions thereof which have been properly tendered to and are to be accepted by the Company (or the Issuer). The Trustee shall, on the Purchase Date, mail or deliver payment (or cause the delivery of payment) to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Notes delivered by the Company (or the Issuer) to the Trustee is less than the Offer Amount applicable to the Notes, the Trustee shall deliver the excess to the Company (or the Issuer) immediately after the expiration of the Offer Period for application in accordance with this Section 4.06.

(4) Holders electing to have a Note purchased shall be required to surrender the Note, with an appropriate form duly completed, to the Company (or the Issuer) at the address specified in the notice at least three Business Days prior to the Purchase Date. A Holder shall be entitled to withdraw its election if the Trustee or the Company (or the Issuer) receives not later than one Business Day prior to the Purchase Date, a letter (or, in the case of the Trustee, a facsimile transmission) setting forth the name of such Holder, the principal amount of the Note which was delivered for purchase by such Holder and a statement that such Holder is withdrawing its election to have such Note purchased. Holders whose Notes are purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered.

(5) At the time the Company (or the Issuer) delivers Notes to the Trustee which are to be accepted for purchase, the Company (or the Issuer) shall also deliver an Officers’ Certificate stating that such Notes are to be accepted by the Company (or the Issuer) pursuant to and in accordance with the terms of this Section 4.06. A Note shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder.

(e) The Company (and the Issuer) shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations, including the laws of Luxembourg, in connection with the purchase of Notes pursuant to this Section 4.06. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.06, the Company (and the Issuer) shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.06 by virtue thereof.

SECTION 4.07. Limitation on Transactions with Affiliates . (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an “Affiliate Transaction”) unless such transaction is on terms:

 

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(1) that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm’s-length dealings with a Person who is not such an Affiliate,

(2) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $25,000,000,

 

  (A) are set forth in writing, and

 

  (B) have been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction and,

 

  (3) that, in the event such Affiliate Transaction involves an amount in excess of $75,000,000, have been determined by a nationally recognized appraisal, accounting or investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries.

 

  (b) The provisions of Section 4.07(a) will not prohibit:

(1) any Restricted Payment permitted to be paid pursuant to Section 4.04,

(2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, incentive compensation plans, stock options and stock ownership plans approved by the Board of Directors,

(3) the grant of stock options or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors,

(4) loans or advances to employees in the ordinary course of business of the Company,

(5) the payment of reasonable fees and compensation to, or the provision of employee benefit arrangements and indemnity for the benefit of, directors, officers and employees of the Company and its Restricted Subsidiaries in the ordinary course of business,

(6) any transaction between or among any of the Company, any Restricted Subsidiary or any joint venture or similar entity which would constitute an Affiliate Transaction solely because the Company or a Restricted Subsidiary owns an equity interest in or otherwise controls such Restricted Subsidiary, joint venture or similar entity,

(7) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company,

 

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(8) any agreement as in effect on the Closing Date and described in the Offering Memorandum or in the Company’s SEC filings as filed on or prior to the Closing Date, or any renewals, extensions or amendments of any such agreement (so long as such renewals, extensions or amendments are not less favorable in any material respect to the Company or its Restricted Subsidiaries) and the transactions evidenced thereby,

(9) transactions with customers, clients, suppliers or purchasers or sellers of goods or services in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors or the senior management thereof, or are on terms at least as favorable as could reasonably have been obtained at such time from an unaffiliated party, or

(10) any transaction effected as part of a Qualified Receivables Transaction.

SECTION 4.08. Change of Control . (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require the Issuer to purchase all or any part of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with Section 4.08(b).

(b) Within 30 days following any Change of Control, the Issuer shall give notice to each Holder with a copy to the Trustee (the “Change of Control Offer”), stating:

(1) that a Change of Control has occurred and that such Holder has the right to require the Issuer to purchase all or a portion of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date);

(2) the circumstances and relevant facts and financial information regarding such Change of Control;

(3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is given); and

(4) the instructions determined by the Issuer, consistent with this Section 4.08, that a Holder must follow in order to have its Notes purchased.

(c) The Issuer shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this

 

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Section 4.08 applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. In addition, the Issuer shall not be required to make a Change of Control Offer upon a Change of Control if the Notes have been called for redemption to the extent that the Issuer gives a valid notice of redemption to Holders prior to the Change of Control, and thereafter redeems all Notes called for redemption in accordance with the terms set forth in such redemption notice.

(d) (1) If and for so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF and the rules of the Luxembourg Stock Exchange so require, the Issuer shall publish notices relating to the Change of Control Offer in a leading newspaper of general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, to the extent and in the manner permitted by such rules, post such notice on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

 

  (2) The Issuer shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations, including the laws of Luxembourg, in connection with the purchase of Notes pursuant to this Section 4.08. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.08, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.08 by virtue thereof.

(e) On the purchase date, all Notes purchased by the Issuer under this Section 4.08 shall be delivered by the Issuer to the Trustee for cancellation, and the Issuer shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto.

SECTION 4.09. Limitation on Liens . The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien (the “Initial Lien”) of any nature whatsoever on any of its property or assets (including Capital Stock of a Restricted Subsidiary), whether owned at the Closing Date or thereafter acquired securing any Indebtedness, other than Permitted Liens, without effectively providing that the Notes shall be secured equally and ratably with (or prior to) the obligations so secured for so long as such obligations are so secured.

Any Lien created for the benefit of the Holders pursuant to the preceding sentence shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien.

 

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SECTION 4.10. Limitation on Sale/Leaseback Transactions . The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property unless:

 

  (1) (A) the Company or such Restricted Subsidiary would be entitled to:

 

  (i) Incur Indebtedness with respect to such Sale/Leaseback Transaction pursuant to Section 4.03; and

 

  (ii) create a Lien on such property securing such Indebtedness without equally and ratably securing the Notes pursuant to Section 4.09;

 

  (B) the gross proceeds payable to the Company or such Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the Fair Market Value of such property; and

 

  (C) the transfer of such property is permitted by, and, if applicable, the Company applies the proceeds of such transaction in compliance with, Section 4.06; or

 

  (2) the Sale/Leaseback Transaction is with respect to all or a portion of the Company’s properties in Akron, Summit County, Ohio.

SECTION 4.11. Future Subsidiary Guarantors . The Company shall cause (i) each Restricted Subsidiary that Guarantees any Indebtedness of the Company or any Subsidiary Guarantor, and (ii) each Restricted Subsidiary that Guarantees any Capital Markets Indebtedness of the Issuer, to become a Subsidiary Guarantor and, if applicable, execute and deliver to the Trustee a supplemental indenture in the form set forth in Exhibit 3 hereto pursuant to which such Subsidiary shall Guarantee payment of the Notes. Each Subsidiary Guarantee shall be limited (x) to an amount not to exceed the maximum amount that can be Guaranteed by that Subsidiary Guarantor, without (A) rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or (B) subjecting any officers or directors of the Subsidiary Guarantor to a material risk of personal liability, and (y) by applicable corporate benefit or similar laws.

SECTION 4.12. Fall Away of Certain Covenants . (a) Following the first day (the “Suspension Date”) that:

 

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  (1) the Notes have an Investment Grade Rating from at least two of the Rating Agencies, and

 

  (2) no Default has occurred and is continuing hereunder with respect to the Notes,

the Company and its Restricted Subsidiaries will not be subject to Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.11 and Section 5.01(a)(3)(collectively, the “Suspended Covenants”). In addition, the Company may elect to suspend the Subsidiary Guarantees.

(b) In the event that the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the foregoing and on any subsequent date (the “Reversion Date”) both (1) one or more of the Rating Agencies withdraws its Investment Grade Rating or downgrades the rating assigned to the Notes below an Investment Grade Rating resulting in the Notes no longer having an Investment Grade Rating from at least two of the Rating Agencies and (2) the terms of any other debt securities of the Company or any of its Restricted Subsidiaries then outstanding include previously suspended covenants (that are substantially the same as the Suspended Covenants described in this Indenture) that have become applicable upon a substantially concurrent reversion as a result of substantially the same ratings withdrawal or downgrade with respect to such debt securities ( provided , however , that the aggregate principal amount then outstanding of such debt securities exceeds $100,000,000), then the Company and its Restricted Subsidiaries shall thereafter again be subject to the Suspended Covenants with respect to future events and the Subsidiary Guarantees shall be reinstated (for the avoidance of doubt, it is understood and agreed that the “Suspended Covenants” as defined in each of the 2012 Indenture, the 2013 Indenture and the 2015 Indenture are substantially the same as the Suspended Covenants described in this Indenture). The period of time between the Suspension Date and the Reversion Date is referred to herein as the “Suspension Period.”

(c) Notwithstanding that the Suspended Covenants may be reinstated, no Default shall be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period. During any Suspension Period, the Company shall not designate any Subsidiary to be an Unrestricted Subsidiary unless the Company would have been permitted to designate such Subsidiary to be an Unrestricted Subsidiary if a Suspension Period had not been in effect for any period.

(d) On the Reversion Date, all Indebtedness Incurred during the Suspension Period shall be classified to have been Incurred pursuant to Section 4.03 (to the extent such Indebtedness would be permitted to be Incurred thereunder as of the Reversion Date and after giving effect to Indebtedness Incurred prior to the Suspension Period and outstanding on the Reversion Date). To the extent such Indebtedness would not be so permitted to be Incurred pursuant to Section 4.03(a) or Section 4.03(b), such Indebtedness shall be deemed to have been outstanding on the Closing Date, so that it is classified as permitted under Section 4.03(b)(3)(B). Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Section 4.04 shall be made as though Section 4.04 had been in effect since the Closing Date and

 

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throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period shall reduce the amount available to be made as Restricted Payments under Section 4.04(a) and the items specified in Section 4.04(a)(3) shall increase the amount available to be made under Section 4.04(a). For purposes of determining compliance with Section 4.06(a) and Section 4.06(b), the Net Available Cash from all Asset Dispositions not applied in accordance with Section 4.06 shall be deemed to be reset to zero after the Reversion Date. For purposes of determining compliance with Section 4.06(c), the amount of Net Available Cash carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition shall be deemed to be reset to zero after the Reversion Date.

(e) In addition, without causing a Default or Event of Default, the Company and the Restricted Subsidiaries may honor any contractual commitments to take actions after a Reversion Date as long as such contractual commitments were entered into during a Suspension Period and not in anticipation of the Notes no longer having an Investment Grade Rating from at least two of the Rating Agencies.

(f) The Company shall provide written notice to the Trustee of the occurrence of any Suspension Date or Reversion Date and of any election made pursuant to this Section 4.12; provided , that the failure to provide such notice shall not affect the operation of this Section 4.12 or the Company’s rights hereunder.

SECTION 4.13. Compliance Certificate . The Issuer or the Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Issuer a certificate signed by a Financial Officer stating (i) that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made with a view to determining whether the Company, the Issuer and the Subsidiary Guarantors have fulfilled their obligations under this Indenture and (ii) that, to the knowledge of such Financial Officer, no Default or Event of Default occurred during such period (or, if a Default or Event of Default hereunder shall have occurred, describing all such Defaults or Events of Default hereunder of which such Financial Officer may have knowledge and what action the Issuer has taken, is taking and/or proposes to take with respect thereto).

SECTION 4.14. Further Instruments and Acts . Upon request of the Trustee, the Issuer and the Note Guarantors will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 4.15. Maintenance of Listing . Each of the Company and the Issuer shall use its reasonable efforts to maintain the listing of the Euro MTF for so long as such Notes are outstanding; provided , however , that if at any time the Company or the Issuer

 

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determines that it will not maintain such listing, it will obtain prior to the delisting of the Notes from the Euro MTF, and thereafter use its reasonable efforts to maintain, a listing of such Notes on another internationally recognized stock exchange.

SECTION 4.16. Payment of Additional Amounts . (a) All payments made by or on behalf of the Issuer or the Note Guarantors under or with respect to the Notes or the Note Guarantees shall be made free and clear of, and without withholding or deduction for or on account of, any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) (hereinafter “Taxes”) imposed or levied by or on behalf of the Netherlands or any political subdivision or any authority or agency therein or thereof having power to tax, or within any other jurisdiction in which the Issuer or any Note Guarantor (or any successor Person) is, organized or otherwise resident for tax purposes or any jurisdiction from or through which payment is made (each a “Relevant Taxing Jurisdiction”), unless the withholding or deduction of such Taxes is required by law or by the interpretation or administration thereof.

(b) If the Issuer or any Note Guarantor is so required to withhold or deduct any amount for or on account of Taxes imposed by a Relevant Taxing Jurisdiction, or if a Holder actually pays such Taxes where the Issuer or the Note Guarantor failed to withhold or deduct Taxes required to be held or deducted, from any payment made under or with respect to the Notes or the Note Guarantees, the Issuer or the relevant Note Guarantor, as applicable, will be required to pay such additional amounts (“Additional Amounts”) as may be necessary so that the net amount received by the Holders (including Additional Amounts) after such withholding or deduction (including any Taxes on such Additional Amounts) will not be less than the amount the Holders would have received if such Taxes had not been withheld or deducted; provided , however , that the foregoing obligation to pay Additional Amounts does not apply to (1) any Taxes that would not have been so imposed but for the existence of any present or former connection (for the avoidance of doubt, including the ownership of shares in the Issuer) between the relevant Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of power over the relevant Holder, if the relevant Holder is an estate, nominee, trust or corporation) and the Relevant Taxing Jurisdiction (other than the mere receipt of such payment or the ownership or holding of such Note); (2) any estate, inheritance, gift, sales, excise, transfer, personal property tax or similar tax, assessment or governmental charge; (3) any Taxes withheld, deducted or imposed on a payment to an individual and which are required to be made pursuant to European Council Directive 2003/48/EC (as amended from time to time) or any law implementing or complying with, or introduced in order to conform to, such directive; (4) any withholding or deduction that is imposed on any payment arising from FATCA; or (5) any Taxes withheld or deducted that could have been avoided by satisfying any statutory requirements or by making a declaration of non-resident or other claim for exemption to the relevant tax authority; nor will the Issuer or any Note Guarantor pay Additional Amounts (a) if the payment could have been made without such deduction or withholding

 

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if the beneficiary of the payment had presented the Note for payment within 30 days after the date on which such payment or such Note became due and payable or the date on which payment thereof is duly provided for, whichever is later (except to the extent that the Holder would have been entitled to Additional Amounts had the Note been presented on the last day of such 30-day period), or (b) with respect to any payment of principal of (or premium, if any, on) or interest on such Note to any Holder who is a fiduciary or partnership or any person other than the sole beneficial owner of such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner of such payment would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the actual holder of such Note.

(c) If an Officer of the Issuer or any Note Guarantor becomes aware that it will be obligated to pay Additional Amounts with respect to any payment under or with respect to the Notes or the Note Guarantees, the Issuer, the Company or the relevant Subsidiary Guarantor shall deliver to the Trustee on a date that is at least 30 days prior to the date of that payment (unless the obligation to pay Additional Amounts arises after the 30th day prior to that payment date, in which case the Issuer, the Company or the relevant Subsidiary Guarantor shall notify the Trustee promptly thereafter) an Officers’ Certificate stating the fact that Additional Amounts will be payable and the amount estimated to be so payable. The Officers’ Certificate must also set forth any other information reasonably necessary to enable the Paying Agents to pay Additional Amounts to Holders on the relevant payment date. The Trustee shall be entitled to rely solely on such Officers’ Certificate as conclusive proof that such payments are necessary. Upon request, the Issuer, the Company or the relevant Subsidiary Guarantor shall also provide the Trustee with official receipts or other documentation satisfactory to the Trustee evidencing the payment of the Taxes with respect to which Additional Amounts are paid.

(d) Whenever in this Indenture there is mentioned, in any context:

(1) the payment of principal;

(2) purchase prices in connection with a purchase of Notes;

(3) interest; or

(4) any other amount payable on or with respect to any of the Notes, such reference shall be deemed to include payment of Additional Amounts as described in this Section to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

(e) The Issuer and the Note Guarantors shall pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies that arise in any jurisdiction from the execution, delivery, enforcement or registration of the Notes, the Note Guarantees, this Indenture or any other document or instrument in relation thereof, or the receipt of any payments with respect to the Notes or the Note Guarantees, excluding such taxes, charges or similar levies imposed by any

 

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jurisdiction outside of the jurisdiction of organization or tax residence of the Issuer or any of the Note Guarantors, or the jurisdiction of organization or tax residence of any successor of the Issuer or any Note Guarantor, or any jurisdiction in which a Paying Agent is located, and the Issuer and the Note Guarantors shall agree to indemnify the Holders for any such taxes paid by such Holders.

(f) The obligations described in this Section shall survive any termination, defeasance or discharge of this Indenture and shall apply mutatis mutandis to any jurisdiction in which any successor Person to the Issuer or any Note Guarantor is organized or any political subdivision or taxing authority or agency thereof or therein.

ARTICLE 5

Successor Company

SECTION 5.01. When Issuer and Note Guarantors May Merge or Transfer Assets . (a) The Company shall not, directly or indirectly, consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets, in one or a series of related transactions, to any Person, unless:

(1) the resulting, surviving or transferee Person (the “Successor Company”) shall be a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and this Indenture;

(2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing;

(3) immediately after giving effect to such transaction, (A) the Successor Company would be able to Incur an additional $1.00 of Indebtedness under Section 4.03(a) or (B) the Consolidated Coverage Ratio for the Successor Company would be greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction; and

(4) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture.

 

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(b) The Issuer shall not, directly or indirectly, consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets, in one or a series of related transactions, to any Person, unless:

 

  (1) the resulting, surviving or transferee Person (the “Successor Issuer”) shall be a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia or any member state of the European Union and the Successor Issuer (if not the Issuer) shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Issuer under the Notes and this Indenture;

 

  (2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; and

 

  (3) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture.

(c) The Successor Company or Successor Issuer, as applicable, shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Issuer, as applicable, under this Indenture. The predecessor Issuer, other than in the case of a lease, shall be released from the obligation to pay the principal of and interest on the Notes, and the predecessor Company shall be released from its obligations under the Note Guarantee.

