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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13279
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UNOVA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4647021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
360 NORTH CRESCENT DRIVE 90210-4867
Beverly Hills, California (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 888-2500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, par value $0.01 per share New York Stock Exchange
Rights to Purchase Series A Junior New York Stock Exchange
Participating Preferred Stock
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes No X
On February 27, 1998, the aggregate market value of the Registrant's voting
stock held by non-affiliates was $1.037 billion.
On February 27, 1998, there were 54,510,193 shares of Common Stock
outstanding, exclusive of treasury shares.
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UNOVA, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
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PART I
Item 1: Business................................................................................... 1
Item 2: Properties................................................................................. 10
Item 3: Legal Proceedings.......................................................................... 10
Item 4: Submission of Matters to a Vote of Security Holders........................................ 10
PART II
Item 5: Market for the Registrant's Common Equity and Related Stockholder Matters.................. 11
Item 6: Selected Financial Data.................................................................... 11
Item 7: Financial Review and Analysis.............................................................. 12
Item 7A: Quantitative and Qualitative Disclosures about Market Risk................................. 16
Item 8: Financial Statements and Supplementary Data................................................ 16
Item 9: Disagreements on Accounting and Financial Disclosure....................................... 16
PART III
Item 10: Directors and Executive Officers of the Registrant......................................... 17
Item 11: Executive Compensation..................................................................... 20
Item 12: Security Ownership of Certain Beneficial Owners and Management............................. 33
Item 13: Certain Relationships and Related Transactions............................................. 35
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 36
Signatures................................................................................. 38
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PART I
ITEM 1. BUSINESS
UNOVA, Inc. (the "Company" or "UNOVA") operates in two business segments:
Automated Data Systems ("ADS") and Industrial Automation Systems ("IAS"). For
the year ended December 31, 1997, ADS produced revenues and operating profits of
$636.4 million and $9.1 million, respectively, and IAS generated revenues and
operating profits of $789.8 million and $94.6 million, respectively. The Company
became an independent public company upon the distribution of its common stock
to the stockholders of Western Atlas Inc. ("WAI") on October 31, 1997.
See Note K to the consolidated and combined financial statements for
financial information by industry segment and by geographical area.
Information related to business acquisitions, investments, and dispositions
is set forth in Note B to the consolidated and combined financial statements.
GENERAL
The Company is an industrial technologies company providing customers with
solutions for improving their efficiency and productivity. The Automated Data
Systems business segment comprises automated data collection and mobile
computing products and services, principally serving the industrial market.
Customers include distribution and transportation companies, food and beverage
operations, manufacturing industries, health care providers and government
agencies. The Industrial Automation Systems business segment includes integrated
manufacturing systems, body welding and assembly systems, and precision grinding
and abrasive operations, primarily serving the worldwide automotive, off-road
and diesel engine manufacturing industries.
PRODUCTS AND SERVICES
AUTOMATED DATA SYSTEMS. The Company's automated data collection ("ADC") and
mobile computing systems business comprises the Intermec, Norand and UBI
activities. Intermec was acquired in 1991; Norand and UBI were acquired early in
1997. In 1997, these three companies were consolidated into one organization
called Intermec Technologies Corporation, serving the global bar code, data
collection and mobile computing market, which has grown approximately 12% to 15%
annually over the past five years. This newly created organization was divided
into three global product divisions: Local Area Systems, Norand Mobile Systems
and Identification Systems. ADS, which included only Intermec's results until
the 1997 acquisitions of Norand and UBI, accounted for 44%, 32% and 34% of the
Company's consolidated and combined revenues in 1997, 1996, and 1995,
respectively.
In 1997, the Company acquired radio frequency identification ("RFID")
technology from IBM Corporation. The Company intends to further develop this
RFID technology and in 1997 acquired 13% of Amtech Corporation ("Amtech") in
order to support such development. The Company and Amtech were unable to agree
on the structure of a proposed product development alliance and are currently
exploring other mutually agreeable means to complete the RFID development.
According to industry statistics, the U.S. RFID market grew over 30% in 1996 to
$200 million.
This combination of companies and capabilities establishes the Company as a
leading participant in the growing automated data collection marketplace.
Together, they offer a broad range of products which are used to gather,
organize, process, transmit and exchange information between various field-based
or in-premise locations and central computers or information retrieval systems.
By facilitating sale order processes, and tracking parts, work-in-process,
finished products and people through manufacturing, distribution and other
commercial operations, industrial users are able to control inventory and to
improve
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ITEM 1. BUSINESS (CONTINUED)
the productivity, quality and responsiveness of their operations, from supply
chain management and enterprise resource planning ("ERP") to field sales and
service.
LOCAL AREA SYSTEMS. The Company continues to demonstrate market leadership
in the wireless LAN industry. Intermec was first to offer a network architecture
that provides customers with the ability to use multiple radio technologies
within one system. This Radio Independent-TM- wireless LAN solution supports all
major radio technologies (including synthesized UHF, 900 MHz and 2.4 GHz direct
sequence and frequency hopping spread spectrum radio technologies), giving
customers the ability to choose the best radio technology for their application.
To ensure compatibility with the customer's host system, all major industry
standard networks are supported.
The Company has developed an extensive line of hand-held computers,
stationary and vehicle-mounted terminals that combine PC-type capability with
scanning and data transmission abilities. Intermec's
TRAKKER-Registered Trademark- family of products ranges from low-cost, hand-held
batch data collection devices to sophisticated and powerful terminals, computers
and network products. For high-performance solutions, the Company's "open
systems" data collection computers deliver maximum flexibility for customers
with diverse application requirements.
NORAND MOBILE SYSTEMS. As a leader in mobile computing systems, especially
with its PEN*KEY-Registered Trademark-terminals, the Company provides
comprehensive data communications, application software, hand-held and
truck-mounted rugged PC products with peripherals and printer solutions. These
solutions enable customers engaged in route distribution, transportation and
field service applications to manage sales, service and inventory information in
real time.
Mobile computing refers to rugged PC-based devices for route accounting,
meter reading, field services and sales management, rather than general personal
or desktop computing applications. In combination with wireless communications,
mobile computing enables remote workers to have access to centralized computer
applications and databases and to send and receive information through wireless
networks for improved productivity, efficiency and accuracy of data.
IDENTIFICATION SYSTEMS. Intermec's Identification Systems products, which
include charged couple device ("CCD") scanners and imagers, wands, laser
scanners and media products, have the ability to read or collect data, and print
data on customized labels and tags.
The Company's line of flexible "on demand" bar code printers ranges from
low-cost, light- to heavy-duty industrial models that accommodate a wide array
of printing widths and label configurations. A variety of specialty printers
provides custom solutions ranging from color printing to the inclusion of
promotional information with the bar code data contents or high-resolution (400
DPI) quality to ensure sharp fonts and precise graphics, even on extremely small
labels for the electronics industry.
TECHNOLOGIES/TRENDS. The Company is consistently broadening the application
of ADC and mobile computing by developing or integrating new technologies into
its product range. Latest examples include the Company's smart, vehicle-based
docking solution for pen-based computers as well as 2-D bar codes, smart cards
and RFID. Tags or labels based on RFID technology can be updated during their
use, making them an integral part of an electronic information network.
Major offices and manufacturing facilities are located in the states of
Iowa, Ohio and Washington; and internationally in The Netherlands, Sweden,
France and Australia.
INDUSTRIAL AUTOMATION SYSTEMS. The Company is a major designer, producer
and integrator of manufacturing technologies, primarily for the global
automotive, off-road and diesel engine industries, but also for other markets
such as electronics and durable goods. Products include integrated manufacturing
systems
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ITEM 1. BUSINESS (CONTINUED)
for the production of powertrain components such as engines, transmissions and
connecting rods, and chassis components such as steering knuckles, rear axle
housings and brake calipers; body welding and assembly systems; test and
automation equipment for integration into production lines; precision grinding
and abrasives; the redesign, remanufacturing and retooling of installed
equipment; and design/engineering services.
The Company's IAS segment includes the following divisions: Lamb Technicon
Machining Systems, Lamb Technicon Body & Assembly Systems, Lamb Assembly & Test
Systems, Modern Prototype, Lamb UK, Honsberg Lamb, Landis Gardner, Landis Lund,
Goldcrown Machinery and Cranfield Precision.
INTEGRATED MANUFACTURING SYSTEMS. The Company designs, integrates and
installs integrated machining systems for the world's automotive and off-road
vehicle industries. The integrated manufacturing systems divisions design
manufacturing solutions for all production volumes of powertrain
components-primarily engines and transmissions. Integrated manufacturing systems
accounted for 27%, 39% and 38% of the Company's consolidated and combined
revenues in fiscal 1997, 1996 and 1995, respectively.
The product lines include computer-numeric-control ("CNC") machines for
low-volume applications (up to 25,000 units of production annually), and modular
flexible production systems for medium- (25,000 to 75,000 units of production
annually) and high-volume (75,000 to 250,000 units of production annually)
requirements. The integrated manufacturing systems operations specialize in
utilizing simultaneous engineering techniques, in conjunction with its
customers, to develop optimum solutions to complex manufacturing requirements.
Historically, the Company has specialized in designing solution sets for
manufacturing cylinder heads, engine blocks and transmission cases. However, the
retooling of existing systems and the design of manufacturing processes for
smaller parts also have expanded into growing businesses for the Company in
recent years.
The Company's emphasis on engineering has resulted in the advancement of
machining processes. These upgrades offer lower life-cycle costs and improved
production performance by reducing unproductive time during operation.
Innovations also include the design of "modular" systems, which result in
shorter design, integration and installation cycles, better flexibility of
transfer line systems using less production floor space, and faster throughput
at much lower costs. The Company has developed modular transfer systems in which
parts are mounted on pallet fixtures that transport work pieces between
workstations faster than guided vehicles could between flexible machining
systems.
Recent additions to the Company's product range include modular machining
centers that perform continuous high-speed, high-precision machining of cast
iron, aluminum or magnesium parts. The Duraflex CNC machine line is designed to
produce a variety of cylinder heads or engine blocks, in a random-run
environment, while maintaining close tolerances. The MACH I-TM- dual-spindle
machine has been designed to improve the efficiency of CNC machines in
higher-volume production scenarios. The MACH I-TM- can complete a machining
operation, change tools and resume machining, all in less than one second.
These new designs allow the machines to operate in stand-alone, cellular or
system configurations. Larger systems also can be adapted to process changes by
exchanging single machining modules on a transfer line. The utilization of
advanced process technology, as represented in these newest CNC machines, has
enabled the Company to provide highly accurate, durable and truly flexible
machining systems.
The Company's emphasis on process engineering is demonstrated by its efforts
in "simultaneous engineering," a process in which manufacturing solutions are
developed with the customer while the customer's product design and engineering
phases are still underway. In these processes, another important technology,
"virtual manufacturing," creates sophisticated 3-D computer simulations that are
used by the Company to design and pre-program systems, workflow and single
machining operations.
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ITEM 1. BUSINESS (CONTINUED)
BODY WELDING AND ASSEMBLY SYSTEMS. The Company designs automated systems to
assemble and weld high-quality automobile and truck bodies as well as other
industrial products. Robotic systems are integrated with high-precision holding
and alignment fixtures and high-volume welding equipment to produce components
and sub-assemblies for the automotive industry. The Company also provides
engineering services and advanced electronic design technology in the areas of
computer simulations and three-dimensional tool design.
Using computer simulations and 3-D tool design, UNOVA has established one of
the broadest product and process design capacities in the industry. Tool design
and prototyping are now linked directly into the actual production systems
engineering process, reducing costs and risks for customers long before their
car body projects move into the capital investment stage. Through its Assembly
and Test Systems operations, the division also designs and builds specialized
assembly and/or testing equipment and systems for a variety of manufacturing
applications. Body Welding and Assembly Systems accounted for 14%, 12% and 8% of
the Company's consolidated and combined revenues in fiscal 1997, 1996 and 1995,
respectively.
A number of proprietary technologies have been developed for use in
automotive assembly. Examples are specialized material handling solutions to
move subassemblies or complete car bodies through the manufacturing process,
such as overhead non-synchronous gantries. The Company also is recognized for
its expertise in "hemming," the process of attaching exterior sheet metal to the
interior frames of doors, hoods, deck lids and similar "hang-ons" or "closures."
Another solution is called "flexible body framing," a patented system which
enables consistent, high-precision positioning for final body assembly.
PRECISION GRINDING AND ABRASIVES. The Company develops and produces
precision grinding systems and equipment for the global manufacturing market. A
key area of the Company's expertise is the application of precision cylindrical
and disc grinding technologies to medium- and high-volume production of car
engines and transmission components such as camshafts, crankshafts or connecting
rods. Precision Grinding and Abrasives accounted for 15%, 17% and 20% of the
Company's consolidated and combined revenues in fiscal 1997, 1996 and 1995,
respectively.
Among the Company's new developments in precision grinding are a CNC machine
for grinding the lobes of automotive camshafts. This advanced camlobe grinder
uses superabrasive cubic boron nitride ("CBN") grinding wheels, which are
capable of higher grinding speeds, more consistent accuracy, and longer
effective performance life. Research into the processing of new materials also
has resulted in the development of ultra-high-precision grinding and finishing
techniques. These advances are being applied to requirements of the
microelectronics, computer, aerospace and optics industries for the manufacture
of materials such as composites, silicon, glass and ceramics.
Other technological innovations include a camshaft lobe grinder for
large-scale production of soft camshaft applications, centerless grinders for
high-production parts processing, a new generation of double-disc grinding
machines used for precision machining of parts with flat and parallel sides and
a horizontal double-disc grinder for automotive connecting rods. The Company
also has developed sophisticated software tools for monitoring and controlling
grinding processes and dressing grinding wheels.
TECHNOLOGIES/TRENDS. UNOVA continues to develop manufacturing technologies
to broaden its product offerings and respond to automotive customers' needs to
lower costs, improve fuel consumption and decrease car emissions. New modular,
multi-spindle machining centers are reducing cycle time, and flexible fixturing
systems are under development to cut costs of high-volume machining. Advances in
grinding technologies have allowed UNOVA to move into the silicon wafer market,
where the Company's technologies are applied to the grinding and polishing of
wafers for the semiconductor industry.
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ITEM 1. BUSINESS (CONTINUED)
The Industrial Automation Systems segment's major offices and production
facilities are located in Kentucky, Illinois, Michigan, Ohio and Pennsylvania
and internationally in Canada, the United Kingdom and Germany.
BUSINESS STRATEGY
The Company's strategy is to develop products, processes and services that
help improve productivity and efficiency in a variety of manufacturing and
distribution applications. Both business segments, Automated Data Systems and
Industrial Automation Systems, offer single products as well as integrated
solutions to their customers.
Future growth in these businesses is expected to result from expansion of
the Company's existing operations and its customer base, and through
acquisitions. In seeking acquisitions, the Company will concentrate on
technologies, products and services that enhance customer productivity and
efficiency, and those that can be characterized as growth drivers.
The ongoing development of the Company's ADC/mobile computing activities
will depend primarily on the application of new technologies and products to
maintain its position in this technology-driven market. The Company believes it
has the necessary technical expertise to achieve this goal. Future geographic
opportunities have been identified outside North America, particularly in
Europe, Latin America and Asia, where the use of data collection technology is
less developed. To capitalize on these emerging markets, the Company is
expanding its international marketing, distribution and support network, and is
engaged in an ongoing program to locate Company-owned resources in key markets
worldwide. In its Industrial Automation Systems business segment, the Company
plans to continue to develop its existing customer base by seeking a greater
role in customer projects, by continuing its emphasis on product development and
by expanding its international activities.
The Company also intends to increase its presence in market segments where
it presently holds a smaller market share, such as the body welding and assembly
systems area, and the application of lower-volume flexible manufacturing systems
and CNC machines. In some areas the Company also has developed high-precision
manufacturing technologies that should allow it to establish a presence in
growth markets such as microelectronics with its new generation of
ultra-high-precision wafer grinders.
In recent years, cost-cutting needs and quality requirements in the
automotive industry have affected the Company's relationships with its
customers. The carmakers' trend toward fewer suppliers has benefited the Company
and allowed it to expand its market participation. These market-driven changes
also have forced many smaller competitors to either withdraw from the market or
reduce their role to that of a second or third tier supplier. The Company's
strategy has been to establish an extensive outsourcing network of qualified
suppliers in North America and overseas, thereby avoiding unnecessary vertical
integration and gaining flexibility in its market approach.
Both major business segments should be able to grow from established
positions in their respective markets; often serving customers in a multitude of
projects that result in repeat business opportunities.
MARKETS AND CUSTOMERS
AUTOMATED DATA SYSTEMS. Because Automated Data Systems represents
technologies that can be utilized by a company of any size, and small systems
can be installed at very low cost, the market is extensive. Worldwide sales of
automated data systems equipment reached over $7 billion in 1997, according to
estimates from independent research sources. These sources also predict that the
overall market will continue to grow at an annual rate of approximately 12% to
15% over the next several years.
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ITEM 1. BUSINESS (CONTINUED)
Market growth is driven by the global need for technologies and solutions
that improve quality, productivity and cost-efficiency in business and
government, particularly through logistics automation, supply chain management
and ERP solutions. Worldwide coverage with a dedicated sales organization is
therefore a major advantage.
Through its application of technologies in the manufacturing,
warehouse-distribution, transportation, health care, government and other
non-retail markets, the Company maintains a strong position in the global
non-retail ADC/mobile computing market.
The Company sells and services its products through multiple sales and
distribution channels: a direct field sales force which concentrates on large,
complex systems sales; value added resellers that offer applications-specific
solutions; and alliances with major systems integrators. The Company's direct
sales organization serves customers from offices throughout North America,
Europe and in some selected countries outside these regions. An indirect sales
channel includes long-time exclusive relationships with value-added distributors
and master resellers.
Although the Company obtains approximately 48% of its sales through indirect
sales channels, no individual value-added distributor or reseller is material to
overall Company results. The Company also maintains contact with customers and
prospective users by having established user forums for automated data systems
applications and technologies.
The mobile computing systems market consists of several applications, such
as route accounting for the distribution and package/parcel delivery industries,
sales merchandising, remote delivery and field service. These applications are
generally used in the consumer products, food, beverage, wholesale, parcel
delivery, freight, field service and home service industries. The radio
frequency ("RF") systems market comprises manufacturing, warehousing and
distribution center and retail applications.
Manufacturing applications include the collection and communication of
information related to receipt of materials, work-in-progress, finished goods
inventory and other functions throughout the manufacturing process. Warehousing
and distribution center applications involve the collection and communication of
information related to receiving materials to be stored, storage locations,
materials retrieval and shipping. Retail applications include the automation of
shelf label maintenance and product shipping and receiving functions.
International sales opportunities exist in countries where mobile computing
systems market practices and other applications are similar to those in the U.S.
The extent of RF systems opportunities in any particular country is based on the
level of industrialization, the status of bar coding implementation and the RF
regulatory environment. The major markets for printers are manufacturing,
distribution, warehousing, transportation, health care, government and other
services.
INDUSTRIAL AUTOMATION SYSTEMS. The Company participates in the automotive
manufacturing and general manufacturing markets. Investments by automotive
customers are driven by model changes; competitive pressures; government
regulations such as emission standards and gasoline consumption rates; and by
the customers' own internal spending cycles. Investments in diesel engine
manufacturing are driven by the infrastructure needs of emerging industrial
nations and by the efficiency benefits diesel engines offer for heavy and light
trucks and utility vehicles.
Customers for the Company's integrated manufacturing systems products are
the major auto and diesel manufacturers and their tier 1 suppliers. Although the
passenger car and light truck industries continue to represent this division's
largest market, business from diesel engine manufacturers has grown in recent
years.
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ITEM 1. BUSINESS (CONTINUED)
The Company believes that its future growth in this business segment will be
dependent on its ability to expand the scope of products and services it can
offer to its current customer base. Many of these additional products should
also allow it to expand into other industrial manufacturing markets.
Based upon internal surveys of equipment installed at customer engine and
transmission plants, management believes that the Company is a leading global
supplier of production systems for engine, transmission and chassis components
in a more than $6 billion market. While the Company is not yet a leader in the
body welding and assembly industry, its growth rate in recent years has exceeded
that of the market which is estimated to be about $3 billion in North America
and Europe.
A substantial majority of the Industrial Automation Systems segment's total
revenues is generated by worldwide automotive and diesel engine industry
purchases of automated manufacturing systems, including integrated machining,
body welding and assembly and precision grinding systems. Among customers for
such equipment, U.S. and Canadian auto and auto-related manufacturers currently
account for more than 69% of the Industrial Automation Systems sales, and
manufacturers in Europe account for about 29%. The remainder of sales represents
products exported from the Company's production facilities, mostly for
installation in Latin America and Asia.
Recent major customers include U.S.-based Chrysler, Cummins, Ford, General
Motors, Navistar and Detroit Diesel; in foreign markets, the major Western
European auto manufacturers, BMW/Rover, Fiat, Mercedes Benz, Jaguar, Peugeot,
Renault, Volkswagen, and the European subsidiaries of the large U.S.
manufacturers, as well as Yuchai Diesel in China, Tata (Telco) in India and
Kamaz in Russia. The Company has also won major systems contracts for the
"transplant" manufacturing facilities of foreign auto makers, including both
European and Japanese, and also serves the automotive components manufacturing
market.
COMPETITION
Strong competition exists both in the domestic and international markets for
the Company's products and services. Products are sold and projects are won in
the marketplace based on price, technology and service.
AUTOMATED DATA SYSTEMS. The market for ADC/mobile computing systems is
highly fragmented. Based on independent market surveys, management believes that
Intermec Technologies Corporation is one of the largest participants measured by
revenues, with a market share close to 10% in the automated data systems
industry. The other two major participants are Symbol and Telxon. The Company
also faces strong competition for single product lines from specialized
suppliers.
The Company competes on the basis of its open modular systems approach,
network and communications expertise, applications software, level of sales and
support services, and product functionality, performance, ruggedness and overall
quality.
The market for mobile computing and RF products is highly competitive and
rapidly changing. Some firms manufacture and market hand-held systems for route
accounting applications, including Telxon and Fujitsu. In addition, a number of
firms manufacture and market radio-linked data communication products, including
LXE, Teklogix, Symbol, and Telxon. On the printer side, the Company faces
competition from Zebra, Eltron, Datamax and many others, depending on the
geographic area.
INDUSTRIAL AUTOMATION SYSTEMS. While product quality is a key determinate
in the competition to win market share, pricing remains the most important
criteria in the global market. Integrated Manufacturing Systems' strength is the
ability to design reliable and efficient manufacturing processes for its
customers
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ITEM 1. BUSINESS (CONTINUED)
and combine them with cost-effective machining solutions in order to win orders
against strong competition.
There are numerous competitors in the markets served by integrated
manufacturing; major competitors include four German companies and one in Italy.
The market for high-volume production systems for engines and transmissions
in North America and Europe is divided among approximately ten major competitors
and numerous smaller participants. Major competitors are Thyssen/Giddings &
Lewis, Ingersoll Milling and Grob (Germany). Management estimates that the
Company has approximately a 12% share of this market.
In the body welding and assembly systems market, the Company is faced with
competitors that are involved in a broad range of assembly equipment and other
competitors that provide "niche" machines to address specific markets. Some of
the stronger competitors have been or are aligned with machine tool companies
for "total capability." In North America, there are eight main competitors and
another seven in Europe. The primary competitors include DCT, Progressive
Industries (PICO) and Valiant in the U.S.; Thyssen, FFT and Kuka in Germany and
Comau in Italy.
In the worldwide market for high-precision grinding of engine parts, the
Company has achieved a strong market position through innovative products that
improve customer efficiency while reducing their capital costs. Major
competitors are the foreign companies Koyo and Toyoda in Japan; the Koerber
Group, Naxos Union and Junkers in Germany; and Guistina in Italy.
RESEARCH AND DEVELOPMENT
Companywide expenditures on research and development activities amounted to
$53.1 million, $29.7 million and $27.5 million, substantially all of which was
sponsored by the Company, in the years ended December 31, 1997, 1996 and 1995,
respectively. The Company expensed a total of $211.5 million of acquired
in-process research and development in 1997. See further discussion in Note B to
the consolidated and combined financial statements.
PATENTS AND TRADEMARKS
The Company owns a large number of patents, trademarks and copyrights
relating to its manufactured products, which have been secured over a period of
years. These patents, trademarks and copyrights have been of value in the growth
of the Company's business and may continue to be of value in the future.
However, the Company's business generally is not dependent upon the protection
of any patent, patent application or patent license agreement, or group thereof,
and would not be materially affected by expiration thereof.
The Company has approximately 28 patent licenses under which it paid out or
received income in the year ended December 31, 1997. During 1997, the aggregate
amount of license fees paid by the Company was approximately $11.8 million, and
the aggregate amount of license fees received was approximately $914 thousand.
SEASONALITY; BACKLOG
Sales backlog was $395 million, $595 million and $579 million at December
31, 1997, 1996 and 1995, respectively. The operations of the Company are not
seasonal to any appreciable degree. The majority of the Company's backlog is
concentrated in the Industrial Automation Systems segment. The Automated Data
Systems market typically operates without a significant backlog of firm orders
and does not consider backlog to be a relevant measure of future sales.
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ITEM 1. BUSINESS (CONTINUED)
EMPLOYEES
At December 31, 1997, the Company had approximately 7,060 full-time
employees, of which approximately 3,170 are engaged in the Automated Data
Systems business, approximately 3,770 in the Industrial Automation Systems
segment and approximately 120 in corporate and shared services.
ENVIRONMENTAL AND REGULATORY MATTERS
During 1997, the amounts incurred to comply with federal, state and local
legislation pertaining to environmental standards did not have a material effect
upon the capital expenditures or earnings of the Company.