(d) The Company shall not permit any Subsidiary Guarantor to, directly or indirectly, consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets, in one or a series of related transactions, to any Person, unless:

(1) except in the case of a Subsidiary Guarantor (A) that has been disposed of in its entirety to another Person (other than to the Company or an Affiliate of the Company), whether through a merger, consolidation or sale of Capital Stock or assets or (B) that, as a result of the disposition of all or a portion of its Capital Stock, ceases to be a Subsidiary, the resulting, surviving or transferee Person (the “Successor Guarantor”) shall be a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, a member state of the European Union or any other jurisdiction under which such Subsidiary Guarantor was organized, and such Person (if not such Subsidiary Guarantor) shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee;

 

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(2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Guarantor or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Guarantor or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; and

(3) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture.

(e) Notwithstanding the foregoing:

(1) any Restricted Subsidiary may Consolidate with, merge into or transfer all or part of its properties and assets to the Company, the Issuer or any Subsidiary Guarantor; and

(2) the Company or the Issuer may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction within the United States of America, any state thereof or the District of Columbia, or, in the case of the Issuer, any member state of the European Union, to realize tax or other benefits.

ARTICLE 6

Defaults and Remedies

SECTION 6.01. Events of Default . An “Event of Default” occurs if:

(1) the Issuer defaults in any payment of interest on any Note when the same becomes due and payable, and such default continues for 30 days;

(2) the Issuer defaults in the payment of principal of any Note when the same becomes due and payable at its Stated Maturity, upon optional redemption or required repurchase, upon declaration of acceleration or otherwise;

(3) the Company, the Issuer or any Subsidiary Guarantor fails to comply with its obligations under Section 5.01;

(4) the Company or any Restricted Subsidiary fails to comply with Section 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12 or 4.15 (in each case, other than a failure to purchase Notes) and such failure continues for 30 days after the notice from the Trustee or the Holders specified below;

 

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(5) the Company or any Restricted Subsidiary fails to comply with its covenants or agreements with respect to such Notes contained in this Indenture (other than those referred to in clauses (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice from the Trustee or the Holders specified below;

(6) the Company or any Restricted Subsidiary fails to pay any Indebtedness (other than Indebtedness owing to the Company or a Restricted Subsidiary) within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $100,000,000 or its foreign currency equivalent;

(7) the Company, the Issuer or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

(A) commences a voluntary case;

(B) consents to the entry of an order for relief against it in an involuntary case;

(C) consents to the appointment of a Custodian of it or for any substantial part of its property; or

(D) makes a general assignment for the benefit of its creditors;

or takes any comparable action under any foreign laws relating to insolvency;

(8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A) is for relief against the Company, the Issuer or any Significant Subsidiary in an involuntary case;

(B) appoints a Custodian of the Company, the Issuer or any Significant Subsidiary or for any substantial part of its property; or

(C) orders the winding up or liquidation of the Company, the Issuer or any Significant Subsidiary;

or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days;

(9) any final and nonappealable judgment or decree (not covered by insurance) for the payment of money in excess of $100,000,000 or its foreign currency equivalent (treating any deductibles, self-insurance or retention as not so covered) is rendered against the Company, the Issuer or a Significant Subsidiary and such final judgment or decree remains outstanding and is not satisfied, discharged or waived within a period of 60 days following such judgment; or

 

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(10) any Note Guarantee ceases to be in full force and effect in all material respects (except as contemplated by the terms thereof) or any Note Guarantor denies or disaffirms such Note Guarantor’s obligations under this Indenture or any Note Guarantee and such Default continues for 10 days after receipt of the notice specified below.

The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether such Event of Default is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

Notwithstanding the foregoing, a default under Section 6.01(4), 6.01(5), 6.01(6), 6.01(9) or 6.01(10) (and under Section 6.01(10) only with respect to any Subsidiary Guarantor that is not a Significant Subsidiary) shall not constitute an Event of Default until the Trustee notifies the Issuer or the Holders of at least 25% in principal amount of the outstanding Notes notify the Issuer and the Trustee of the default and the Company, the Issuer or the Restricted Subsidiary, as applicable, does not cure such default within any applicable time specified in Section 6.01(4), 6.01(5), 6.01(6), 6.01(9) or 6.01(10) hereof after receipt of such notice.

The term “Bankruptcy Law” means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

The Issuer shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any Event of Default under Section 6.01(6) or 6.01(10) and any event which with the giving of notice or the lapse of time would become an Event of Default under Section 6.01(4), 6.01(5) or 6.01(9), its status and what action the Issuer is taking or proposes to take with respect thereto.

SECTION 6.02. Acceleration . If an Event of Default (other than an Event of Default specified in Section 6.01(7) or 6.01(8) with respect to the Company or the Issuer) occurs and is continuing, the Trustee by notice to the Issuer or the Holders of at least 25% in principal amount of the outstanding Notes by notice to the Issuer and the Trustee may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest will be due and payable immediately. If an Event of Default specified in Section 6.01(7) or 6.01(8) with respect to the Company or the Issuer occurs, the principal of and accrued but unpaid interest on all the Notes shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of at least a majority in principal amount of the Notes by notice

 

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to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto.

SECTION 6.03. Other Remedies . If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

SECTION 6.04. Waiver of Past Defaults . The Holders of at least a majority in principal amount of the Notes by notice to the Trustee may waive an existing Default and its consequences except (a) a Default in the payment of the principal of or interest on a Note, (b) a Default arising from the failure to redeem or purchase any Note when required pursuant to this Indenture or (c) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Holder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.

SECTION 6.05. Control by Majority . The Holders of at least a majority in principal amount of the Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not any such directions are unduly prejudicial to such Holders), subject to Section 7.01, or that would involve the Trustee in personal liability; provided , however , that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Subject to Section 7.01, if an Event of Default has occurred and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any of the Holders, unless such Holders have offered to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense, including by way of pre-funding, which might be incurred by it in compliance with such request or direction.

 

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SECTION 6.06. Limitation on Suits . Except to enforce the right to receive payment of principal or interest when due, no Holder may pursue any remedy with respect to this Indenture or the Notes unless:

(1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;

(2) the Holders of at least 25% in principal amount of the outstanding Notes make a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

(5) the Holders of at least a majority in principal amount of the Notes do not give the Trustee a direction inconsistent with the request during such 60-day period.

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

SECTION 6.07. Rights of Holders to Receive Payment . Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Notes held by such Holder, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.08. Collection Suit by Trustee . If an Event of Default specified in Section 6.01(1) or 6.01(2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07.

SECTION 6.09. Trustee May File Proofs of Claim . The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Issuer, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee

 

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in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07.

SECTION 6.10. Priorities . If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:

FIRST: to the Trustee for amounts due under Section 7.07;

SECOND: to Holders for amounts due and unpaid on the Notes for principal and interest ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest respectively; and

THIRD: to the Issuer.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section. At least 15 days before such record date, the Issuer or the Company shall deliver to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid.

SECTION 6.11. Undertaking for Costs . In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Notes.

SECTION 6.12. Waiver of Stay or Extension Laws . The Issuer (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

 

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ARTICLE 7

Trustee

SECTION 7.01. Duties of Trustee . (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person’s own affairs.

(b) Except during the continuance of an Event of Default:

(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, the Notes and the Note Guarantees and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm the accuracy of mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that:

(1) this paragraph does not limit the effect of paragraph (b) of this Section;

(2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.

(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer.

 

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(f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

SECTION 7.02. Rights of Trustee . (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers’ Certificate or Opinion of Counsel.

(c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided , however , that the Trustee’s conduct does not constitute wilful misconduct or negligence.

(e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes, including any Opinion of Counsel, shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel, including any Opinion of Counsel.

(f) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

(g) The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions, or agreements on the part of the Issuer, except as otherwise set forth herein, but the Trustee may require of the Issuer full information and advice as to the performance of the covenants, conditions and agreements contained herein.

(h) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and, with respect to such permissive rights, the Trustee shall not be answerable for other than its negligence or willful misconduct.

(i) Except for a default under Sections 6.01(1)or (2) hereof, the Trustee shall not be deemed to have notice or be charged with knowledge of any Default or Event

 

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of Default unless a Trust Officer shall have received from the Issuer or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding written notice thereof at its address set forth in Section 11.02 hereof, and such notice references the Notes and this Indenture. In the absence of any such notice, the Trustee may conclusively assume that no Default or Event of Default exists.

(j) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

(k) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee and each Agent.

(l) In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

SECTION 7.03. Individual Rights of Trustee . (a) The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Section 7.10.

(b) The Trustee shall be permitted to engage in other transactions; however , if it acquires any conflicting interest it must eliminate such conflict within 90 days or resign as Trustee.

SECTION 7.04. Trustee’s Disclaimer . The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes or the Subsidiary Guarantees, it shall not be accountable for the Issuer’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in this Indenture or the Offering Memorandum or in any other document issued in connection with the sale of the Notes or in the Notes other than the Trustee’s certificate of authentication.

 

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SECTION 7.05. Notice of Defaults . If a Default occurs and is continuing and is actually known to a Trust Officer, the Trustee shall mail or deliver to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of or interest on any Note (including payments pursuant to the redemption provisions of such Note), the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Holders.

SECTION 7.06. [Reserved] .

SECTION 7.07. Compensation and Indemnity . The Issuer or the Company shall pay to the Trustee and Agents from time to time reasonable compensation for their services as shall be agreed to in writing from time to time by the Issuer and the Trustee and Agents, as applicable. The Trustee’s and Agents’ compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee and Agents upon request for all reasonable out-of-pocket expenses incurred or made by them, including costs of collection, in addition to the compensation for their services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee’s and Agents’ agents, counsel, accountants and experts. The Issuer shall indemnify the Trustee and Agents, their agents, representatives, officers, directors, employees and attorneys against any and all loss, liability or expense (including reasonable compensation and expenses, disbursements and advances of the Trustee’s and Agents’ counsel) incurred by them in connection with the administration of this trust and the performance of their duties or in connection with the exercise or performance of any of their rights or powers hereunder. Such indemnified party shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by such indemnified party to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. Upon notice to the indemnified party, the Issuer may defend the claim and such indemnified party shall provide reasonable cooperation in such defense. Such indemnified party may have separate counsel and the Issuer shall pay the fees and expenses of such counsel reasonably acceptable to the Issuer, provided , however , that the Issuer shall not be required to pay such fees and expenses if the Issuer assumes such defense unless there is a conflict of interest between the Issuer and such indemnified party in connection with such defense as determined by such indemnified party in consultation with counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee or Agents through the Trustee’s or Agents’ own wilful misconduct, negligence or bad faith.

 

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In no event shall the Trustee or any Agent be responsible or liable for any special, indirect or consequential loss or damage of any kind (including, without limitation, loss of business, goodwill, opportunity or profit of any kind) of the Issuer or any Note Guarantor, even if advised of it in advance and even if foreseeable and regardless of the form of action.

To secure the Issuer’s payment obligations in this Section, the Trustee and Agents shall have a lien prior to the Notes on all money or property held or collected by the Trustee or Agents other than money or property held in trust to pay principal of and interest on particular Notes.

The Issuer’s payment obligations pursuant to this Section shall survive the resignation or removal of the Trustee and Agents and the discharge of this Indenture. When the Trustee and Agents incur expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.

SECTION 7.08. Replacement of Trustee . The Trustee may resign at any time by so notifying the Issuer. The Holders of a majority in principal amount of the Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Issuer shall remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or other public officer takes charge of the Trustee or its property; or

(4) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns, is removed by the Issuer or by the Holders of a majority in principal amount of the outstanding Notes and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall deliver a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

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If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding the replacement of the Trustee pursuant to this Section, the Issuer’s obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

SECTION 7.09. Successor Trustee by Merger . If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have.

SECTION 7.10. Eligibility; Disqualification . There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof or a jurisdiction in the European Union that is authorized under such laws to exercise corporate trustee power and which customarily performs such corporate trustee roles and provides such corporate trustee services in transactions similar in nature to the offering of the Notes as described in the Offering Memorandum.

ARTICLE 8

Discharge of Indenture; Defeasance

SECTION 8.01. Discharge of Liability on Notes; Defeasance . (a) When (1) the Issuer delivers to the Trustee all outstanding Notes (other than Notes replaced pursuant to Section 2.07) for cancellation or (2) all outstanding Notes have become due and payable, whether at maturity or on a redemption date as a result of the delivery of a notice of redemption pursuant to Article 3 hereof and, in the case of clause (2), the Issuer irrevocably deposits with the Trustee cash in

 

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euro or euro-denominated European Government Obligations, or any combination thereof, sufficient to pay at maturity or upon redemption all outstanding Notes, including premium, if any, and interest thereon to maturity or such redemption date (other than Notes replaced pursuant to Section 2.07), and if in either case the Issuer pays all other sums payable under this Indenture by the Issuer, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. Upon satisfaction of the above conditions, the Trustee shall acknowledge satisfaction and discharge of this Indenture.

(b) Subject to Sections 8.01(c) and 8.02, the Issuer at any time may terminate (1) all its obligations under the Notes and this Indenture with respect to any Notes (“legal defeasance option”) or (2) the obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12 and 4.15 and the operation of Sections 6.01(4), 6.01(5) (with respect only to the obligations under Section 4.02), 6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) and the limitations contained in Section 5.01(a)(3) (“covenant defeasance option”). The Issuer may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.

If the Issuer exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default. If the Issuer exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(5) (with respect only to the obligations under Section 4.02), 6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or because of the failure of the Company to comply with Section 5.01(a)(3). In the event that the Issuer exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor will be released from all of its obligations with respect to its Subsidiary Guarantee.

Upon satisfaction of the conditions set forth herein and upon request of the Issuer accompanied by an Officers’ Certificate and an Opinion of Counsel complying with Section 11.04, the Trustee shall acknowledge in writing the discharge of those obligations that the Issuer terminates.

(c) Notwithstanding clauses (a) and (b) above, the Issuer’s obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this Article 8 shall survive until the Notes have been paid in full. Thereafter, the Issuer’s obligations in Sections 7.07, 8.04 and 8.05 shall survive.

SECTION 8.02. Conditions to Defeasance . The Issuer may exercise its legal defeasance option or its covenant defeasance option only if:

(1) the Issuer irrevocably deposits in trust with the Trustee cash in euro or euro-denominated European Government Obligations, the principal of and interest on which shall be sufficient, or a combination thereof sufficient, to pay the principal of, premium (if any) and interest in respect of the Notes to redemption or maturity, as the case may be;

 

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(2) the Issuer delivers to the Trustee a certificate from an internationally recognized investment bank, appraisal firm or firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited European Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Notes to maturity or redemption, as the case may be;

(3) 91 days pass after the deposit is made and during the 91-day period no Default specified in Sections 6.01(7) or (8) with respect to the Issuer occurs which is continuing at the end of the period;

(4) the deposit does not constitute a default under any other material agreement binding on the Issuer;

(5) the Issuer delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940;

(6) in the case of the legal defeasance option, the Issuer shall have delivered to the Trustee (A) an Opinion of Counsel stating that (i) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable U.S. Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred and (B) an Opinion of Counsel in the jurisdiction of organization of the Issuer to the effect that Holders will not recognize income, gain or loss for income tax purposes in such jurisdiction as a result of such deposit and defeasance and will be subject to income tax in such jurisdiction on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and

(7) in the case of the covenant defeasance option, the Issuer shall have delivered to the Trustee (A) an Opinion of Counsel to the effect that the Holders will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to U.S. Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred and (B) an Opinion of Counsel in the jurisdiction of organization of the

 

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Issuer to the effect that Holders will not recognize income, gain or loss for income tax purposes in such jurisdiction as a result of such deposit and covenant defeasance and will be subject to income tax in such jurisdiction on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred.

Before or after a deposit, the Issuer may make arrangements satisfactory to the Trustee for the redemption of Notes at a future date in accordance with Article 3.

SECTION 8.03. Application of Trust Money . The Trustee shall hold in trust cash in euro or euro-denominated European Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited cash in euro or euro-denominated European Government Obligations, as the case may be, through the relevant Paying Agent(s) and in accordance with this Indenture to the payment of principal of and interest on the Notes.

SECTION 8.04. Repayment to Issuer . The Trustee and the relevant Paying Agent(s) shall promptly turn over to the Issuer upon request any excess money or securities held by them at any time.

Subject to any applicable abandoned property law, the Trustee and the relevant Paying Agent(s) shall pay to the Issuer upon request any money held by them for the payment of principal or interest that remains unclaimed for two years. After any such payment, Holders entitled to the money must look to the Issuer for payment as general creditors, and the Trustee and such Paying Agent shall have no further liability with respect to such monies.

SECTION 8.05. Indemnity for Government Obligations . The Issuer shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited European Government Obligations or the principal and interest received on such European Government Obligations.

SECTION 8.06. Reinstatement . If the Trustee or the relevant Paying Agent(s) is unable to apply any cash in euro or euro-denominated European Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s and each Note Guarantor’s obligations under this Indenture and each Note Guarantee with respect to such Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or the relevant Paying Agent(s) is permitted to apply all such cash in euro or euro-denominated European Government Obligations in accordance with this Article 8; provided , however , that, if the Issuer has made any payment of interest on or principal of any Notes because of the

 

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reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the cash in euro or euro-denominated European Government Obligations held by the Trustee or the relevant Paying Agent(s).

ARTICLE 9

Amendments

SECTION 9.01. Without Consent of Holders . The Issuer, the Note Guarantors and the Trustee may amend this Indenture or the Notes without notice to or consent of any Holder:

(1) to cure any ambiguity, omission, defect or inconsistency, as set forth in an Officers’ Certificate;

(2) to provide for the assumption by a successor corporation of the obligations of the Issuer or any Note Guarantor under this Indenture in compliance with Article 5;

(3) to provide for uncertificated Notes in addition to or in place of certificated Notes; provided , however , that the uncertificated Notes are issued in registered form for U.S. Federal income tax purposes;

(4) to add Guarantees with respect to the Notes or to confirm and evidence the release, termination or discharge of any Note Guarantee when such release, termination or discharge is permitted under this Indenture;

(5) to add to the covenants of the Company or the Issuer for the benefit of the Holders or to surrender any right or power herein conferred upon the Company or the Issuer;

(6) to make any change that does not adversely affect the rights of any Holder in any material respect, subject to the provisions of this Indenture, as set forth in an Officers’ Certificate;

(7) to make any amendment to the provisions of this Indenture relating to the form, authentication, transfer and legending of Notes; provided , however , that (A) compliance with this Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any other applicable securities law, and (B) such amendment does not materially affect the rights of Holders to transfer Notes;

(8) to provide for the issuance of Additional Notes in accordance with the terms of this Indenture; or

(9) to convey, transfer, assign, mortgage or pledge as security for the Notes any property or assets in accordance with Section 4.09.