Radio emissions are the subject of governmental regulation in all countries
in which the Company currently conducts business. In North America, both the
Canadian and the U.S. governments publish relevant regulations, and changes to
these regulations are made only after public discussion. In some countries
regulatory changes can be introduced with little or no grace period for
implementing the specified changes. Furthermore, there is little consistency
among the regulations of various countries outside North America, and future
regulatory changes in North America are possible. These conditions introduce
uncertainty into the product planning process and could have an adverse effect
on the ADC/ Mobile Computing business.
The European Community ("EC") has passed a directive requiring its members
to adopt laws relating to electro-magnetic compatibility and emissions
standards. These standards will apply to ADC/Mobile Computing products sold in
EC member countries as those countries adopt the EC standards into law.
Currently, the Company believes that its products are in material compliance
with the regulations in force in each of the EC member countries.
RAW MATERIALS
The Company uses a wide variety of raw materials in the manufacture of its
products and obtains such raw materials from a variety of suppliers. No single
supplier provides 10% or more of the Company's raw materials, nor do raw
materials from any one supplier generate 10% or more of the Company's
consolidated revenues. The Company does not have any long-term supply agreements
relating to raw materials.
9
<PAGE>
ITEM 2. PROPERTIES
The Company's executive offices, in owned premises, are at 360 North
Crescent Drive, Beverly Hills, California. Its principal plants and offices have
an aggregate floor area of approximately 4,137,324 square feet, of which
3,392,064 square feet (82%) are located in the United States, and 745,260 square
feet (18%) are located outside of the United States, primarily in the United
Kingdom, Germany and Canada.
These properties are used by the business segments as follows:
<TABLE>
<CAPTION>
SQUARE
FEET
---------
<S> <C>
Industrial Automation Systems........................................ 3,056,666
Automated Data Systems............................................... 748,108
---------
3,804,774
---------
---------
</TABLE>
Approximately 3,102,885 square feet (75%) of the principal plant, office and
commercial floor area is owned by the Company, and the balance is held under
lease.
The Company's plants and offices in the United States are situated in 20
locations in the following states:
<TABLE>
<CAPTION>
SQUARE
STATE FEET
- --------------------------------------------------------------------- ---------
<S> <C>
Michigan............................................................. 887,450
Pennsylvania......................................................... 495,662
Kentucky............................................................. 400,779
California........................................................... 332,550
Washington........................................................... 312,000
Illinois............................................................. 306,015
Ohio................................................................. 289,483
Iowa................................................................. 269,725
Other states......................................................... 98,400
---------
3,392,064
---------
---------
</TABLE>
The above-mentioned facilities are in satisfactory condition and suitable
for the particular purposes for which they were acquired or constructed and are
adequate for present operations.
The foregoing information excludes Company-held properties leased to others
and also excludes plants or offices which, when added to all other of the
Company's plants and offices in the same city, have a total floor area of less
than 50,000 square feet.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently, and is from time to time, subject to claims and
suits arising in the ordinary course of its business. Although the results of
litigation proceedings cannot be predicted with certainty, the Company believes
that the ultimate resolution of these proceedings will not have a material
adverse effect on the Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders, through the
solicitation of proxies or otherwise, since October 31, 1997, the date on which
the Company became an independent public company.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Quarterly Financial Information (unaudited)............................... F-23
Dividend Information...................................................... F-15
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
UNOVA, INC.
<TABLE>
<CAPTION>
FIVE MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
------------------------------------------ DECEMBER 31, JULY 31,
1997 1996 1995 1994 1993 1993
--------- --------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales and Service Revenues $ 1,426.2 $ 1,164.7 $ 942.9 $ 971.1 $ 360.9 $ 844.3
--------- --------- --------- --------- ------------- -----------
Operating Costs and Expenses
Cost of sales................................ 981.4 841.8 669.3 689.9 270.2 589.9
Selling, general and administrative (1)...... 535.9 218.7 194.1 199.9 79.4 170.6
Depreciation and amortization................ 40.6 27.0 26.1 28.7 12.0 26.8
--------- --------- --------- --------- ------------- -----------
Total...................................... 1,557.9 1,087.5 889.5 918.5 361.6 787.3
--------- --------- --------- --------- ------------- -----------
Earnings (Loss) before Interest and Taxes
(2).......................................... (131.7) 77.2 53.4 52.6 (0.7) 57.0
Interest Expense, net (3)...................... (16.7) (7.1) (9.3) (15.7) (4.3) (5.1)
Taxes on Income................................ (23.0) (28.1) (17.9) (15.3) (0.3) (20.5)
--------- --------- --------- --------- ------------- -----------
Net Earnings (Loss) (2)........................ $ (171.4) $ 42.0 $ 26.2 $ 21.6 $ (5.3) $ 31.4
--------- --------- --------- --------- ------------- -----------
--------- --------- --------- --------- ------------- -----------
Basic and Diluted Net Earnings (Loss)
per Share (2)................................ $ (3.17) $ 0.78 $ 0.49 $ 0.40 $ (0.10) $ 0.58
Equivalent Shares (4).......................... 54,056 53,892 53,892 53,892 53,892 53,892
FINANCIAL POSITION (at end of period):
Total Assets................................... $ 1,356.4 $ 1,073.8 $ 919.0 $ 860.8 $ 799.0 $ 748.0
Notes Payable and Current Portion of Long-term
Obligations.................................. $ 86.6 $ 27.5 $ 22.2 $ 41.7 $ 7.1 $ 4.3
Long-term Obligations.......................... $ 216.9 $ 14.5 $ 14.1 $ 9.0 $ 8.9 $ 19.1
Allocated Portion of Western Atlas Debt........ $ 109.6 $ 112.4 $ 112.8 $ 211.0 $ 27.3
Working Capital................................ $ 277.8 $ 266.0 $ 194.7 $ 115.2 $ 53.0 $ 199.5
Current Ratio.................................. 1.6 1.6 1.6 1.3 1.1 2.0
Total Debt as a Percentage of Total
Capitalization............................... 34% 21% 23% 27% 37% 10%
</TABLE>
- ------------------------------
(1) General and Administrative Costs include allocated charges from Western
Atlas of $13.5 million, $22.2 million, $19.9 million, $27.6 million, $8.1
million and $14.1 million for the years ended December 31, 1997, 1996, 1995
and 1994, the five months ended December 31, 1993, and the fiscal year ended
July 31, 1993, respectively. The year ended December 31, 1997 includes
charges of $211.5 million, or $3.91 per share, for the value of acquired
in-process research and development activities resulting from acquisitions
made during the year.
(2) Amounts presented for the year ended July 31, 1993 are before a cumulative
effect of a change in accounting principle for the adoption of the
provisions of SFAS No. 106, EMPLOYER'S ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS. The Company elected immediate recognition of
the transition liability, and recorded a net of tax charge of $9.3 million.
Net earnings for the period were $22.1 million and earnings per share were
$0.41 after the cumulative effect of a change in accounting principle.
(3) Interest expense includes allocated charges from Western Atlas of $12.0
million, $8.3 million, $8.4 million, $12.1 million, $3.7 million and $3.9
million for the years ended December 31, 1997, 1996, 1995 and 1994, the five
months ended December 31, 1993, and the fiscal year ended July 31, 1993,
respectively.
(4) In thousands. The number of common shares used to calculate earnings per
share prior to 1997 is based on the number of Western Atlas Common Stock
that was outstanding as of June 30, 1997.
11
<PAGE>
ITEM 7. FINANCIAL REVIEW AND ANALYSIS
RESULTS OF OPERATIONS
Sales and service revenues and segment operating profit for the years ended
December 31, 1997 (excluding the $211.5 million charges for acquired in-process
research and development), 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
SALES AND SERVICE REVENUES
Automated Data Systems......................................................... $ 636.4 $ 367.3 $ 320.6
Industrial Automation Systems.................................................. 789.8 797.4 622.3
--------- --------- ---------
Total Sales and Service Revenues............................................... $ 1,426.2 $ 1,164.7 $ 942.9
--------- --------- ---------
--------- --------- ---------
SEGMENT OPERATING PROFIT
Automated Data Systems......................................................... $ 9.1 $ 30.1 $ 13.0
Industrial Automation Systems.................................................. 94.6 69.5 61.9
--------- --------- ---------
Total Segment Operating Profit................................................. $ 103.7 $ 99.6 $ 74.9
--------- --------- ---------
--------- --------- ---------
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO 1996
Total sales and service revenues increased $261.5 million, or 22% for the
year ended December 31, 1997 compared with the corresponding prior period. Total
segment operating profit, excluding the $211.5 million charges for acquired
in-process research and development, increased $4.1 million, or 4% for the year
ended December 31, 1997 compared to the corresponding prior period.
ADS revenues increased by $269.1 million, or 73% due to the acquisitions of
Norand Corporation ("Norand") and United Barcode Industries ("UBI"). However,
ADS operating profit declined by $21.0 million, or 70% due primarily to the
process of integrating the newly acquired companies with Intermec and the costs
of a long-term contract related to wireless radio frequency identification
("RFID") technology purchased from IBM Corporation. Operating profit margins,
which declined from 8.2% in 1996 to 1.4% in 1997, are expected to improve
following the completion of the integration efforts in 1998.
IAS revenues decreased $7.6 million, or 1% and related operating profit
increased $25.1 million, or 36% for the year ended December 31, 1997 compared
with the corresponding prior period. The decrease in IAS revenues is primarily
attributable to the sale of the Material Handling Systems ("MHS") division in
November 1996, which offsets an increase in integrated manufacturing systems
revenues. IAS experiences lower profit margins in the early stages of long-term
contracts until the development risks have been mitigated. During 1997 the
integrated manufacturing systems operations experienced a higher level of
revenues and profits from contracts in the final delivery and installation
phase. These projects contributed to an increase in operating margins for IAS
from 8.7% in 1996 to 12.0% in 1997. Accordingly, IAS backlog declined from
$545.0 million at December 31, 1996 to $332.0 million at December 31, 1997. Also
contributing to the increased operating profit are nonrecurring costs recorded
in 1996 associated with the MHS sale and the reorganization of the Company's
European and grinding businesses.
The Company acquired Norand on March 3, 1997, and UBI on April 4, 1997.
Norand designs, manufactures and markets mobile computing systems and wireless
data communications networks using radio frequency technology. UBI is a
European-based automated data collection company headquartered in Sweden. These
companies are currently being integrated into the ADS segment. Both transactions
were
12
<PAGE>
ITEM 7. FINANCIAL REVIEW AND ANALYSIS (CONTINUED)
funded by Western Atlas borrowings and cash on hand, and have been accounted for
under the purchase method of accounting. Accordingly, the acquisition costs
(approximately $280.0 million and $107.0 million for Norand and UBI,
respectively) have been allocated to the net assets acquired based upon their
relative fair values. Such allocation resulted in $203.3 million assigned to
in-process research and development activities; $154.1 million assigned to
goodwill (amortized over 25 years); and $29.0 million assigned to other
intangibles (amortized over periods ranging from 4 to 18 years). During the
second quarter of 1997, the Company expensed the amounts assigned to acquired
in-process research and development in accordance with Financial Accounting
Standards Board Interpretation No. 4.
The Company acquired the remaining 51% of Honsberg, a German machine tool
maker, in the second quarter of 1997. The original 49% of Honsberg was acquired
during 1995. The Company acquired the stamping, engineering, and prototyping
division of Modern Prototype Company in September 1997. In December 1997, UNOVA
acquired Goldcrown Machinery, Inc., a manufacturer of precision centerless
grinding systems. Also, in November 1997, the Company acquired 13% of the common
stock of Amtech Corporation, a global provider of systems and solutions using
wireless data and RFID technologies.
Selling, general and administrative ("SG&A") expense as a percentage of
sales and service revenues increased to 22.7% for the year ended December 31,
1997, compared to 18.8% in 1996. This increase is primarily due to a higher
percentage of the Company's 1997 sales coming from the ADS segment, where SG&A
rates are historically higher than those experienced in the IAS segment. ADS
sales as a percentage of total Company sales increased to 44.6% in 1997 from
31.5% in 1996.
Net interest expense was $16.7 million and $7.1 million for the years ended
December 31, 1997 and 1996, respectively. The increase is primarily due to an
increase in the level of Western Atlas allocated debt from $109.6 million at
December 31, 1996 to $230.0 million at October 31, 1997 (when the Company paid
this amount to WAI as an intercompany dividend). The increase in allocated debt
is primarily attributable to the 1997 acquisitions of Norand and UBI.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995
Total sales and service revenues increased by $221.8 million, or 24%, and
related segment operating profit increased $24.7 million, or 33% for the year
ended December 31, 1996 compared with the corresponding prior period.
ADS revenues increased by $46.7 million, or 15% as a result of the success
of new product introductions and increased deliveries on Intermec's five-year
purchase agreement with the U.S. Government. Revenues attributable to new
product introductions rose by $23.0 million, or 209%, and related unit shipments
increased 213% over 1995 levels. Revenues under the purchase agreement with the
U.S. Government increased $16.0 million, primarily attributable to a 38%
increase in unit hardware shipments.
ADS operating profit increased by $17.1 million in 1996, and operating
margins improved from 4.1% in 1995 to 8.2% in 1996. In 1995, margins were
adversely impacted by changes in product mix and competitive pressure on pricing
of certain mature product lines. Approximately one percentage point of the 1996
increase was due to improved margins on media products (labels and printer
ribbons), while the remaining improvement resulted from the Company responding
to factors contributing to the 1995 decrease. The 1995 decrease in margins was
affected by the cost of a shift from proprietary to open architecture systems
which caused an approximate two percentage point decrease, while pricing
pressure contributed to an additional decrease of approximately two percentage
points.
IAS revenues increased by $175.1 million, or 28% in 1996, and its operating
profit increased by 12% to $69.5 million. Operating margins declined from 10.0%
in 1995 to 8.7% in 1996 as a result of lower profit
13
<PAGE>
ITEM 7. FINANCIAL REVIEW AND ANALYSIS (CONTINUED)
recognition in the early stages of certain 1996 contracts. Backlog improved to
$545.0 million at December 31, 1996 compared to $501.0 million at the prior
year-end.
SG&A expense as a percentage of sales and service revenues decreased to
18.8% for the year ended December 31, 1996, compared to 20.6% in 1995. This
decrease is primarily due to a higher percentage of the Company's 1996 sales
coming from the IAS segment, where SG&A rates are historically lower than those
experienced in the ADS segment. Furthermore, IAS sales growth in 1996 was
attributable to divisions with lower SG&A rates, not the MHS division, which
carried a higher SG&A rate.
Net interest expense decreased from $9.3 million in 1995 to $7.1 million in
1996 because of lower levels of allocated Western Atlas debt, offset by reduced
interest income attributable to lower average balances in cash and marketable
securities.
FOREIGN CURRENCY TRANSACTIONS
The Company is subject to the effects of international currency fluctuations
due to the global nature of its operations. Currency fluctuations did not have a
significant impact on operations during fiscal years 1997, 1996 and 1995. It is
not possible to predict the Company's exposure to foreign currency fluctuations
beyond the near term because revenues generated from particular foreign
jurisdictions vary widely over time. The Company hedges transactions from time
to time, but the amount and volume of such transactions are not material.
For fiscal year 1997, the Company derived approximately 30% of its revenues
and approximately 35% of its operating profits (exclusive of corporate overhead
and charges for acquired in-process research and development) from non-U.S.
operations. However, at December 31, 1997, identifiable assets attributable to
foreign operations comprised 20% of total assets (of which the largest
components were attributable to European operations). Therefore, exposure of
identifiable assets to foreign currency fluctuations or expropriations is not
significant.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities decreased from $149.5 million at December 31,
1996 to $13.7 million at December 31, 1997 primarily as a result of the Norand
and UBI acquisitions.
Total debt increased from $151.5 million at December 31, 1996 to $303.6
million at December 31, 1997 due primarily to the use of committed and
uncommitted credit facilities to fund the Norand and UBI acquisitions. The
remaining increase is primarily attributable to capital expenditures and working
capital needs of the operations. The Company expects that cash flow from
operations, along with available borrowing capacity, will be adequate to meet
working capital requirements. At December 31, 1997, the Company has unused
credit facilities of approximately $275.0 million. The Company does not
anticipate any material adverse decline in cash flow from operations nor any
significant changes in capital expenditures required to support ongoing
operations.
In March 1998, subsequent to the end of the fiscal year, the Company sold
$200.0 million principal amount of senior unsecured debt. The sale comprised
$100.0 million of 6.875% seven-year notes, at a price of 99.867 and $100.0
million of 7.00% ten-year notes, at a price of 99.856. Including underwriting
fees, discounts and effects of forward rate agreements entered into by the
Company to hedge the interest rates on the debt, the effective interest rates on
the seven-year and ten-year notes are 6.982% and 7.217%, respectively. The net
proceeds of approximately $198.0 million were used by the Company to repay
outstanding short-term debt, which increased the Company's total additional
available borrowing capacity to $512.0 million, comprising a $400.0 million
unsecured committed credit facility and $112.0 million of uncommitted credit
facilities.
14
<PAGE>
ITEM 7. FINANCIAL REVIEW AND ANALYSIS (CONTINUED)
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define a year. Any such computer programs may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company has identified all significant applications that will require
modification to ensure Year 2000 compliance. Internal and external resources are
being used to make the required modifications and test Year 2000 compliance. The
Company plans to complete the modification and testing process prior to December
31, 1999. In addition, the Company is actively working with others with whom it
does significant business to assess their Year 2000 compliance efforts and the
Company's exposure to them.
The total cost to the Company of these Year 2000 compliance activities has
not been and is not anticipated to be material to the financial position or
results of operations in any given year. These costs and the date on which the
Company plans to complete the Year 2000 modification are based on management's
best estimates. However, there can be no guarantee that these estimates will be
achieved and actual results could differ from those plans.
INFLATION
In the opinion of management, inflation has not been a significant factor in
the markets in which the Company operates and has not had a significant impact
upon the results of its operations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME, and No.
131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. In
February 1998, Statement of Financial Accounting Standards No. 132, EMPLOYERS'
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS, was issued. These
statements are effective for financial statements issued for periods beginning
after December 15, 1997. The Company is evaluating what additional disclosures
may be required upon the implementation of SFAS Nos. 130, 131 and 132.
FORWARD-LOOKING STATEMENTS
The Company cautions readers that, in addition to the historical information
covered in this report, included are certain forward-looking statements and
information that are based on management's beliefs as well as on assumptions
made by and information currently available to management. Such statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions which could cause the Company's future results to differ
materially from those expressed or implied in any forward-looking statements
made by, or on behalf of, the Company. Such factors include, but are not limited
to, fluctuations in the strength of the automotive market; technological
developments, particularly in the ADC/Mobile Computing System industry;
competitive conditions; the availability and cost of materials and supplies;
relations with the Company's employees; the Company's ability to manage its
operating costs and to integrate acquired businesses in an effective manner;
general economic conditions; governmental regulations; and risks associated with
international operations. Any forward-looking statements should be considered in
light of these factors, many of which are beyond the Company's ability to
control or predict. Readers are cautioned not to put undue reliance on
forward-looking statements. The
15
<PAGE>
ITEM 7. FINANCIAL REVIEW AND ANALYSIS (CONTINUED)
Company disclaims any intent or obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Responsibility for Financial Reporting....................... F-1
Independent Auditors' Report.............................................. F-2
Consolidated and Combined Statements of Operations........................ F-3
Consolidated and Combined Balance Sheets.................................. F-4
Consolidated and Combined Statements of Cash Flows........................ F-5
Notes to Consolidated and Combined Financial Statements................... F-6
Quarterly Financial Information (unaudited)............................... F-23
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
Each of the directors of the Company identified below was elected to his
initial term on the Board of Directors on October 31, 1997, except that Alton J.
Brann was first elected a director of the Company on August 13, 1997. The
Certificate of Incorporation and By-laws of the Company provide that the
Company's Board will be divided into three classes of directors, with the
classes to be as nearly equal in number as possible. Of the initial directors,
Mr. Frank and Dr. Hoch will serve until the 1999 Annual Meeting of Shareholders;
Dr. Sample and Mr. Walsh will serve until the 2000 Annual Meeting of
Shareholders; and Mr. Brann will serve until the 2001 Annual Meeting of
Shareholders. Starting with the 1999 Annual Meeting of Shareholders, one class
of directors will be elected each year for a three-year term.
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
PRINCIPAL BUSINESS AFFILIATIONS
NAME AGE DURING PAST FIVE YEARS
- ------------------------------ --- ----------------------------------------------------------------------------
<S> <C> <C>
Alton J. Brann................ 56 Chairman of the Board and Chief Executive Officer of the Company and
non-executive Chairman of Western Atlas Inc. ("Western Atlas") since October
31, 1997; Chief Executive Officer of Western Atlas from March 1994 until
October 31, 1997. Prior thereto, President of Litton Industries, Inc.
("Litton") from November 1990 to March 1994 and Chief Executive Officer of
Litton from December 1992 to March 1994. Mr. Brann has been a director of
Western Atlas since February 1994 and a director of Litton since December
1990.
Stephen E. Frank.............. 56 President and Chief Operating Officer of Southern California Edison, a
subsidiary of Edison International, since June 1995. Prior thereto,
President and Chief Operating Officer of Florida Power and Light Company
beginning August 1990. Mr. Frank is also a director of Edison International
and of Washington Mutual, Inc.
Orion L. Hoch................. 69 Chairman Emeritus of Litton since March 1994. Prior thereto, Chairman of the
Board of Litton from March 1988. Dr. Hoch is also a director of Litton,
Western Atlas, Bessemer Trust Corporation, and Bessemer Trust Companies.
Steven B. Sample.............. 57 President of the University of Southern California since March 1991. Dr.
Sample is also a member of the Board of Directors of Presley Companies and
of Wm. Wrigley Jr. Company.
William D. Walsh.............. 67 Partner of Sequoia Associates, a private investment firm, since 1988. Mr.
Walsh is Chairman of the Board of Golden Valley Produce, LLC, Clayton Group,
Inc., Consolidated Freightways Corporation, Newell Manufacturing
Corporation, and Newell Industrial Corporation. He is also a director of
Basic Vegetable Products, L.P., Crown Vantage, Inc., Newcourt Credit Group
Inc., and URS Corporation.
</TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are elected each year by the Board of
Directors at its first meeting following the Annual Meeting of Shareholders to
serve, unless the Board otherwise determines,
17
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
during the ensuing year and until their respective successors are elected and
qualified. There are no family relationships between any of the executive
officers of the Company.
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
PRINCIPAL BUSINESS AFFILIATIONS
NAME AGE DURING PAST FIVE YEARS
- ------------------------------ --- ----------------------------------------------------------------------------
<S> <C> <C>
Edward J. Borey............... 47 Vice President of the Company and Chief Operating Officer of the Company's
Automated Data Systems Group since November 6, 1997, and Chief Operating
Officer of Intermec Technologies Corporation, a subsidiary of the Company
("Intermec"), since August 22, 1997; Executive Vice President of Intermec
since March 9, 1998; and prior thereto Senior Vice President of Intermec
since March 10, 1997. Senior Vice President and General Manager of the Media
Products Division of Intermec from 1995 to August 1997 and Vice President
and General Manager of the National Tag Group of Paxar Corporation from 1992
to 1995.
Alton J. Brann................ 56 Chairman of the Board and Chief Executive Officer; for prior business
experience see "Directors of the Company" above.
Charles A. Cusumano........... 51 Vice President, Finance, since October 31, 1997. Prior thereto, Vice
President, Finance, of Western Atlas since October 1996; Vice President and
Controller of Western Atlas from March 1994 to September 1996; and Vice
President, Finance, of Litton's Industrial Automation Systems Group from
October 1988 to March 1994.
Michael E. Keane.............. 42 Senior Vice President and Chief Financial Officer since October 31, 1997.
Prior thereto, Senior Vice President and Chief Financial Officer of Western
Atlas since October 1996; Vice President and Treasurer of Western Atlas from
March 1994 to September 1996; and Director of Pensions and Insurance of
Litton from February 1991 to March 1994. A director of Amtech Corporation
since November 1997, in which the Company presently has an ownership
interest.
Michael Ohanian............... 66 Senior Vice President and Group Executive, Automated Data Systems, since
October 31, 1997, and President of Intermec since May 1995. Senior Vice
President of Western Atlas from July 8, 1997, to October 31, 1997, and Vice
President of Western Atlas from May 1996 to July 1997. Independent
consultant from September 1994 to May 1995 and Vice President, Strategic and
Government Programs, of Intermec from April 1988 to September 1994.
Norman L. Roberts............. 63 Senior Vice President and General Counsel since October 31, 1997. Prior
thereto, Senior Vice President and General Counsel of Western Atlas since
March 1994 and Senior Vice President and General Counsel of Litton from
March 1990 to March 1994.
</TABLE>
18
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
PRINCIPAL BUSINESS AFFILIATIONS
NAME AGE DURING PAST FIVE YEARS
- ------------------------------ --- ----------------------------------------------------------------------------
<S> <C> <C>
Clayton A. Williams........... 64 Senior Vice President and Group Executive, Industrial Automation Systems,
since October 31, 1997. Prior thereto, Senior Vice President of Western
Atlas since May 1996 and Group Executive of Western Atlas' Manufacturing
Systems Group since December 1995; Vice President of Western Atlas from
December 1995 to May 1996; Vice President of Litton from June 1992 to
December 1995; and President of Litton's Applied Technology division from
January 1990 to December 1995.
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to the Distribution, on October 31, 1997, Clayton A. Williams
received 117 shares of UNOVA Common Stock. These 117 shares should have been,
but were not, reflected on Mr. Williams' Form 3 that was filed with the SEC on
October 2, 1997. In connection with the preparation for the filing of this
report on Form 10-K, Mr. Williams' inadvertent omission of the shares in a
footnote of such Form 3 was discovered. An amendment to the Form 3 previously
filed by Mr. Williams was filed with the SEC on March 25, 1998.