 

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For the avoidance of doubt, nothing in this Indenture shall be construed to require any consent of any Holder to amend or supplement this Indenture in any manner that does not relate to the Notes.

After an amendment under this Section becomes effective, the Issuer shall deliver to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

For the avoidance of doubt, the Subsidiary Guarantors shall not be required to sign any amendment or supplemental indenture hereto pursuant to which a Subsidiary becomes a Subsidiary Guarantor as contemplated by Section 4.11.

SECTION 9.02. With Consent of Holders . (a) The Issuer, the Note Guarantors and the Trustee may amend this Indenture (as it relates to the Notes) or the Notes with the written consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange for such Notes). Any existing Default or compliance with any provisions of this Indenture with respect to the Notes may be waived with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class, subject to the restrictions of Section 6.04 and this Section 9.02. Notwithstanding the foregoing, without the consent of each Holder affected thereby, an amendment or waiver may not:

(1) reduce the amount of Notes whose Holders must consent to an amendment;

(2) reduce the rate of or extend the time for payment of interest on any Note;

(3) reduce the principal of or extend the Stated Maturity of any Note;

(4) reduce the premium payable upon the redemption of any Note or change the time at which such Note may be redeemed pursuant to Article 3 hereto or paragraph 6 of the Notes;

(5) make any Note payable in money other than that stated in such Note;

(6) impair the right of any Holder to receive payment of principal of and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;

(7) make any change in Section 6.04 or 6.07 or the third sentence of this Section 9.02(a); or

 

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(8) make any change in, or release other than in accordance with this Indenture, any Note Guarantee that would adversely affect the Holders.

(b) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

After an amendment under this Section becomes effective, the Issuer shall deliver to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

SECTION 9.03. Revocation and Effect of Consents and Waivers . A consent to an amendment or a waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent or waiver is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s Note or portion of the Note if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Holder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee.

The Issuer or the Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.

SECTION 9.04. Notation on or Exchange of Notes . If an amendment changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder. Alternatively, if the Issuer, the Company or the Trustee so determines, the Issuer in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment.

SECTION 9.05. Trustee To Sign Amendments . The Trustee shall sign any amendment authorized pursuant to this Article 9 if

 

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the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

SECTION 9.06. Payment for Consent . Neither the Issuer nor any Affiliate of the Issuer shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.

ARTICLE 10

Guarantees

SECTION 10.01. Guarantees . (a) Each Note Guarantor hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, the due and punctual payment and performance of all of the Guaranteed Obligations of such Note Guarantor, jointly with the other Note Guarantors and severally. Each of the Note Guarantors further agrees that its Guaranteed Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any such Guaranteed Obligation. Each of the Note Guarantors waives presentment to, demand of payment from and protest to the Issuer or any Note Guarantor of any of its Guaranteed Obligations, and also waives notice of acceptance of its guarantee, notice of protest for nonpayment and all similar formalities.

(b) Each of the Note Guarantors further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Trustee or any Holder to any security held for the payment of its Guaranteed Obligations or to any balance of any deposit account or credit on the books of the Trustee or any Holder in favor of the Company.

(c) Except for termination of a Note Guarantor’s obligations hereunder, suspension of a Subsidiary Guarantor’s obligations hereunder pursuant to Section 4.12 or a release of such Subsidiary Guarantor pursuant to Section 10.06, to the fullest extent permitted by applicable law, the obligations of each Note Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not

 

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be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations of such Note Guarantor or otherwise. Without limiting the generality of the foregoing, to the fullest extent permitted by applicable law, the obligations of each Note Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Trustee or any Holder to assert any claim or demand or to enforce any right or remedy under the provisions of this Indenture or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Indenture or any other agreement, including with respect to any other Note Guarantor under this Agreement; (iii) any default, failure or delay, wilful or otherwise, in the performance of the Guaranteed Obligations of such Note Guarantor; or (iv) any other act or omission that may or might in any manner or to any extent vary the risk of such Note Guarantor or otherwise operate as a discharge of such Note Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Guaranteed Obligations of such Note Guarantor).

(d) To the fullest extent permitted by applicable law, each Note Guarantor waives any defense based on or arising out of any defense of the Company or any other Note Guarantor or the unenforceability of the Guaranteed Obligations of such Note Guarantor or any part thereof from any cause, or the cessation from any cause of the liability of the Issuer or any other Note Guarantor, other than the indefeasible payment in full in cash of all the Guaranteed Obligations of such Note Guarantor. The Trustee may, at its election, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with the Issuer or any Note Guarantor or exercise any other right or remedy available to them against the Issuer or any Note Guarantor, in each case without affecting or impairing in any way the liability of any Note Guarantor hereunder except to the extent the Guaranteed Obligations of such Note Guarantor have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Note Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Note Guarantor against the Issuer or any other Note Guarantor, as the case may be.

(e) Each of the Note Guarantors agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Guaranteed Obligation of such Note Guarantor is rescinded or must otherwise be restored by the Trustee upon the bankruptcy or reorganization of the Issuer, any other Note Guarantor or otherwise.

SECTION 10.02. Limitation on Liability . Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Note Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Note Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

 

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SECTION 10.03. Successors and Assigns . This Article 10 shall be binding upon each Note Guarantor and its successors and assigns and shall inure to the benefit of the successors, transferees and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

SECTION 10.04. No Waiver . Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 10 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 10 at law, in equity, by statute or otherwise.

SECTION 10.05. Modification . No modification, amendment or waiver of any provision of this Article 10, nor the consent to any departure by any Note Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Note Guarantor in any case shall entitle such Note Guarantor to any other or further notice or demand in the same, similar or other circumstances.

SECTION 10.06. Release of Subsidiary Guarantor . A Subsidiary Guarantor shall be released from its obligations under this Article 10 (other than any obligation that may have arisen under Section 10.07):

(1) upon the sale (including any sale pursuant to any exercise of remedies by a holder of Indebtedness of the Issuer or of such Subsidiary Guarantor) or other disposition (including by way of consolidation or merger) of such Subsidiary Guarantor;

(2) upon the sale or disposition of all or substantially all the assets of such Subsidiary Guarantor;

(3) upon the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the terms of this Indenture;

(4) unless there is then existing an Event of Default, at such time and for so long as any such Subsidiary Guarantor that became a Subsidiary Guarantor

 

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after the Closing Date pursuant to Section 4.11 does not Guarantee any Indebtedness that would have required such Subsidiary Guarantor to enter into a supplemental indenture pursuant to Section 4.11 and the Issuer provides an Officers’ Certificate to the Trustee certifying that no such Guarantee is outstanding and the Issuer elects to have such Subsidiary Guarantor released from this Article 10;

(5) at any time during a Suspension Period if the Issuer provides an Officers’ Certificate to the Trustee stating that the Issuer elects to have such Subsidiary Guarantor released from this Article 10; or

(6) upon the exercise by the Issuer of its legal defeasance option or its covenant defeasance option or if the Obligations of the Issuer under this Indenture and the Notes are discharged pursuant to Article 8;

provided , however , that in the case of clauses (1) and (2) above, (i) such sale or other disposition is made to a Person other than the Company or a Subsidiary of the Company, (ii) such sale or disposition is otherwise permitted by this Indenture and (iii) the Company complies with its obligations under Section 4.06.

At the request of the Issuer, the Trustee shall execute and deliver an appropriate instrument evidencing such release (it being understood that the failure to obtain any such instrument shall not impair any release pursuant to this Section 10.06).

SECTION 10.07. Contribution . Each Note Guarantor that makes a payment under its Note Guarantee shall be entitled upon payment in full of all Guaranteed Obligations under this Indenture to a contribution from each other Note Guarantor in an amount equal to such other Note Guarantor’s pro rata portion of such payment based on the respective net assets of all the Note Guarantors at the time of such payment determined in accordance with GAAP.

ARTICLE 11

Miscellaneous

SECTION 11.01. [Reserved] .

 

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SECTION 11.02. Notices . Any notice or communication shall be in writing in the English language and delivered in person or mailed by first-class mail addressed as follows:

if to the Issuer:

Goodyear Dunlop Tires Europe B.V.

Park Lane Culliganlaan 2A

1831 Diegem, Brussels

Belgium

fax: 0032-2-761 1879

Attention of: Vice President Finance EMEA

if to the Company or any Subsidiary Guarantor:

The Goodyear Tire & Rubber Company

200 Innovation Way

Akron, Ohio 44316-0001

Attention of: Treasurer

if to the Trustee:

Deutsche Trustee Company Limited

Winchester House

1 Great Winchester Street

London EC2N 2DB

United Kingdom

fax: +44 (0) 20 7547 6149

Attention of: Trustee & Securities Services

if to the Registrar and Luxembourg Paying Agent and Transfer Agent:

Deutsche Bank Luxembourg S.A.

2 Boulevard Konrad Adenauer

L-1115, Luxembourg

fax: +352 473 136

Attention of: Luxembourg Registrar

 

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if to the Principal Paying Agent and Transfer Agent:

Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester Street

London EC2N 2DB

United Kingdom

fax: +44 (0) 207 547 6149

Attention of: Debt and Agency Services

Each of the Issuer, the Company, any Subsidiary Guarantor, the Trustee and any Agent set forth in the immediately preceding paragraph by notice to the others may designate additional or different addresses for subsequent notices or communications.

Any notice or communication mailed to a Holder shall be mailed to the Holder at the Holder’s address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

For Notes which are represented by global certificates held on behalf of Euroclear or Clearstream, notices may be given by delivery of the relevant notices to Euroclear or Clearstream for communication to entitled account holders. So long as any Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF and the rules of the Luxembourg Stock Exchange so require, any such notice to the Holders of the relevant notes shall also be published in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort ) or, to the extent and in the manner permitted by such rules, post such notice on the official website of the Luxembourg Stock Exchange (www.bourse.lu), and, in connection with any redemption, the Issuer shall notify the Luxembourg Stock Exchange of any change in the principal amount of Notes outstanding.

Notwithstanding any other provision of this Indenture or any Note, where this Indenture or any Note provides for notice of any event (including any notice of redemption) to a Holder of a Note in global form (whether by mail or otherwise), such notice shall be sufficiently given if given to the depositary for such Note (or its designee) pursuant to the customary procedures of such depositary.

Failure to deliver a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is delivered in the manner provided above, it is duly given, whether or not the addressee receives it.

In no event, shall Agents be liable for any losses arising from Agents receiving and acting on any instructions from the Issuer or Note Guarantor via any non-secure method of transmission or communication, including, without limitation, by facsimile or email.

 

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SECTION 11.03. [Reserved] .

SECTION 11.04. Certificate and Opinion as to Conditions Precedent . Upon any request or application by the Issuer to the Trustee to take or refrain from taking any action under this Indenture, the Issuer shall furnish to the Trustee, to the extent reasonably requested by the Trustee:

(1) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with ( provided , however , that such counsel may rely as to matters of fact on Officers’ Certificates).

SECTION 11.05. Statements Required in Certificate or Opinion . Each certificate (other than a certificate delivered pursuant to Section 4.13) or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(1) a statement that the individual making such certificate or opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

SECTION 11.06. When Notes Disregarded . In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination.

 

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SECTION 11.07. Rules by Trustee and Agents . The Trustee may make reasonable rules for action by or a meeting of Holders. Each Agent may make reasonable rules for its functions.

SECTION 11.08. Legal Holidays . If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.

SECTION 11.09. Governing Law; Jury Trial Waiver; Submission to Jurisdiction; Service . (a) This Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.

(b) EACH OF THE COMPANY, THE SUBSIDIARY GUARANTORS AND THE TRUSTEE HEREBY, AND EACH HOLDER OF A NOTE BY ITS ACCEPTANCE THEREOF, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES, THE NOTE GUARANTEES OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

(c) The Trustee, the Company, the Issuer and each Subsidiary Guarantor irrevocably submit to the non-exclusive jurisdiction of any state or federal court located in The Borough of Manhattan, City of New York in relation to any legal action or proceeding arising out of, related to or in connection with this Indenture, the Notes and the Note Guarantees.

(d) The Issuer and each Subsidiary Guarantor appoint the Company as its agent for service of process in any such action or proceeding.

SECTION 11.10. Judgment Currency . Any payment on account of an amount that is payable in euros (the “Required Currency”) which is made to or for the account of any Holder or the Trustee in lawful currency of any other jurisdiction (the “Judgment Currency”), whether as a result of any judgment or order or the enforcement thereof or the liquidation of the Company, the Issuer or any Subsidiary Guarantor, shall constitute a discharge of the Company’s, the Issuer’s or the Subsidiary Guarantor’s obligation under this Indenture and the Notes, as the case may be, only to the extent of the amount of the Required Currency which such Holder or the Trustee, as the case may be, could

 

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purchase in the London foreign exchange markets with the amount of the Judgment Currency in accordance with normal banking procedures at the rate of exchange prevailing on the first Business Day following receipt of the payment in the Judgment Currency. If the amount of the Required Currency that could be so purchased is less than the amount of the Required Currency originally due to such Holder or the Trustee, as the case may be, under this Indenture or the Notes, the Company, the Issuer and the Subsidiary Guarantors shall indemnify and hold harmless the Holder or the Trustee, as the case may be, from and against all loss sustained by such recipient as a result of such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Indenture or the Notes, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any Holder or the Trustee from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due under this Indenture, the Notes or any judgment or order. If the amount of the Required Currency that could be so purchased is greater than the amount of the Required Currency originally due to such Holder or the Trustee, as the case may be, under this Indenture or the Notes, such Holder or the Trustee, as the case may be, shall return the amount of any excess to the Company, the Issuer or such Subsidiary Guarantor, as the case may be (or to any other Person who may be entitled thereto under applicable law).

SECTION 11.11. No Recourse Against Others . A director, officer, employee or shareholder, as such, of the Issuer or any Note Guarantor shall not have any liability for any obligations of the Issuer under the Notes or this Indenture or of such Note Guarantor under its Note Guarantee or this Indenture, or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes.

SECTION 11.12. Successors . All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

SECTION 11.13. Multiple Originals . The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

 

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SECTION 11.14. Table of Contents; Headings . The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

 

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

 

GOODYEAR DUNLOP TIRES EUROPE B.V.
    by       /s/ Christopher Collins
  Name:   Christopher Collins
  Title:   Attorney-in-fact

 

Indenture - Goodyear Dunlop Tires Europe B.V.

PARENT GUARANTOR

 

THE GOODYEAR TIRE & RUBBER COMPANY

    By       /s/ Peter R. Rapin
  Name:   Peter R. Rapin
  Title:   Vice President and Treasurer

 

Indenture - The Goodyear Tire and Rubber Company

SUBSIDIARY GUARANTORS

 

CELERON CORPORATION

    By       /s/ Peter R. Rapin
  Name:   Peter R. Rapin
  Title:   Vice President and Treasurer

 

DIVESTED COMPANIES HOLDING COMPANY
    By       /s/ Steven M. Wilton
  Name:   Steven M. Wilton
  Title:   Vice President, Treasurer and Secretary
    By       /s/ Randall M. Loyd
  Name:   Randall M. Loyd
  Title:   Vice President and Assistant Secretary

 

DIVESTED LITCHFIELD PARK

PROPERTIES, INC.

    By       /s/ Steven M. Wilton
  Name:   Steven M. Wilton
  Title:   Vice President, Treasurer and Secretary
    By       /s/ Randall M. Loyd
  Name:   Randall M. Loyd
  Title:   Vice President and Assistant Secretary

 

GOODYEAR EXPORT INC.
    By       /s/ Peter R. Rapin
  Name:   Peter R. Rapin
  Title:   Vice President and Treasurer

 

Indenture - Subsidiary Guarantors

GOODYEAR FARMS, INC.
    By       /s/ Peter R. Rapin
  Name:   Peter R. Rapin
  Title:   Vice President and Treasurer

 

GOODYEAR INTERNATIONAL CORPORATION
    By       /s/ Peter R. Rapin
  Name:   Peter R. Rapin
  Title:   Vice President and Treasurer

 

GOODYEAR WESTERN HEMISPHERE

CORPORATION

    By       /s/ Peter R. Rapin
  Name:   Peter R. Rapin
  Title:   Vice President and Treasurer

 

T&WA, INC.
    By       /s/ Peter R. Rapin
  Name:   Peter R. Rapin
  Title:   Treasurer

 

WINGFOOT COMMERCIAL TIRE

SYSTEMS, LLC

    By       /s/ Peter R. Rapin
  Name:   Peter R. Rapin
  Title:   Vice President and Treasurer

 

Indenture - Subsidiary Guarantors

GOODYEAR CANADA INC.
    By       /s/ C. Pajot
  Name:   C. Pajot
  Title:   President
    By       /s/ R. Hunter
  Name:   R. Hunter
  Title:   Secretary

 

WINGFOOT MOLD LEASING COMPANY
    By       /s/ Paul Braczek
  Name:   Paul Braczek
  Title:   Secretary

 

Indenture - Subsidiary Guarantors

DEUTSCHE TRUSTEE COMPANY

LIMITED, as Trustee,

    by       /s/ Miriam Keeler
  Name:   Miriam Keeler
  Title:   Associate Director
    by       /s/ S Ferguson
  Name:   S Ferguson
  Title:   Associate Director

 

DEUTSCHE BANK AG, LONDON BRANCH, as Principal Paying Agent and Transfer Agent,
    by       /s/ Miriam Keeler
  Name:   Miriam Keeler
  Title:   Director
    by       /s/ S Ferguson
  Name:   S Ferguson
  Title:   Vice President

 

DEUTSCHE BANK LUXEMBOURG S.A., as Registrar and Luxembourg Paying Agent and Transfer Agent,
    by       /s/ Miriam Keeler
  Name:   Miriam Keeler
  Title:   Attorney
    by       /s/ S Ferguson
  Name:   S Ferguson
  Title:   Attorney

APPENDIX A

PROVISIONS RELATING TO NOTES

1. Definitions

1.1 Definitions

Capitalized terms used but not otherwise defined in this Appendix A shall have the meanings assigned to them in the Indenture. For the purposes of this Appendix A the following terms shall have the meanings indicated below:

“Applicable Procedures” means, with respect to any transfer or transaction involving a Regulation S Global Note or beneficial interest therein, the rules and procedures of Euroclear and Clearstream, in each case to the extent applicable to such transaction and as in effect from time to time.