On November 14, 1997, Michael Ohanian purchased 2,000 shares of UNOVA Common
Stock on the open market at a purchase price of $16.50 per share. These 2,000
shares should have been, but were not, reported on Mr. Ohanian's Form 4 that was
filed with the SEC on December 10, 1997. In connection with the preparation of
this report on Form 10-K, the failure to report the acquisition of the 2,000
shares was discovered. An amendment to the Form 4 previously filed by Mr.
Ohanian was filed with the SEC on March 25, 1998.
19
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
For the chief executive and the four other executive officers of the Company
who, based upon employment by the Company (and by Western Atlas and their
respective subsidiaries) received the highest compensation with respect to the
fiscal year ended December 31, 1997 (the "Named Executive Officers"), the
following table sets forth information concerning compensation paid by such
companies to these individuals with respect to the periods indicated. The
principal positions listed in the table are those held by the Named Executive
Officers at the end of 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(A) (#) ($)(B)
- ----------------------------------------------------- --------- ----------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Alton J. Brann, Chairman of the Board 1997 713,486 875,000 500,000(c) 17,996
and Chief Executive Officer 61,601(d)
1996 687,030 928,125 61,601(d) 17,382
1995 649,065 669,638 61,601(d) 17,130
Michael E. Keane, Senior Vice President 1997 267,308 267,308 125,000(c) 6,570
and Chief Financial Officer 36,961(d)
Michael Ohanian, Senior Vice President 1997 305,781 191,113 50,000(c) 9,050
18,480(d)
1996 269,232 269,232 13,552(d) 9,250
Norman L. Roberts, Senior Vice President 1997 305,769 275,192 100,000(c) 9,060
and General Counsel 18,480(d)
1996 295,846 292,887 18,480(d) 9,057
1995 285,774 220,455 18,480(d) 10,090
Clayton A. Williams, Senior Vice President 1997 272,444 332,109 75,000(c) -0-
18,480(d)
1996 257,500 321,875 14,783(d) 45,540
1995 15,385(e) -0- 30,800(d) -0-
</TABLE>
- ------------------------
(a) Bonuses awarded to the Named Executive Officers, with respect to 1997 were
paid as follows: an amount equal to 50% of the recipient's annual base pay
in effect on January 1, 1997, was paid at the time the award was determined
and the remainder will be paid one year later provided the recipient is then
in the employ of the Company or has terminated employment by reason of
death, disability, or retirement or is on an approved leave of absence.
Where a bonus exceeded 100% of the recipient's base pay at January 1, 1997,
an amount equal to one half of such base pay was paid at the time the award
was determined; and, subject to satisfaction of the conditions set forth in
the preceding sentence, an additional amount equal to 50% of such base pay
will be paid one year later. The remainder of the award will be paid two
years later. However, awards with respect to the portion of the fiscal year
subsequent to the Distribution (as defined below) made to Messrs. Brann,
Keane, and Roberts were payable in a single installment, subject to the
recipient's election to defer payment thereof.
20
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(b) Included in this column for 1997 are the following: (i) present value costs
of the Company's portion of the 1997 premium for split-dollar life insurance
for Mr. Brann of $2,258; (ii) the amount of $2,792 representing premiums
paid by the Company with respect to the participation in the Company's
Executive Medical Plan of each of Messrs. Brann, Keane, and Roberts; (iii)
the following amounts representing interest imputed to and taxable to the
holder of loans from the Company: Mr. Brann, $11,396; Mr. Keane, $2,228; and
Mr. Roberts, $4,718; (iv) the Company's matching contributions of $1,550
made to the respective accounts of Messrs. Brann, Keane, Ohanian, and
Roberts under the Company's 401(k) plan; and (iv) the amount of $7,500 paid
to Mr. Ohanian by a subsidiary of the Company pursuant to an executive
flexible benefits plan.
(c) Represents options to purchase Company Common Stock.
(d) Represents options to purchase Western Atlas Common Stock; numbers of shares
have been adjusted for the Distribution in the manner described below.
(e) Represents the salary paid to Mr. Williams from the date of his employment
by Western Atlas, December 9, 1995, through December 31, 1995.
For the fiscal year 1997, the Named Executive Officers were employed by
Western Atlas and its subsidiaries until October 31, 1997, when the Common Stock
of the Company was distributed (the "Distribution") to the shareholders of
Western Atlas as a dividend. During this 10-month period the Named Executive
Officers received options to purchase Western Atlas Common Stock prior to the
Distribution as shown in the second table below. On October 31, 1997, the Named
Executive Officers became employees of the Company and thereafter received the
options to purchase Company Common Stock shown in the first table below. Upon
the Distribution each Western Atlas option held by the Named Executive Officers
was adjusted by (i) multiplying the number of shares of Western Atlas Common
Stock subject to the option by the Adjustment Factor (described below) and (ii)
dividing the exercise price per share of the option by the Adjustment Factor.
For these purposes the "Adjustment Factor" means the quotient obtained by
dividing (x) the Average Market Price of the Company Common Stock by (y) the
Average Market Price of the Western Atlas Common Stock. The "Average Market
Price" of Western Atlas Common Stock or Company Common Stock is the average of
the high and low daily prices of such Common Stock as reported on the New York
Stock Exchange Composite Tape on the sixth through tenth trading days,
inclusive, following the Distribution. The number of shares subject to options
to purchase Western Atlas Common Stock and the per share exercise price of such
options shown in the following tables reflect the number of shares and prices
which result from applying the adjustment described above. The Western Atlas
options held by the Named Executive Officers have also been amended to provide
that for purposes of the vesting, exercisability, and duration of these options,
service with the Company shall be deemed to be service with Western Atlas.
21
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
The following tables show stock option grants with respect to shares of the
Company Common Stock under employee stock option plans of the Company and
Western Atlas to the Named Executive Officers during the 1997 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS TO PURCHASE COMPANY COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF TOTAL GRANT DATE
SECURITIES OPTIONS GRANTED EXERCISE PRESENT
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION VALUE
NAME GRANTED (#) (A) IN FISCAL YEAR ($/SH) DATE ($) (B)
- ------------------------------------- ------------------- ------------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Alton J. Brann....................... 26,490(c) 1.06% 18.875 11/7/07 296,000
473,510(d) 18.91% 18.875 11/7/07 5,287,000
Michael E. Keane..................... 26,490(c) 1.06% 18.875 11/7/07 296,000
98,510(d) 3.93% 18.875 11/7/07 1,100,000
Michael Ohanian...................... 10,596(e) 0.42% 18.875 11/7/07 118,000
39,404(f) 1.57% 18.875 11/7/07 440,000
Norman L. Roberts.................... 21,192(g) 0.85% 18.875 11/7/07 237,000
78,808(h) 3.15% 18.875 11/7/07 880,000
Clayton A. Williams.................. 15,894(i) 0.63% 18.875 11/7/07 177,000
59,106(j) 2.36% 18.875 11/7/07 660,000
</TABLE>
INDIVIDUAL GRANTS TO PURCHASE WESTERN ATLAS COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF TOTAL GRANT DATE
SECURITIES OPTIONS GRANTED EXERCISE PRESENT
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION VALUE
NAME GRANTED (#) (A) IN FISCAL YEAR ($/SH) DATE ($) (B)
- ----------------------------------- ------------------- ------------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Alton J. Brann..................... 61,601(k) 5.78% 60.9477 7/9/07 2,171,000
Michael E. Keane................... 36,961(k) 3.47% 60.9477 7/9/07 1,303,000
Michael Ohanian.................... 18,480(k) 1.73% 60.9477 7/9/07 651,000
Norman L. Roberts.................. 18,480(k) 1.73% 60.9477 7/9/07 651,000
Clayton A. Williams................ 18,480(k) 1.73% 60.9477 7/9/07 651,000
</TABLE>
- ------------------------
(a) All options granted to the Named Executive Officers were granted at the
prevailing market price of the Company or Western Atlas Common Stock, as
applicable, on the date of grant. These options permit payment of the
exercise price and any withholding tax due upon exercise by the surrender of
already owned shares of the Company or Western Atlas Common Stock, as the
case may be, having a fair market value equal to the exercise price or the
amount of withholding tax, and also permit payment of withholding tax by
applying shares otherwise issuable upon exercise. All such options become
immediately exercisable upon the occurrence of certain events resulting in a
change of control of the Company or Western Atlas and accelerated vesting
schedules become applicable in the event of the death of the optionee while
in the employ of the Company. Change of control has the meaning described on
page 25.
(b) The Black-Scholes model was used to determine the grant date present value
of Company and Western Atlas stock options. This method requires the
assumption of certain values that affect the option price. The values which
were used in this model are the volatility of the stock price of the
22
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Company Common Stock and Western Atlas Common Stock and the estimate of the
risk-free interest rate. Since the Company and Western Atlas do not pay a
cash dividend, no yield on the Company or Western Atlas Common Stock was
assumed. For purposes of the model used to value the options in these
tables, a volatility factor of 36% for the Company, determined from
historical industry stock price fluctuations, and 33% for Western Atlas,
determined from historical stock price fluctuations, and 5.9% and 6.2%
risk-free interest rates, respectively, determined from market information
prevailing on the respective grant dates, were used. No adjustments were
made for the nontransferability or risk of forfeiture of the stock options.
This model assumed all options are exercised on their respective expiration
dates. There is no assurance that these assumptions will prove true in the
future. The actual value of the options depends on the market price of the
Company and Western Atlas Common Stock at the date of exercise, which may
vary from the theoretical value indicated in the table.
(c) Incentive Stock Options. These options become exercisable in five equal
installments of the shares subject thereto on the first through the fifth
anniversaries of the date of grant.
(d) Nonqualified Stock Options. These options become exercisable in five equal
installments of the shares subject thereto on the first through the fifth
anniversaries of the date of grant.
(e) Incentive Stock Options. These options become exercisable in two equal
installments of 5,298 shares each on the first and the second anniversaries
of the date of grant.
(f) Nonqualified Stock Options. These options become exercisable in two equal
installments of 19,702 shares each on the first and the second anniversaries
of the date of grant.
(g) Incentive Stock Options. These options become exercisable in four
installments of 5,298 shares each on the first through the fourth
anniversaries of the date of grant.
(h) Nonqualified Stock Options. These options become exercisable in four
installments of 19,702 shares each on the first through the fourth
anniversaries of the date of grant.
(i) Incentive Stock Options. These options become exercisable in three
installments of 5,298 shares each on the first through the third
anniversaries of the date of grant.
(j) Nonqualified Stock Options. These options become exercisable in three
installments of 19,702 shares each on the first through the third
anniversaries of the date of grant.
(k) Nonqualified Stock Options. These options become exercisable in five
substantially equal installments of the shares subject thereto on the first
through the fifth anniversaries of the date of grant.
No option to purchase Company Common Stock was exercised during 1997 by any
of the Named Executive Officers, and none of such individuals held unexercised
in-the-money options to purchase
23
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Company Common Stock at the end of 1997. The following table shows the number of
shares of Company Common Stock underlying unexercised options outstanding as of
December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS
AT
DECEMBER 31, 1997
------------------------------
EXERCISABLE UNEXERCISABLE
--------------- -------------
<S> <C> <C>
Alton J. Brann................................................ -0- 500,000
Michael E. Keane.............................................. -0- 125,000
Michael Ohanian............................................... -0- 50,000
Norman L. Roberts............................................. -0- 100,000
Clayton A. Williams........................................... -0- 75,000
</TABLE>
The following table provides information with respect to options to purchase
Western Atlas Common Stock exercised by any of the Named Executive Officers
during 1997 and with respect to the number and value of unexercised Western
Atlas options held by each Named Executive Officer at December 31, 1997.
WESTERN ATLAS AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (A)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES WESTERN ATLAS OPTIONS AT WESTERN ATLAS OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)
EXERCISE REALIZED -------------------------- -------------------------
NAME (#) (B) ($) EXERCISBLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- --------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alton J. Brann...................... 4,046 216,231 214,490 267,958 9,206,803 8,517,051
Michael E. Keane.................... 13,352 806,949 11,890 72,685 502,098 1,587,803
Michael Ohanian..................... -0- -0- 8,260 29,316 389,809 535,149
Norman L. Roberts................... 8,214 451,189 35,773 67,450 1,723,181 1,990,106
Clayton A. Williams................. -0- -0- 15,282 48,781 492,664 1,180,294
</TABLE>
- ------------------------
(a) The number and value of unexercised options to purchase Western Atlas Common
Stock at the end of 1997 are shown in the table. In addition, Messrs. Brann,
Keane, Ohanian, and Roberts held the following options to purchase shares of
Common Stock of Litton Industries, Inc. ("Litton"), adjusted on account of
the 1994 distribution of the Western Atlas Common Stock to the shareholders
of Litton as a dividend and granted to them prior to such distribution. For
purposes of the vesting and exercisability of these options, service with
the Company is regarded as service with Litton.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
LITTON OPTIONS AT LITTON OPTIONS AT
DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alton J. Brann....................................... 23,440 10,000 884,368 333,421
Micheal E. Keane..................................... 14,000 -0- 591,141 -0-
Michael Ohanian...................................... 4,500 -0- 190,305 -0-
Norman L. Roberts.................................... 16,000 -0- 633,398 -0-
</TABLE>
(b) During 1997 Mr. Roberts also exercised Litton options to purchase 6,000
shares, thereby realizing $243,337.
24
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Messrs. Brann, Keane, Roberts, and certain additional officers of the
Company have entered into change in control employment agreements with the
Company (collectively, the "Agreements"). The Agreements are operative only upon
the occurrence of a change in control, which includes substantially those events
described below. Absent a change in control, the Agreements do not require the
Company to retain the executives or pay them any specified level of compensation
or benefits.
Generally, under the Agreements, a change in control is deemed to have
occurred if: (a) a majority of the Board becomes composed of persons other than
persons for whose election proxies have been solicited by the Board, or other
than persons who are then serving as directors appointed by the Board to fill
vacancies caused by death or resignation (but not removal) of a director or to
fill newly created directorships; (b) another party becomes the beneficial owner
of at least 30% of the Company's outstanding voting stock, other than as a
result of a repurchase by the Company of its voting stock; (c) the approval by
the shareholders of the Company of a merger, reorganization, consolidation with
another party (other than certain limited types of mergers), or sale or other
disposition of all or substantially all of the Company's assets; or (d) the
shareholders approve the liquidation or dissolution of the Company.
Each Agreement provides that for three years after a change in control there
will be no adverse change in the executive's salary, bonus opportunity,
benefits, or location of employment. If, during this three-year period, the
executive's employment is terminated by the Company other than for cause, or if
the executive terminates his or her employment for good reason as such terms are
defined in the Agreements (including compensation reductions, demotions,
relocation, and requiring excessive travel), or voluntarily during the 30-day
period following the first anniversary of the change in control, the executive
is entitled to receive an accrued salary and annual incentive payment through
the date of the termination and, except in the event of death or disability, a
lump-sum severance payment equal to three times the sum of the executive's base
salary and annual bonus (and certain pension credit and insurance and other
welfare plan benefits). Further, an additional payment is required in such
amount that after the payment of all taxes, income and excise, the executive
will be in the same after-tax position as if no excise tax under the Internal
Revenue Code of 1986, as amended (the "Code"), had been imposed. In the event of
termination of employment by reason of death or disability or for cause, the
Agreements terminate and the sole obligation of the Company is to pay any
amounts theretofore accrued thereunder.
The Company has entered into an employment agreement with Clayton A.
Williams whereby Mr. Williams has agreed to accept employment from the period
from October 31, 1997, to February 13, 1999. Mr. Williams serves as Group
Executive of the Company's Industrial Automation Systems operations and Senior
Vice President of the Company. Under this agreement, Mr. Williams will receive a
current annual salary of not less than $280,000 and is entitled to participate
in the cash bonus plan or plans for which he is eligible. In the event of Mr.
Williams' termination of employment without cause, he is entitled to receive the
remaining installments of base salary payable during the term of the agreement
and a PRO RATA portion of the bonus for which he would have qualified had he
remained employed throughout the year of any such termination.
Mr. Ohanian has an employment contract with Intermec Technologies
Corporation, a subsidiary of the Company, which provides for his employment
through February 28, 1999, for a base salary of $300,000 and provides that he is
eligible to receive an annual bonus, subject to the satisfaction of performance
goals established by the Compensation Committee of the Company's Board of
Directors, in accordance with the terms of any cash bonus plan in which he is
eligible to participate.
25
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
RETIREMENT BENEFITS
THE FSSP AND RELATED RETIREMENT PLAN. Messrs. Brann, Keane, Ohanian, and
Roberts participate in the Company's Financial Security and Savings Program (the
"FSSP"), a defined contribution plan intended to qualify under Sections 401(a)
and 401(k) of the Code. Participation in the FSSP is generally available to
employees of the Company located in the United States.
A participant in the FSSP may elect to defer from 2% to 18% of his or her
covered compensation for investment in the trust established under the FSSP, but
the maximum amount which the employee may contribute to the FSSP for any
calendar year is limited by provisions of the Code relating to the maximum
amount, as adjusted for inflation, which may be contributed to plans qualified
under Section 401(k) of the Code (the "401(k) Maximum Amount"), which is $9,500
for 1997. Deposits of 2% to 4% of the participant's compensation are invested in
the FSSP Retirement Fund, while deposits in excess of 4% are invested in one or
more investment funds as designated by the participant.
The Company adds to the investment fund account of an FSSP participant an
amount (not to exceed 2% of the participant's compensation) equal to 50% of the
participant's deposits in excess of 4% of his or her compensation. In the case
of employees who are classified as highly compensated pursuant to applicable
Treasury releases (those earning over $80,000 for 1997), such employees'
permissible contributions may be reduced further and the amount of the
employer's matching contributions may be limited if certain nondiscrimination
tests set forth in the Code are not achieved. A participant is entitled to
receive his or her entire FSSP account, to the extent it has become vested, upon
retirement or earlier termination of employment with the Company.
Benefits under the FSSP are intended to supplement benefits under the
Company's related retirement plan, which is a defined benefit plan. Although
deposits to the FSSP do not comprise part of the retirement plan's trust (except
for transfers of assets made at the request of a participant in connection with
a distribution, as described below), the extent of an employee's participation
in the Retirement Fund of the FSSP will affect the amount of such employee's
benefit under the related retirement plan. The employee's contribution to the
FSSP of 2% to 4% of his or her gross earnings causes the employee (if eligible
to participate in the Company's retirement plan) to become eligible to accrue
benefits under such retirement plan. Covered compensation for purposes of both
the retirement plans and the FSSP Retirement Fund is aggregate cash compensation
including bonuses and commissions but would, in the case of Messrs. Brann,
Keane, Ohanian, and Roberts be limited to $160,000 pursuant to provisions of the
Code.
The amount of a participant's annual retirement benefit at his or her normal
retirement date (generally age 65) under the Company's defined benefit
retirement plan is the higher of (A) 60% of the participant's deposits to the
Retirement Fund of the FSSP (during the entire period of his or her employment)
or (B) 85% of such deposits minus 75% of the participant's estimated Social
Security primary benefit at age 65, with adjustments in the amount of the
benefit to take into account factors such as age at retirement, degree of
vesting, and form of benefit selected. In the case of Company employees who
transferred directly from Western Atlas to the Company, contributions to the
Retirement Fund of the similar plan sponsored by Western Atlas will be included
in the computation of a participant's total deposits for purposes of the formula
set forth above. The annual retirement benefit at normal retirement age is
reduced by the actuarial equivalent of lump sum distributions made (at the
request of the participant) of the participant's Retirement Fund account in the
FSSP. Should a participant wish to receive the entire benefit described in the
formula set forth above, the participant may direct that his or her Retirement
Fund balance consisting of deposits with earnings be transferred to the
retirement plan trust.
26
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
RESTORATION PLAN. The limitations in the Code establishing the 401(k)
Maximum Amount cause certain participants in the FSSP to lose Company-provided
benefits which they could otherwise have derived from the deposit of a full 8%
of their covered compensation to the FSSP. Consequently, the Company has adopted
a noncontributory and unfunded plan (the "Restoration Plan") designed to restore
the approximate amount of lost employer-provided benefits to those employees who
participate in the FSSP to the fullest extent permitted by the applicable Code
provisions but who are unable (as a result of the 401(k) Maximum Amount
limitation) to contribute 8% of their compensation to the FSSP. Such lost
employer-provided benefits which are restored under this plan consist of (i) all
or part of the 50% matching contribution to the investment fund account of the
FSSP participant and (ii) except in the case of Mr. Brann, who participates in a
supplemental contractual arrangement (as described below), a portion of the full
benefit under the Company's retirement plan if the participant's contributions
to the FSSP Retirement Fund are limited to less than 4% of his or her
compensation. Amounts that would have been deposited to the employee's
Retirement Fund account by the employee and to his or her investment fund
account by the Company are projected with interest to the participant's normal
retirement date. Based upon these amounts, the participant's lost benefits from
the Company's retirement plan and lost Company contributions to the investment
fund are determined and converted to, and payable upon the participant's
retirement as, a single life annuity if the participant is unmarried at such
time or as a 100% joint and survivor annuity if the participant is then married.
No retirement benefit is payable under the Restoration Plan until the retired
employee has reached the age of 62.
SUPPLEMENTAL ARRANGEMENT FOR MR. BRANN. In addition to the FSSP, the
related retirement plan, and the Restoration Plan, the Company has a
noncontributory and unfunded supplemental contractual arrangement (the
"Supplemental Arrangement") designed to provide additional retirement benefits
to Mr. Brann. If Mr. Brann retires on or after age 65 following 25 years of
service with the Company (including prior service with Western Atlas and
Litton), his annual benefit (computed as a single life annuity) under the
Supplemental Arrangement is 55% of his final average compensation, less amounts
payable to Mr. Brann under Social Security and less that portion of pension
benefits deemed to have been provided by the employer's (as opposed to Mr.
Brann's) contributions which would have been received by Mr. Brann under any
other retirement plan sponsored by the Company, Western Atlas or Litton if he
was eligible to participate and had participated at all times in any such plan
to the maximum extent permitted (regardless of the degree of actual
participation). Final average compensation means one-third of covered cash
compensation (including salary and bonus) deemed to have been awarded to or
received by Mr. Brann during any three periods of 12 consecutive months
specified by Mr. Brann occurring during the 60-month period preceding his
retirement. Salary is deemed to have been received when paid and bonuses are
deemed to have been received when determined and awarded to Mr. Brann by the
Compensation Committee, regardless of when paid. For purposes of the
Supplemental Arrangement, Mr. Brann had 24 credited years of service at March
16, 1998.
If Mr. Brann's employment is terminated before he has completed 25 years of
service or attained the age of 65, then the percentage of 55% referred to above
is reduced in accordance with a schedule relating to age and length of service;
however, payment of retirement benefits to Mr. Brann under the Supplemental
Arrangement will, in no event, commence until he reaches age 62. The
Supplemental Arrangement also provides for certain salary continuation payments
in the event of Mr. Brann's disability and certain survivors' benefits in the
event of his death while employed by the Company and prior to the commencement
of the payment of retirement benefits.
The following table indicates the approximate annual combined benefit which
would be received by Mr. Brann representing the sum of (a) the benefit under the
Company's basic retirement plan deemed to
27
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
have been provided by the employer's contributions and (b) the benefit under the
Supplemental Arrangement, based on the following assumptions: (i) participation
in the voluntary retirement plans to the maximum extent permitted during the
entire period of Mr. Brann's employment, (ii) retirement at age 65, and (iii)
election of the benefit in the form of a single life annuity.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------
REMUNERATION 15 20 25 OR MORE
- ------------- ---------- ---------- ------------
<S> <C> <C> <C>
$ 1,200,000 $ 420,000 $ 570,000 $ 660,000
1,400,000 490,000 665,000 770,000
1,600,000 560,000 760,000 880,000
1,800,000 630,000 855,000 990,000
2,000,000 700,000 950,000 1,100,000
</TABLE>
Although, as indicated above, the amount of such combined benefit would be
reduced by Mr. Brann's Social Security primary benefit, the foregoing table does
not give effect to such offset. Covered compensation under the Supplemental
Arrangement is aggregate cash compensation, including salary and bonus, actually
paid to Mr. Brann during the fiscal year. Since Mr. Brann received incentive
awards from Western Atlas and the Company payable in installments, and since a
portion of Mr. Brann's bonus awarded by Western Atlas and the Company for fiscal
1997 was not paid during 1997, the cash compensation paid to Mr. Brann during
1997 was $1,654,986, rather than the amount shown in the Summary Compensation
Table.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Messrs. Keane, Ohanian, and Roberts
participate in the Company's Supplemental Executive Retirement Plan, an unfunded
plan which provides additional retirement benefits to key executive employees
designated by the Compensation Committee of the Board after nomination by the
Chief Executive Officer. A participant in this plan does not ordinarily vest in
a retirement benefit until reaching the age of 60 and completing 15 years of
service following the participant's 40th birthday and may not ordinarily begin
receiving a retirement benefit thereunder until reaching age 62. Under this plan
a participant's annual retirement benefit is the actuarial equivalent, as of the
age of the participant at retirement, of the following computation (a) 1.6% of
"average earnings" of the participant up to $125,000 (which amount is adjusted
annually for inflation) plus (b) 2.2% of "average earnings" in excess of such
amount, the sum of (a) plus (b) then being multiplied by the participant's
number of years of service (not to exceed 25) following the participant's 40th
birthday. Average earnings for purposes of this plan is the average of base
salary and bonus awarded by the Company to the participant in the three periods
of 12 consecutive months in which the participant's compensation was highest
during the final 60 months of the participant's employment. There is offset from
the benefit calculated in the manner described above the participant's Social
Security primary benefit as well as all amounts of "Company-provided" retirement
benefit which the participant receives (or could have received assuming full
participation at all times of eligibility) under other retirement plans
sponsored by the Company. For purposes of this plan, at March 16, 1998, Mr.