“Definitive Registered Note” means a certificated Note that does not include the Global Notes Legend.

“Depositary” means Deutsche Bank AG, London Branch, as common depositary of Euroclear and Clearstream, or another Person designated as common depositary by the Issuer.

“QIB” means a “Qualified Institutional Buyer” as defined in Rule 144A.

“Regulation S” means Regulation S under the Securities Act.

“Regulation S Notes” means all Notes offered and sold outside the United States in reliance on Regulation S.

“Restricted Period”, with respect to any Notes, means the period of 40 consecutive days beginning on and including the later of (a) the day on which such Notes are first offered to persons other than distributors (as defined in Regulation S) in reliance on Regulation S, notice of which day shall be promptly given by the Issuer to the Trustee, and (b) the Closing Date with respect to such Notes.

“Rule 144A” means Rule 144A under the Securities Act.

“Rule 144A Notes” means all Notes offered and sold to QIBs in reliance on Rule 144A.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as amended.

“Transfer Restricted Notes” means Definitive Registered Notes and any other Notes that bear or are required to bear the Restricted Notes Legend.

1.2 Other Definitions

 

Term

   Defined in
Section 		 

“Agent Members”

     2.1(c)   

“Definitive Registered Notes Legend”

     2.3(e)(iii)   

“Global Note”

     2.1(b)   

“Global Notes Legend”

     2.3(e)(iv)   

“Permanent Regulation S Global Note”

     2.1(b)   

“Regulation S Global Note”

     2.1(b)   

“Restricted Notes Legend”

     2.3(e)(i)   

“Rule 144A Global Note”

     2.1(b)   

“Temporary Regulation S Global Note”

     2.1(b)   

“Temporary Regulation S Global Notes Legend”

     2.3(e)(ii)   

2. The Notes

2.1 Form and Dating

(a) The Notes issued on the date hereof will be (i) offered and sold by the Issuer pursuant to a purchase agreement and (ii) resold initially only to (1) QIBs in reliance on Rule 144A and (2) Persons outside the United States in reliance on Regulation S. Such Notes may thereafter be transferred to, among others, QIBs and purchasers outside the United States in reliance on Regulation S.

(b) Global Notes . Rule 144A Notes shall be issued initially in the form of one or more permanent global Notes in fully registered form without interest coupons (collectively, the “Rule 144A Global Notes”). The Regulation S Global Notes shall be issued initially in the form of one or more temporary global Notes in fully registered form without interest coupons (the “Temporary Regulation S Global Notes”). Beneficial interests in the Temporary Regulation S Global Notes will be exchanged for beneficial interests in one or more corresponding permanent global Notes in fully registered form without interest coupons (the “Permanent Regulation S Global Notes” and, together with the Temporary Regulation S Global Notes, the “Regulation S Global Notes”) within a reasonable period after the expiration of the Restricted Period upon delivery of the certification contemplated by Section 3. The Temporary Regulation S Global Notes shall also bear the Temporary Regulation S Notes Legend. The Rule 144A Global Notes and the Regulation S Global Notes shall bear the Global Notes Legend and the Restricted Notes Legend. The Rule 144A Global Notes and the Regulation S Global Notes shall be deposited on behalf of the purchasers of the Notes represented thereby with the Depositary, and registered in the name of the Depositary or a nominee of such Depositary, duly executed by the Issuer and authenticated by the Trustee or an Authentication Agent as provided in the Indenture. The Rule 144A Global Notes and the Regulation S Global Notes are each referred to herein as a “Global Note” and are collectively referred to herein as “Global Notes”. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee or Registrar and the Depositary or its nominee and on the schedules thereto as hereinafter provided, in connection with transfers, exchanges, redemptions and repurchases of beneficial interests therein.

 

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(c) Book-Entry Provisions . This Section 2.1(c) shall apply only to a Global Note deposited with or on behalf of the Depositary.

The Issuer shall execute and the Trustee or an Authentication Agent shall, in accordance with Section 2.02 of the Indenture and Section 2.2 and pursuant to an Authentication Order, authenticate and deliver initially one or more Global Notes that (i) shall be registered in the name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and (ii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary’s instructions.

Members of, or direct or indirect participants in, Euroclear or Clearstream (“Agent Members”) shall have no rights under the Indenture with respect to any Global Note held on their behalf by the Depositary or under such Global Note. So long as the Depositary or any of its nominees is the registered holder of a Global Note, the Depositary or such nominee will be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the sole owner and holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by Euroclear or Clearstream or impair, as between Euroclear or Clearstream and their respective Agent Members, the operation of customary practices thereof governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

(d) Definitive Registered Notes . Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Global Notes will not be entitled to receive physical delivery of certificated Notes.

2.2 Authentication . The Trustee or an Authentication Agent shall authenticate and make available for delivery upon receipt of an Authentication Order of the Issuer signed by two of its Officers or a duly authorized attorney-in-fact (a) Notes for original issue on the date hereof in an aggregate principal amount of €250,000,000 and (b) subject to the terms of the Indenture, Additional Notes in an unlimited aggregate principal amount. Such Authentication Order shall (x) specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated, (y) direct the Trustee or an Authentication Agent to authenticate such Notes and (z) certify, or be accompanied by an Officers’ Certificate certifying, that all conditions precedent to the issuance of such Notes have been complied with in accordance with the terms hereof.

2.3 Transfer and Exchange . (a)  Transfer and Exchange of Definitive Registered Notes . When Definitive Registered Notes are presented to the Registrar with a request:

 

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(i) to register the transfer of such Definitive Registered Notes; or

(ii) to exchange such Definitive Registered Notes for an equal principal amount of Definitive Registered Notes of other authorized denominations,

the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met, provided, however, that the Definitive Registered Notes surrendered for transfer or exchange:

(1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Issuer and the Registrar, duly executed by the Holder thereof or its attorney duly authorized in writing; and

(2) in the case of Transfer Restricted Notes, are accompanied by the following additional information and documents, as applicable:

(i) if such Definitive Registered Notes are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse side of the Note); or

(ii) if such Definitive Registered Notes are being transferred to the Issuer, a certification to that effect (in the form set forth on the reverse side of the Note); or

(iii) if such Definitive Registered Notes are being transferred pursuant to an exemption from registration in accordance with Rule 144A or Regulation S or another available exemption under the Securities Act, (x) a certification to that effect (in the form set forth on the reverse side of the Note) and (y) if the Issuer or Registrar so requests, an Opinion of Counsel or other evidence reasonably satisfactory to it that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

(b) Restrictions on Transfer of a Definitive Registered Note for a Beneficial Interest in a Global Note . A Definitive Registered Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Registered Note, duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Issuer, the Trustee, the Transfer Agent and the Registrar, together with:

(i) certification (in the form provided in Exhibit 2) that such Definitive Registered Note is being transferred (1) to a QIB in accordance with Rule 144A or (2) outside the United States in an offshore transaction within the meaning of Regulation S and in compliance with Rule 904 under the Securities Act; and

(ii) written instructions directing the Registrar to make, or to direct the Depositary to make, an adjustment on its books and records with respect to such Global Note to reflect an increase in the aggregate principal amount of the Notes represented by the Global Note, such instructions to contain information regarding the account to be credited with such increase; then the Trustee shall cancel such Definitive Registered Note

 

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and cause, or direct the Depositary to cause the aggregate principal amount of Notes represented by the Global Note to be increased by the aggregate principal amount of the Definitive Registered Note to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Note equal to the principal amount of the Definitive Registered Note so cancelled. If no Global Notes are then outstanding and the Global Notes have not been previously exchanged for Definitive Registered Notes pursuant to Section 2.4, the Issuer shall issue and the Trustee or an Authentication Agent shall authenticate, upon receipt of an Authentication Order, a new Global Note in the appropriate principal amount.

(c) Transfer and Exchange of Global Notes .

(i) The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depositary, in accordance with the Indenture (including applicable restrictions on transfer set forth herein, if any) and the applicable rules and procedures of Euroclear and Clearstream. A transferor of a beneficial interest in a Global Note shall deliver to the Registrar a written order given in accordance with the applicable rules and procedures of Euroclear and Clearstream containing information regarding the Agent Member account to be credited with a beneficial interest in such Global Note or another Global Note and such account shall be credited in accordance with such order with a beneficial interest in the applicable Global Note and the Agent Member account from which such transfer is made shall be debited by an amount equal to the beneficial interest in the Global Note being transferred. Transfers by an owner of a beneficial interest in a Rule 144A Global Note to a transferee who takes delivery of such interest through a Regulation S Global Note, whether before or after the expiration of the Restricted Period, shall be made only upon receipt by the Registrar of a certification in the form provided in Exhibit 2 from the transferor to the effect that such transfer is being made in accordance with Regulation S.

(ii) Notwithstanding any other provisions of this Appendix A (other than the provisions set forth in Section 2.4), a Global Note may not be transferred as a whole except by the Depositary to a successor Depositary or a nominee of such successor Depositary.

(d) Restrictions on Transfer of Regulation S Global Note .

(i) Prior to the expiration of the Restricted Period, interests in the Regulation S Global Note may only be held through Euroclear or Clearstream. During the Restricted Period, beneficial interests in the Temporary Regulation S Global Note may only be sold, pledged or transferred through Euroclear or Clearstream in accordance with the Applicable Procedures and only (1) to the Company or any Subsidiary thereof, (2) so long as such security is eligible for resale pursuant to Rule 144A, to a person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A and who takes ownership of such beneficial interest through the Rule 144A Global Note or (3) to non-U.S. Persons in an offshore transaction in accordance with Regulation S, in each case in accordance with any applicable securities

 

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laws of any state of the United States. Prior to the expiration of the Restricted Period, transfers by an owner of a beneficial interest in the Regulation S Global Note to a transferee who takes delivery of such interest through the Rule 144A Global Note shall be made only in accordance with Applicable Procedures and upon receipt by the Registrar of a written certification from the transferor of the beneficial interest in the form provided in Exhibit 2 to the effect that such transfer is being made to a QIB within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A. Such written certification shall no longer be required after the expiration of the Restricted Period.

(ii) Upon the expiration of the Restricted Period, beneficial ownership interests in the Regulation S Global Note shall be transferable in accordance with applicable law and the other terms of the Indenture.

(iii) Notwithstanding anything to the contrary in the Indenture, in no event shall a Definitive Registered Note be delivered upon exchange or transfer of a beneficial interest in a Temporary Regulation S Global Note prior to the end of the Restricted Period.

(e) Legends .

(i) Each Transfer Restricted Note shall bear the following legend (the “Restricted Notes Legend”):

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) THAT IS [IN THE CASE OF RULE 144A NOTES: ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF, THE ORIGINAL ISSUE DATE OF THE ISSUANCE OF ANY ADDITIONAL NOTES AND THE LAST DATE ON WHICH EITHER THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY),] [IN THE CASE OF REGULATION S NOTES: 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE DATE ON WHICH THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) WAS FIRST OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN RULE 902 OF REGULATION S) IN RELIANCE ON REGULATION S], ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT

 

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THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. [IN THE CASE OF REGULATION S NOTES DURING THE RESTRICTED PERIOD APPLICABLE TO REGULATION S NOTES: BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.]”

(ii) Each Temporary Regulation S Global Note shall bear the following additional legend (the “Temporary Regulation S Global Notes Legend”):

“THIS SECURITY IS A TEMPORARY GLOBAL NOTE. PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD APPLICABLE HERETO, BENEFICIAL INTERESTS HEREIN MAY NOT BE HELD BY ANY PERSON OTHER THAN A NON-U.S. PERSON. BENEFICIAL INTERESTS HEREIN ARE NOT EXCHANGEABLE FOR PHYSICAL SECURITIES OTHER THAN A PERMANENT GLOBAL NOTE IN ACCORDANCE WITH THE TERMS OF THE INDENTURE. TERMS IN THIS LEGEND ARE USED AS USED IN REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED.”

(iii) Each Definitive Registered Note shall bear the following additional legend (the “Definitive Registered Notes Legend”):

“IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.”

 

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(iv) Each Global Note shall bear the following legend (the “Global Notes Legend”):

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR BANK S.A./N.V. (“EUROCLEAR”), OR CLEARSTREAM BANKING, SOCIÉTÉ ANONYME (“CLEARSTREAM”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF ITS AUTHORIZED NOMINEE, OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR OR CLEARSTREAM (AND ANY PAYMENT IS MADE TO ITS AUTHORIZED NOMINEE, OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR OR CLEARSTREAM), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, ITS AUTHORIZED NOMINEE, HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITARY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.”

(f) Cancellation or Adjustment of Global Note . At such time as all beneficial interests in a Global Note have either been exchanged for Definitive Registered Notes, transferred, redeemed, repurchased or cancelled, such Global Note shall be returned by the Depositary to the Trustee for cancellation or retained and cancelled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Definitive Registered Notes, transferred in exchange for an interest in another Global Note, redeemed, repurchased or cancelled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Registrar (if it is then the Depositary for such Global Note), by the Trustee or the Depositary, to reflect such reduction.

(g) Obligations with Respect to Transfers and Exchanges .

(i) To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee or an Authentication Agent shall authenticate, Definitive Registered Notes and Global Notes at the Registrar’s request.

(ii) No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to the Indenture).

 

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(iii) Prior to the due presentation for registration of transfer of any Note, the Issuer, the Trustee, the Paying Agent or the Registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Issuer, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.

(iv) All Notes issued upon any transfer or exchange pursuant to the terms of the Indenture shall evidence the same debt and shall be entitled to the same benefits under the Indenture as the Notes surrendered upon such transfer or exchange.

(v) Notwithstanding any statement herein, the Issuer and the Trustee, and their respective agents and nominees, reserve the right to impose such transfer, certification, exchange or other requirements, and to require such restrictive legends on certificates evidencing Notes, as they may determine are necessary to ensure compliance with the securities laws of the United States and any state therein and any other applicable laws or as Euroclear or Clearstream may require.

(h) No Obligation of the Trustee .

(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depositary or any other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to the Holders (which shall be the Depositary or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance, with any restrictions on transfer imposed under the Indenture or under applicable law or regulation with respect to any transfer of any interest in any Note (including, without limitation, any transfers between or among Depositary participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of the Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

 

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2.4 Definitive Registered Notes .

(a) A Global Note deposited with the Depositary pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Registered Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 and (i) Euroclear and Clearstream notify the Issuer they are unwilling or unable to continue as clearing agency and a successor clearing agency is not appointed by the Issuer within 90 days, (ii) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary and a successor Depositary is not appointed by the Issuer within 90 days of such notice and (iii) the Issuer, at its option, notifies the Trustee that the Issuer elects to cause the issuance of definitive Notes in registered form for all, but not a part of, the Global Notes. Except as provided by the foregoing, owners of book-entry interests in the Global Notes will not be entitled to have any portions of such Global Notes registered in their names, will not receive or be entitled to receive physical delivery of Notes in certificated form and will not be considered the owners or holders of such Global Notes (or any notes represented thereby) under the Indenture or the Notes.

(b) Any Global Note that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee or an Authentication Agent shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Definitive Registered Notes of authorized denominations. Any portion of a Global Note transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in minimum denominations of €100,000 and integral multiples of €1,000 in excess thereof and registered in such names as the Depositary shall direct. Any certificated Note in the form of a Definitive Registered Note delivered in exchange for an interest in the Global Note shall, except as otherwise provided by Section 2.3(e), bear the Restricted Notes Legend.

(c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under the Indenture or the Notes.

(d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Issuer will promptly make available to the Trustee a reasonable supply of Definitive Registered Notes in fully registered form without interest coupons.

3. Form of Certificate to be Delivered upon Termination of Restricted Period .

[Date]

Goodyear Dunlop Tires Europe B.V.

c/o Deutsche Trustee Company Limited,

 

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[            ]

Attention: [            ]

Telecopy: [            ]

 

  Re: Goodyear Dunlop Tires Europe B.V. (the “Issuer”)

3.750% Senior Notes due 2023 (the “Notes”)

Ladies and Gentlemen:

This letter relates to Notes represented by a temporary global note (the “Temporary Regulation S Global Note”). Pursuant to Section 2.1(b) of Appendix A to the Indenture dated as of December 15, 2015 relating to the Notes (the “Indenture”), we hereby certify that the persons who are the beneficial owners of €[              ] principal amount of Notes represented by the Temporary Regulation S Global Note are either non-U.S. persons or U.S. persons who purchased such interests in a transaction that did not require registration under the Securities Act of 1933, as amended. Accordingly, you are hereby requested to issue a Permanent Regulation S Global Note representing the undersigned’s interest in the principal amount of Notes represented by the Temporary Regulation S Global Note, all in the manner provided by the Indenture. We certify that we are not an Affiliate of the Issuer.

You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this letter have the meanings set forth in Regulation S.

 

Very truly yours,
[Name of Transferor]
By:    

 

  Authorized Signature

 

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EXHIBIT 1

[FORM OF FACE OF SECURITY]

3.750% Senior Notes due 2023

[Global Notes Legend]

[Restricted Notes Legend]

[Temporary Regulation S Global Notes Legend]

[Definitive Registered Notes Legend]

No. -   €                 

3.750% Senior Note due 2023

Common Code No. [Reg S/144A] [[•]/[•]]

ISIN No. [Reg S/144A] [[•]/[•]]

GOODYEAR DUNLOP TIRES EUROPE B.V., a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), promises to pay to [                ], or registered assigns, the principal sum [of €                ] [listed on the Schedule of Increases or Decreases in Global Note attached hereto] 1 on December 15, 2023.

Interest Payment Dates: June 15 and December 15, commencing June 15, 2016

Record Dates: June 14 or December 14

 

1   Use the Schedule of Increases and Decreases language if Note is in Global Form.

 

2

Additional provisions of this Note are set forth on the other side of this Note.

IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

 

GOODYEAR DUNLOP TIRES EUROPE B.V.,

      by

   
  Name:
  Title:

Dated:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

DEUTSCHE TRUSTEE COMPANY LIMITED,

as Trustee, certifies that this is one of the Notes referred to in the Indenture.

 

By:    
  Authorized Signatory

 

*/   If the Note is to be issued in global form, add the Global Notes Legend and the attachment from Exhibit 1 captioned “TO BE ATTACHED TO GLOBAL NOTES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE”.

 

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[FORM OF REVERSE SIDE OF SECURITY ]

3.750% Senior Note due 2023

1. Interest

GOODYEAR DUNLOP TIRES EUROPE B.V., a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) (such company, and its successors and assigns under the Indenture hereinafter referred to, being called the “Issuer”), promises to pay interest on the principal amount of this Note at the rate per annum shown above. The Issuer shall pay interest semi-annually on June 15 and December 15 of each year, commencing on June 15, 2016. Interest on the Notes shall accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from December 15, 2015 until the principal hereof is due. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Issuer shall pay interest on overdue principal at the rate borne by the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

2. Method of Payment

The Issuer shall pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders at the close of business on June 14 or December 14 next preceding the interest payment date even if Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Issuer shall pay principal, interest, Additional Amounts and premium, if any, in euros. Principal, interest, Additional Amounts and premium, if any, on Global Notes will be payable at the specified office or agency of the relevant Paying Agent(s); provided, that all such payments with respect to Notes represented by one or more Global Notes registered in the name of or held by a nominee of Euroclear and/or Clearstream will be made by wire transfer of immediately available funds to the account specified by the Holder or Holders thereof.

Principal, interest, Additional Amounts and premium, if any, on any Definitive Registered Notes will be payable at the specified office or agency of one or more Paying Agents maintained for such purposes. In addition, interest on the Definitive Registered Notes may be paid by check mailed to the person entitled thereto as shown on the register for the Definitive Registered Notes.

If the due date for any payment in respect of any Note is not a Business Day at the place in which such payment is due to be paid, the Holder thereof will not be entitled to payment of the amount due until the next succeeding Business Day at such place, and will not be entitled to any further interest or other payment as a result of any such delay.

3. Paying Agent, Transfer Agent and Registrar

Initially, Deutsche Bank Luxembourg S.A. will act as Transfer Agent and Paying Agent in Luxembourg and as Registrar, and Deutsche Bank AG, London Branch will act as Transfer Agent and Principal Paying Agent in London. The Issuer may appoint and change any Paying Agent, Transfer Agent or Registrar upon written notice to such Agent and to the Trustee, without prior notice to the Holders. The Issuer, the Company or any Wholly Owned Subsidiary may act as Paying Agent, Transfer Agent or Registrar.

4. Indenture

The Issuer issued the Notes under an Indenture dated as of December 15, 2015 (the “Indenture”), among the Issuer, the Note Guarantors, the Trustee, Deutsche Bank AG, London Branch, as Principal Paying Agent and Transfer Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Luxembourg Paying Agent and Transfer Agent. The terms of the Notes include those stated in the Indenture. Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all terms and provisions of the Indenture, and Holders (as defined in the Indenture) are referred to the Indenture for a statement of such terms and provisions. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

The Notes are senior unsecured obligations of the Issuer. This Note is one of the Notes referred to in the Indenture. The Indenture imposes certain limitations on the ability of the Issuer, the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, sell assets, including shares of capital stock of Restricted Subsidiaries, enter into or permit certain transactions with Affiliates and create or incur Liens. The Indenture also imposes limitations on the ability of the Issuer and each Note Guarantor to consolidate or merge with or into any other Person or convey, transfer or lease all or substantially all of its property.

Following the first day (the “Suspension Date”) that (i) the Notes have an Investment Grade Rating from at least two of the Rating Agencies, and (ii) no Default with respect to the Notes has occurred and is continuing under the Indenture, the Company and its Restricted Subsidiaries will not be subject to Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.11 and Section 5.01(a)(3) (collectively, the “Suspended Covenants”) of the Indenture with respect to the Notes. In addition, the Company may elect to suspend the Subsidiary Guarantees with respect to the Notes. Upon and following any Reversion Date, the Company and its Restricted Subsidiaries shall again be subject to the Suspended Covenants with respect to the Notes with respect to future events and the Subsidiary Guarantees with respect to the Notes shall be reinstated.

 

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5. Guarantee

The payment by the Issuer of the principal of, and premium and interest on, the Notes is fully and unconditionally guaranteed on a joint and several senior unsecured basis by each Note Guarantor to the extent set forth in the Indenture. The precise terms of the Note Guarantee of the Notes and the Guaranteed Obligations of the Note Guarantors with respect to the Notes are expressly set forth in Article 10 of the Indenture.

6. Optional Redemption

Except as set forth below in this paragraph 6 and paragraph 7, the Issuer will not be entitled to redeem the Notes.

On and after December 15, 2018, the Issuer may redeem the Notes, in whole or in part, on not less than 30 nor more than 60 days’ prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12 month period commencing on December 15 of the years set forth below:

 

Year

   Redemption
Price 		 

2018

     101.875 % 

2019

     100.938 % 

2020 and thereafter

     100.000 % 

In addition, prior to December 15, 2018, the Issuer may, on one or more occasions, redeem up to a maximum of 35% of the original aggregate principal amount of the Notes (calculated giving effect to any issuance of Additional Notes) with the Net Cash Proceeds of one or more Equity Offerings, at a redemption price equal to 103.750% of the principal amount thereof, plus accrued and unpaid interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided , however , that (1) at least 65% of the original aggregate principal amount of the Notes (calculated giving effect to any issuance of Additional Notes) remains outstanding after giving effect to any such redemption and (2) any such redemption by the Issuer is made within 90 days after the closing of such Equity Offering and is made in accordance with certain procedures set forth in the Indenture.

In addition, prior to December 15, 2018, the Issuer may at its option redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest to, the redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date). Notice of such redemption must be given to each registered Holder not less than 30 nor more than 60 days prior to the redemption date.

 

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“Applicable Premium” means, with respect to a Note at any redemption date, the greater of (1) 1.00% of the principal amount of such Note and (2) the excess of (A) the present value at such redemption date of (i) the redemption price of such Note on December 15, 2018 (such redemption price being described in the second paragraph in this section exclusive of any accrued interest), plus (ii) all required remaining scheduled interest payments due on such Note through December 15, 2018 (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to the Bund Rate plus 50 basis points, over (B) the principal amount of such Note on such redemption date.

“Bund Rate” means, with respect to any redemption date, the yield to maturity at the time of computation of direct obligations of the Federal Republic of Germany ( Bunds or Bundesanleihen ) with a constant maturity (as officially compiled and published in the most recent financial statistics that have become publicly available at least two Business Days (but not more than five Business Days) prior to the redemption date (or, if such financial statistics are not so published or available, any publicly available source of similar market data selected by the Issuer in good faith)) most nearly equal to the period from such redemption date to December 15, 2018; provided , however , that if the period from the redemption date to December 15, 2018 is not equal to the constant maturity of the direct obligation of the Federal Republic of Germany for which a weekly average yield is given, the Bund Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of direct obligations of the Federal Republic of Germany for which such yields are given, except that if the period from the redemption date to December 15, 2018 is less than a year, the weekly average yield on actually traded direct obligations of the Federal Republic of Germany adjusted to a constant maturity of one year shall be used.

7. Redemption Upon Changes in Withholding Taxes

The Issuer is entitled to redeem the Notes, at its option, at any time as a whole but not in part, upon not less than 30 nor more than 60 days’ notice, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in the event the Issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Notes, any Additional Amounts as a result of:

(a) a change in or an amendment to the laws (including any regulations promulgated thereunder) of any Relevant Taxing Jurisdiction (or any political subdivision or taxing authority thereof or therein) or

(b) any change in or amendment to any official position regarding the application or interpretation of such laws or regulations,

 

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which change or amendment is announced or becomes effective on or after December 9, 2015 (or, if a jurisdiction becomes a Relevant Taxing Jurisdiction after such date, after the date on which such jurisdiction became a Relevant Taxing Jurisdiction under the Indenture) and such obligation cannot be avoided by taking reasonable measures available to the Issuer or the Note Guarantors, individually or together (including, for the avoidance of doubt, the appointment of a new Paying Agent where this would be reasonable).

Before the Issuer publishes or gives notice of redemption of the Notes as described above, the Issuer will deliver to the Trustee an Officers’ Certificate to the effect that the Issuer cannot avoid its obligation to pay Additional Amounts by taking reasonable measures available to it. The Issuer will also deliver an opinion of independent legal counsel of recognized standing stating that the Issuer would be obligated to pay Additional Amounts as a result of a change in tax laws or regulations or the application or interpretation of such laws or regulations. The Trustee will accept such Officers’ Certificate and opinion of counsel as sufficient evidence of the existence and satisfaction of the conditions precedent as described above, in which event it will be conclusive and binding on the Holders. For the avoidance of doubt, the implementation of European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such directive will not be a change or amendment for such purposes.

8. Payment of Additional Amounts

The Issuer is required to make all payments under or with respect to the Notes free and clear of and without withholding or deduction for or on account of any present or future Taxes in accordance with Section 4.16 of the Indenture.

9. Sinking Fund

The Notes are not subject to any sinking fund.

10. Notice of Redemption

At least 30 days but not more than 60 days before a date for redemption of Notes, the Issuer, or the Trustee (at the direction of the Issuer), shall give notice of redemption to each Holder of Notes to be redeemed. For Notes which are represented by global certificates held on behalf of Euroclear or Clearstream, notices may be given by delivery of the relevant notices to Euroclear or Clearstream for communication to entitled account holders. Notes in denominations larger than €100,000 may be redeemed in part but only in whole multiples of €1,000. If money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes (or portions thereof) to be redeemed on the redemption date is deposited with one or more Paying Agents on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Notes (or such portions thereof) called for redemption.

In addition, for so long as any Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF and the rules of

 

5

the Luxembourg Stock Exchange so require, any such notice to the Holders of the relevant Notes shall also be published in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort ) or, to the extent and in the manner permitted by such rules, post such notice on the official website of the Luxembourg Stock Exchange (www.bourse.lu), and, in connection with any redemption, the Issuer will notify the Luxembourg Stock Exchange of any change in the principal amount of Notes outstanding.

11. Purchase of Notes at the Option of Holders

Upon a Change of Control, any Holder of Notes will have the right, subject to certain conditions specified in the Indenture, to cause the Issuer to purchase all or any part of the Notes of such Holder at a purchase price equal to 101% of the principal amount of the Notes to be purchased plus accrued and unpaid interest to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture.

In accordance with Section 4.06 of the Indenture, the Issuer will be required to offer to purchase Notes upon the occurrence of certain events.

12. Denominations; Transfer; Exchange

The Notes are in registered form without interest coupons in denominations of €100,000 and integral multiples of €1,000 in excess thereof. A Holder may transfer or exchange Notes in accordance with the Indenture. Upon any transfer or exchange, the Registrar, the Transfer Agent and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer will not be required to make and the Registrar need not register transfers or exchanges of any Notes selected for redemption (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) or any Notes for a period of 15 days before a selection of Notes to be redeemed or any Notes during the period after the relevant record date and prior to the relevant interest payment date.

13. Persons Deemed Owners

Except as provided in paragraph 2 hereof, the registered Holder of this Note may be treated as the owner of it for all purposes.

14. Unclaimed Money

Subject to any applicable abandoned property law, the Trustee and the relevant Paying Agent(s) shall pay to the Issuer upon request any money held by them for the payment of principal or interest that remains unclaimed for two years. After any such payment, Holders entitled to the money must look to the Issuer for payment as general creditors, and the Trustee and such Paying Agent shall have no further liability with respect to such monies.

 

6

15. Discharge and Defeasance

Subject to certain conditions, the Issuer at any time may terminate some of or all its obligations under the Notes and the Indenture with respect to the Notes if the Issuer deposits with the Trustee cash in euro or euro-denominated European Government Obligations, or any combination thereof, for the payment of principal of, and interest and premium on, the Notes to redemption or maturity, as the case may be.

16. Amendment, Waiver

Subject to certain exceptions set forth in the Indenture, (i) the Indenture (as it relates to the Notes) or the Notes may be amended with the written consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class and (ii) any existing Default or compliance with any provisions of the Indenture with respect to the Notes may be waived with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class.

Subject to certain exceptions set forth in the Indenture, without notice to or consent of any Holder of Notes, the Issuer, the Note Guarantors and the Trustee may amend the Indenture or the Notes (i) to cure any ambiguity, omission, defect or inconsistency, as set forth in an Officers’ Certificate; (ii) to provide for the assumption by a successor corporation of the obligations of the Issuer or any Note Guarantor under the Indenture in compliance with Article 5 of the Indenture; (iii) to provide for uncertificated Notes in addition to or in place of certificated Notes (provided, however, that the uncertificated Notes are issued in registered form for U.S. Federal income tax purposes); (iv) to add Guarantees with respect to the Notes or to confirm and evidence the release, termination or discharge of any Note Guarantee when such release, termination or discharge is permitted under the Indenture; (v) to add to the covenants of the Company or the Issuer for the benefit of the Holders of the Notes or to surrender any right or power conferred upon the Company or the Issuer in the Indenture; (vi) to make any change that does not adversely affect the rights of any Holder of Notes in any material respect, subject to the provisions of the Indenture, as set forth in an Officers’ Certificate; (vii) to make any amendment to the provisions of the Indenture relating to the form, authentication, transfer and legending of Notes; provided , however , that (A) compliance with the Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any other applicable securities law, and (B) such amendment does not materially affect the rights of Holders to transfer Notes; (viii) to provide for the issuance of Additional Notes in accordance with the terms of the Indenture; or (ix) to convey, transfer, assign, mortgage or pledge as security for the Notes any property or assets in accordance with Section 4.09 of the Indenture.

17. Defaults and Remedies

An “Event of Default” with respect to the Notes occurs if: (i) the Issuer defaults in any payment of interest on any Note when the same becomes due and payable, and such default continues for 30 days; (ii) the Issuer defaults in the payment of principal of any Note when the same becomes due and payable at its Stated Maturity, upon

 

7

optional redemption or required repurchase, upon declaration of acceleration or otherwise; (iii) the Company, the Issuer or any Subsidiary Guarantor fails to comply with its obligations under Section 5.01 of the Indenture; (iv) the Company or any Restricted Subsidiary fails to comply with Section 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12 or 4.15 of the Indenture (in each case, other than a failure to purchase Notes) and such failure continues for 30 days after the notice from the Trustee or the Holders specified below; (v) the Company or any Restricted Subsidiary fails to comply with its covenants or agreements with respect to such Notes contained in the Indenture (other than those referred to in clauses (i), (ii), (iii) or (iv) above) and such failure continues for 60 days after the notice from the Trustee or the Holders specified below; (vi) the Company or any Restricted Subsidiary fails to pay any Indebtedness (other than Indebtedness owing to the Company or a Restricted Subsidiary) within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $100,000,000 or its foreign currency equivalent; (vii) certain events of bankruptcy, insolvency or reorganization of the Company, the Issuer or a Significant Subsidiary under Sections 6.01(7) and (8) of the Indenture; (viii) any final and nonappealable judgment or decree (not covered by insurance) for the payment of money in excess of $100,000,000 or its foreign currency equivalent (treating any deductibles, self-insurance or retention as not so covered) is rendered against the Company, the Issuer or a Significant Subsidiary and such final judgment or decree remains outstanding and is not satisfied, discharged or waived within a period of 60 days following such judgment; or (ix) any Note Guarantee ceases to be in full force and effect in all material respects (except as contemplated by the terms thereof) or any Note Guarantor denies or disaffirms such Note Guarantor’s obligations under the Indenture or any Note Guarantee and such Default continues for 10 days after receipt of the notice specified below.

The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether such Event of Default is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

Notwithstanding the foregoing, a default under clause (iv), (v), (vi), (viii) or (ix) (and under clause (ix), only with respect to any Subsidiary Guarantor that is not a Significant Subsidiary) shall not constitute an Event of Default until the Trustee notifies the Issuer or the Holders of at least 25% in principal amount of the outstanding Notes notify the Issuer and the Trustee of the default and the Company, the Issuer or the Restricted Subsidiary, as applicable, does not cure such default within any applicable time specified in clause (iv), (v), (vi), (viii) or (ix) hereof after receipt of such notice.

If an Event of Default (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company or the Issuer under Sections 6.01(7) and (8) of the Indenture) occurs and is continuing, the Trustee by notice to the Issuer or the Holders of at least 25% in principal amount of the outstanding Notes by notice to the Issuer and the Trustee may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company or the Issuer

 

8

under Sections 6.01(7) and (8) of the Indenture occurs, the principal of and accrued but unpaid interest on all the Notes shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of at least a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences.

18. Trustee Dealings with the Issuer

The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee.

19. No Recourse Against Others

A director, officer, employee or shareholder, as such, of the Issuer or any Note Guarantor shall not have any liability for any obligations of the Issuer under the Notes or the Indenture or of such Note Guarantor under its Note Guarantee or the Indenture, or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.

20. Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an authentication agent) manually signs the certificate of authentication on the other side of this Note.

21. Abbreviations

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

22. Governing Law; Jury Trial Waiver

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

BY ACCEPTING THIS NOTE, THE HOLDER HEREOF IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, THE INDENTURE, THE NOTE GUARANTEES OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

 

9

23. Common Codes and ISINs

The Issuer has caused Common Codes and ISINs to be printed on the Notes and has directed the Trustee to use Common Codes and ISINs in notices as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice or notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

The Issuer will furnish to any Holder of Notes upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Note.

 

10

ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                              agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.