Roberts had 23 credited years of service, Mr. Keane had 2 credited years of
service, and Mr. Ohanian had 24 credited years of service.
The following table indicates the approximate combined annual retirement
benefit which would be received by a participant in this plan representing the
sum of (a) the Company-provided benefit under the Company's basic retirement
plan; (b) the benefit under the Restoration Plan; and (c) the benefit under the
Supplemental Executive Retirement Plan based on retirement at age 65, full
participation at all relevant
28
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
times in the basic retirement plans, and election of a benefit in the form of a
single life annuity. The table does not give effect to the offset of the
participant's Social Security benefit.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------
REMUNERATION 15 20 25 OR MORE
- ------------- ---------- ---------- ------------
<S> <C> <C> <C>
$ 600,000 $ 176,864 $ 235,819 $ 294,774
800,000 242,864 323,819 404,774
1,000,000 308,864 411,819 514,774
1,200,000 374,864 499,819 624,774
</TABLE>
In addition to retirement benefits, certain benefits are payable under this
plan in the event of the death or disability of the participant. In the event of
a change of control of the Company, a participant is immediately vested in the
retirement benefit and is entitled to receive a lump sum payment equal to the
actuarial equivalent, as of the age of the participant on the date of the change
of control of the Company, of the retirement benefit which would have been
payable at age 65, unless the committee which then administers the plan elects
to defer such lump sum payment.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of UNOVA, Inc. was
constituted on November 6, 1997, at the first meeting of the Board following the
spinoff of UNOVA to the shareholders of Western Atlas Inc. The Committee held
its first meeting on the same day.
Because ten months of UNOVA's fiscal year had already passed at the time the
Committee was established, most of the critical decisions with respect to the
compensation of the executive officers of UNOVA for the 1997 fiscal year had
been made by the Compensation Committee of Western Atlas. In addition, certain
other long-range compensation plans and policies for UNOVA were formulated prior
to the formation of the Committee, as contemplated in an agreement between
Western Atlas and UNOVA relating to the spinoff. For example, the UNOVA, Inc.
1997 Stock Incentive Plan had been adopted prior to the spinoff and Change of
Control Employment Agreements with several officers had been concluded.
The UNOVA Compensation Committee also was not involved in setting the level
of the base salary of the UNOVA executive officers for 1997. The Committee
intends to study the present base compensation levels of the UNOVA executive
officers with a view toward determining if any adjustments to these compensation
levels (including any annual raises that may be granted during fiscal 1998) are
appropriate.
The Committee's chief responsibilities for compensation awarded for or
during fiscal 1997 were with respect to certain bonus awards, or portions
thereof, and the initial grant of UNOVA stock options under the UNOVA 1997 Stock
Incentive Plan. The actions taken on these matters are discussed below.
CASH BONUS AWARDS
With respect to those executive officers of UNOVA who were members of the
corporate headquarters staff of Western Atlas prior to the spinoff, the Western
Atlas Compensation Committee determined that, since such individuals had devoted
their time to the success of both the industrial automation systems businesses
spun off as UNOVA and the oilfield services businesses of Western Atlas, it was
appropriate that certain awards be made to these individuals by the Western
Atlas Compensation Committee prior to the spinoff since the Western Atlas
Committee was familiar with the qualifications and achievements of those
individuals. This Committee firmly concurs with that decision.
29
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
The Western Atlas Compensation Committee determined that, as of June 30,
1997, Western Atlas was meeting its business plan and the plan to establish
UNOVA as an independent public company was proceeding smoothly and on schedule.
Accordingly, the Western Atlas Compensation Committee determined to award the
maximum potential bonuses, based on stipulated percentages of base salary, which
these individuals could have received under the Western Atlas 1995 Incentive
Compensation Plan, prorated for the ten months of the fiscal year which preceded
the spinoff.
With respect to such executive officers, our task was to determine whether
an additional bonus for the final two months of the 1997 year should be awarded,
and, if so, in what amount. The Committee did not believe it appropriate to base
any award solely on the results of either the entire fiscal year performance of
Western Atlas or the two months of performance following the spinoff of UNOVA
because they were not entirely appropriate measures of performance of these
particular individuals during an extraordinary year. Rather, we reviewed the
basis of the determination by the Western Atlas Compensation Committee to make
the pro-rated awards and gave particular attention to the contributions and
extraordinary efforts of these individuals toward the successful establishment
of UNOVA as an independent public company. On this basis we determined that each
of such executive officers should be awarded the remaining pro-rated amount (for
the final two months of 1997) of the maximum potential bonuses previously
determined by the Western Atlas Compensation Committee.
Based on these premises, Mr. Brann was awarded an additional bonus amount of
$147,000 and the three other executive officers who were members of the
corporate headquarters staff were awarded additional bonuses totaling $122,823
for the 1997 fiscal year. These additional bonus amounts were payable in a
single installment in February 1998, subject to the election of the recipient to
defer payment.
With respect to the executive officers associated with the Company's two
business segments, this Committee determined that the performance of the
segments for the entire fiscal year was an appropriate measure. Accordingly, we
examined the extent to which the performance goals previously established under
the Western Atlas 1995 Plan as applicable to these individuals had been met.
In the case of the executive officer responsible for the Industrial
Automation Systems segment, the performance goals were achieved at a level of
97.5%. After consideration of the performance of this business segment, we
determined to award this executive officer the maximum potential bonus that he
would have received had he participated in the Western Atlas 1995 Plan for the
entire year.
With respect to the Automated Data Systems segment, we took into
consideration two factors in determining the level of bonus to award--the
performance during 1997 of this segment as constituted at the beginning of the
fiscal year and the integration of two major acquisitions into the segment
during the year. Based on these factors, we determined to award the executive
officer associated with this business segment the bonus that would have been
payable if the performance goals previously established under the Western Atlas
1995 Plan were met at the level which would have entitled him to receive 50% of
his maximum potential bonus.
STOCK OPTIONS
The Compensation Committee of Western Atlas provided us with detailed
recommendations for initial grants to be made under the UNOVA 1997 Stock
Incentive Plan. We studied their recommendations in detail, which were based on
that Committee's methodology utilized in prior stock option awards at Western
Atlas, the methodology utilized with respect to the first Western Atlas option
grant following the earlier spinoff of Western Atlas by Litton Industries, Inc.,
and an extensive report prepared by an independent national compensation
consulting firm which considered stock-based compensation at 19 competitors of
UNOVA for executive officers with similar responsibilities.
The methodology ordinarily used by the Western Atlas Compensation Committee
in granting stock options was based on a range of potential share quantities, in
the case of each executive officer, with the value of the grants based upon a
multiple of base salary, subject to the Committee's qualitative assessment
30
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
of each individual's performance. We set multiples of base salary for executive
officers of UNOVA in a range of 5.6 to 12.9.
This Committee was satisfied that these recommendations were prepared with
considerable care and with the clear objective of allowing UNOVA to be
competitive in regard to stock-based compensation.
In concurrence with the recommendations of the Western Atlas Compensation
Committee, this Committee awarded to executive officers as a group options to
purchase an aggregate of 985,000 shares of UNOVA Common Stock at a price per
share of $18.875, the fair market value on November 6, 1997, the date of grant.
Of these options, Mr. Brann received options to purchase 500,000 shares,
representing somewhat less than 1% of UNOVA's outstanding stock.
OTHER MATTERS
The Committee has adopted a cash bonus plan and set performance goals and
maximum potential bonuses for the participants for fiscal 1998.
It will be the policy of the Committee that awards under this and other
incentive compensation plans of the Company will qualify for deduction under
Section 162(m) of the Internal Revenue Code. However, the Committee may
determine from time to time that certain awards that do not qualify for
deduction under the Code are appropriate.
THE COMPENSATION COMMITTEE
Orion L. Hoch, Chair
Stephen E. Frank
Steven B. Sample
William D. Walsh
31
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return on UNOVA Common Stock with the cumulative
total return of the Standard & Poor's Midcap 400 Index and a composite
line-of-business index designed to reflect the mix of the Company's business
segments for the period beginning October 22, 1997, which was the date "when
issued" trading commenced in UNOVA Common Stock on the New York Stock Exchange,
and ending December 31, 1997. The composite line-of-business index was prepared
by combining the Standard & Poor's 400 Electrical Equipment Index, believed by
management to comprise companies reasonably comparable to UNOVA's Automated Data
Systems segment, and the Standard & Poor's 400 Manufacturing (Specialized)
Index, believed by management to comprise companies reasonably comparable to
UNOVA's Industrial Automation Systems segment. Each of these two indexes was
weighted based on relative sales and asset levels of the Company's business
segments. The graph assumes the investment of $100 on October 22, 1997, in UNOVA
Common Stock, in the S&P Midcap 400 Index, and in the composite line-of-business
index prepared as described above. Total shareholder return was calculated on
the basis that in each case all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPOSITE LINE- S&P MIDCAP
<S> <C> <C> <C>
UNOVA, INC OF-BUSINESS INDEX 400 INDEX
10/22/97 $100 $100 $100
12/31/97 83.76 93.14 98.83
</TABLE>
32
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BY MANAGEMENT
The following table sets forth the number of shares of Company Common Stock
beneficially owned directly or indirectly, by each director, each Named
Executive Officer, and all directors and executive officers as a group as of
March 16, 1998. Except as otherwise indicated, each individual named has sole
investment and voting power with respect to the securities shown.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Alton J. Brann................................................................... 20,245 (a)
Stephen E. Frank................................................................. 2,730(b) (a)
Orion L. Hoch.................................................................... 102,187(c) (a)
Michael E. Keane................................................................. 14,751 (a)
Michael Ohanian.................................................................. 2,473 (a)
Norman L. Roberts................................................................ 8,716 (a)
Steven B. Sample................................................................. 1,169(d) (a)
William D. Walsh................................................................. 60,000 (a)
Clayton A. Williams.............................................................. 2,258(e) (a)
All directors and executive officers (11 persons)................................ 296,887(f) (a)
</TABLE>
- ------------------------
(a) Less than 1%.
(b) Includes 730 shares of phantom Common Stock credited to Mr. Frank's deferred
account under the Director Stock Option and Fee Plan.
(c) Includes 1,080 shares owned by Dr. Hoch's wife, as to which shares Dr. Hoch
disclaims beneficial ownership, and 730 shares of phantom Common Stock
credited to Dr. Hoch's deferred account under the Director Stock Option and
Fee Plan.
(d) Includes 669 shares of phantom Common Stock credited to Dr. Sample's
deferred account under the Director Stock Option and Fee Plan.
(e) Mr. Williams has advised the Company that he shares with his spouse voting
power and investment power with respect to such shares of Common Stock.
(f) Includes 48,500 shares of Common Stock held by The UNOVA Foundation (the
"Foundation"). Voting power and investment power with respect to these
shares are exercised by the Foundation's officers, who are elected by the
directors of the Foundation. The Foundation's directors are elected by, and
may be removed by, the Board of Directors of the Company. The officers of
the Foundation share voting power with respect to such shares of Common
Stock held by the Foundation, and one officer of the Foundation, who is also
an executive officer of the Company, has sole investment power with respect
to such shares. Thus such officers may be deemed to have incidents of
beneficial ownership thereof for certain purposes within the meaning of the
SEC regulations referred to above. Also includes 31,475 shares of Common
Stock held by the UNOVA Master Pension Trust, a trust organized to hold the
assets of certain qualified U.S. pension plans. Voting and investment power
with respect to these shares are exercised by a committee appointed by the
Board of Directors comprising four officers of the Company.
33
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
BY OTHERS
The following table sets forth each person or entity that as of December 31,
1997, reported beneficial ownership of more than 5% of the Company Common Stock
outstanding on such date except that Perry Corp. and Richard C. Perry reported
the acquisition on February 24, 1998, of more than 5% of the Company Common
Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------------------------------------------------------------------ ------------------ -----------
<S> <C> <C>
Unitrin, Inc........................................................................ 12,657,764(a) 23.2%
One East Wacker Drive
Chicago, IL 60601
The Capital Group Companies, Inc.................................................... 4,112,400(b) 7.5%
333 South Hope Street
Los Angeles, CA 90071
Merrill Lynch & Co., Inc............................................................ 5,494,000(c) 10.1%
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281
Dodge & Cox......................................................................... 3,487,753(d) 6.4%
One Sansome Street, 35th Floor
San Francisco, CA 94104
Perry Corp. and Richard C. Perry ................................................... 3,238,900(e) 5.9%
599 Lexington Avenue
New York, NY 10022
</TABLE>
- --------------------------
(a) Unitrin, Inc. ("Unitrin"), has reported in a filing on Schedule 13D under
the Exchange Act that these shares are owned by two of its subsidiaries,
Trinity Universal Insurance Company (7,206,776 shares) and United Insurance
Company of America (5,450,988 shares). Unitrin and each of such subsidiaries
reported that each such subsidiary shared voting power and dispositive power
with Unitrin with respect to the shares so owned. Based upon the foregoing,
Unitrin may be deemed to be the indirect beneficial owner of such 12,657,764
shares.
(b) In a filing on Schedule 13G under the Exchange Act, The Capital Group
Companies, Inc., stated that it has sole voting power with respect to 600
shares and sole dispositive power with respect to 4,112,400 shares of
Company Common Stock. The Capital Group Companies, Inc., has advised the
Company that 4,111,800 of such shares are beneficially owned by its wholly
owned subsidiary Capital Research and Management Company, which acts as
investment adviser to various investment companies. The Capital Group
Companies, Inc. disclaims beneficial ownership of these shares.
(c) In a filing on Schedule 13G under the Exchange Act, Merrill Lynch & Co.,
Inc. stated that it held shared voting power and shared dispositive power
with respect to 5,494,000 shares of Company Common Stock. The filing further
discloses that the beneficial owner of more than 5% of the outstanding
shares of Company Common Stock as of December 31, 1997, is a registered
investment company advised by Merrill Lynch Asset Management known as
Merrill Lynch Growth Fund. Merrill Lynch & Co. and various of its affiliates
disclaim beneficial ownership of the shares reported.
(d) In a filing on Schedule 13G under the Exchange Act, Dodge & Cox stated that
it has sole voting power with respect to 3,143,903 shares, shared voting
power with respect to 47,100 shares, and sole dispositive power with respect
to 3,487,753 shares. Dodge & Cox has reported that such shares are
beneficially owned by clients of such firm, including investment companies,
pension funds, and other institutional holders.
(e) In a joint filing on Schedule 13G under the Exchange Act by Richard C. Perry
and Perry Corp., Perry Corp. is described as a private investment firm of
which Richard C. Perry is the president and sole stockholder. The joint
filers state that they have sole voting power and sole dispositive power
with respect to 3,238,900 shares of Company Common Stock.
34
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
Edward J. Borey, a Vice President of the Company and Chief Operating Officer
of the Company's Automated Data Systems Group, relocated his office from
Fairfield, Ohio, to Everett, Washington, in September 1997 to assume the
position of Senior Vice President and Chief Operating Officer of Intermec
Technologies Corporation ("Intermec"), a subsidiary of the Company. To
facilitate such relocation, Intermec has purchased Mr. Borey's former residence
in Centerville, Ohio, for a purchase price of $350,000. Such purchase price was
determined by the Company's corporate director of real estate after comparing
the results of the reports of three independent real estate appraisers engaged
by the Company.
In connection with such purchase, Intermec has agreed that such residence
shall be offered for sale for a period of at least 90 days for a sales price not
less than $350,000. Should Intermec sell such residence for a gross sales price
which exceeds $350,000, the amount of gross proceeds in excess of $350,000 shall
be paid to Mr. Borey. Any loss incurred by Intermec in connection with the
purchase and sale of such residence shall be borne by Intermec.
CERTAIN BUSINESS RELATIONSHIPS
Alton J. Brann, Chairman and Chief Executive Officer of the Company, is also
a director and non-executive Chairman of Western Atlas, and Orion L. Hoch is a
director of both the Company and Western Atlas. In addition, Mr. Brann and five
additional executive officers of the Company served as executive officers of
Western Atlas during the first ten months of fiscal 1997, when the Company's
businesses were a part of Western Atlas. During this period the Company had
outstanding indebtedness to Western Atlas, of which the largest aggregate amount
outstanding at any one time during 1997 was $230 million.
Immediately prior to the distribution of the Common Stock of the Company to
the shareholders of Western Atlas on October 31, 1997, the Company paid a
dividend of $230 million to Western Atlas. The Company and Western Atlas entered
into a Distribution and Indemnity Agreement which, together with certain related
agreements, governs the relationship between Western Atlas and the Company with
respect to or in consequence of the Distribution, including the treatment of
employee benefit plan matters and liability for federal income and other taxes.
Pursuant to such agreements, the Company has received $480,000 from Western
Atlas subsequent to October 31, 1997.
INDEBTEDNESS OF MANAGEMENT
As a form of additional incentive for its key employees, the Company
provides loans to certain such employees located in the United States. Under
such program, loans in the aggregate principal amount of $1,751,000 were
outstanding at March 16, 1998, to six executive officers of the Company, as
follows: Edward J. Borey, $100,000; Alton J. Brann, $616,000; Charles A.
Cusumano, $225,000; Michael E. Keane, $275,000; Norman L. Roberts, $255,000; and
Clayton A. Williams, $280,000. These loans are unsecured, currently bear
interest at the rate of 4% per annum, and are payable on the Company's demand,
but, in any event, not later than the earlier of (i) termination of the
borrower's employment with the Company or any subsidiary thereof, or (ii)
December 31, 2002. The foregoing amounts represent the largest amount of
indebtedness of each such executive officer and present executive officers as a
group under such loan program outstanding since December 31, 1996.
35
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
(a)(1) Financial Statements
See Part II
(a)(2) Financial Statement Schedules *
(a)(3) Executive Compensation Plans and Arrangements 37
(b) Reports on Form 8-K
In a report filed on Form 8-K dated December 23, 1997, the Company reported the acquisition of
proprietary radio frequency identification (RFID) technology.
(c) Index to Exhibits E1
</TABLE>
- ------------------------
* All schedules and notes specified under Regulation S-X are omitted because
they are either not applicable, not required or the information called for
therein appears in the consolidated and combined financial statements or
notes thereto.
36
<PAGE>
UNOVA, INC.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
<TABLE>
<CAPTION>
REPORT WITH WHICH
DESCRIPTION EXHIBIT NO. EXHIBIT WAS FILED
- ------------------------------------------------------------------------ ----------- -------------------------------
<S> <C> <C>
Employee Benefits Agreement dated October 31, 1997, between Western 10.3 September 30, 1997
Atlas Inc. and UNOVA, Inc. Form 10-Q
Change of Control Employment Agreements with Alton J. Brann, Michael E. 10.5 September 30, 1997
Keane, Norman L. Roberts and certain other officers, dated as of Form 10-Q
October 31, 1997.
Employment Agreement between Intermec Corporation and Michael Ohanian, 10.6 Form 10
dated May 18, 1995, as amended.
UNOVA, Inc. Restoration Plan. 10.8 Form 10
UNOVA, Inc. Supplemental Executive Retirement Plan. 10.9 Form 10 Amendment No. 1
Supplemental Retirement Agreement between UNOVA, Inc. and Alton J. Brann 10.10 Form 10 Amendment No. 1
dated October 1997.
Employment Agreement between UNOVA, Inc. and Clayton A. Williams, dated 10.11 Form 10 Amendment No. 1
August 1997.
UNOVA, Inc. 1997 Stock Incentive Plan. 10.12 September 30, 1997
Form 10-Q
UNOVA, Inc. Executive Severance Plan. 10.13 September 30, 1997
Form 10-Q
Form of Promissory Notes in favor of the Company given by certain 10.14 September 30, 1997
officers and key employees. Form 10-Q
Board resolution dated September 24, 1997 establishing the UNOVA, Inc. 10.15 September 30, 1997
Incentive Loan Program. Form 10-Q
UNOVA, Inc. Management Incentive Compensation Plan 10.16 December 31, 1997
Form 10-K
UNOVA, Inc. Executive Survivor Benefit Plan 10.17 December 31, 1997
Form 10-K
Amendment No. 1 to Employment Agreement between Intermec Corporation and 10.18 December 31, 1997
Michael Ohanian, dated February 28, 1997. Form 10-K
Amendment No. 2 to Employment Agreement between Intermec Technologies 10.19 December 31, 1997
Corporation and Michael Ohanian, dated February 28, 1998. Form 10-K
Amendment to Employment Agreement between UNOVA, Inc. and Clayton A. 10.20 December 31, 1997
Williams, dated March 24, 1998. Form 10-K
</TABLE>
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNOVA, INC.
/s/ MICHAEL E. KEANE
----------------------------------------------------------------
Michael E. Keane
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
March 18, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Director, Chairman of the
/s/ ALTON J. BRANN Board
- ------------------------------ and Chief Executive March 18, 1998
Alton J. Brann Officer
/s/ STEPHEN E. FRANK
- ------------------------------ Director March 18, 1998
Stephen E. Frank
/s/ ORION L. HOCH
- ------------------------------ Director March 18, 1998
Orion L. Hoch
/s/ STEVEN B. SAMPLE
- ------------------------------ Director March 18, 1998
Steven B. Sample
/s/ WILLIAM D. WALSH
- ------------------------------ Director March 18, 1998
William D. Walsh
/s/ CHARLES A. CUSUMANO Vice President, Finance
- ------------------------------ (Chief Accounting March 18, 1998
Charles A. Cusumano Officer)
38
<PAGE>
UNOVA, INC.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated and combined financial statements of UNOVA, Inc. and
subsidiaries and related financial information included in this Annual Report,
have been prepared by the Company, whose management is responsible for their
integrity. These statements, which necessarily reflect estimates and judgments,
have been prepared in conformity with generally accepted accounting principles.
The Company maintains a system of internal controls to provide reasonable
assurance that assets are safeguarded and transactions are properly executed and
recorded. As part of this system, the Company has an internal audit staff to
monitor the compliance with and the effectiveness of established procedures.
The consolidated and combined financial statements have been audited by
Deloitte & Touche LLP, independent auditors, whose report appears on page F-2.
The Audit and Compliance Committee of the Board of Directors, which consists
solely of directors who are not employees of the Company, meets periodically
with management, the independent auditors and the Company's internal auditors to
review the scope of their activities and reports relating to internal controls
and financial reporting matters. The independent and internal auditors have full
and free access to the Audit and Compliance Committee and meet with the
Committee both with and without the presence of Company management.
/s/Michael E. Keane
Michael E. Keane
Senior Vice President and
Chief Financial Officer
March 11, 1998
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
UNOVA, Inc.
Beverly Hills, California
We have audited the accompanying consolidated and combined balance sheets of
UNOVA, Inc. and subsidiaries (as described in Note A) as of December 31, 1997
and 1996, and the related consolidated and combined statements of operations,
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated and combined financial statements present
fairly, in all material respects, the financial position of UNOVA, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Los Angeles, California
March 11, 1998
F-2
<PAGE>
UNOVA, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Sales and Service Revenues.............................................. $ 1,426,247 $ 1,164,682 $ 942,852
------------ ------------ ------------
Costs and Expenses
Cost of sales......................................................... 981,380 841,820 669,279
Selling, general and administrative................................... 324,405 218,672 194,069
Depreciation and amortization......................................... 40,672 27,043 26,116
Acquired in-process research and development charges.................. 211,500
Interest, net......................................................... 16,689 7,111 9,347
------------ ------------ ------------
Total Costs and Expenses............................................ 1,574,646 1,094,646 898,811
------------ ------------ ------------
Earnings (Loss) before Taxes on Income.................................. (148,399) 70,036 44,041
Taxes on Income......................................................... (22,968) (28,014) (17,837)
------------ ------------ ------------
Net Earnings (Loss)..................................................... $ (171,367) $ 42,022 $ 26,204
------------ ------------ ------------
------------ ------------ ------------
Basic and Diluted Earnings (Loss) per Share............................. $ (3.17) $ .78 $ .49
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-3
<PAGE>
UNOVA, INC.
CONSOLIDATED AND COMBINED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents........................................................... $ 13,685 $ 149,467
Accounts receivable, net of allowance for doubtful accounts
of $19,719 (1997) and $5,124 (1996)............................................... 448,079 394,572
Inventories, net of progress billings............................................... 150,537 94,452
Deferred tax assets................................................................. 106,694 53,636
Other current assets................................................................ 30,072 3,664
------------ ------------
Total Current Assets.............................................................. 749,067 695,791
Property, Plant and Equipment, Net.................................................... 157,680 132,508
Goodwill and Other Intangibles, Net of Accumulated Amortization
of $54,266 (1997) and $42,095 (1996)................................................ 366,098 178,810
Other Assets.......................................................................... 83,513 66,684
------------ ------------
Total Assets.......................................................................... $ 1,356,358 $ 1,073,793
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable.................................................................... $ 311,759 $ 242,168
Payrolls and related expenses....................................................... 72,909 50,567
Notes payable and current portion of long-term obligations.......................... 86,645 27,461
Due to Western Atlas Inc............................................................ 109,574
------------ ------------
Total Current Liabilities......................................................... 471,313 429,770
------------ ------------
Long-term Obligations................................................................. 216,938 14,507
------------ ------------
Deferred Tax Liabilities.............................................................. 22,918 22,727
------------ ------------
Other Long-term Liabilities........................................................... 55,700 32,281
------------ ------------
Commitments and Contingencies
Shareholders' Investment
Preferred stock (50,000,000 shares authorized)......................................