 

       
Date:        Your Signature:    
 
Sign exactly as your name appears on the other side of this Note. Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee.

 

11

[FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER RESTRICTED NOTES]

This certificate relates to €                  principal amount of Notes held in definitive registered form by the undersigned.

The undersigned has requested the Trustee by written order to exchange or register the transfer of a Definitive Registered Note.

In connection with any transfer or exchange of any of the Notes evidenced by this certificate occurring prior to the time that the Notes may be freely traded without any limitations and conditions under Rule 144 under the Securities Act, the undersigned confirms that such Notes are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

 

  (1) ¨ to the Issuer; or

 

  (2) ¨ to the Registrar for registration in the name of the Holder, without transfer; or

 

  (3) ¨ pursuant to an effective registration statement under the Securities Act; or

 

  (4) ¨ inside the United States to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act; or

 

  (5) ¨ outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act and such Note shall be held immediately after the transfer through Euroclear or Clearstream until the expiration of the Restricted Period (as defined in the Indenture); or

 

  (6) ¨ pursuant to another available exemption from registration provided under the Securities Act.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any Person other than the registered Holder thereof, provided , however , that if box (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the Notes, such legal opinions, certifications and other information as the Trustee or the Issuer has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

 

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Date:                                     

Your Signature:

 

 

Sign exactly as your name appears on the other side of this Note.

 

Signature Guarantee*:    

*(Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee)

TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

 

Date:        
Signature:     

(to be executed by an executive officer of purchaser)

 

13

[TO BE ATTACHED TO GLOBAL NOTES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The initial principal amount of this Global Note is €[            ]. The following increases or decreases in this Global Note have been made:

 

Date of

Exchange

   Amount of decrease in
Principal Amount of this
Global Note 		   Amount of increase in
Principal Amount of this
Global Note 		   Principal amount of this
Global Note following such
decrease or increase 		   Signature of authorized
signatory of Trustee or
Principal Paying Agent

 

14

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, check the box:

Asset Sale ¨ Change of Control ¨

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount (€100,000 and integral multiples of €1,000 in excess thereof):

 

€                              

Date:                                      Your Signature:                                     

(Sign exactly as your name appears on the other side of the Note)

Signature Guarantee:                                                                                                                   

Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee

 

15

EXHIBIT 2

[FORM OF CERTIFICATE OF TRANSFER]

Deutsche Trustee Company Limited

Winchester House

1 Great Winchester Street

London EC2N 2DB

United Kingdom

 

  Re: 3.750% Senior Notes due 2023 of Goodyear Dunlop Tires Europe B.V. (the “Notes” )

Reference is hereby made to the Indenture dated as of December 15, 2015, among Goodyear Dunlop Tires Europe B.V., a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) (the “Issuer”), The Goodyear Tire & Rubber Company, an Ohio corporation (the “Company”), the Subsidiary Guarantors listed on the signature pages thereto, Deutsche Trustee Company Limited, as Trustee (the “Trustee”), Deutsche Bank AG, London Branch, as Principal Paying Agent and Transfer Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Luxembourg Paying Agent and Transfer Agent (the “Indenture”). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                          , (the “Transferor”) owns and proposes to transfer the Note/Notes or interest in such Note/Notes (the “Book-Entry Interest”) specified in Annex A hereto, in the principal amount of €                      in such Note/Notes or interests (the “Transfer”), to                              (the “Transferee”), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1. ¨ Check if Transfer is Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the U.S. Securities Act of 1933 (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the Book-Entry Interest or Definitive Registered Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the Book-Entry Interest or Definitive Registered Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A to whom notice was given that the Transfer was being made in reliance on Rule 144A and such Transfer is in compliance with any applicable securities laws of any state of the United States or any other jurisdiction. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred Book-Entry Interest or Definitive Registered Note will be subject to the restrictions on transfer enumerated in the Restricted Notes Legend printed on the Rule 144A Global Note and/or the Rule 144A Definitive Registered Note (as applicable) and in the Indenture, the Securities Act and any applicable securities laws of any state of the United States or any other jurisdiction.

 

133

2. ¨ Check if Transfer is pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Regulation S under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (A) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (B) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States; (ii) no directed selling efforts have been made in contravention of the requirements of Regulation S under the Securities Act; (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act; and (iv) if the Transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Registered Note will be subject to the restrictions on transfer printed on the Regulation S Global Note and/or the Regulation S Definitive Registered Note (as applicable) and in the Indenture and any applicable securities laws of any jurisdiction.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the Trustee.

 

[Insert Name of Transferor]
By:  
Name:  
Title:  

Dated:                                                          

 

2

ANNEX A TO CERTIFICATE OF TRANSFER

The Transferor owns and proposes to transfer the following:

[CHECK ONE]

¨ a Book-Entry Interest held through Euroclear Account No.              or Clearstream Banking Account No.              , in the:

¨ Rule 144A Global Note (ISIN/COMMON CODE              ); or

¨ Regulation S Global Note (ISIN/COMMON CODE              ); or

¨ a Rule 144A Definitive Registered Note; or

¨ a Regulation S Definitive Registered Note.

After the Transfer the Transferee will hold:

[CHECK ONE]

¨ a Book-Entry Interest through Euroclear Account No.              or Clearstream Banking Account No.              in the:

¨ Rule 144A Global Note (ISIN/COMMON CODE              ); or

¨ Regulation S Global Note (ISIN/COMMON CODE              ); or

¨ a Rule 144A Definitive Registered Note; or

¨ a Regulation S Definitive Registered Note.

 

3

EXHIBIT 3

[FORM OF SUPPLEMENTAL INDENTURE]

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”) dated as of                         , among [GUARANTOR] (the “New Guarantor”), a subsidiary of THE GOODYEAR TIRE & RUBBER COMPANY (or its successor), an Ohio corporation (the “Company”), the Company, GOODYEAR DUNLOP TIRES EUROPE B.V., a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) (the “Issuer”), and DEUTSCHE TRUSTEE COMPANY LIMITED, as trustee under the indenture referred to below (the “Trustee”).

W I T N E S S E T H :

WHEREAS the Issuer, the Company and the subsidiary guarantors party thereto (the Company and such subsidiary guarantors, collectively, the “Existing Guarantors”) have heretofore executed and delivered to the Trustee the Indenture dated as of December 15, 2015 (the “Indenture”), providing for the issuance of the Issuer’s 3.750% Senior Notes due 2023 (the “Notes”), initially in the aggregate principal amount of €250,000,000.

WHEREAS Section 4.11 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all the Issuer’s obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein; and

WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Issuer and the Company are authorized to execute and deliver this Supplemental Indenture;

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Issuer, the Company and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows:

1. Agreement to Guarantee . The New Guarantor hereby agrees, jointly and severally with all Existing Guarantors, to unconditionally guarantee the Issuer’s obligations under the Notes on the terms and subject to the conditions set forth in Article 10 of the Indenture and to be bound by all other applicable provisions of the Indenture with respect to the Notes and of the Notes themselves.

EXHIBIT 3

 

2.  Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture with respect to the Notes only is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture with respect to the Notes only for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

3. Governing Law . THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

4. Trustee Makes No Representation . The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.

5. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

6. Effect of Headings . The Section headings herein are for convenience only and shall not affect the construction thereof.

EXHIBIT 3

 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

[NEW GUARANTOR],
by    
  Name:  
  Title:  
THE GOODYEAR TIRE & RUBBER COMPANY,
by    
  Name:  
  Title:  
GOODYEAR DUNLOP TIRES EUROPE B.V.,
by    
  Name:  
  Title:  
DEUTSCHE TRUSTEE COMPANY LIMITED, as Trustee,
by    
  Name:  
  Title:  

Exhibit 10.1

THE GOODYEAR TIRE & RUBBER COMPANY

OUTSIDE DIRECTORS’ EQUITY PARTICIPATION PLAN

(As Adopted February 2, 1996 and last Amended as of October 1, 2015)

 

1. Purpose . The purpose of the Plan is to enable The Goodyear Tire & Rubber Company (the “Company”) to (a) attract and retain outstanding individuals to serve as non-employee directors of the Company, (b) further align the interests of non-employee directors with the interests of the other shareholders of the Company by making the amount of the compensation of non-employee directors dependent in part on the value and appreciation over time of the Common Stock of the Company, and (c) permit each non-employee director to defer receipt of all or a portion of his or her annual retainer until after retirement from the Board of Directors of the Company.

 

2. Definitions . As used in the Plan, the following words and phrases shall have the meanings specified below:

“ Account ” means any of, and “ Accounts ” means all of, the Equity Participation Accounts and the Retainer Deferral Accounts maintained in the records of the Company for Participants.

“ Accrual ” means any dollar amount credited to an Account, including Special Accruals, Quarterly Accruals, Retainer Deferral Accruals, Dividend Equivalents and Interest Equivalents.

“ Beneficiary ” means the person or persons designated by a Participant pursuant to Section 12.

“ Board ” means the Board of Directors of the Company.

“ Committee ” means the Compensation Committee of the Board.

“ Common Stock ” means the Common Stock, without par value, of the Company.

“ Conversion Date ” means, with respect to each Account of each Retired Outside Director, the later of (i) the first business day of the seventh month following the month during which such Retired Outside Director terminated his or her service as a member of the Board, or (ii) the fifth business day of the calendar year following the calendar year during which such Retired Outside Director terminated his or her service as a member of the Board. For all balances that are earned and vested after December 31, 2004, the term “termination of service” means a separation from service as defined in Section 409A of the Code.

“ Dividend Equivalent ” means, with respect to each dividend payment date for the Common Stock, an amount equal to the cash dividend per share of Common Stock which is payable on such dividend payment date.

 

1

“ Equity Grant Amount ” means for each calendar quarter of service from October 1, 2008 through September 30, 2010, $23,750; for service from October 1, 2010 through December 31, 2011, $27,500; for service from January 1, 2012 through December 31, 2012, $28,750; for service from January 1, 2013 through December 31, 2013, $30,000; for service from January 1, 2014 through September 30, 2015, $31,250; and for service on or after October 1, 2015, $35,000.

“ Equity Participation Account ” means a bookkeeping account maintained by the Company for a Participant to which Quarterly Accruals and Dividend Equivalents are credited in respect of Outside Directors through the Conversion Date (and, with respect to each Outside Director serving as a Director on February 2, 1996, a Special Accrual will be credited) and Interest Equivalents are credited on Dollar denominated amounts subsequent to the Conversion Date, which Account shall be denominated in Units until the Conversion Date and, thereafter, for Units granted prior to January 1, 2009 shall be denominated in dollars and for Units granted after December 31, 2008 (for service on or after October 1, 2008) shall be denominated in shares of Common Stock except any remaining fractional Unit shall be denominated in Dollars.

“ Fair Market Value of Common Stock ” means, in respect of any date on or as of which a determination thereof is being or to be made, the closing market price of the Common Stock reported on the New York Stock Exchange Composite Transactions Tape on such date, or, if the Common Stock was not traded on such date, on the next preceding day on which sales of shares of the Common Stock were reported on the New York Stock Exchange Composite Transactions tape.

“ Interest Equivalent ” has the meaning assigned in Section 11(C).

“ Outside Director ” means and includes each person who, at the time any determination thereof is being made, is a member of the Board and who is not and never has been an employee of the Company or any subsidiary or affiliate of the Company.

“ Participant ” means and includes, at the time any determination thereof is being made, each Outside Director and each Retired Outside Director who has a balance in his or her Accounts.

“ Restricted Stock Unit ” means the Units issued pursuant to a Restricted Stock Grant under Section 8 of the Company’s 2008 Performance Plan, or any successor equity compensation plan, so long as such Units remains subject to the restrictions and conditions specified in this Plan pursuant to which such Restricted Stock Grant is made.

“ Retainer ” means with respect to each Outside Director the retainer fee payable to such Outside Director by the Company, plus all meeting attendance fees payable by the Company to such Outside Director, in respect of a calendar quarter.

 

2

“ Retainer Deferral Account ” means a bookkeeping account maintained by the Company for a Participant to which Retainer Accruals and Dividend Equivalents are credited through the Conversion Date and Interest Equivalents on Dollar denominated amounts are credited subsequent to the Conversion Date, which Account shall be denominated in Units until the Conversion Date and, thereafter, for Units created prior to January 1, 2011 shall be denominated in dollars and for Units created after December 31, 2010 shall be denominated in shares of Common Stock except any remaining fractional Unit shall be denominated in Dollars.

“ Retired Outside Director ” means an Outside Director who has terminated his or her service as a member of the Board and is entitled to receive distributions in respect of his or her Account or Accounts as provided in Section 10.

“ Plan ” means The Goodyear Tire & Rubber Company Outside Directors’ Equity Participation Plan, the provisions of which are set forth herein.

“ Quarterly Accrual ” has the meaning assigned in Section 7.

“ Retainer Deferral Accrual ” has the meaning assigned in Section 8.

“ Special Accrual ” has the meaning assigned in Section 7.

“ Unit ” means an equivalent to a hypothetical share of Common Stock which is the denomination into which all dollar Accruals (other than Interest Equivalents) to any Account are to be translated. Upon the Accrual of any dollar amount to any Account on or prior to the Conversion Date thereof, such dollar amount shall be translated into Units by dividing the dollar amount of such Accrual by the Fair Market Value of the Common Stock on the day on or as of which such Accrual to the Account is made or, if not made on a day on which the New York Stock Exchange is open for trading, on the trading day next following the date of the Accrual. Additionally, each Restricted Stock Unit granted is equal to one Unit. Units, and the translation thereof from dollars, shall be calculated and recorded in the Accounts rounded to the fourth decimal place.

“ Year of Service ” means, with respect to each Outside Director, the twelve month period commencing with the date of the individuals’ election as an Outside Director or any anniversary thereof.

 

3. Effective Date . The Plan is adopted on, and is effective on and after, February 2, 1996.

 

4. Eligibility . Each person who serves as an Outside Director at any time subsequent to February 1, 1996 is eligible to participate in the Plan.

 

5. Administration . Except with respect to matters expressly reserved for action by the Board pursuant to the provisions of the Plan, the Plan shall be administered by the Committee, which shall have the exclusive authority except as aforesaid to take any action necessary or appropriate for the proper administration of the Plan, including the full power and authority to interpret the Plan and to adopt such rules, regulations and procedures consistent with the terms of the Plan as the Committee deems necessary or appropriate. The Committee’s interpretation of the Plan, and all actions taken within the scope of its authority, shall be final and binding on the Company and the Participants.

 

3

6. Equity Participation Accounts . There shall be established and maintained by the Company an Equity Participation Account with respect to each Outside Director to which Accruals or Grants of Restricted Stock Units shall be made from time to time in accordance with the provisions of the Plan.

 

7. (A)  Quarterly Accruals . On the first day of each calendar quarter, commencing April 1, 2007 and ending on October 1, 2008 for service through September 30, 2008, the Company shall credit $23,750 ($20,000 in respect of each quarter during the period beginning July 1, 2005 and ended on December 31, 2006, $17,500 in respect of each quarter during the period beginning July 1, 2004 and ended on June 30, 2005, $7,500 in respect of each quarter during the period beginning January 1, 2003 and ended on June 30, 2004, $2,500 in respect of each quarter during the period beginning July 1, 1998 and ended on December 31, 2002 and $2,000 in respect of each quarter during the period beginning April 1, 1996 and ended on June 30, 1998) to the Equity Participation Account of each Outside Director who is then a member of the Board of Directors and served as a member of the Board for the entire calendar quarter ended immediately prior to such day (each a “Quarterly Accrual”).

(B) (1)  Special Accruals . The Company shall credit to the Equity Participation Account of each Outside Director who was an Outside Director on January 1, 2007, a $3,750 accrual as of April 2, 2007.

(B) (2)  Special Accruals . On April 13, 2004, the Company shall credit to the Equity Participation Account of each Outside Director eligible to receive a quarterly accrual as of April 1, 2004, an additional credit in the amount of $20,000.

(B) (3)  Special Accruals . On February 2, 1996, the Company shall credit to the Equity Participation Account of each Outside Director then serving as a member of the Board of Directors a special, one-time credit (a “Special Accrual”), the amount of which shall be determined in accordance with the following formula:

 

                     N
SP = [FRPA – FQC] / 1.01943

where,

SP is the dollar amount of the Special Accrual in respect of a participating Outside Director at February 2, 1996;

FRPA is the future value of an annuity at age 70 under the Retirement Plan for Outside Directors (as provided by Watson Wyatt and based on the UP-1984 mortality table) that would be needed to provide a lifetime annuity at age 70 assuming the benefit increases 3% per year starting in 1997.

FQC is the future value of quarterly accruals, calculated on the value at age 70 of $1,000 quarterly accruals to the Equity Participation Account of the participating Outside Director starting April 1, 1996, assuming a compound annual growth rate of 8%.

 

4

N is the number of quarters until the Outside Director retires having attained age 70.

(C) Restricted Stock Units Grant . Effective for service on or after October 1, 2008 to be granted January 1, 2009 and on the first day of each succeeding calendar quarter, each Outside Director who is then a member of the Board of Directors and served as a member of the Board for any portion of the calendar quarter ended immediately prior to such day, will be granted the number of Restricted Stock Units that will be equal to the applicable Equity Grant Amount (or the pro-rata amount based on the number of days of service in the quarter if the Outside Director did not serve the whole quarter) divided by the Fair Market Value of Common Stock for such grant date, or if the New York Stock Exchange is not open for trading on such date, the grant date shall be the next following trading date. For the last quarterly grant with respect to the last quarter of Board service, any fractional amount of the applicable Equity Grant Amount (or the pro-rata amount based on the number of days of service in the quarter if the Outside Director did not serve the whole quarter) that is not utilized in converting the grant into whole shares of Restricted Stock when added to any outstanding fractional Restricted Stock Unit shall be paid in cash when the shares are distributed pursuant to 10.(C). Effective for grants made in respect of service on or after October 1, 2010, the Restricted Stock Units are further restricted by only ratably vesting over three years, subject to accelerated full vesting upon becoming a Retired Outside Director.