Common stock (54,510,193 shares outstanding)........................................ 545
Additional paid-in capital.......................................................... 603,743
Accumulated deficit................................................................. (8,041)
Cumulative currency translation adjustment.......................................... (6,758)
Investment by Western Atlas Inc..................................................... 574,508
------------ ------------
Total Shareholders' Investment.................................................... 589,489 574,508
------------ ------------
Total Liabilities and Shareholders' Investment $ 1,356,358 $ 1,073,793
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-4
<PAGE>
UNOVA, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Cash and Cash Equivalents at Beginning of Year.............................. $ 149,467 $ 103,501 $ 29,190
----------- ----------- ----------
Cash Flows from Operating Activities:
Net earnings (loss)....................................................... (171,367) 42,022 26,204
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities (net of acquisitions):
Acquired in-process research and development charges.................... 211,500
Depreciation and amortization........................................... 40,672 27,043 26,116
Deferred taxes.......................................................... 2,162 (9,803) 7,519
Change in pensions...................................................... (11,217) (6,983) (7,772)
Change in accounts receivable........................................... 39,752 (142,159) 47,712
Change in inventories................................................... (9,167) 21,986 (19,613)
Change in other current assets.......................................... (12,540) (804) 4,012
Change in accounts payable.............................................. (53,830) 73,701 (11,572)
Change in payrolls and related expenses................................. 6,238 (2,382) (99)
Other operating activities.............................................. (1,247) 6,537 6,519
----------- ----------- ----------
Net cash provided by operating activities............................. 40,956 9,158 79,026
----------- ----------- ----------
Cash Flows from Investing Activities:
Acquisition of businesses net of cash acquired............................ (400,754) (2,284)
Capital expenditures...................................................... (30,310) (22,541) (23,944)
Investment in unconsolidated companies.................................... (8,500) (3,632)
Investment in radio frequency identification technology................... (8,200)
Proceeds from sale of businesses.......................................... 31,100
Other investing activities................................................ 7,117 1,049 775
----------- ----------- ----------
Net cash (used in) provided by investing activities..................... (440,647) 9,608 (29,085)
----------- ----------- ----------
Cash Flows from Financing Activities:
Short-term obligations, net............................................... 243,938 3,818 (20,848)
Dividend paid to Western Atlas Inc........................................ (230,000)
Net transactions with Western Atlas Inc................................... 190,338 25,747 38,195
Change in due to Western Atlas Inc........................................ 120,426 (2,855) (352)
Repayment of borrowings................................................... (62,847) (649)
Other financing activities................................................ 2,054 1,139 7,375
----------- ----------- ----------
Net cash provided by financing activities............................... 263,909 27,200 24,370
----------- ----------- ----------
Resulting in (Decrease) Increase in Cash and Cash Equivalents............... (135,782) 45,966 74,311
----------- ----------- ----------
Cash and Cash Equivalents at End of Year.................................... $ 13,685 $ 149,467 $ 103,501
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-5
<PAGE>
UNOVA, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
GENERAL INFORMATION. UNOVA, Inc. ("UNOVA" or the "Company") became an
independent public company on October 31, 1997 (the "Distribution Date"), when
all of the UNOVA common stock was distributed to holders of common stock of
Western Atlas Inc. ("WAI"), in the form of a dividend (the "Distribution").
Every WAI shareholder of record on October 24, 1997 was entitled to receive one
share of UNOVA common stock for each WAI share of common stock held of record.
NATURE OF OPERATIONS. UNOVA is an industrial technologies company providing
global customers with solutions for improving their efficiency and productivity.
The Automated Data Systems business segment is comprised of automated data
collection ("ADC") and mobile computing products and services, principally
serving the industrial market. Customers are the global distribution and
transportation companies, food and beverage operations, manufacturing
industries, health care providers and government agencies. The Industrial
Automation Systems business segment includes integrated manufacturing systems,
body welding and assembly systems, and precision grinding and abrasives
operations, primarily serving the worldwide automotive, off-road and diesel
engine manufacturing industries.
PRINCIPLES OF CONSOLIDATION AND COMBINATION. The consolidated and combined
financial statements include those of the Company, its subsidiaries and
companies in which UNOVA has a controlling interest. Investments in companies
over which UNOVA has influence but not a controlling interest are accounted for
using the equity method. Investments in other companies are carried at cost. All
material intercompany transactions have been eliminated.
The combined financial statements for all periods presented prior to the
Distribution Date include the historical accounts and operations of the former
WAI businesses that now comprise the Company. They include, at their historical
amounts, the assets, liabilities, revenues and expenses directly related and
those allocated to the businesses that now comprise the Company's operations.
A pro rata share of certain general and administrative corporate costs
incurred by WAI have been allocated to the Company based on the relative ratio
of such projected costs to be incurred by WAI and the Company individually. Such
costs include general management, legal, tax, treasury, insurance, financial
audit, financial reporting, human resources and real estate services.
The Company's historical debt includes an allocation of a portion of WAI's
corporate debt, based on the Company's estimated past capital requirements.
Interest expense related thereto has been included in the Company's statements
of operations at WAI's estimated blended historical rate of interest on long-
term borrowings of 7.5%.
Management believes the above stated allocations were made on a reasonable
basis; however, they do not necessarily reflect the results of operations which
would have occurred had the Company been an independent entity nor are they
necessarily indicative of future expenses or income (see Note J).
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses for each reporting period. Actual
results could differ from those estimates.
EARNINGS PER SHARE. In December 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), EARNINGS PER
SHARE, which replaces the presentation of primary earnings per share with a
presentation of basic earnings per share based upon the weighted
F-6
<PAGE>
NOTE A: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
average number of common shares for the period. It also requires dual
presentation of basic and diluted earnings per share of companies with complex
capital structures. Under the provisions of SFAS 128, basic and diluted earnings
per share amounts were the same for all periods presented in the consolidated
and combined statements of operations. The 1997 basic earnings per share
computation was based on 54,056,243 weighted average shares, while the diluted
earnings per share computation was based on 54,056,798 shares. The Company used
53,891,534 shares, the outstanding shares of WAI common stock at June 30, 1997,
to calculate both basic and diluted earnings per share in the years ended
December 31, 1996 and 1995. At December 31, 1997, Company employees and
directors held 2,504,500 options to purchase Company common stock. These options
could become dilutive in future periods if the market price of the Company's
common stock exceeds the exercise price of the outstanding options.
CASH EQUIVALENTS. The Company considers time deposits and commercial paper
purchased within three months of their date of maturity to be cash equivalents.
INVENTORIES. Inventories are stated at the lower of cost (first-in,
first-out method) or market.
REVENUE RECOGNITION. Revenues are generally recognized when products are
shipped or as services are performed. Revenues and profits on long-term
contracts associated with the Company's operations are recorded under the
percentage-of-completion method of accounting. Any anticipated losses on
contracts are charged to operations as soon as they are determinable. General
and administrative costs are expensed as incurred.
RESEARCH AND DEVELOPMENT. Research and development costs are charged to
expense as incurred. Total expenditures on research and development activities
amounted to $53.1 million, $29.7 million and $27.5 million, in the years ended
December 31, 1997, 1996 and 1995, respectively. The Company expensed a total of
$211.5 million of acquired in-process research and development in 1997. See
further discussion in Note B.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is stated at
cost. Depreciation, computed generally by the straight-line method for financial
reporting purposes, is provided over the estimated useful lives of the related
assets.
INCOME TAXES. The Company accounts for income taxes using the asset and
liability approach which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax-bases of assets and liabilities. For
further discussion of accounting policies for taxes see Note G.
The Company's domestic operations and their foreign branches have been
included in WAI's consolidated tax returns (for periods prior to the
Distribution Date). Any tax benefits related to these operations have been
recorded in these financial statements if such were realizable by WAI on a
consolidated basis. Foreign entities included in these financial statements
provide taxes in accordance with local laws and regulations.
CONCENTRATIONS OF CREDIT RISK. Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents and trade receivables. The Company places its cash and cash
equivalents with high credit quality institutions and limits the amount of
credit exposure with any one institution. Concentrations of credit risk with
respect to trade receivables are limited because a large number of
geographically diverse customers make up the Company's customer base, thus
spreading the trade credit risk. The Company evaluates the creditworthiness of
its customers and maintains an allowance for anticipated losses.
F-7
<PAGE>
NOTE A: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A different automotive industry customer was significant to the Company's
revenues in each of the three years ended 1997. One customer represented 13% of
revenues in 1997, another represented 15% of revenues in 1996, and another
represented 11% of revenues in 1995.
FOREIGN CURRENCIES. The currency effects of translating the financial
statements of those non-U.S. entities of the Company which operate in local
currency environments are included in the "cumulative currency translation
adjustment" component of shareholders' investment. Currency transaction gains
and losses are included in the consolidated and combined statements of
operations and were not material for any periods presented herein.
GOODWILL AND OTHER INTANGIBLES. Goodwill is amortized on a straight-line
basis over periods ranging from 15 to 40 years. Other intangibles are amortized
on a straight-line basis over periods ranging from four to 18 years. The Company
assesses the recoverability of goodwill at the end of each fiscal year or as
circumstances warrant. Factors considered in evaluating recoverability include
management's plans for the operations to which the goodwill relates and the
historical earnings and projected undiscounted cash flows of such operations.
IMPAIRMENT OF LONG-LIVED ASSETS. The Company reviews long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be fully recoverable. An impairment is
recorded to write-down long-lived assets to their fair value if the undiscounted
cash flows estimated to be generated by the asset are less than its carrying
amount.
ENVIRONMENTAL COSTS. Provisions for environmental costs are recorded when
the Company determines its responsibility for remedial efforts and such amounts
are reasonably estimable.
NEW ACCOUNTING PRONOUNCEMENTS. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
REPORTING COMPREHENSIVE INCOME, and No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. In February 1998, Statement of Financial
Accounting Standards No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER
POSTRETIREMENT BENEFITS, was issued. These statements are effective for
financial statements issued for periods beginning after December 15, 1997. The
Company is evaluating what additional disclosures may be required upon the
implementation of SFAS Nos. 130, 131 and 132.
RECLASSIFICATIONS. Certain prior year amounts have been reclassified to
conform to the current year presentation.
NOTE B: BUSINESS ACQUISITIONS, INVESTMENTS, AND DISPOSITIONS
ACQUISITIONS AND INVESTMENTS
The Company acquired Norand Corporation ("Norand") on March 3, 1997, and
United Barcode Industries ("UBI") on April 4, 1997. Norand designs, manufactures
and markets mobile computing systems and wireless data communications networks
using radio frequency technology. UBI is a European-based ADC company
headquartered in Sweden. These companies are currently being integrated into the
Automated Data Systems segment. Both transactions were funded by Western Atlas
borrowings and cash on hand, and have been accounted for under the purchase
method of accounting. Accordingly, the acquisition costs (approximately $280.0
million and $107.0 million for Norand and UBI, respectively) have been allocated
to the net assets acquired based upon their relative fair values. Such
allocation resulted in $203.3 million assigned to acquired in-process research
and development activities; $154.1 million assigned to goodwill (amortized over
25 years using the straight-line method); and $29.0 million assigned to other
intangibles (amortized over periods ranging from four to 18 years using the
straight-line method). During
F-8
<PAGE>
NOTE B: BUSINESS ACQUISITIONS, INVESTMENTS, AND DISPOSITIONS (CONTINUED)
the second quarter, the Company expensed the amounts assigned to acquired
in-process research and development projects that had not yet achieved
technological feasibility in accordance with Financial Accounting Standards
Board Interpretation No. 4 ("FIN 4").
The Norand acquisition added increased knowledge and capabilities in
wireless data communication using radio frequency ("RF") technology and mobile
computing solutions for the logistics markets. In the communications area,
Norand brings advanced access point and docking station technology,
communication software, product configuration and ergonomics. This acquisition
also expands the Company's offering in the RF spread-spectrum technology. The
mobile computing technology allows the Company to enter the route accounting,
meter reading, and field service markets. Norand provides the Company with
pen-based, hand-held computers with desktop PC performance that is important to
these markets.
The UBI acquisition provides two major product line technologies: bar code
on-demand printers with labels and ribbons, and hand-held scanners. UBI's
printer technology complements the Company's existing printer offerings with
low-end, low-cost printers and high-end, high-speed printers. UBI also provides
enhanced media-handling systems, such as linerless adhesive labels and software.
The scanner technology includes scanners based on charge-coupled device ("CCD")
technology, which is an alternative to laser scanners in many applications. UBI
also brings software that improves laser scanning for one- and two-dimensional
symbologies.
In addition to the amount charged to in-process research and development,
the Company expects to expend an additional $30 million over the next three
years to develop these technologies into commercially viable products. These
expenditures include engineering labor, material costs, overhead charges, and
software development, as well as general and administrative expenses.
The allocation of the acquisition cost of Norand and UBI is preliminary and
subject to revision upon receipt of pending information, such as final
assessment of certain legal and environmental exposures and the completion of
certain appraisals. Any such revisions are not expected to have a material
impact on the Company's consolidated and combined financial statements.
The Company acquired the remaining 51% of Honsberg, a German machine tool
maker, in the second quarter of 1997. The original 49% of Honsberg was acquired
during 1995. The Company purchased the stamping, engineering and prototyping
division of Modern Prototype Company in September 1997. In December 1997, UNOVA
acquired Goldcrown Machinery, Inc., a manufacturer of precision centerless
grinding systems. Although these acquisitions are integral to the Company's
goals, they are not material in the aggregate to UNOVA's consolidated and
combined financial statements.
In December 1997, the Company acquired radio frequency identification
("RFID") technology from IBM Corporation. In connection with this acquisition,
the Company recorded a $13.0 million after-tax charge to expense acquired
in-process research and development in accordance with FIN 4 and the anticipated
loss on a related long-term contract. The Company intends to further develop
this RFID technology and in 1997 acquired 13% of Amtech Corporation ("Amtech")
in order to support such development. The Company and Amtech were unable to
agree on the structure of a proposed product development alliance and are
currently exploring other mutually agreeable means to complete the RFID
development.
F-9
<PAGE>
NOTE B: BUSINESS ACQUISITIONS, INVESTMENTS, AND DISPOSITIONS (CONTINUED)
The fair values of Norand, UBI, Honsberg, Modern Prototype and Goldcrown
Machinery assets and liabilities at their respective acquisition dates are
presented below for supplemental cash flow disclosure purposes:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS)
- ---------------------------------------------------------------------------------
<S> <C>
Current assets................................................................... $ 164,153
Property, plant & equipment...................................................... 29,093
Goodwill and intangibles......................................................... 201,380
Other non-current assets......................................................... 55,956
Total debt....................................................................... (84,163)
Other current liabilities........................................................ (146,724)
Other non-current liabilities.................................................... (11,642)
In-process research and development.............................................. 203,300
-----------
Purchase price................................................................... 411,353
Less cash acquired............................................................... (10,599)
-----------
Purchase price, net of cash acquired............................................. $ 400,754
-----------
-----------
</TABLE>
The Company made acquisitions and investments during 1995, including
Cranfield Precision Engineering, a grinding technology company located in the
United Kingdom. These acquisitions are integral to the Company's goals, though
not material in the aggregate to the Company's consolidated and combined
financial statements.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following pro forma information for the years ended December 31, 1997
and 1996 gives effect to the acquisition of Norand as if it had occurred on
January 1, 1997 and 1996, respectively.
Unaudited pro forma sales and service revenues, net earnings and earnings
per share for the year ended December 31, 1996 are $1,405.8 million, $27.9
million and $0.52, respectively, reflecting the Norand acquisition as if it had
occurred on January 1, 1996, after giving effect to certain pro forma
adjustments, including amortization of goodwill and other intangibles, and
interest associated with the increase in allocated WAI debt.
The following unaudited pro forma combined statement of operations for the
year ended December 31, 1997 has been prepared from the historical financial
statements of the Company and Norand Corporation. Norand's historical operations
for the two months ended March 1, 1997 have been combined with the Company's
operations for the year ended December 31, 1997 (which include Norand subsequent
to the acquisition date), reflecting the acquisition as if it had occurred on
January 1, 1997.
F-10
<PAGE>
NOTE B: BUSINESS ACQUISITIONS, INVESTMENTS, AND DISPOSITIONS (CONTINUED)
The unaudited pro forma financial information is not necessarily indicative
of what the results of operations would have been if the combination had
occurred on the above-mentioned dates. Additionally, such information is not
predictive of future results of operations.
<TABLE>
<CAPTION>
NORAND
UNOVA HISTORICAL HISTORICAL TWO
YEAR ENDED MONTHS ENDED
DECEMBER 31, 1997 MARCH 1, 1997 ADJUSTMENTS
----------------- -------------- ---------------------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
Sales and Service Revenues.............................. $1,426,247 $36,798
----------------- -------
Costs and Expenses
Cost of sales......................................... 981,380 21,675
Selling, general and administrative................... 324,405 17,168
Depreciation and amortization......................... 40,672 1,932 $ 1,127(a)
In-process research and development charges........... 211,500 (203,300)(b)
Interest-net.......................................... 16,689 979 2,171(c)(d)
----------------- ------- ----------
Total Costs and Expenses............................ 1,574,646 41,754 (200,002)
----------------- ------- ----------
Earnings (Loss) before Taxes on Income.................. (148,399) (4,956) 200,002
Taxes on Income......................................... (22,968) 1,487 1,889(e)
----------------- ------- ----------
Net Earnings (Loss)..................................... $ (171,367) $(3,469) $ 201,891
----------------- ------- ----------
----------------- ------- ----------
Earnings (Loss) per Share (Equivalent Shares of 54.1
million)............................................... $ (3.17) $ (0.06) $ 3.73
----------------- ------- ----------
----------------- ------- ----------
<CAPTION>
COMBINED PRO
FORMA YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Sales and Service Revenues.............................. $1,463,045
-----------------
Costs and Expenses
Cost of sales......................................... 1,003,055
Selling, general and administrative................... 341,573
Depreciation and amortization......................... 43,731
In-process research and development charges........... 8,200
Interest-net.......................................... 19,839
-----------------
Total Costs and Expenses............................ 1,416,398
-----------------
Earnings (Loss) before Taxes on Income.................. 46,647
Taxes on Income......................................... (19,592)
-----------------
Net Earnings (Loss)..................................... $ 27,055
-----------------
-----------------
Earnings (Loss) per Share (Equivalent Shares of 54.1
million)............................................... $ 0.50
-----------------
-----------------
</TABLE>
The following pro forma adjustments give effect to the acquisition of Norand
as if it had occurred on January 1, 1997.
a) To record amortization of goodwill and other intangible assets acquired in
the acquisition of Norand.
b) To eliminate the Company's non-recurring, non-tax deductible charge to
expense acquired in-process research and development activities acquired
from Norand and UBI in accordance with FIN 4.
c) To record incremental interest expense on allocated Western Atlas corporate
debt using the Western Atlas estimated blended historical 7.5% annual rate.
d) To eliminate Norand's historical interest expense related to short-term
borrowings under agreements which were repaid with additional Western Atlas
corporate debt concurrent with the Company's acquisition of Norand.
e) To adjust the pro forma combined effective federal and state income tax rate
to 42%.
DISPOSITIONS
The Company sold its Material Handling Systems operations in November of
1996 and received cash proceeds of approximately $31 million. The activities of
the division were not considered a core business of the Company.
F-11
<PAGE>
NOTE C: CASH AND CASH EQUIVALENTS, DEBT AND INTEREST
Cash and cash equivalents amounted to $13.7 million and $149.5 million at
December 31, 1997 and December 31, 1996, respectively, and consisted mainly of
time deposits and commercial paper.
Notes payable and long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Borrowings under revolving credit facility, with average interest at 6.0%, due
1998.......................................................................... $ 200,000
Notes payable, with average interest at 5.1% (1997) and 5.6% (1996)............. 86,411 $ 27,045
Industrial revenue bonds, with average interest at 5.6% (1997) and 5.5% (1996),
due through 2005.............................................................. 13,500 13,500
Other, with average interest at 6.2% (1997) and 5.2% (1996), due through 2002... 3,672 1,423
---------- ----------
303,583 41,968
Less notes payable and current portion of long-term obligations................. (86,645) (27,461)
---------- ----------
Long-term obligations........................................................... $ 216,938 $ 14,507
---------- ----------
---------- ----------
</TABLE>
As of December 31, 1997 the Company classified $200.0 million of short-term
debt as long-term to reflect the debt offering that occurred in March 1998,
which is discussed below.
Notes payable and long-term obligations at December 31, 1997 mature as
follows:
<TABLE>
<CAPTION>
(THOUSANDS OF
YEAR ENDING DECEMBER 31, DOLLARS)
- ------------------------------------------------------------------------
<S> <C>
1998.................................................................... $ 86,645
1999.................................................................... 1,064
2000.................................................................... 1,081
2001.................................................................... 1,009
2002.................................................................... 284
Thereafter.............................................................. 213,500
--------
$ 303,583
--------
--------
</TABLE>
The Company has an unsecured committed credit facility with a group of banks
from which it may borrow up to $400.0 million. Under this credit facility, which
expires in September 2002, the Company may borrow at the prime rate or rates
based on the London Interbank Offered Rate, certificates of deposit or other
rates which are mutually acceptable to the banks and the Company. At December
31, 1997, $200.0 million of the credit facility was available for the Company's
general use. In addition, the Company maintains other uncommitted credit
facilities and lines of credit of which $75.0 million was available to the
Company at December 31, 1997.
The Company is in compliance with its various debt covenants which relate to
the Company's incurrence of debt, mergers, consolidations and sale of assets and
require the Company to satisfy certain leverage ratios.
Financial instruments on the Company's consolidated and combined balance
sheets include accounts receivable, notes payable, accounts payable, and
payrolls and related expenses, which approximate their market values due to
their short maturity. The fair market value of long-term obligations does not
differ significantly from their carrying value as of December 31, 1997, due to
the variable interest rates on the
F-12
<PAGE>
NOTE C: CASH AND CASH EQUIVALENTS, DEBT AND INTEREST (CONTINUED)
Company's long-term debt. UNOVA also has off-balance-sheet guarantees and
letter-of-credit reimbursement agreements with face values totaling $54.8
million at December 31, 1997 relating principally to the guarantee of
performance on contracts.
Debt allocated from WAI was $109.6 million at December 31, 1996. Immediately
prior to the Distribution, the Company paid to WAI a dividend in the amount of
$230.0 million which represented the WAI debt allocation at October 31, 1997.
Interest expense related thereto of $12.0 million, $8.3 million, and $8.4
million on the allocated portion of WAI's corporate debt for the years ended
December 31, 1997, 1996 and 1995, respectively, has been included in the
Company's statements of operations at WAI's estimated blended historical rate of
interest on long-term borrowings of 7.5%.
Net interest expense is composed of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Interest expense............................................. $ 20,234 $ 11,533 $ 12,174
Interest income.............................................. (3,545) (4,422) (2,827)
--------- --------- ---------
Net interest expense......................................... $ 16,689 $ 7,111 $ 9,347
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company made interest payments to non-related parties of $6.6 million,
$2.6 million, and $3.8 million in the years ended December 31, 1997, 1996 and
1995, respectively. Capitalized interest costs in each of the periods presented
were not material.
In March 1998, subsequent to the end of the fiscal year, the Company sold
$200.0 million principal amount of senior unsecured debt. The sale comprised
$100.00 million of 6.875% seven-year notes, at a price of 99.867 and $100.0
million of 7.00% ten-year notes, at a price of 99.856. Including underwriting
fees, discounts and effects of forward rate agreements entered into by the
Company to hedge the interest rates on the debt, the effective interest rates on
the seven-year and ten-year notes are 6.982% and 7.217%, respectively. The net
proceeds of approximately $198.0 million were used by the Company to repay
outstanding short-term debt.
NOTE D: ACCOUNTS RECEIVABLE AND INVENTORIES
Accounts receivable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1997 1996
---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Trade receivables, net................................................ $ 202,890 $ 132,814
Receivables related to long-term contracts
Amounts billed...................................................... 116,865 49,538
Unbilled costs and accrued profit on progress completed and
retentions........................................................ 128,324 212,220
---------- ----------
Net accounts receivable............................................... $ 448,079 $ 394,572
---------- ----------
---------- ----------
</TABLE>
The unbilled costs and retentions at December 31, 1997 are expected to be
entirely billed and collected during 1998.
F-13
<PAGE>
NOTE D: ACCOUNTS RECEIVABLE AND INVENTORIES (CONTINUED)
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1997 1996
---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in process............................................... $ 94,845 $ 65,016
Finished goods.................................................................. 38,074 18,697
Inventoried costs related to long-term contracts................................ 29,656 35,062
Less progress billings.......................................................... (12,038) (24,323)
---------- ----------
Net inventories................................................................. $ 150,537 $ 94,452
---------- ----------
---------- ----------
</TABLE>
NOTE E: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1997 1996
---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Property, plant and equipment, at cost
Land.......................................................................... $ 23,418 $ 23,283
Buildings and improvements.................................................... 102,462 105,445
Machinery and equipment....................................................... 213,582 165,257
Less accumulated depreciation................................................... (181,782) (161,477)
---------- ----------
Net property, plant and equipment............................................... $ 157,680 $ 132,508
---------- ----------
---------- ----------
</TABLE>
Depreciation expense was $27.4 million, $20.7 million and $20.9 million for
the years ended December 31, 1997, 1996 and 1995, respectively. The net book
value of assets under capital leases was not material at December 31, 1997 and
1996.
The range of estimated useful lives of the major classes of assets are:
<TABLE>
<S> <C>
Buildings................................................. 10-45 years
Building improvements..................................... 2-20 years
Machinery and equipment................................... 2-15 years
</TABLE>
As of December 31, 1997, minimum rental commitments under noncancellable
operating leases were:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------------------------------------------------------ OPERATING LEASES
--------------------
(THOUSANDS OF
DOLLARS)
<S> <C>
1998.................................................................... $ 10,307
1999.................................................................... 7,546
2000.................................................................... 5,373
2001.................................................................... 3,540
2002.................................................................... 2,414
Thereafter.............................................................. 6,855
-------
$ 36,035
-------
-------
</TABLE>
F-14
<PAGE>
NOTE E: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Rental expense for operating leases, including amounts for short-term leases
with nominal, if any, future rental commitments, was $17.9 million, $10.4
million and $9.8 million, for the years ended December 31, 1997, 1996 and 1995,
respectively. The minimum future rentals receivable under subleases and
contingent rental expenses were not significant.
NOTE F: SHAREHOLDERS' INVESTMENT
Changes in shareholders' investment are summarized as follows:
<TABLE>
<CAPTION>
CUMULATIVE
ADDITIONAL CURRENCY NET TOTAL
COMMON PAID-IN ACCUMULATED TRANSLATION INVESTMENT BY SHAREHOLDERS'
(THOUSANDS OF DOLLARS) STOCK CAPITAL DEFICIT ADJUSTMENT WESTERN ATLAS INVESTMENT
- ------------------------------------- ----------- ---------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995............. $ 439,415 $ 439,415
Net earnings......................... 26,204 26,204
Currency translation adjustment...... (1,155) (1,155)
Net transactions with Western Atlas
Inc................................ 38,195 38,195
------------- -------------
BALANCE, DECEMBER 31, 1995........... 502,659 502,659
Net earnings......................... 42,022 42,022
Currency translation adjustment...... 4,080 4,080
Net transactions with Western Atlas
Inc................................ 25,747 25,747
------------- -------------
BALANCE, DECEMBER 31, 1996........... 574,508 574,508
Net loss to Distribution Date........ (163,326) (163,326)
Currency translation adjustment to
Distribution Date.................. (3,699) (3,699)
Net transactions with Western Atlas
Inc................................ 190,338 190,338
Distribution of common stock to UNOVA
shareholders....................... $ 545 $ 601,689 $ (4,413) (597,821)
Net loss from Distribution Date to
December 31, 1997.................. $ (8,041) (8,041)
Currency translation adjustment from
Distribution Date to December 31,
1997............................... (2,345) (2,345)
Other................................ 2,054 2,054
----- ---------- ------------ ----------- ------------- -------------
BALANCE, DECEMBER 31, 1997........... $ 545 $ 603,743 $ (8,041) $ (6,758) -- $ 589,489
----- ---------- ------------ ----------- ------------- -------------
----- ---------- ------------ ----------- ------------- -------------
</TABLE>
At December 31, 1997, there were authorized 250 million shares of common
stock, par value $0.01, and 50 million shares of preferred stock, par value
$0.01. No cash dividends were paid on the common stock in the year ended
December 31, 1997.
STOCK OPTIONS
The UNOVA, Inc. 1997 Stock Incentive Plan (the "1997 Plan") provides for the
grant of incentive awards to officers and other key employees. Incentive awards
may be granted in the form of stock options,
F-15
<PAGE>
NOTE F: SHAREHOLDERS' INVESTMENT (CONTINUED)
with or without related stock appreciation rights, or in the form of restricted
stock. Under the 1997 Plan, stock options may not be granted at a price less
than the market value of the Company's common stock on the date of grant. The
Company also has a Director Stock Option Plan (the "Director Plan") which
provides for the grant of stock options to the Company's non-employee directors.
Under this plan, stock options are granted annually at the market value of the
Company's common stock on the date of grant. The number of options granted
annually is fixed by the plan. Such options become fully exercisable on the
first anniversary of their grant.
Subsequent to the Distribution, the Company granted 2,404,500 options to
officers and other key employees under the 1997 Plan and 100,000 options to
non-employee directors under the Director Plan. These options were granted at a
weighted-average exercise price of $18.80. None of these options have been
exercised and none were exercisable at December 31, 1997, and there were a total
of 3,495,500 options available for grant under both plans as of December 31,
1997. No awards in the form of stock appreciation rights or restricted stock
have been granted under the 1997 Plan.
Outstanding stock option data at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------------------
WEIGHTED-AVERAGE
EXERCISE REMAINING WEIGHTED-AVERAGE
PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
- ------------- ----------- ------------------- -----------------
<S> <C> <C> <C>
$14.88 16,000 9.97 $ 14.88
$17.56 100,000 9.84 $ 17.56
$18.88 2,388,500 9.85 $ 18.88
</TABLE>
The weighted-average fair value of stock options granted during 1997 was
$7.76 per option. The fair value of each stock option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1997: risk-free interest rate of
5.8%, expected life of five years, and expected volatility of 36%, determined
from historical industry stock price fluctuations. There is no assurance that
the assumptions used in determining the fair values of stock options will prove
true in the future. The actual value of the options depends on several factors,
including the actual market price of the common stock on the date of exercise.
Changes in any of these factors as well as fluctuations in the market price of
the Company's common stock will cause the actual value of these options to vary
from the theoretical value indicated above.
EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 1998, UNOVA adopted an Employee Stock Purchase Plan
under which the Company is authorized to sell up to five million shares of
common stock to its eligible full-time employees. Under the terms of the plan,
which is intended to qualify under Section 423 of the Internal Revenue Code,
employees can choose to have up to 8% of their annual earnings (up to a maximum
amount of $21,250 per calendar year) withheld to purchase the Company's common
stock. The purchase price of the stock is 85% of the lower of the market price
on the first day or last day of the applicable offering period, which is
normally six months in duration.
PRO FORMA COMPENSATION COST DISCLOSURE
The Company accounts for its stock-based compensation plans in accordance
with Accounting Principles Board Opinion No. 25, under which no compensation
cost has been recognized for stock option awards. Had compensation cost for
these plans been determined consistent with Statement of Financial Accounting
Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's pro
forma net loss and loss per share for 1997 would have been $173.6 million and
$3.21, respectively.
F-16
<PAGE>
NOTE F: SHAREHOLDERS' INVESTMENT (CONTINUED)
SHAREHOLDER RIGHTS PLAN
On September 24, 1997, the Company's Board of Directors adopted a Share
Purchase Rights Plan (the "Plan") and, in accordance with such Plan, declared a
dividend of one preferred share purchase right (the "Right") for each
outstanding share of Company common stock, payable to shareholders of record on
October 31, 1997. The Plan will cause substantial dilution to a party that
attempts to acquire the Company in a manner or on terms not approved by the
Board of Directors. Each Right entitles the holder to purchase from the Company
one one-hundredth of a share of Series A Preferred Stock at a price of seventy
dollars. The Rights become exercisable if a person other than a person which
presently holds more than 15 percent of the Company's common stock acquires 15
percent or more, or announces a tender offer for 15 percent or more, of the
Company's outstanding common stock. If a person acquires 15 percent or more of
the Company's outstanding common stock, each right will entitle the holder to
purchase the Company's common stock having a market value of twice the exercise
price of the Right. The Rights, which expire in September 2007, may be redeemed
by UNOVA at a price of one cent per Right at any time prior to a person
acquiring 15 percent or more of the outstanding common stock.
NOTE G: TAXES ON INCOME
Earnings (loss) before taxes on income by geographic area are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
----------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
United States.............................................. $ (113,075) $ 47,470 $ 41,989
Other nations.............................................. (35,324) 22,566 2,052
----------- --------- ---------
$ (148,399) $ 70,036 $ 44,041
----------- --------- ---------
----------- --------- ---------
</TABLE>
Taxes on income consist of the following provisions (benefits):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
---------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Currently Payable:
U.S. taxes................................................ $ 13,821 $ 31,619 $ 8,926
International taxes....................................... 10,124 6,446 1,392
---------- --------- ---------
23,945 38,065 10,318
---------- --------- ---------
Deferred:
U.S. taxes................................................ 242 (9,685) 8,220
International taxes....................................... (1,219) (366) (701)
---------- --------- ---------
(977) (10,051) 7,519
---------- --------- ---------
$ 22,968 $ 28,014 $ 17,837
---------- --------- ---------
---------- --------- ---------
</TABLE>
Deferred taxes result from the effect of transactions which are recognized
in different periods for financial and tax reporting purposes and relate
primarily to employee benefits, depreciation and other valuation allowances.
F-17
<PAGE>
NOTE G: TAXES ON INCOME (CONTINUED)
The primary components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------- --------------------
ASSET LIABILITY ASSET LIABILITY
---------- --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Accrued liabilities.............................. $ 49,194 $ 32,197
Receivables and inventory........................ 14,431 8,426
Retiree medical benefits......................... 6,255 4,501
Intangibles...................................... 9,025 23
Tax credit carryforward.......................... 4,887
Deferred income.................................. 10,195 810
Net operating loss carryforward.................. 9,136
Pensions......................................... $ 14,251 $ 11,239
Accelerated depreciation......................... 6,123 6,892
Other items...................................... 3,571 2,544 7,679 4,596
---------- --------- --------- ---------
$ 106,694 $ 22,918 $ 53,636 $ 22,727
---------- --------- --------- ---------
---------- --------- --------- ---------
</TABLE>
For tax purposes, the Company has available at December 31, 1997, a net
operating loss carryforward of approximately $26.0 million expiring in 2009 and
2010. The Company also has general business credit carryforwards of
approximately $4.9 million which expire during the 2005 through 2010 time
period.
The following is a reconciliation of income taxes at the U.S. statutory rate
to the provision for income taxes:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
---------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Tax at U.S. statutory rate.................................. $ (51,940) $ 24,513 $ 15,414
Nondeductible acquired in-process research and
development................................................ 71,050
State income taxes net of federal benefit................... 1,625 1,382 1,285
Amortization of nondeductible goodwill...................... 4,431 1,916 1,916
Foreign earnings taxed at other than U.S. statutory rate.... (223) 60 100
Other items................................................. (1,975) 143 (878)
---------- --------- ---------
$ 22,968 $ 28,014 $ 17,837
---------- --------- ---------
---------- --------- ---------
</TABLE>
The Company made tax payments of $44.4 million, $26.1 million and $15.1
million, in the years ended December 31, 1997, 1996 and 1995, respectively.
It is the policy of the Company to accrue appropriate U.S. and foreign
income taxes on earnings which are intended to be remitted by foreign
subsidiaries to the parent company. Unremitted earnings, which have been or are
intended to be permanently reinvested by foreign subsidiaries, were
approximately $4.0 million at December 31, 1997.
F-18
<PAGE>
NOTE H: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company has retirement and pension plans which cover most of its
employees. Most of the Company's U.S. employees are covered by a contributory
defined benefit plan, under which annual contributions are made to the extent
such contributions are actuarially determined.
There are also defined contribution voluntary savings programs generally
available for U.S. employees, which are intended to qualify under Sections
401(a) and 401(k) of the Internal Revenue Code. These plans are designed to
enhance the retirement programs of participating employees. Under these plans,
the Company matches up to 50% of a certain portion of participants'
contributions.
Certain of the Company's non-U.S. subsidiaries also have a retirement plan
for employees. The pension liabilities and their related costs are computed in
accordance with the laws of the individual nations and appropriate actuarial
practices.
U.S. PENSION PLANS
A summary of the components of net periodic pension cost for the U.S.
defined benefit plans and defined contribution plans for the years ended
December 31, 1997, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Defined benefit plans
Service cost - benefits earned during the period......... $ 5,988 $ 6,507 $ 4,565
Interest cost on projected benefit obligation............ 10,075 10,107 9,619
Actual return on plan assets............................. (88,571) (41,727) (58,985)
Net amortization and deferral............................ 62,673 19,371 37,439
--------- ---------- ----------
Net periodic pension income................................ (9,835) (5,742) (7,362)
Defined contribution plans................................. 4,160 2,983 2,414
--------- ---------- ----------
Net periodic pension income................................ $ (5,675) $ (2,759) $ (4,948)
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
Actuarial assumptions for the Company's U.S. defined benefit plans included
an expected long-term rate of return on plan assets of 9 1/4% for fiscal years
1997 and 1996. The weighted-average discount rate used in determining the
actuarial present value of the projected benefit obligation was 7 1/2% at
December 31, 1997 and 1996. The rate of increase in future compensation levels
was 5% at December 31, 1997 and 1996.
F-19
<PAGE>
NOTE H: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status of the Company's U.S. plans
and amounts recognized in the Company's balance sheets at December 31, 1997 and
1996.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation............................................................. $ (132,477) $ (125,121)
----------- -----------
Accumulated benefit obligation........................................................ $ (133,460) $ (126,092)
----------- -----------
Projected benefit obligation.......................................................... $ (151,649) $ (139,026)
Fair value of plan assets............................................................... 345,347 267,956
Unrecognized net transition asset....................................................... (12,769) (16,268)
Unrecognized net gain................................................................... (145,050) (87,550)
----------- -----------
Prepaid pension cost.................................................................... $ 35,879 $ 25,112
----------- -----------
----------- -----------
</TABLE>
The above table includes prepaid pension cost presented net of pension
liabilities for plans in which accumulated benefits exceed plan assets. As of
December 31, 1997 and 1996, these liabilities amounted to $16.2 million and
$13.5 million, respectively.
Plan assets consist primarily of equity securities and investment grade
fixed income securities. The excess of plan assets over the projected benefit
obligation at August 1, 1986 (when the Company adopted SFAS No. 87) and
subsequent unrecognized gains and losses are fully amortized over the average
remaining service period of active employees expected to receive benefits under
the plans, generally 15 years.
NON-U.S. PENSION PLAN
For the principal non-U.S. pension plan located in the United Kingdom, the
weighted-average discount rate used was 7% at December 31, 1997. The rate of
increase in future compensation used was 4%, and the rate of return on assets
was 7 1/2% at December 31, 1997.
Pension costs for the non-U.S. plan were not material for any of the periods
presented herein. The actuarial present value of projected benefits at December
31, 1997 was $35.6 million compared with net assets available for benefits of
$40.4 million.
OTHER POSTRETIREMENT BENEFITS
In addition to pension benefits, certain of the Company's U.S. employees are
covered by postretirement health care and life insurance defined benefit plans.
These benefit plans are unfunded.
The net periodic postretirement benefit costs were not material for any of
the periods presented herein. The accumulated benefit obligation at December 31,
1997 was $19.6 million, of which $17.8 million was attributable to retirees and
$1.8 million to other active plan participants. The accumulated benefit
obligation at December 31, 1996 was $18.5 million, of which $14.7 million was
attributable to retirees and $3.8 million was attributable to active plan
participants.
Actuarial assumptions used to measure the accumulated benefit obligation
include a discount rate of 7 1/2% at December 31, 1997 and 1996. The assumed
health care cost trend rate for fiscal year 1997 was 12.4% and is projected to
decrease over 20 years to 6%, where it is expected to remain thereafter. The
effect of a one-percentage-point increase in the assumed health care cost trend
rate on the service cost and
F-20
<PAGE>
NOTE H: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)
interest cost components of the net periodic postretirement benefit cost is not
material. A one-percentage-point increase in the assumed health care cost trend
rate on the accumulated benefit obligation results in an increase of
approximately $1.9 million.
NOTE I: LITIGATION, COMMITMENTS AND CONTINGENCIES
The Company is currently, and is from time to time, subject to claims and
suits arising in the ordinary course of its business. In the opinion of the
Company's General Counsel, the ultimate resolution of currently pending
proceedings will not have a material adverse effect on the Company's
consolidated and combined financial statements.
NOTE J: RELATED PARTY TRANSACTIONS
Immediately prior to the Distribution, the Company paid a dividend of $230.0
million to WAI with funds borrowed under the Company's revolving credit
facility.
Included in other assets are amounts due from certain Company officers and
other related parties of $2.1 million and $1.6 million at December 31, 1997 and
1996, respectively.
Included in general and administrative costs are allocated charges from WAI
of $13.5 million, $22.2 million, and $19.9 million, for the years ended December
31, 1997, 1996, and 1995, respectively.
Included in interest expense are allocated charges from WAI of $12.0
million, $8.3 million, and $8.4 million, for the years ended December 31, 1997,
1996, and 1995, respectively.
NOTE K: BUSINESS SEGMENT REPORTING
The Company reports its operations in two business segments: the Automated
Data Systems segment and the Industrial Automation Systems segment. Material
Handling Systems was sold during the fourth quarter of 1996. Figures for this
division were reported as part of the Industrial Automation Systems segment.
Activities are primarily product sales oriented. Export sales are not
material.
Corporate and other amounts include corporate operating costs, net interest
expense and currency transaction gains and losses (see Notes A and J). Assets
classified as corporate and other amounts consist of cash and cash equivalents
and other corporate assets.
F-21
<PAGE>
NOTE K: BUSINESS SEGMENT REPORTING (CONTINUED)
OPERATIONS BY BUSINESS SEGMENT
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
AUTOMATED INDUSTRIAL CORPORATE
YEAR ENDED DATA AUTOMATION AND OTHER
DECEMBER 31, SYSTEMS SYSTEMS AMOUNTS TOTAL
--------------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales............................................. 1997 $ 636 $ 790 $ 1,426
1996 367 798 1,165
1995 321 622 943
Operating profit (loss)........................... 1997 (202)(A) 95 $ (25) (132)(A)
1996 30 70 (23) 77
1995 13 62 (22) 53
Capital expenditures.............................. 1997 16 14 30
1996 9 14 23
1995 8 16 24
Depreciation and amortization expense............. 1997 25 15 1 41
1996 11 15 1 27
1995 12 13 1 26
Identifiable assets at year end................... 1997 642 650 64 1,356
1996 277 620 177 1,074
1995 289 499 131 919
</TABLE>
- ------------------------
(A) Includes the $211.5 million charges for acquired in-process research and
development.
OPERATIONS BY GEOGRAPHIC AREA
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED UNITED OTHER CORPORATE
DECEMBER 31, STATES EUROPE NATIONS AND OTHER TOTAL
--------------- --------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales........................................... 1997 $ 989 $ 363 $ 74 $ 1,426
1996 950 193 22 1,165
1995 771 151 21 943
Operating profit (loss)......................... 1997 (78) (35) 6 $ (25) (132)
1996 78 22 (23) 77
1995 70 4 1 (22) 53
Identifiable assets at year end................. 1997 1,015 261 16 64 1,356
1996 751 136 10 177 1,074
1995 671 105 12 131 919
</TABLE>
F-22
<PAGE>
UNOVA, INC.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
COMMON
BASIC DILUTED STOCK SALES
GROSS NET EARNINGS EARNINGS PRICE
SALES PROFIT EARNINGS PER SHARE PER SHARE HIGH/LOW (1)
------ ------- ------------- ----------- ----------- --------------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter..................................... $323.1 $ 88.9 $ 11.6 $ 0.21 $ 0.21
Second Quarter.................................... 409.3 122.7 (189.1)(2) (3.51) (3.51)
Third Quarter..................................... 361.8 116.4 11.7 0.22 0.22
Fourth Quarter.................................... 332.0 99.9 (5.6)(3) (0.10) (0.10) $19 1/4 14 1/8
YEAR ENDED DECEMBER 31, 1996
First Quarter..................................... $240.4 $ 68.0 $ 8.2 $ 0.15 $ 0.15
Second Quarter.................................... 264.1 73.4 8.7 0.16 0.16
Third Quarter..................................... 310.0 81.0 11.0 0.20 0.20
Fourth Quarter.................................... 350.2 88.0 14.1 0.26 0.26
</TABLE>
As of February 27, 1998 there were approximately 21,687 holders of record of
the Company's common stock.
(1) The common stock began trading on the New York Stock Exchange under the
symbol "UNA" on October 22, 1997 on a "when issued" basis, and "regular way"
on November 3, 1997. Prior to October 31, 1997, the Company was a wholly
owned subsidiary of Western Atlas Inc.
(2) In June 1997, the Company expensed $203.3 million of in-process research and
development activities in connection with the acquisitions of Norand and
UBI.
(3) In December 1997, the company expensed $4.9 million (net of tax) of
in-process research and development activities in connection with the
acquisition of RFID technology.
F-23
<PAGE>
UNOVA, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.1 $400,000,000 Credit Agreement dated September 24, 1997, among UNOVA, Inc., the Banks listed therein,
and Morgan Guaranty Trust Company of New York, as Agent, filed on October 1, 1997 as Exhibit 10M to
Amendment No. 1 to the Company's Registration Statement on Form 10 No. 001-13279 and incorporated
herein by reference.
4.2 Rights Agreement dated September 24, 1997, between UNOVA, Inc. and The Chase Manhattan Bank, as
Rights Agent, to which is annexed the form of Right Certificate as Exhibit A, filed on October 22,
1997 as Exhibit 3C to Amendment No. 2 to the Company's Registration Statement on Form 10 No.
001-13279.
4.3 Instruments defining the rights of holders of long-term debt of the Company are not filed as exhibits
because the amount of debt authorized under any such instrument does not exceed 10% of the total
assets of the Company and its consolidated subsidiaries. The Company hereby undertakes to furnish a
copy of any such instrument to the Commission upon request.
4.4 Amendment No. 1 to the $400,000,000 Credit Agreement, dated January 15, 1998.*
4.5 Indenture dated as of March 11, 1998 between the Company and The First National Bank of Chicago,
Trustee, providing for the issuance of securities in series.*
4.6 Form of 6.875% Notes due March 15, 2005 issued by the Company under such indenture.*
4.7 Form of 7.00% Notes due March 15, 2008 issued by the Company under such indenture.*
10.1 Distribution and Indemnity Agreement dated October 31, 1997, between Western Atlas Inc. and UNOVA,
Inc, filed as Exhibit 10.1 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.2 Tax Sharing Agreement dated October 31, 1997, between Western Atlas Inc., and UNOVA, Inc., filed as
Exhibit 10.2 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
10.3 Employee Benefits Agreement dated October 31, 1997, between Western Atlas Inc., and UNOVA, Inc.,
filed as Exhibit 10.3 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.4 Intellectual Property Agreement dated October 31, 1997, between Western Atlas Inc., and UNOVA, Inc.,
filed as Exhibit 10.4 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.5 Change of Control Employment Agreements with Alton J. Brann, Michael E. Keane, Norman L. Roberts and
certain other officers of the Company, dated as of October 31, 1997, filed as Exhibit 10.5 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and incorporated herein by reference.
10.6 Employment Agreement between Intermec Corporation and Michael Ohanian, dated May 18, 1995, as
amended, filed on August 18, 1997 as Exhibit 10J to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
10.7 UNOVA, Inc. Director Stock Option and Fee Plan, filed as Exhibit 10.7 to the Company's September 30,
1997 Quarterly Report on Form 10-Q, and incorporated herein by reference.
10.8 UNOVA, Inc. Restoration Plan, filed on August 18, 1997 as Exhibit 10I to the Company's Registration
Statement on Form 10 No. 001-13279 and incorporated herein by reference.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.9 UNOVA, Inc. Supplemental Executive Retirement Plan, filed on October 1, 1997 as Exhibit 10H to
Amendment No. 1 to the Company's Registration Statement on Form 10 No. 001-13279 and incorporated
herein by reference.
10.10 Supplemental Retirement Agreement between UNOVA, Inc. and Alton J. Brann, filed on October 1, 1997 as
Exhibit 10L to Amendment No. 1 to the Company's Registration Statement on Form 10 No. 001-13279 and
incorporated herein by reference.
10.11 Employment Agreement dated August 1997, between UNOVA, Inc., and Clayton A. Williams, filed on
October 1, 1997 as Exhibit 10K to Amendment No. 1 to the Company's Registration Statement on Form
10 No. 001-13279 and incorporated herein by reference.
10.12 UNOVA, Inc. 1997 Stock Incentive Plan, filed as Exhibit 10.12 to the Company's September 30, 1997
Quarterly Report on Form 10-Q, and incorporated herein by reference.
10.13 UNOVA, Inc. Executive Severance Plan, filed as Exhibit 10.13 to the Company's September 30, 1997
Quarterly Report on Form 10-Q, and incorporated herein by reference.
10.14 Form of Promissory Notes in favor of the Company given by certain officers and key employees, filed
as Exhibit 10.14 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.15 Board resolution dated September 24, 1997 establishing the UNOVA, Inc. Incentive Loan Program, filed
as Exhibit 10.15 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.16 UNOVA, Inc. Management Incentive Compensation Plan.*
10.17 UNOVA, Inc. Executive Survivor Benefit Plan.*
10.18 Amendment No. 1 to Employment Agreement between Intermec Corporation and Michael Ohanian, dated
February 28, 1997.*
10.19 Amendment No. 2 to Employment Agreement between Intermec Technologies Corporation and Michael
Ohanian, dated February 28, 1998.*
10.20 Amendment to Employment Agreement between UNOVA, Inc. and Clayton A. Williams, dated March 24, 1998.*
21 Subsidiaries of the Registrant included herein on page E-3.
23 Independent Auditors' Consent included herein on page E-4.
27 Financial Data Schedule (filed only electronically with the Securities and Exchange Commission).
</TABLE>
- ------------------------
* Copies of these documents have been included in this Annual Report on Form
10-K filed with the Securities and Exchange Commission.
E-2
<PAGE>
EXHIBIT 21
UNOVA, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION
OF PERCENTAGE OF
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
- -------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Intermec Technologies Corporation............................. Washington 100
UNOVA Industrial Automation Systems, Inc...................... Delaware 100
</TABLE>
The Registrant has additional operating subsidiaries which, considered in the
aggregate as a single subsidiary, do not constitute a significant subsidiary.
All above-listed subsidiaries have been consolidated in the Registrant's
financial statements.