(D) Translation of Accruals into Units . Each Accrual (other than Interest Equivalents) to an Equity Participation Account shall be translated into Units by dividing the dollar amount thereof by the Fair Market Value of the Common Stock on the day as of which such Accrual is made, or, if the date on or as of which such Accrual is made is not a day on which the New York Stock Exchange is open for trading, on the next following trading day. Upon such translation of an Accrual into Units, the resulting number of Units shall be credited to the relevant Equity Participation Account (in lieu of the dollar amount of such Accrual) and such Accrual shall continue to be denominated in such number of Units until the Conversion Date for such Account, when those Units derived from Accruals (as compared to Units from Restricted Stock Unit Grants) will be converted into a dollar amount equal to the product of (i) the number of Units credited to such Account on such Conversion Date, multiplied by (ii) the Fair Market Value of the Common Stock on such Conversion Date.

 

8.

Retainer Deferral Accounts . Each Outside Director may, at his or her sole election, defer receipt of 25%, 50%, 75% or 100% of his or her Retainer payable in respect of and during any calendar year by electing to have such amount credited to his or her Retainer Deferral Account (herein referred to as a “Retainer Account Accrual”). Each deferral election, if any, shall be made by an Outside Director annually, must be in respect of an entire calendar year and shall be made not later than, and shall become irrevocable as of, June 30th of the year prior to the calendar year in respect of which such election is being made. The dollar amount of each Retainer Account Accrual shall be translated (in the manner specified in Section 7(D)) into Units on the date such Retainer Account Accrual is credited to the relevant Retainer Deferral Account, which shall be the day on which the payment of such portion of the Retainer would have been made absent the election of the Outside Director to defer the payment of all or a portion thereof. Upon such translation into Units, the resulting

 

5

  number of Units shall be credited to the relevant Retainer Deferral Account (in lieu of the dollar amount of such Accrual) and such Accrual shall continue to be denominated in such number of Units until the Conversion Date, when for Units in respect of deferrals elected prior to January 1, 2011 applicable to plans years through December 31, 2010, the Units will be converted into a dollar amount equal to the product of (i) the number of Units credited to such Retainer Deferral Account on such Conversion Date, multiplied by (ii) the Fair Market Value of the Common Stock of such Conversion Date. For Units relating to deferrals effective on or after January 1, 2011, each Unit will be converted to a share of Common Stock and all such shares of Common Stock will be delivered on the fifth business day of the calendar quarter following the quarter of his or her separation from Board service with any remaining fractional Unit paid in cash at that time.

 

9. Dividend Equivalents . With respect to each Account and Restricted Stock Unit, from time to time through the relevant Conversion Date each Unit in such Account and Restricted Stock Unit shall be credited with a Dividend Equivalent at the same time as cash dividends are paid on shares of the Common Stock. Dividend Equivalents credited to each Account and Restricted Stock Unit shall be automatically translated into Units or Restricted Stock Units by dividing the dollar amount of such Dividend Equivalents by the Fair Market Value of the Common Stock on the date the relevant Dividend Equivalent is accrued to such Account and Restricted Stock Unit. The number of Units or Restricted Stock Units resulting shall be credited to such Account and Restricted Stock Unit (in lieu of the dollar amount of such Accrual) and such Accrual shall be denominated in Units until the Conversion Date.

 

10. Eligibility For Benefits . (A)  Equity Participation Accounts . (1) For all balances that were earned and vested prior to January 1, 2005, each Retired Outside Director shall be entitled to receive the balance of his or her Equity Participation Account in accordance with the provisions of Section 11 of the Plan, unless the Board of Directors acts to reduce the amount of, or to deny the payment of, the Equity Participation Account of such Retired Outside Director; provided , however , that the Board of Directors shall not have the authority to reduce the amount of, or to deny the payment of, the Equity Participation Account of any Outside Director who terminates his or her service on the Board of Directors if (i) prior to such termination of service, the Retired Outside Director either (x) had five or more years of service and had attained age 70, or (y) had ten or more years of service and had attained age 65, or (ii) such termination was due to the death of the Outside Director. Notwithstanding the foregoing, the Board may at any time deny the payment of, or reduce the amount of, the Equity Participation Account of any Participant if, in the opinion of the Board, such Participant was engaged in an act of misconduct or otherwise engaged in conduct contrary to the best interest of the Company. (2) For all balances that are earned or vested after December 31, 2004, each Retired Outside Director shall be entitled to receive the balance of his or her Equity Participation Account in accordance with the provisions of Section 11 of the Plan for Units that are to be paid in Dollars (Units granted from Accruals prior to January 1, 2009). Notwithstanding the foregoing, the Board may at any time deny the payment of, or reduce the amount of, the Equity Participation Account of any Participant if, in the opinion of the Board, such Participant was engaged in an act of misconduct or otherwise engaged in conduct detrimental to the Company.

 

6

  (B) Retainer Deferral Accounts . Each Retired Outside Director shall be entitled to receive the balance, if any, of his or her Retainer Deferral Account in accordance with the provisions of Section 11 of the Plan.

 

  (C) Restricted Stock Units . Each Outside Director will receive shares of Common Stock for their Restricted Stock Units on the fifth business day of the calendar quarter following the quarter of his or her separation from Board service. Notwithstanding the foregoing, the Board may at any time deny the payment of, or reduce the amount of, the Restricted Stock Units of any Participant if, in the opinion of the Board, such Participant was engaged in an act of misconduct or otherwise engaged in conduct detrimental to the Company.

 

11. Payment of Accounts . (A) All distributions of Equity Participation Accounts and Retainer Deferral Accounts to Participants shall be made in cash or Common Stock pursuant to the terms of the Accrual, Grant or deferral according to the provisions of the Plan.

(B) In the case of each Retired Outside Director, the Units credited to his or her Equity Participation Account and Retainer Deferral Account, respectively, shall, on the Conversion Date for such Retired Outside Director, be converted to a dollar denominated amount by multiplying the number of Units that are to be paid in Dollars in each of the Accounts by the Fair Market Value of the Common Stock on such Conversion Date and for Units that are to be paid in Common Stock, each Unit is equal to one share.

(C) For all balances that were earned and vested prior to January 1, 2005, from and after the Conversion Date until paid, the balance (expressed in dollars) of the Equity Participation Account, and, if any, of the Retainer Deferral Account, of each Retired Outside Director shall be credited monthly until paid with “Interest Equivalents”, which shall be equal to one-twelfth (1/12th) of the product of (x) the dollar balance of such Account, multiplied by (y) the sum (expressed as a decimal to six places) of the rate equivalent to the prevailing annual yield of United States Treasury obligations having a maturity of ten years (or, if not exactly ten years, as close to ten years as possible without exceeding ten years) at the Conversion Date, plus one percent (1%).

(D) (1) For all balances that were earned and vested prior to January 1, 2005, the Accounts of each Retired Outside Director will be paid in ten (10) annual installments commencing on the fifth business day following the Conversion Date with respect to such Accounts, and thereafter on each anniversary of such Conversion Date; each installment to be in an amount equal to the total dollar balance of such Accounts on the fifth business day prior to the date such annual installment is due and payable divided by the number of installments remaining (including the annual installment then being calculated for payment) to be paid.

(D) (2) For all balances that are earned or vested after December 31, 2004, the payment of such balance for Units that are to be paid in Dollars (Units created from Accruals prior to January 1, 2009) shall be made in a lump sum payment on the fifth business day following the Conversion Date in respect of such Retired Outside Director. For Units relating to deferrals effective on or after January 1, 2011, each Unit will be converted to a share of Common Stock and all such shares of Common Stock will be delivered on the fifth business day of the calendar quarter following the quarter of his or her separation from Board service with any remaining fractional Unit paid in cash at that time.

 

7

(E) For all balances that were earned and vested prior to January 1, 2005, the Committee may, in its sole discretion, elect to pay the Equity Participation Account or the Retainer Deferral Account, or both, of any Retired Outside Director in a lump sum or in fewer than ten installments. In the event that the Committee shall elect to make a lump sum payment of an Account of any Retired Outside Director (or to make payment thereof in fewer than ten annual installments), the payment of such lump sum shall be made (or such installments shall commence) on the fifth business day following the Conversion Date in respect of such Retired Outside Director.

(F) In the event of the death of an Outside Director, the entire balance of his or her Accounts shall be eligible for payment which shall be made in a lump sum on the Conversion Date for his or her Accounts.

(G) In the event of the death of a Retired Outside Director, the entire balance of his or her Accounts(s) shall be paid on the Conversion Date for his or her Accounts (if it has not occurred) or on the next occurring anniversary thereof.

 

12. Designation of Beneficiary . A Participant may designate a person or persons (the “Beneficiary”) to receive, after the Participant’s death, any remaining benefits payable under the Plan. Such designation shall be made by the Participant on a form prescribed by the Committee. The Participant may at any time change or revise such designation by filing a new form with the Committee. The person or persons named as beneficiary in the designation of beneficiary form duly completed and filed with the Company bearing the most recent date will be the Beneficiary. All payments due under the Plan after the death of a Participant shall be made to his or her Beneficiary, except that (i) if the Participant does not designate a Beneficiary or the Beneficiary predeceases the Participant, any remaining benefits payable under the Plan after the Participant’s death shall be paid to the Participant’s estate, and (ii) if the Beneficiary survives the Participant but dies prior to receiving the benefits payable under the Plan, the benefits under the Plan shall be paid to the Beneficiary’s estate.

 

13. Amendment and Termination . The Board may at any time, or from time to time, amend or terminate the Plan; provided, however , that no such amendment or termination shall reduce Plan benefits which accrued prior to such amendment or termination without the prior written consent of each person entitled to receive benefits under the Plan who is adversely affected by such action; and, provided further , that the Plan shall not be amended more frequently than once every six months, other than to comply with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules promulgated thereunder.

Notwithstanding the foregoing, no termination or amendment of this Plan may accelerate payment of post-2004 benefits to any Participant except under the following conditions:

(1) The Company may terminate and liquidate the Plan within 12 months of a corporate dissolution taxed under section 331 of the Internal Revenue Code, or with the

 

8

approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participants’ gross incomes in the latest of the following years (or, if earlier the taxable year in which the amount is actually or constructively received): (a) the calendar year in which the Plan termination and liquidation occurs; (b) the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (c) the first calendar year in which the payment is administratively practicable.

(2) The Company may terminate and liquidate the Plan pursuant to irrevocable action taken by the Board of Directors within the 30 days preceding or the 12 months following a change in control event (as defined in Treasury Regulation §1.409A-3(i)(5)), provided that this paragraph will only apply to a payment under a plan if all agreements, methods, programs, and other arrangements sponsored by the Company immediately after the time of the change in control event with respect to which deferrals of compensation are treated as having been deferred under a single plan under Treasury Regulation §1.409A-1(c)(2) are terminated and liquidated with respect to each Participant that experienced the change in control event, so that under the terms of the termination and liquidation all such participants are required to receive all amounts of compensation deferred under the terminated agreements, methods, programs and other arrangements within 12 months of the date the Company irrevocably takes all necessary action to terminate and liquidate the agreements, methods, programs, and other arrangements.

(3) The Company may terminate and liquidate the Plan, provided that (a) the termination and liquidation does not occur proximate to a downturn in the financial health of the Company; (b) the Company terminates and liquidates all agreements, methods, programs, and other arrangements sponsored by the Company that would be aggregated with any terminated and liquidated agreements, methods, programs, and other arrangements under Treasury Regulation §1.409-1(c) if any Participant had deferrals of compensation under all of the agreements, methods, programs, and other arrangements that are terminated and liquidated; (c) no payments in liquidation of the Plan are made within 12 months of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan other than payments that would be payable under the terms of the Plan if the action to terminate and liquidate the Plan had not occurred; (d) all payments are made within 24 months of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan; and (e) the Company does not adopt a new plan that would be aggregated with any terminated and liquidated plan under Treasury Regulation §1.409A-1(c) if the same service provider participated in both plans, at any time within three years following the date the service recipient takes all necessary action to irrevocably terminate and liquidate the Plan.

 

14. Plan Unfunded, Rights Unsecured . With respect to the Equity Participation Account and the Retainer Deferral Account, the Plan is unfunded. Each Account under the plan represents only a general contractual conditional obligation of the Company to pay in cash or shares of Common Stock the balance thereof in accordance with the provisions of the Plan. All Restricted Stock Units or shares of Common Stock granted or payable under the Plan will be made from and pursuant to the Company’s 2008 Performance Plan, or any successor equity compensation plan.

 

9

15. Assignability . All payments under the Plan shall be made only to the Participant or his or her duly designated Beneficiary (in the event of his or her death). Except pursuant to Section 12 or the laws of descent and distribution and except as may be required by law, the right to receive payments under the Plan may not be assigned or transferred by, and are not subject to the claims of creditors of, any Participant or his or her Beneficiary during his or her lifetime.

 

16. Change in the Common Stock . In the event of any stock dividend, stock split, recapitalization, merger, split-up or other change affecting the Common Stock of the Company, the Units in each Account shall be adjusted in the same manner and proportion as the change to the Common Stock.

 

17. Quarterly Statements of Accounts - Valuation . Each calendar quarter the Company will prepare and send to each Participant a statement reporting the status of his or her Account or Accounts and Restricted Stock Units as of the close of business on the last business day of the prior calendar quarter. To the extent an Account is denominated in Units, the value of the Units and Restricted Stock Units will be reported at the Fair Market Value of the Common Stock on the relevant valuation date.

 

18. No Other Rights . Neither the establishment of the Plan, nor any action taken thereunder, shall in any way obligate the Company to nominate an Outside Director for re-election or continue to retain an Outside Director on the Board or confer upon any Outside Director any other rights in respect of the Company.

 

19. Successors of the Company . The Plan shall be binding upon any successor to the Company, whether by merger, acquisition, consolidation or otherwise.

 

20. Law Governing . The Plan shall be governed by the laws of the State of Ohio.

 

THE GOODYEAR TIRE & RUBBER COMPANY
By:   /s/ John T. Lucas
      John T. Lucas
      Senior Vice President, Global Human Resources

 

ATTEST:
By:   /s/ Bertram Bell
  Bertram Bell
  Assistant Secretary

 

10



EXHIBIT 12.1
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Year Ended December 31,
EARNINGS
2015
 
2014
 
2013
 
2012
 
2011
Pre-tax income before adjustment for minority interests in consolidated subsidiaries or income or loss from equity investees
$
592

 
$
658

 
$
782

 
$
406

 
$
599

Add:
 
 
 
 
 
 
 
 
 
Amortization of previously capitalized interest
12

 
11

 
10

 
8

 
9

Distributed income of equity investees
24

 
24

 
21

 
11

 
8

          Total additions
36

 
35

 
31

 
19

 
17

Deduct:
 
 
 
 
 
 
 
 
 
Capitalized interest
19

 
24

 
39

 
22

 
31

Minority interest in pre-tax income of consolidated subsidiaries with no fixed charges
8

 
14

 
26

 
20

 
9

  Total deductions
27

 
38

 
65

 
42

 
40

 
 
 
 
 
 
 
 
 
 
TOTAL EARNINGS
$
601

 
$
655

 
$
748

 
$
383

 
$
576

 
 
 
 
 
 
 
 
 
 
FIXED CHARGES
 
 
 
 
 
 
 
 
 
Interest expense
$
412

 
$
428

 
$
392

 
$
357

 
$
330

Capitalized interest
19

 
24

 
39

 
22

 
31

Amortization of debt discount, premium or expense
14

 
11

 
15

 
13

 
14

Interest portion of rental expense (1)
97

 
114

 
119

 
121

 
118

Proportionate share of fixed charges of investees accounted for by the equity method
1

 
2

 
1

 
1

 
1

 
 
 
 
 
 
 
 
 
 
TOTAL FIXED CHARGES
$
543

 
$
579

 
$
566

 
$
514

 
$
494

 
 
 
 
 
 
 
 
 
 
TOTAL EARNINGS BEFORE FIXED CHARGES
$
1,144

 
$
1,234

 
$
1,314

 
$
897

 
$
1,070

 
 
 
 
 
 
 
 
 
 
RATIO OF EARNINGS TO FIXED CHARGES
2.11

 
2.13

 
2.32

 
1.75

 
2.17


(1)
Interest portion of rental expense is estimated to equal 1/3 of such expense, which is considered a         reasonable approximation of the interest factor.




EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT (1) (2) (3)

The subsidiary companies of The Goodyear Tire & Rubber Company at December 31, 2015, and the places of incorporation or organization thereof, are:


NAME OF SUBSIDIARY
---------------------------------
PLACE OF
INCORPORATION
OR ORGANIZATION
------------------------------
UNITED STATES
 
Celeron Corporation
Delaware
Divested Atomic Corporation
Delaware
Divested Companies Holding Company
Delaware
Divested Litchfield Park Properties, Inc.
Arizona
Goodyear Export Inc.
Delaware
Goodyear Farms, Inc.
Arizona
Goodyear International Corporation
Delaware
+Goodyear-SRI Global Purchasing Company
Ohio
+Goodyear-SRI Global Technologies LLC
Ohio
Goodyear Western Hemisphere Corporation
Delaware
Laurelwood Properties Inc.
Delaware
Retreading L Inc.
Delaware
Retreading L, Inc. of Oregon
Oregon
T&WA, Inc.
Kentucky
Wingfoot Commercial Tire Systems, LLC
Ohio
Wingfoot Corporation
Delaware



1




NAME OF SUBSIDIARY
---------------------------------
PLACE OF
INCORPORATION
OR ORGANIZATION
------------------------------
INTERNATIONAL
 
C.A. Goodyear de Venezuela
Venezuela
+Compania Goodyear del Peru, S.A.
Peru
Compania Goodyear S. de R.L. de C.V.
Mexico
Corporacion Industrial Mercurio S.A. de C.V.
Mexico
+DNA (Housemarks) Limited
England
Dunglaide Limited
England
Dunlop Grund und Service Verwaltungs GmbH
Germany
Dunlop Tyres (Executive Pension Trustee) Limited
England
Dunlop Tyres Limited
England
GD Handelssysteme GmbH
Germany
GD Versicherungsservice GmbH
Germany
G.I.E. Goodyear Mireval
France
Goodyear Australia Pty Limited
Australia
Goodyear Canada Inc.
Canada
Goodyear Dalian Tire Company Ltd.
China
Goodyear de Chile S.A.I.C.
Chile
Goodyear de Colombia S.A.
Colombia
Goodyear do Brasil Produtos de Borracha Ltda
Brazil
Goodyear & Dunlop Tyres (Australia) Pty Ltd
Australia
Goodyear & Dunlop Tyres (NZ) Limited
New Zealand
Goodyear Dunlop Sava Tires d.o.o.
Slovenia
Goodyear Dunlop Tires Amiens Sud SAS
France
Goodyear Dunlop Tires Austria GmbH
Austria
Goodyear Dunlop Tires Baltic OU
Estonia
Goodyear Dunlop Tires Belgium N.V.
Belgium
Goodyear Dunlop Tires Czech s.r.o.
Czech Republic
Goodyear Dunlop Tires Danmark A/S
Denmark
Goodyear Dunlop Tires Espana S.A.
Spain
Goodyear Dunlop Tires Europe B.V.
Netherlands
Goodyear Dunlop Tires Finland OY
Finland
Goodyear Dunlop Tires France
France
Goodyear Dunlop Tires Germany GmbH
Germany
Goodyear Dunlop Tires Hellas S.A.I.C.
Greece
Goodyear Dunlop Tires Hungary Ltd.
Hungary
Goodyear Dunlop Tires Ireland Ltd
Ireland
Goodyear Dunlop Tires Ireland (Pension Trustees) Limited
Ireland
Goodyear Dunlop Tires Italia SpA
Italy
Goodyear Dunlop Tires Norge A/S
Norway
Goodyear Dunlop Tires Operations S.A.
Luxembourg
+Goodyear Dunlop Tires Operations Romania S.r.L.
Romania
Goodyear Dunlop Tires Polska Sp. z.o.o.
Poland

2




NAME OF SUBSIDIARY
---------------------------------
PLACE OF
INCORPORATION
OR ORGANIZATION
------------------------------
Goodyear Dunlop Tires Portugal Unipessoal, Ltda
Portugal
Goodyear Dunlop Tires Romania S.r.L.
Romania
Goodyear Dunlop Tires Slovakia s.r.o.
Slovakia
Goodyear Dunlop Tires Suisse S.A.
Switzerland
Goodyear Dunlop Tires Sverige A.B.
Sweden
Goodyear Dunlop Tires Ukraine
Ukraine
Goodyear Dunlop Tyres UK Ltd
England
Goodyear Dunlop Tyres UK (Pension Trustees) Limited
England
Goodyear Earthmover Pty Ltd
Australia
Goodyear EEMEA Financial Services Center Sp. z.o.o.
Poland
+Goodyear India Ltd
India
Goodyear Industrial Rubber Products Ltd
England
Goodyear Italiana S.p.A.
Italy
+Goodyear Jamaica Limited
Jamaica
Goodyear Korea Company
South Korea
+Goodyear Lastikleri TAS
Turkey
+Goodyear Malaysia Berhad
Malaysia
+Goodyear Marketing & Sales Sdn. Bhd.
Malaysia
Goodyear Maroc S.A.
Morocco
Goodyear Middle East FZE
Dubai
Goodyear Nederland B.V.
Netherlands
Goodyear Orient Company Private Limited
Singapore
+Goodyear Philippines, Inc.
Philippines
Goodyear Regional Business Services Inc.
Philippines
Goodyear Russia LLC
Russia
Goodyear S.A.
Luxembourg
Goodyear Servicios y Asistencia Tecnica S. de R.L. de C.V.
Mexico
Goodyear Servicios Comerciales S. de R.L. de C.V.
Mexico
Goodyear-SLP, S. de R.L. de C.V.
Mexico
Goodyear South Africa (Pty) Ltd
South Africa
Goodyear South Asia Tyres Private Limited
India
+Goodyear SRI Global Purchasing Yugen Kaisha
Japan
+Goodyear Taiwan Limited
Taiwan
+Goodyear (Thailand) Public Company Limited
Thailand
Goodyear Tire Management Company (Shanghai) Ltd.
China
Goodyear Tyre and Rubber Holdings (Pty) Ltd
South Africa
Goodyear Tyres Pty Ltd
Australia
Goodyear Tyres Vietnam LLC
Vietnam
Goodyear Wingfoot Kabushiki Kaisha
Japan
GY Tire Kitakanto Kabushiki Kaisha
Japan
Hi-Q Automotive (Pty) Ltd
South Africa
+Holding Rhodanienne du Pneumatique – HRP
France

3




NAME OF SUBSIDIARY
---------------------------------
PLACE OF
INCORPORATION
OR ORGANIZATION
------------------------------
Kabushiki Kaisha Goodyear Aviation Japan
Japan
Kabushiki Kaisha Tohoku GY
Japan
Kelly-Springfield Tyre Company Ltd
England
Kettering Tyres Ltd
England
Luxembourg Mounting Center S.A.
Luxembourg
Motorway Tyres and Accessories (UK) Limited
England
Neumaticos Goodyear S.r.L.
Argentina
Nippon Giant Tyre Kabushiki Kaisha
Japan
Nippon Goodyear Ltd
Japan
O.T.R. International NZ Limited
New Zealand
Property Leasing Sarl
Luxembourg
+P.T. Goodyear Indonesia Tbk
Indonesia
Rossal No 103 (Pty) Ltd
South Africa
SACRT Trading Pty Ltd
Australia
+Safe-T-Tyre & Exhaust (Pty) Ltd
Lesotho
+Sandton Wheel Engineering (Pty) Limited
South Africa
Sava Trade d.o.o.
Croatia
Servicios y Montajes Eagle S. de R.L. de C.V.
Mexico
+SDP-Savoisienne de distribution de Pneumatique
France
SP Brand Holding EEIG
Belgium
+SSR-Pneu Savoyard
France
+Tire Company Debica S.A.
Poland
Tredcor (Kenya) Limited
Kenya
Tredcor Limited (Malawi)
Malawi
Tren Tyre Holdings (Pty) Ltd
South Africa
+Trentyre (Lesotho) (Pty) Ltd
Lesotho
+Trentyre (Pty) Ltd
South Africa
Trentyre Uganda Limited
Uganda
Tyre Services Great Britain Limited
England
+Vulco Developpement
France
+Vulco Truck Services
France
Wingfoot Australia Partner Pty Ltd
Australia
Wingfoot Insurance Company Limited
Bermuda
Wingfoot Mold Leasing Company
Canada
4 Fleet Group GmbH
Germany
(1)
Each of the subsidiaries named in the foregoing list conducts its business under its corporate name and, in a few instances, under a shortened form of its corporate name or in combination with a trade name.
(2)
Each of the subsidiaries named in the foregoing list is directly or indirectly wholly-owned by the Registrant, except that in respect of each of the following subsidiaries (marked by a plus preceding its name) Registrant directly or indirectly owns the indicated percentage of such subsidiary’s equity capital: Compania Goodyear del Peru, S.A., 78.05%; DNA (Housemarks) Limited, 98%; Goodyear Dunlop Tires Operations Romania S.r.L., 99.9%; Goodyear India Ltd., 74%; Goodyear Jamaica Limited, 60%; Goodyear Lastikleri TAS, 74.60%; Goodyear Malaysia Berhad, 51%; Goodyear Marketing & Sales Sdn. Bhd., 51%; Goodyear Philippines, Inc., 88.54%; Goodyear-SRI Global Purchasing Company, 80%; Goodyear SRI Global Purchasing Yugen Kaisha, 80%; Goodyear-SRI Global Technologies LLC,

4


51%; Goodyear Taiwan Limited, 94.22%; Goodyear (Thailand) Public Company Limited, 66.79%; Holding Rhodanienne du Pneumatique-HRP, 99.99%; P.T. Goodyear Indonesia Tbk, 85%; Safe-T-Tyre & Exhaust (Pty) Ltd., 69.93%; Sandton Wheel Engineering (Pty) Limited, 69.93%; SDP-Savoisienne de distribution de Pneumatique, 99.99%; SSR-Pneu Savoyard, 99.99%; Tire Company Debica S.A., 81.40%; Trentyre (Lesotho) (Pty) Ltd, 69.93%; Trentyre (Pty) Ltd, 69.93%; Vulco Developpement, 99.99% and Vulco Truck Services, 99.99%.
(3)
Except for C.A. Goodyear de Venezuela and Wingfoot Corporation, at December 31, 2015, the Registrant did not have any majority owned subsidiaries that were not consolidated.


5


EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in (i) the Registration Statements on Form S-8 (Nos. 333-190252, 333-177752, 333-150405, 333-141468, 333-129709, 333-126566, and 333-126565), and (ii) the Registration Statement on Form S-3ASR (No. 333-207723) of The Goodyear Tire & Rubber Company of our report dated February 9, 2016 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10‑K.
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
February 9, 2016



1

EXHIBIT 24.1

THE GOODYEAR TIRE & RUBBER COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of THE GOODYEAR TIRE & RUBBER COMPANY, a corporation organized and existing under the laws of the State of Ohio (the “Company”), hereby constitute and appoint LAURA K. THOMPSON, DAVID L. BIALOSKY and RICHARD J. NOECHEL, and each of them, their true and lawful attorneys-in-fact and agents, each one of them with full power and authority to sign the names of the undersigned directors to the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K for its fiscal year ended December 31, 2015, and to any and all amendments, supplements and exhibits thereto and any other instruments filed in connection therewith; provided, however, that said attorneys-in-fact shall not sign the name of any director unless and until the Annual Report shall have been duly executed by the officers of the Company then serving as the chief executive officer of the Company, the principal financial officer of the Company and the principal accounting officer of the Company; and each of the undersigned hereby ratifies and confirms all that the said attorneys-in-fact and agents, or any one or more of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents this 8th day of December, 2015.

/s/ William J. Conaty
 
/s/ James A. Firestone
William J. Conaty, Director
 
James A. Firestone, Director
 
 
 
/s/ Werner Geissler
 
/s/ Peter S. Hellman
Werner Geissler, Director
 
Peter S. Hellman, Director
 
 
 
/s/ Laurette T. Koellner
 
/s/ Richard J. Kramer
Laurette T. Koellner, Director
 
Richard J. Kramer, Director
 
 
 
/s/ W. Alan McCollough
 
/s/ John E. McGlade
W. Alan McCollough, Director
 
John E. McGlade, Director
 
 
 
/s/ Michael J. Morell
 
/s/ Roderick A. Palmore
Michael J. Morell, Director
 
Roderick A. Palmore, Director
 
 
 
/s/ Stephanie A. Streeter
 
/s/ Thomas H. Weidemeyer
Stephanie A. Streeter, Director
 
Thomas H. Weidemeyer, Director
 
 
 
/s/ Michael R. Wessel
 
 
Michael R. Wessel, Director
 
 




EXHIBIT 31.1
CERTIFICATION
I, Richard J. Kramer, certify that:
1.
I have reviewed this Annual Report on Form 10-K of The Goodyear Tire & Rubber Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 9, 2016
 /s/  R ICHARD  J. K RAMER
 
Richard J. Kramer
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)
 





EXHIBIT 31.2
CERTIFICATION
I, Laura K. Thompson, certify that:
1.
I have reviewed this Annual Report on Form 10-K of The Goodyear Tire & Rubber Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 9, 2016
/s/  L AURA  K. T HOMPSON
 
Laura K. Thompson
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
 





EXHIBIT 32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of The Goodyear Tire & Rubber Company, an Ohio corporation (the “Company”), hereby certifies with respect to the Annual Report on Form 10-K of the Company for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (the “10-K Report”) that to his or her knowledge:
(1)
the 10-K Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the 10-K Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated:
February 9, 2016
 /s/  R ICHARD  J. K RAMER
 
 
Richard J. Kramer
Chairman of the Board, President and Chief Executive Officer
The Goodyear Tire & Rubber Company
 
 
 
 
Dated:
February 9, 2016
/s/  L AURA  K. T HOMPSON
 
 
Laura K. Thompson
Executive Vice President and Chief Financial Officer
The Goodyear Tire & Rubber Company
 
 




EXHIBIT 99.1
THE GOODYEAR TIRE & RUBBER COMPANY
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The Goodyear Tire & Rubber Company's (the "Company") wholly-owned subsidiary, C.A. Goodyear de Venezuela, manufactures, markets and distributes consumer and commercial tires throughout Venezuela. Evolving conditions in Venezuela, including currency exchange control regulations and continued reductions in access to U.S. dollars through official currency exchange mechanisms, have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar fuerte and the U.S. dollar, and have restricted the ability of the Venezuelan subsidiary to pay dividends and royalties and to settle liabilities. These currency exchange regulations, combined with other government regulations such as price and profit margin controls and strict labor laws, have increasingly limited the Company's ability to make and execute operational decisions at the Venezuelan subsidiary. This lack of currency exchangeability, combined with these other operating restrictions, have significantly limited the Venezuelan subsidiary's ability to maintain normal production and control over its operations. The Company expects these conditions to continue for the foreseeable future.
As a result of these conditions, the Company concluded that effective as of December 31, 2015, the Company does not meet the accounting criteria for control over the Venezuelan subsidiary and began reporting the results of the Venezuelan subsidiary using the cost method of accounting. This change resulted in a pre-tax charge of $646 million in the fourth quarter of 2015. The pre-tax charge includes the derecognition of the carrying amounts of the Venezuelan subsidiary's assets and liabilities, including $320 million of Cash and Cash Equivalents, that are no longer reported in the Consolidated Balance Sheet as of December 31, 2015. The pre-tax charge also includes $248 million of foreign currency translation losses and pension losses previously included in Accumulated Other Comprehensive Loss in the Company’s Consolidated Balance Sheet. The Company has determined the fair value of its investment in, and receivables from, the Venezuelan subsidiary to be insignificant based on the expectations of dividend payments and settlements of such receivables in future periods.
The following unaudited pro forma Consolidated Statement of Operations for the year ended December 31, 2015 is based on the Consolidated Statement of Operations of the Company and its consolidated subsidiaries, and is adjusted to reflect the deconsolidation of the Venezuelan subsidiary. The unaudited pro forma Consolidated Statement of Operations gives effect to the deconsolidation of the Venezuelan subsidiary as if it had occurred on January 1, 2015. The deconsolidation was fully reflected in the Consolidated Balance Sheet as of December 31, 2015 as presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and therefore a pro forma balance sheet is not required.
The unaudited pro forma Consolidated Statement of Operations does not necessarily reflect what the Company's results of operations would have been had the deconsolidation occurred on January 1, 2015. It also may not be useful in predicting the future results of the Company. The actual results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The unaudited pro forma Consolidated Statement of Operations should be read in conjunction with the historical consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.



 
The Goodyear Tire & Rubber Company
 
 
Unaudited Pro Forma Consolidated Statement of Operations
 
 
Year Ended December 31, 2015
 
(In millions, except per share amounts)
Historical Goodyear
(a)  
Historical Venezuelan Subsidiary
(b)  
Historical Goodyear less Venezuelan Subsidiary
 
Pro Forma Adjustments
 
Goodyear Pro Forma
(c)  
Net Sales
$
16,443

 
$
531

 
$
15,912

 
$
21

(d)  
$
15,933

 
Cost of Goods Sold
12,164

 
369

 
11,795

 
26

(e)  
11,821

 
Selling, Administrative and General Expense
2,614

 
37

 
2,577

 
—

 
2,577

 
Rationalizations
114

 
—

 
114

 
—

 
114

 
Interest Expense
412

 
—

 
412

 
—

 
412

 
Loss on Deconsolidation of Venezuelan Subsidiary
646

 
—

 
646

 
(646
)
(f)  
—

 
Other (Income) Expense
(115
)
 
24

 
(139
)
 
(8
)
(g)  
(147
)
 
Income before Income Taxes
608

 
101

 
507

 
649

 
1,156

 
United States and Foreign Tax Expense
232

 
—

 
232

 
71

(h)  
303

 
Net Income
376

 
101

 
275

 
578

 
853

 
Less: Minority Shareholders’ Net Income
69

 
—

 
69

 
—

 
69

 
Goodyear Net Income
$
307

 
$
101

 
$
206

 
$
578

 
$
784

 
Goodyear Net Income available to Common Shareholders — Per Share of Common Stock
 
 
 
 
 
 
 
 
 
 
Basic
$
1.14

 
 
 
 
 
 
 
$
2.91

 
Weighted Average Shares Outstanding
269

 
 
 
 
 
 
 
269

 
Diluted
$
1.12

 
 
 
 
 
 
 
$
2.87

 
Weighted Average Shares Outstanding
273

 
 
 
 
 
 
 
273

 
Notes to the unaudited pro forma Consolidated Statement of Operations:
(a)
Represents the Consolidated Statement of Operations of the Company and its consolidated subsidiaries for the year ended December 31, 2015, as filed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
(b)
Represents the results of operations of the Venezuelan subsidiary that did not arise from intercompany transactions with the Company and its consolidated subsidiaries, for the fiscal year ended December 31, 2015. Intercompany transactions between the Company and its consolidated subsidiaries, including its Venezuelan subsidiary, were eliminated from the Consolidated Statement of Operations of the Company referenced in footnote (a) above.
(c)
Represents the pro forma Consolidated Statement of Operations of the Company and its consolidated subsidiaries after giving effect to the deconsolidation of the Venezuelan subsidiary as if it had occurred on January 1, 2015, and excludes the effect of the nonrecurring charge recorded for the loss on deconsolidation of the Venezuelan subsidiary.
(d)
Represents the cash settled in 2015 with the Venezuelan subsidiary for the sale of raw materials from the Company's consolidated subsidiaries that was eliminated in consolidation in the historical financial statements and is recognized in income under the cost method in the Goodyear pro forma results.
(e)
Represents intercompany sales to the Venezuelan subsidiary of raw materials that are expenses in the Goodyear pro forma results.
(f)
Adjustment to remove the effects of the nonrecurring charge for the deconsolidation of the Venezuelan subsidiary.
(g)
Adjustment to remove the effects of foreign currency remeasurement losses on transactions denominated in bolivar fuerte between the Company and the Venezuelan subsidiary.
(h)
Represents the income tax effects of the pre-tax pro forma adjustments.