E-3
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to registration
statement No. 333-42839 of UNOVA, Inc. on Form S-3 and registration statements
Nos. 333-39003, 333-39005, and 333-39007 of UNOVA, Inc. each filed on Form S-8,
of our report dated March 11, 1998, appearing in this Annual Report on Form 10-K
of UNOVA, Inc. for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 26, 1998
E-4
<PAGE>
EXHIBIT 4.4
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of January 15, 1998 to the Credit Agreement dated as
of September 24, 1997 (the "CREDIT AGREEMENT") among UNOVA, INC. (the
"BORROWER"), the BANKS party thereto (the "BANKS") and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent (the "AGENT").
The parties hereto agree as follows:
A. SECTION . DEFINED TERMS; REFERENCES . Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement has the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and
each other similar reference and each reference to "this Agreement" and each
other similar reference contained in the Credit Agreement shall, after this
Amendment becomes effective, refer to the Credit Agreement as amended hereby.
B. SECTION . AMENDMENTS . The Credit Agreement is hereby amended as
follows:
a.
i. In the definition of "Financing Documents" in Section
1.01, by deleting the phrase "and the Subsidiary Guarantee Agreement" and by
replacing the comma with the word "and".
ii. In the definition of "Material Subsidiary" in Section
1.01, by deleting the following language "(i) any Guarantor and (ii)" and
deleting the word "other" between the words "any" and "Subsidiary" in the
second line thereof.
iii. By deleting in its entirety the definition of "Obligors"
in Section 1.01.
iv. In the first sentence of Section 4.02, by replacing the
phrase "each Obligor" with "the Borrower" and deleting the phrase "to which
it is a party".
v. By deleting the second sentence of Section 4.03.
vi. In Section 4.10, by replacing the phrase "Neither the
Borrower nor any Guarantor is" with "The Borrower is not".
vii. In Section 4.12, by deleting both instances of the phrase
"or any Guarantor" in the first sentence thereof and by replacing the phrase
"any Obligor" with "the Borrower" in the second sentence thereof.
viii. In Section 6.01:
(i) by replacing the phrases "any Obligor" and "such Obligor" with
"the Borrower" in Subsections (c) and (d) thereof;
(ii) by deleting in its entirety Subsection (l) and moving the word
"or" from the end of Subsection (k) to the end of Subsection (j);
<PAGE>
i. (iii) by replacing each occurrence of the phrase "any Obligor"
or the phrase "the Obligors" with "the Borrower" in the proviso at the end of
Section 6.01. In Section 6.02, by replacing the phrase "an Obligor"
with "the Borrower".
ii. In Section 7.04, by replacing the phrase "any Obligor"
with "the Borrower".
iii. In item (ii) of the second sentence of Section 7.05, by
replacing the phrase "any Obligor" with "the Borrower".
iv. In the second sentence of Section 9.04, by replacing the
phrase "Each of the Borrower and the Guarantors" with "The Borrower" and
deleting the phrase "or such Guarantor, as the case may be".
v. In the second and third sentences of Section 9.08, by
replacing the phrase "Each of the Borrower and the Guarantors" with "The
Borrower".
vi. In Section 9.10, by deleting the phrase "THE GUARANTORS,".
B. SECTION . SUBSIDIARY GUARANTEE AGREEMENT . The Subsidiary
Guarantee Agreement dated as of December 31, 1997 among UNOVA, Inc., the
Guarantors referred to therein and Morgan Guaranty Trust Company of New York,
as Agent, is hereby terminated in its entirety and the Guarantors referred to
therein are hereby released from all obligations thereunder.
C. SECTION . REPRESENTATIONS OF BORROWER . The Borrower represents
and warrants that (i) the representations and warranties of the Borrower set
forth in Article 4 of the Credit Agreement are true on and as of the date
hereof and (ii) no Default has occurred and is continuing on and as of the
date hereof.
D. SECTION . GOVERNING LAW . This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
E. SECTION . COUNTERPARTS . This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
F. SECTION . EFFECTIVENESS . This Amendment shall become effective
as of the date hereof when the Agent shall have received from each of the
Borrower and the Banks a counterpart hereof duly signed by such party or
facsimile or other written confirmation (in form satisfactory to the Agent)
that such party has signed a counterpart hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
UNOVA, INC.
By: /s/ LORI J. SEGALE
-------------------------------------
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ ROBERT BOTTAMEDI
-------------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ GINA M. WEST
-------------------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ REBECCA K. LEVINE
-------------------------------------
Title: Vice President
<PAGE>
THE CHASE MANHATTAN BANK
By: /s/ LENARD WEINER
-------------------------------------
Title: Vice President
CIBC INC.
By: /s/ TIMOTHY E. DOYLE
-------------------------------------
Title: Managing Director, CIBC
Oppenheimer Securities Corp.,
as Agent
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ JAMES D. BENKO
-------------------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ GEORGE V. HAUSLER
-------------------------------------
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ DAVID J. WORTHINGTON
-------------------------------------
Title: Managing Director
By: /s/ GEOFFREY CRAIG
-------------------------------------
Title: Vice President
<PAGE>
DRESDNER BANK A.G., NEW YORK BRANCH
AND GRAND CAYMAN BRANCH
By: /s/ CHRISTOPHER E. SARISKY
-------------------------------------
Title: Assistant Treasurer
By: /s/ JOHN W. SWEENEY
-------------------------------------
Title: Assistant Vice President
THE FUJI BANK, LIMITED
By: /s/ MASAHITO FUKUDA
-------------------------------------
Title: Joint General Manager
MELLON BANK, N.A.
By: /s/ STEPHEN P. YOST
-------------------------------------
Title: First Vice President
THE NORTHERN TRUST COMPANY
By: /s/ JOHN E. BURDA
-------------------------------------
Title: Second Vice President
<PAGE>
EXHIBIT 4.5
UNOVA, INC.
TO
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
__________
INDENTURE
Dated as of March 11, 1998
Providing for Issuance of Senior
Debt Securities in Series
<PAGE>
UNOVA, INC.
Certain Sections of this Indenture relating to
Sections 310 through 318, inclusive, of the
Trust Indenture Act of 1939:
Trust Indenture
Act Section Indenture Section
Section 310(a)(1). . . . . . . . . . . . . . . . . . . .609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . .609
(a)(3). . . . . . . . . . . . . . . . . . . .Not Applicable
(a)(4) . . . . . . . . . . . . . . . .Not Applicable
(b) . . . . . . . . . . . .. . . . . . . . . .608
. . . . . . . . . . .610
Section 311(a) . . . . . . . . . . . .. . . . .613
(b) . . . . . . . . . . . .. . . . . . . . . .613
Section 312(a) . . . . . . . . . . . .. . . . .701
. . . . . . . . . .702(a)
(b) . . . . . . . . . . . .. . . . . . . . .702(b)
(c) . . . . . . . . . . . .. . . . . . . . .702(c)
Section 313(a) . . . . . . . . . . . .. . . .703(a)
(b) . . . . . . . . . . . .. . . . . . . . .703(a)
(c) . . . . . . . . . . . .. . . . . . . . .703(a)
(d) . . . . . . . . . . . .. . . . . . . . .703(b)
Section 314(a) . . . . . . . . . . . .. . . . .704
(a)(4) . . . . . . . . . . . .. . . . . . . . . .101
. . . . . . . . . . 1004
(b) . . . . . . . . . . . .. . . . Not Applicable
(c)(1) . . . . . . . . . . . .. . . . . . . . . .102
(c)(2) . . . . . . . . . . . .. . . . . . . . . .102
(c)(3) . . . . . . . . . . . .. . . . Not Applicable
(d) . . . . . . . . . . . .. . . . Not Applicable
(e) . . . . . . . . . . . .. . . . . . . . . .102
Section 315(a) . . . . . . . . . . . .. . . . .601
(b) . . . . . . . . . . . .. . . . . . . . . .602
(c) . . . . . . . . . . . .. . . . . . . . . .601
(d) . . . . . . . . . . . .. . . . . . . . . .601
(e) . . . . . . . . . . . .. . . . . . . . . .514
Section 316(a) . . . . . . . . . . . .. . . . .101
(a)(1)(A). . . . . . . . . . . .. . . . . . . . . .502
. . . . . . . . . . .512
(a)(1)(B). . . . . . . . . . . .. . . . . . . . . .513
(a)(2) . . . . . . . . . . . .. . . . Not Applicable
(b) . . . . . . . . . . . .. . . . . . . . . .508
(c) . . . . . . . . . . . .. . . . . . . . .104(c)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . .503
(a)(2) . . . . . . . . . . . .. . . . . . . . . .504
(b) . . . . . . . . . . . .. . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . .. . . . .107
____________________
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
iii
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE Definitions and Other Provisions of General Application
Section 101. Definitions. 1
Section 102. Compliance Certificates and Opinions 10
Section 103. Form of Documents Delivered to Trustee 11
Section 104. Acts of Holders; Record Dates 12
Section 105. Notices, Etc., to Trustee and Company 13
Section 106. Notice to Holders; Waiver 14
Section 107. Conflict with Trust Indenture Act 14
Section 108. Effect of Headings and Table of
Contents 15
Section 109. Successors and Assigns 15
Section 110. Separability Clause 15
Section 111. Benefits of Indenture 15
Section 112. Governing Law 15
Section 113. Legal Holidays 15
ARTICLE TWO Security Forms
Section 201. Forms Generally 16
Section 202. Form of Face of Security 17
Section 203. Form of Reverse of Security 19
Section 204. Additional Provisions Required in
Book-Entry Security 24
Section 205. Form of Trustee's Certificate of Authentication 24
ARTICLE THREE The Securities
Section 301. Amount Unlimited; Issuable in Series 25
Section 302. Denominations 28
Section 303. Execution, Authentication, Delivery
and Dating 28
Section 304. Temporary Securities 31
Section 305. Registration, Registration of Transfer
and Exchange 31
Section 306. Mutilated, Destroyed, Lost and Stolen Securities 33
i
<PAGE>
Section 307. Payment of Interest; Interest Rights
Preserved 34
Section 308. Persons Deemed Owners 36
Section 309. Cancellation 36
Section 310. Computation of Interest 37
Section 311. CUSIP Numbers. 37
ARTICLE FOUR Satisfaction and Discharge
Section 401. Satisfaction and Discharge of
Indenture 37
Section 402. Application of Trust Money 39
ARTICLE FIVE Remedies
Section 501. Events of Default 39
Section 502. Acceleration of Maturity; Rescission
and Annulment 42
Section 503. Collection of Indebtedness and Suits
for Enforcement by Trustee 43
Section 504. Trustee May File Proofs of Claim 44
Section 505. Trustee May Enforce Claims Without
Possession of Securities 44
Section 506. Application of Money Collected 45
Section 507. Limitation on Suits 45
Section 508. Unconditional Right of Holders to
Receive Principal, Premium
and Interest 46
Section 510. Rights and Remedies Cumulative 47
Section 511. Delay or Omission Not Waiver 47
Section 512. Control by Holders 47
Section 513. Waiver of Past Defaults 48
Section 514. Undertaking for Costs 48
Section 515. Waiver of Usury, Stay or
Extension Laws 48
ARTICLE SIX The Trustee
Section 601. Certain Duties and Responsibilities 49
Section 602. Notice of Defaults 49
Section 603. Certain Rights of Trustee 49
Section 604. Not Responsible for Recitals or
Issuance of Securities 51
Section 605. May Hold Securities 51
Section 606. Money Held in Trust 52
Section 607. Compensation and Reimbursement 52
Section 608. Disqualification; Conflicting
Interests 53
Section 609. Corporate Trustee Required;
Eligibility 53
Section 610. Resignation and Removal; Appointment
of Successor 54
Section 611. Acceptance of Appointment by
Successor 56
ii
<PAGE>
Section 612. Merger, Conversion, Consolidation or
Succession to Business 57
Section 613. Preferential Collection of Claims
Against Company 58
Section 614. Appointment of Authenticating Agent 58
ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and
Addresses of Holders 60
Section 702. Preservation of Information;
Communications to Holders 60
Section 703. Reports by Trustee 61
Section 704. Reports by Company 61
ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc., Only on
Certain Terms 62
Section 802. Successor Substituted 63
Section 803. Officers' Certificate and Opinion
of Counsel 63
ARTICLE NINE Supplemental Indentures
Section 901. Supplemental Indentures Without
Consent of Holders 63
Section 902. Supplemental Indentures with Consent
of Holders 65
Section 903. Execution of Supplemental Indentures 66
Section 904. Effect of Supplemental Indentures 67
Section 905. Conformity with Trust Indenture Act 67
Section 906. Reference in Securities to Supplemental
Indentures 67
ARTICLE TEN Covenants
Section 1001. Payment of Principal, Premium and
Interest 67
Section 1002. Maintenance of Office or Agency 67
Section 1003. Money for Securities Payments to Be
Held in Trust 68
Section 1004. Statement by Officers as to Default 70
Section 1005. Existence 70
Section 1006. Maintenance of Properties 70
Section 1007. Payment of Taxes and Other Claims 71
Section 1008. Limitation on Liens 71
Section 1009. Limitation on Sales and Leasebacks 73
Section 1010. Waiver of Certain Covenants 74
iii
<PAGE>
Section 1011. Calculation of Original Issue Discount 74
ARTICLE ELEVEN Redemption of Securities
Section 1101. Applicability of Article 74
Section 1102. Election to Redeem: Notice to Trustee 75
Section 1103. Selection by Trustee of Securities to
Be Redeemed 75
Section 1104. Notice of Redemption 76
Section 1105. Deposit of Redemption Price 77
Section 1106. Securities Payable on Redemption Date 77
Section 1107. Securities Redeemed in Part 77
ARTICLE TWELVE Sinking Funds
Section 1201. Applicability of Article 78
Section 1202. Satisfaction of Sinking Fund Payments
with Securities 78
Section 1203. Redemption of Securities for Sinking
Fund 79
ARTICLE THIRTEEN Defeasance and Covenant Defeasance
Section 1301. Applicability of Article; Company's
Option to Effect Defeasance or
Covenant Defeasance 79
Section 1302. Defeasance and Discharge 80
Section 1303. Covenant Defeasance 80
Section 1304. Conditions to Defeasance or Covenant
Defeasance 81
Section 1305. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions 84
Section 1306. Reinstatement 85
(1) NOTE: This table of contents shall not, for any purpose, be deemed to
be a part of the Indenture.
iv
<PAGE>
INDENTURE, dated as of March 11, 1998, between UNOVA, Inc., a
corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 360
North Crescent Drive, Beverly Hills, California, and, The First National Bank
of Chicago, a national banking association, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its senior
unsubordinated unsecured debentures, notes or other evidences of indebtedness
(herein called the "Securities"), to be issued in one or more series as in
this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof,
as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
<PAGE>
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation; and
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"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 specified 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.
"Attributable Debt," in respect of any Sale and Leaseback
Transaction, means, as of the time of determination, the total obligation
(discounted to present value at the rate per annum equal to the discount rate
which would be applicable to a capital lease obligation with like term in
accordance with generally accepted accounting principles) of the lessee for
rental payments (other than amounts required to be paid on account of
property taxes, maintenance, repairs, insurance, water rates and other items
which do not constitute payments for property rights) during the remaining
portion of the initial term of the lease included in such Sale and Leaseback
Transaction.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
<PAGE>
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Book-Entry Security" means a Security in the form prescribed in
Section 204 evidencing all or part of a series of Securities, issued to the
Depositary for such series or its nominee, and registered in the name of such
Depositary or such nominee.
"Business Day", when used with respect to any Place of Payment,
means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day
on which banking institutions in that Place of Payment are authorized or
obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934,
or, if at any time after the execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, its Chief Financial Officer or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Controller, an
Assistant Controller, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Net Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after
deducting therefrom (i) all current liabilities (excluding any indebtedness
for money borrowed having a maturity of less than 12 months from the date of
the most recent consolidated balance sheet of the Company but which by its
terms is renewable or extendable beyond 12 months from such date at the
option of the
<PAGE>
borrower) and (ii) all Investments in Unrestricted Subsidiaries, all as set
forth on the most recent consolidated balance sheet of the Company and
computed in accordance with generally accepted accounting principles.
"Corporate Trust Office" means the principal office of the Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the date of original execution of this
Indenture is located at One First National Plaza, Suite 0126, Chicago,
Illinois 60670, Attention: Corporate Trust Services Division, except that,
with respect to presentation of the Securities for payment or registration of
transfers or exchanges and the location of the register, such term means the
office or agency of the Trustee at which at any particular time its corporate
agency business shall be conducted, which at the date of original execution
of this Indenture is located at c/o First Chicago Trust Company of New York,
14 Wall Street, 8th Floor-Window 2, New York, New York 10005.
"Corporation" means a corporation, association, company,
joint-stock company or business trust.
"Debt" has the meaning specified in Section 1008.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Book-Entry
Securities, the Person designated as Depositary for such series by the
Company pursuant to Section 301, which Person shall be a clearing agency
registered under the Securities Exchange Act of 1934; and if at any time
there is more than one such Person, "Depositary" as used with respect to the
Securities of any series shall mean the Depositary with respect to the
Securities of such series.
"Event of Default" has the meaning specified in Section 501.
"Funded Debt" means all Debt having a maturity of more than 12
months from the date as of which the determination is made or having a
maturity of 12 months or less but by its terms being renewable or extendable
beyond 12 months from such date at the option of the borrower, but excluding
any such Debt owed to the Company or a Restricted Subsidiary.
<PAGE>
"Holder" means a Person in whose name a Security is registered in
the Security Register.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof, including, for all purposes of this instrument, and any such
supplemental indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this instrument and any such supplemental
indenture, respectively. The term "Indenture" shall also include the forms
and terms of particular series of Securities established as contemplated by
Section 301.
"Indexed Security" means any Security which provides that the
principal amount thereof payable at Stated Maturity may be more or less than
the principal face amount thereof at original issuance.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.
"Interest Payment Date", when used with respect to any Security,
means the Stated Maturity of an installment of interest on such Security.
"Investment," with respect to any Person, means any obligations or
other securities of, capital contribution to, or investment in such Person,
in each case in the amount that would be reflected from time to time on a
balance sheet of the Company prepared in accordance with generally accepted
accounting principles.
"Maturity", when used with respect to any Security, means the date
on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
"Mortgage" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, security
interest, lien, encumbrance, or other security arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
any conditional sale or other title retention agreement having substantially
the same economic effect as any of the foregoing).
<PAGE>
"Officers' Certificate" means a certificate signed by the Chairman
of the Board, the Chief Executive Officer, the President, the Chief Financial
Officer or a Vice President, and by the Treasurer, an Assistant Treasurer,
the Controller, an Assistant Controller, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee.
"Operating Property" means any real property or equipment located
within the United States and owned by, or leased to, the Company or any of
its Subsidiaries that has a net book value (after deduction of accumulated
depreciation) in excess of 1.0% of Consolidated Net Assets.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 502.
"Outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, EXCEPT:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; PROVIDED that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
Section 1104 of this Indenture or provision therefor satisfactory to the
Trustee has been made;
(iii) Securities, except to the extent provided in Sections 1302 and
1303, with respect to which the Company has effected defeasance or covenant
defeasance as provided in Article Thirteen; and
(iv) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such
<PAGE>
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid obligations
of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder, or whether sufficient funds are available for redemption or
for any other purpose, and for the purpose of making the calculations
required by Section 313 of the Trust Indenture Act, (i) the principal amount
of an Original Issue Discount Security that shall be deemed to be Outstanding
shall be the amount of the principal thereof that would be due and payable as
of the date of such determination upon acceleration of the Maturity thereof
pursuant to Section 502, (ii) the principal amount of a Security denominated
in one or more foreign currencies or currency units shall be the U.S. dollar
equivalent, determined in the manner provided as contemplated by Section 301
on the date of original issuance of such Security, of the principal amount
(or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent on the date of original issuance of such Security of the amount
determined as provided in (i) above) of such Security, (iii) the principal
amount of any Indexed Security that may be counted in making such
determination or calculation and that shall be deemed to be Outstanding for
such purpose shall be equal to the principal face amount of such Indexed
Security at original issuance, unless otherwise provided with respect to such
Security pursuant to Section 301, and (iv) Securities owned by the Company or
any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent,
waiver or other action, only Securities which a Responsible Officer of the
Trustee actually knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's
right so to act with respect to such Securities and that the pledgee is not
the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay
the principal of or any premium or interest on any Securities on behalf of
the Company.
<PAGE>
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Sections 301 and 1002.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost
or stolen Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities of any series means the date specified for
that purpose as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means
any vice president, any assistant secretary, any assistant treasurer, any
trust officer or assistant trust officer, or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means any Subsidiary of the Company that
owns any Operating Property.
"Sale and Leaseback Transaction" means any arrangement with any
Person providing for the leasing to the Company or any Subsidiary of any
Operating Property, which Operating Property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person.
<PAGE>
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of such
Security or such installment of principal or interest is due and payable.
"Subsidiary" means any corporation of which at least a majority of
the outstanding stock having by the terms thereof ordinary voting power for
the election of directors of such corporation (irrespective of whether or not
at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by the Company, or
by one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder,
and if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect
to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; PROVIDED,
HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means any Subsidiary other than a
Restricted Subsidiary.
"U.S. Government Obligations" has the meaning specified in Section
1304.
<PAGE>
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
Section 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required
under the Trust Indenture Act. Each such certificate or opinion shall be
given in the form of an Officers' Certificate, if to be given by an officer
of the Company, or an Opinion of Counsel, if to be given by counsel, and
shall comply with the requirements of the Trust Indenture Act and any other
requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(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 each 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, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify
<PAGE>
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. ACTS OF HOLDERS; RECORD DATES.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Holders in
person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
601) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the
<PAGE>
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining
the Holders of Securities of any series entitled to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or
to vote on any action, authorized or permitted to be given or taken by
Holders of Securities of such series. If not set by the Company prior to the
first solicitation of a Holder of Securities of such series made by any
Person in respect of any such action, or, in the case of any such vote, prior
to such vote, the record date for any such action or vote shall be the 30th
day (or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation or vote,
as the case may be. With regard to any record date for action to be taken by
the Holders of one or more series of Securities, only the Holders of
Securities of such series on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
Section 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
<PAGE>
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Services Division, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
Section 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders.
Any notice mailed to a Holder in the manner herein prescribed shall be
conclusively deemed to have been received by such Holder, whether or not such
Holder actually receives such notice. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
<PAGE>
Section 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If
any provision of this Indenture modifies or excludes any provision of the
Trust Indenture Act that may be so modified or excluded, the latter provision
shall be deemed to apply to this Indenture as so modified or to be excluded,
as the case may be.
Section 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date,
Stated Maturity or Maturity of any Security shall not be a Business Day at
any Place of Payment, then (notwithstanding any other provision of this
Indenture or of
<PAGE>
the Securities (other than a provision of the Securities of any series which
specifically states that such provision shall apply in lieu of this Section))
payment of interest or principal (and premium, if any) need not be made at
such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if
made on the Interest Payment Date, the Redemption Date, or at the Stated
Maturity or Maturity.
ARTICLE TWO
Security Forms
Section 201. FORMS GENERALLY.
The Securities of each series shall be in substantially the form
set forth in this Article, or in such other form as shall be established by
or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or Depositary
therefor or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of the Securities.
If the form of Securities of any series is established by, or by action taken
pursuant to, a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and delivery
of such Securities.
The definitive Securities shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange on which the Securities may
be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
<PAGE>
Section 202. FORM OF FACE OF SECURITY.
[INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE
REGULATIONS THEREUNDER.]
UNOVA, INC.
............................................
No. $. . . . . . .
CUSIP No.______________
UNOVA, Inc., a corporation duly organized and existing under the
laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ................................., or
registered assigns, the principal sum of ........................... Dollars
on ........................... [IF THE SECURITY IS TO BEAR INTEREST PRIOR
TO MATURITY, INSERT --, and to pay interest thereon from ........... or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on ............. and ............ in each year,
commencing ........., at the rate of .......... % per annum, until the
principal hereof is paid or made available for payment [IF APPLICABLE,
INSERT -- and (to the extent that the payment of such interest shall be
legally enforceable) at the rate of .... % per annum on any overdue principal
and premium and on any overdue installment of interest]. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall
be the ..... ..... or ........ (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for will forthwith cease to be payable to
the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall
be given to Holders of Securities of this series not less than 10 days prior
to such Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities of this series may be
<PAGE>
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture].
[IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT -- The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at
Stated Maturity and in such case the overdue principal of this Security shall
bear interest at the rate of ....% per annum (to the extent that the payment
of such interest shall be legally enforceable), which shall accrue from the date
of such default in payment to the date payment of such principal has been made
or duly provided for. Interest on any overdue principal shall be payable on
demand. Any such interest on any overdue principal that is not so paid on
demand shall bear interest at the rate of ......% per annum (to the extent that
the payment of such interest shall be legally enforceable), which shall accrue
from the date of such demand for payment to the date payment of such interest
has been made or duly provided for, and such interest shall also be payable
on demand.]
Payment of the principal of (and premium, if any) and
[IF APPLICABLE, INSERT -- any such] interest on this Security will be made at
the office or agency of the Company maintained for that purpose in
............., in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts
[IF APPLICABLE, INSERT -- ; PROVIDED, HOWEVER, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register
or by wire transfer to an account maintained by the Person entitled thereto
as specified in the Security Register, provided that such Person shall have
given the Trustee written wire instructions.]
[IF THE SECURITY IS PAYABLE IN A FOREIGN CURRENCY, INSERT -- the
appropriate provision.]
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
UNOVA, Inc.
By.......................
Title:
Attest:
...........................
Title:
Section 203. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of securities of
the Company (herein called the "Securities"), issued and to be issued in one
or more series under an Indenture, dated as of __________, 1997 (herein
called the "Indenture"), between the Company and The First National Bank of
Chicago, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face
hereof[, limited in aggregate principal amount to $..........].
[IF APPLICABLE, INSERT -- The Securities of this series are subject to
redemption upon not less than 30 nor more than 60 days' notice by mail,
[IF APPLICABLE, INSERT -- (1) on ........... in any year commencing with the
year...... and ending with the year .......... through operation of the
sinking fund for this series at a Redemption Price equal to 100% of the
principal amount, and (2)] at any time [on or after .......... 19..], as a
whole or in part, at the election of the Company, [at Redemption Prices
determined as follows:][at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [on or before ..........
......,___%, and if redeemed] during the 12-month period beginning ........
of the years indicated,
<PAGE>
YEAR PRICE YEAR PRICE
- ---- ----- ---- -----
and thereafter at a Redemption Price equal to ..........% of the principal
amount,] together in the case of any such redemption [IF APPLICABLE, INSERT --
(whether through operation of the sinking fund or otherwise)] with accrued
interest to the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Regular Record Dates or Special Record Dates referred
to on the face hereof, all as provided in the Indenture.]
[IF APPLICABLE INSERT -- The Securities of this series are subject to
redemption upon not less than 30 nor more than 60 days' notice by mail, (1) on
.......... in any year commencing with the year .... and ending with the year
.... through operation of the sinking fund for this series at the Redemption
Prices for redemption through operation of the sinking fund (expressed as
percentages of the principal amount) set forth in the table below, and (2) at
any time [on or after ........], as a whole or in part, at the election of the
Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal amount)
set forth in the table below: If redeemed during the 12-month period beginning
.......... of the years indicated,
Redemption Price Redemption Price for
For Redemption Redemption Otherwise
Through Operation Than Through Operation
YEAR OF THE SINKING FUND OF THE SINKING FUND
- ---- ------------------- ----------------------
<PAGE>
and thereafter at a Redemption Price equal to ........% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Regular Record Dates or Special Record Dates referred to on the face hereof, all
as provided in the Indenture.]
Notwithstanding the foregoing, the Company may not, prior to
.........., redeem any Securities of this series as contemplated by [Clause (2)
of] the preceding paragraph as a part of, or in anticipation of, any refunding
operation by the application, directly or indirectly, of moneys borrowed having
an interest cost to the Company (calculated in accordance with generally
accepted financial practice) of less than .......% per annum.]
[The sinking fund for this series provides for the
redemption on ........ in each year beginning with the year ......... and ending
with the year .......... of [not less than $............ ("mandatory sinking
fund") and not more than] $......... aggregate principal amount of Securities of
this series. Securities of this series acquired or redeemed by the Company
otherwise than through [mandatory] sinking fund payments may be credited against
subsequent [mandatory] sinking fund payments otherwise required to be made [in
the inverse order in which they become due].]
[IF THE SECURITY IS SUBJECT TO REDEMPTION, INSERT -- In the event of
redemption of this Security in part only, a new Security or Securities of this
series and of like tenor for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.]
[IF APPLICABLE, INSERT -- The Indenture contains provisions for
defeasance at any time of [the entire indebtedness of this Security] [or]
[certain restrictive covenants and Events of Default with respect to this
Security] [, in each case] upon compliance with certain conditions set forth in
the Indenture.]
[IF THE SECURITY IS NOT AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT --
If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.]
<PAGE>
[IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT -- If
an Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to -INSERT FORMULA FOR DETERMINING THE
AMOUNT. Upon payment (i) of the amount of principal so declared due and
payable and (ii) of interest on any overdue principal and overdue interest (in
each case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and interest, if any, on the Securities of this series shall
terminate.]
[IF THE SECURITY IS AN INDEXED SECURITY, INSERT -the appropriate
provision.]
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the
<PAGE>
principal of and any premium and interest on this Security are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $....... and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
This Security shall be governed by and construed in accordance with
the laws of the State of New York.
Section 204. ADDITIONAL PROVISIONS REQUIRED IN BOOK-ENTRY SECURITY.
Any Book-Entry Security issued hereunder shall, in
addition to the provisions contained in Sections 202 and 203, bear a legend
in substantially the following form:
"This Security is a Book-Entry Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee of a Depositary. This Security is exchangeable for Securities
registered in the name of a person other than the Depositary or its nominee only
in the limited circumstances described
<PAGE>
in the Indenture and may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary."
Section 205. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: _____________ THE FIRST NATIONAL BANK OF CHICAGO
AS TRUSTEE
By...........................
AUTHORIZED SIGNATORY
ARTICLE THREE
The Securities
Section 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued from time to time in one or more series.
There shall be established in or pursuant to a Board Resolution and, subject to
Section 303, set forth, or determined in the manner provided, in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon
<PAGE>
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906 or 1107
and except for any Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(4) the date or dates on which the principal of and premium, if any,
on the Securities of the series is payable or the method of determination
thereof;
(5) the rate or rates at which the Securities of the series shall
bear interest, if any, or the method of calculating such rate or rates of
interest, the date or dates from which such interest shall accrue or the
method by which such date or dates shall be determined, the Interest
Payment Dates on which any such interest shall be payable and the Regular
Record Date for any interest payable on any Interest Payment Date;
(6) the place or places where the principal of and any premium and
interest on Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which,
the currency or currencies (including currency units) in which and the
other terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the other terms and
conditions upon which Securities of the series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(10) the currency, currencies or currency units in which payment of
the principal of and any premium and
<PAGE>
interest on any Securities of the series shall be payable if other than
the currency of the United States of America and the manner of determining
the equivalent thereof in the currency of the United States of America for
purposes of the definition of "Outstanding" in Section 101;
(11) if the amount of payments of principal of or any premium or
interest on any Securities of the series may be determined with reference
to an index, formula or other method, the index, formula or other method by
which such amounts shall be determined;
(12) if the principal of or any premium or interest on any Securities
of the series is to be payable, at the election of the Company or a Holder
thereof, in one or more currencies or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on Securities of such series as to which such election
is made shall be payable, and the periods within which and the other terms
and conditions upon which such election is to be made;
(13) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502
or the method by which such portion shall be determined;
(14) the application, if any, of Section 1302 or 1303 to the
Securities of any series;
(15) whether the Securities of the series shall be issued in whole or
in part in the form of one or more Book-Entry Securities and, in such case,
the Depositary with respect to such Book-Entry Security or Securities and
the circumstances under which any Book-Entry Security may be registered for
transfer or exchange, or authenticated and delivered, in the name of a
Person other than such Depositary or its nominee, if other than as set
forth in Section 305;
(16) any additional, modified or different covenants applicable to
one or more particular series of Securities; and
(17) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 901(5)).
<PAGE>
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 303) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto. All Securities
of any one series need not be issued at the same time and, unless otherwise
provided, a series may be reopened, without the consent of the Holders, for
issuances of additional Securities of such series.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth, or providing the manner for determining, the terms of
the series.
Section 302. DENOMINATIONS.
The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 301. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
Section 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President, its Chief
Financial Officer or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may
<PAGE>
deliver Securities of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver or make available for delivery such
Securities; PROVIDED, HOWEVER, that, in the case of Securities of a series
that are not to be originally issued at one time, the Trustee shall
authenticate and deliver or make available for delivery such Securities from
time to time in accordance with such other procedures (including, without
limitation, the receipt by the Trustee of oral or electronic instructions
from the Company or its duly authorized agents, promptly confirmed in
writing) acceptable to the Trustee as may be specified by or pursuant to a
Company Order delivered to the Trustee prior to the time of the first
authentication of Securities of such series. If the form or terms of the
Securities of the series have been established in or pursuant to one or more
Board Resolutions as permitted by Sections 201 and 301, in authenticating
such Securities, and accepting the additional responsibilities under this
Indenture in relation to such Securities, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such form
has been established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 301, that such terms
have been established in conformity with the provisions of this Indenture;
and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under
<PAGE>
the Securities and this Indenture or otherwise in a manner which is not
reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the time
of authentication of each Security of such series if such documents, with
appropriate modifications to cover such future issuances, are delivered at or
prior to the authentication upon original issuance of the first Security of such
series to be issued.
If the Company shall establish pursuant to Section 301 that the
Securities of a series are to be issued in whole or in part in the form of one
or more Book-Entry Securities, then the Company shall execute and the Trustee
shall, in accordance with this Section and the Company Order with respect to
such series, authenticate and deliver or make available for delivery one or more
Securities in such form that (i) shall represent and shall be denominated in an
amount equal to the aggregate principal amount of the Outstanding Securities of
such series to be represented by such Book-Entry Security or Securities, (ii)
shall be registered in the name of the Depositary for such Book-Entry Security
or Securities or the nominee of such Depositary, (iii) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instruction and (iv)
shall bear the legend set forth in Section 204.
Unless otherwise established pursuant to Section 301, each Depositary
designated pursuant to Section 301 for a Book-Entry Security must, at the time
of its designation and at all times while it serves as Depositary, be a clearing
agency registered under the Securities Exchange Act of 1934 and any other
applicable statute or regulation. The Trustee shall have no responsibility to
determine if the Depositary is so registered. Each Depositary shall enter into
an agreement with the Trustee governing the respective duties and rights of such
Depositary and the Trustee with regard to Book-Entry Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
<PAGE>
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
Section 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver or make available for delivery, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and deliver or make available for delivery in
exchange therefor one or more definitive Securities of the same series, of any
authorized denominations and of a like aggregate principal amount and tenor.
Until so exchanged the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series and tenor.
Section 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein
<PAGE>
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of Securities.
The Trustee is hereby appointed "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver or make
available for delivery, in the name of the designated transferee or
transferees, one or more new Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Securities of any series may be
exchanged for other Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor, upon
surrender of the Securities to be exchanged at such office or agency.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver or make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the Security
Registrar or the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar and the Trustee duly executed, by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities,
other than exchanges pursuant to Section 304, 906 or 1107 not involving any
transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of any
<PAGE>
series during a period beginning at the opening of business 15 days before
the day of the mailing of a notice of redemption of Securities of that series
selected for redemption under Section 1103 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
Notwithstanding the foregoing, any Book-Entry Security shall be
exchangeable pursuant to this Section 305 for Securities registered in the
names of Persons other than the Depositary for such Security or its nominee
only if (i) such Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Book-Entry Security or if at any
time such Depositary ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended, (ii) the Company executes and
delivers to the Trustee a Company Order that such Book-Entry Security shall
be so exchangeable or (iii) there shall have occurred and be continuing an
Event of Default with respect to the Securities. Any Book-Entry Security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for Securities registered in such names as such Depositary shall direct.
Notwithstanding any other provision in this Indenture, unless and
until it is exchanged in whole or in part for Securities that are not in the
form of a Book-Entry Security, a Book-Entry Security may not be transferred
or exchanged except as a whole by the Depositary with respect to such
Book-Entry Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
Section 306. MUTILITATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver or make
available for delivery in exchange therefor a new Security of the same series
and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to
save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the
<PAGE>
Company shall execute and the Trustee shall authenticate and deliver, in lieu
of any such destroyed, lost or stolen Security, a new Security of the same
series and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Securities of that series duly
issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Except as otherwise provided as contemplated by Section 301 with
respect to any series of Securities, interest on any Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest at the office or agency maintained for such
purpose pursuant to Section 1002; PROVIDED, HOWEVER, that at the option of
the Company, interest on Securities of any series that bear interest may be
paid (i) by check mailed to the address of the Person entitled thereto as it
shall appear on the Security Register or (ii) by wire transfer to an account
maintained by the Person entitled thereto as specified in the Security
Register.
<PAGE>
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") shall forthwith cease to be payable to
the Holder on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder of Securities of
such series at his address as it appears in the Security Register, not less
than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other
<PAGE>
lawful manner not inconsistent with the requirements of any securities
exchange on which such Securities may be listed, and upon such notice as
may be required by such exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this Clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name such Security is registered as the
owner of such Security for the purpose of receiving payment of principal of
and any premium and (subject to Section 307) any interest on such Security
and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
<PAGE>
Section 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the
Trustee. All Securities so delivered and any Securities surrendered directly
to the Trustee for any such purpose shall be promptly cancelled by the
Trustee and such cancellation shall be noted conspicuously on each such
Security. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver
to the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the
Company has not issued and sold, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities cancelled as provided in this
Section, except as expressly permitted by this Indenture. Unless the Company
directs otherwise by a Company Order, all cancelled Securities held by the
Trustee may be destroyed, but the Trustee shall not be obligated to so
destroy such Securities, and, if any such cancelled Security is destroyed,
the Trustee shall furnish to the Company a certificate with respect to such
destruction.
Section 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
Section 311. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; PROVIDED that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of
a redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such CUSIP numbers. The Company
will promptly notify the Trustee of any change in the CUSIP numbers.
<PAGE>
ARTICLE FOUR
Satisfaction and Discharge
Section 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further
effect with respect to Securities of any series (except as to any surviving
rights of registration of transfer, exchange or replacement of such
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to such Securities, when
(1) either
(A) all such Securities theretofore authenticated and delivered
(other than (i) such Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and (ii)
such Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid
to the Company or discharged from such trust, as provided in Section 1003)
have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of
the Company, and the Company, in the case of (B)(i), (ii) or (iii)
above, has deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount in the currency or currencies or
currency unit or units in which such Securities are payable sufficient to
pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for principal and
any premium and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
<PAGE>
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture with respect to such Securities have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 607, the
obligations of the Trustee to any Authenticating Agent under Section 614 and,
if money shall have been deposited with the Trustee pursuant to subclause (B)
of Clause (1) of this Section, the obligations of the Trustee under Section
402, Article Six and the last paragraph of Section 1003 shall survive.
Section 402. APPLICATION OF TRUST MONEY.
Subject to provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in
trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal and any
premium and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
Section 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect to Securities
of any series, means any one of the following events (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
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):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
<PAGE>
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture with respect to Securities of
that series (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically dealt
with), and continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
or
(5) if an event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any indebtedness for money borrowed of the Company or
any Subsidiary, whether such indebtedness now exists or shall hereafter be
created, if (A) such default either (1) results from the failure to pay the
principal of any such indebtedness at its stated maturity or (2) relates to
an obligation other than the obligation to pay the principal of such
indebtedness at its stated maturity and results in such indebtedness
becoming or being declared due and payable prior to the date on which it
would otherwise become due and payable, (B) the principal amount of such
indebtedness, together with the principal amount of any other such
indebtedness in default for failure to pay principal at stated maturity or
the maturity of which has been so accelerated, aggregates $50,000,000 or
more at any one time outstanding and (C) such indebtedness is not
discharged, or such acceleration is not rescinded or annulled within a
period of 30 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of Outstanding Securities a
written notice specifying such event of default and requiring the Company
to cause such acceleration to be rescinded or annulled or to cause such
indebtedness to be discharged
<PAGE>
and stating that such notice is a "Notice of Default" hereunder; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in
furtherance of any such action; or
(8) any other Event of Default provided with respect to Securities of
that series.
<PAGE>
Section 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default described in
clause 6 or 7 of Section 501) with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or,
if any of the Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount of
such Securities as may be specified in the terms thereof) of all of the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or, in the case of Original Issue
Discount Securities or Indexed Securities, such specified amount) shall
become immediately due and payable.
At any time after such a declaration of acceleration with respect
to Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities
of that series which have become due otherwise than by such declaration of
acceleration and any interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
<PAGE>
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
If an Event of Default described in clause 6 or 7 of Section 501
occurs, the Outstanding Securities shall IPSO FACTO become immediately due
and payable without need of any declaration or other act on the part of the
Trustee or any Holder.
Section 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any
overdue principal and premium and on any overdue interest, at the rate or
rates prescribed therefor in such Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or
<PAGE>
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
Section 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by intervention in such proceeding
or otherwise, to take any and all actions authorized under the Trust
Indenture Act in order to have claims of the Holders and the Trustee allowed
in any such proceeding. In particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or deliverable on
any such claims and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee
any amount due it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts
due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the Holders, vote for
the election of a trustee in bankruptcy or similar official and may be a
member of a creditors' or other similar committee.
Section 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
Section 506. APPLICATION OF MONEY COLLECTED.
<PAGE>
Any money collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal or any
premium or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607;
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal and any premium and interest,
respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
Section 507. LIMITATION ON SUITS.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
<PAGE>
(5) no direction inconsistent with such written request has been
given to the Trustee before or during such 60-day period by the Holders of
a majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all Holders.
Section 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder
of any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section
307) any interest on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
Section 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
Section 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306 and as otherwise provided in Section 507, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition
to every
<PAGE>
other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent assertion
or employment of any other appropriate right or remedy.
Section 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any
Securities to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
Section 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, with respect to
the Securities of such series, PROVIDED that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on
any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
<PAGE>
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 514. 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, suffered
or omitted by it as Trustee, a court may require any party litigant in such
suit to file an undertaking to pay the costs of such suit, and may assess
costs, including counsel fees and expenses, against any such party litigant,
in the manner and to the extent provided in the Trust Indenture Act; PROVIDED
that neither this Section nor the Trust Indenture Act shall be deemed to
authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company, the Trustee or the Holders
of 10% aggregate principal amount of the Outstanding Securities of any
series.
Section 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any usury, 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
Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided
by the Trust Indenture Act. Notwithstanding the foregoing, no provision of
this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate
<PAGE>
indemnity against such risk or liability is not reasonably assured
to it. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
Section 602. NOTICE OF DEFAULTS.
If a default occurs hereunder with respect to Securities of any
series, the Trustee shall give the Holders of Securities of such series
notice of such default as and to the extent provided by the Trust Indenture
Act; PROVIDED, HOWEVER, that in the case of any default of the character
specified in Section 501(4) with respect to Securities of such series, no
such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to Securities of such series.
Section 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
<PAGE>
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) 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 reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered,
or omitted to be taken by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers conferred upon
it by this Indenture; and
(i) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact
such a default is received by the Trustee at the Corporate Trust Office of
the Trustee, and such notice references the Securities and this Indenture.
<PAGE>
Section 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be accountable for the
use or application by the Company of Securities or the proceeds thereof.
Section 605. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Securities and,
subject to Sections 608 and 613, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, Authenticating Agent,
Paying Agent, Security Registrar or such other agent.
Subject to the provisions of Section 608, the Trustee may become
and act as trustee under other indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding in the same manner as if it were not Trustee.
Section 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed in writing with the Company.
Section 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for
<PAGE>
all reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and disbursements
of its agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee, or any predecessor Trustee,
for, and to hold it harmless against, any and all loss, liability, damage,
claim or expense incurred without negligence or willful misconduct on its
part, arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder and the
costs and expenses of enforcing this right of indemnification.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(6) or Section 501(7), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture and the resignation or removal of the Trustee.
Section 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
<PAGE>
Section 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such
and has a combined capital and surplus of at least $50,000,000 and an office
in the Borough of Manhattan, The City of New York at which at any particular
time the Trustee's corporate trust business may be administered. If such
Person publishes reports of condition at least annually, pursuant to law or
to the requirements of any Federal or state supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published. If at any
time the Trustee shall cease to be eligible in accordance with the provisions
of this Section, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article.
Section 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition,
at the expense of the Company, any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series, delivered to the Trustee
and to the Company. If the instrument of acceptance by a successor Trustee
required by Section 611 shall not have been delivered to the Trustee within
30 days after the giving of such notice of removal, the Trustee being removed
may petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
<PAGE>
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution
may remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) subject to Section 514, any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities
and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
with respect to the Securities of one or more series, the Company, by or
pursuant to a Board Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those series (it being
understood that any such successor Trustee may be appointed with respect to
the Securities of one or more or all of such series and that at any time
there shall be only one Trustee with respect to the Securities of any
particular series) and shall comply with the applicable requirements of
Section 611. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment
in accordance with the applicable requirements of Section 611, become the
successor Trustee with respect to
<PAGE>
the Securities of such series and to that extent supersede the successor
Trustee appointed by the Company. If no successor Trustee with respect to
the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611,
any Holder who has been a bona fide Holder of a Security of such series for
at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of
a successor Trustee with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any
series to all Holders of Securities of such series in the manner provided in
Section 106. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its
Corporate Trust Office.
Section 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duites of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary
or desirable to transfer and confirm to, and to vest in, each successor
Trustee all the rights, powers, trusts and duties of the retiring Trustee
with respect to the Securities of that or those
<PAGE>
series to which the appointment of such successor Trustee relates, (2) if the
retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee,
and (3) shall add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee, it being understood that nothing
herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of
a trust or trusts hereunder separate and apart from any trust or trusts
hereunder administered by any other such Trustee; and upon the execution and
delivery of such supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent provided therein and
each such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee
relates; provided, however, that to the extent that such property and money
is not held by the Trustee in trust for the benefit of the Holders of
particular Securities, such retiring Trustee shall transfer and deliver to
such successor Trustee such property and money upon payment of its charges
hereunder.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
<PAGE>
Section 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act
on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
Section 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
of claims against the Company (or any such other obligor).
<PAGE>
Section 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with
respect to one or more series of Securities which shall be authorized to act
on behalf of the Trustee to authenticate Securities of such series issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall
be valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating
Agent and a certificate of authentication executed on behalf of the Trustee
by an Authenticating Agent. Each Authenticating Agent shall be acceptable to
the Company and shall at all times be a corporation organized and doing
business under the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or state authority. If such
Authenticating Agent publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, such Authenticating Agent
shall resign immediately in the manner and with the effect specified in this
Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to all or substantially
all the corporate agency or corporate trust business of an Authenticating
Agent, shall continue to be an Authenticating Agent, provided such
corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the
Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency
<PAGE>
of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to
all Holders of Securities of the series with respect to which such
Authenticating Agent will serve, as their names and addresses appear in the
Security Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named
as an Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated:
--------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
By
---------------------------------
AS AUTHENTICATING AGENT
By
----------------------------------
AUTHORIZED OFFICER
<PAGE>
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not later than January 15 and July 15 in each
year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of the preceding January 1 or July 1,
as the case may be, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list in
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities,
and the corresponding rights and privileges of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of then shall be held accountable by reason
of any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
<PAGE>
Section 703. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant
to the Trust Indenture Act at the times and in the manner provided pursuant
thereto. If required by Section 313(a) of the Trust Indenture Act, the
Trustee shall, within sixty days after each May 15 following the date of the
first issuance deliver to Holders a brief report, dated as of such May 15,
which complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange
upon which any Securities are listed, with the Commission and with the
Company. The Company promptly will notify the Trustee when any Securities
are listed on any stock exchange.
Section 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; PROVIDED that any
such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge with or into any
other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless:
(1) either the Company shall be the continuing corporation, or the
successor Person or purchaser shall be a corporation, partnership or trust
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due
<PAGE>
and punctual payment of the principal of and any premium and interest on
all the Securities and the performance or observance of every covenant of
this Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing;
(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, the Person formed by or resulting or
surviving therefrom or which shall have received the properties and assets
of the Company substantially as an entirety would have outstanding any Debt
secured by any Mortgage on any Operating Property, or on any shares of
stock or Debt of any Restricted Subsidiary, which Debt could not at such
time be incurred by such Person under Section 1008 without equally and
ratably securing the Securities, the Company, or such Person, prior to such
consolidation, merger, conveyance, transfer or lease, will secure the
Outstanding Securities, equally and ratably with (or prior to) the Debt
secured by such Mortgage; and
(4) if a supplemental indenture is to be executed in connection with
such consolidation, merger, transfer or lease, the Company shall have
delivered to the Trustee (A) an Officers' Certificate and (B) an Opinion of
Counsel attesting to compliance with these provisions.
Section 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
with or into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.
<PAGE>
Section 803. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL.
The Trustee, subject to the provisions of Sections 601 and 603,
shall receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, conveyance, transfer
or lease, and any such assumption, complies with the provisions of this
Article before the Trustee shall execute any supplemental indenture required
pursuant to this Article.
ARTICLE NINE
Supplemental Indentures
Section 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory
to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default with respect to all or
any series of Securities; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form or in the form of Book-Entry
Securities; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more
<PAGE>
series of Securities, PROVIDED that any such addition, change or
elimination (i) shall neither (A) apply to any Security of any series
created prior to the execution of such supplemental indenture and
entitled to the benefit of such provision nor (B) modify the rights of
the Holder of any such Security with respect to such provision or (ii)
shall become effective only when there is no such Security Outstanding;
or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series as permitted
by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611(b); or
(9) if allowed, without penalty under applicable laws and
regulations, to permit payment in the United States (including any of the
States thereof and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction of principal,
premium, if any, or interest, if any, on securities in bearer form or
coupons, if any; or
(10) to cure any ambiguity, to correct or supplement any provision
herein which is mistaken or may be inconsistent with any other provision
herein or to make any other provisions with respect to matters or questions
arising under this Indenture, PROVIDED that such action pursuant to this
clause (10), other than with respect to a mistaken provision, shall not
adversely affect the interests of the Holders of Securities of any series
in any material respect.
<PAGE>
Section 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series adversely
affected by such supplemental indenture, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such
series under this Indenture; PROVIDED, HOWEVER, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502, or change any Place of Payment where, or the coin or currency in
which, any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or adversely affect the right of the Holder
of any Security to require the Company to repurchase such Securities, or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1010, except to increase any percentage set forth in such Sections
or to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each Outstanding
Security affected thereby; PROVIDED, HOWEVER, that this clause shall not
be deemed to require the consent of any Holder with respect to changes in
the references to "the Trustee" and concomitant changes in this Section and
Section 1010,
<PAGE>
or the deletion of this proviso, in accordance with the requirements of
Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
Section 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
<PAGE>
Section 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and
shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities of any series so modified as to
conform, in the opinion of the Trustee and the Company, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such series.
ARTICLE TEN
Covenants
Section 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any
premium and interest on the Securities of that series in accordance with the
terms of such Securities and this Indenture.
Section 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in each Place of Payment for any series
of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be
presented or surrendered for any or all such purposes and may from time to
time rescind
<PAGE>
such designations; PROVIDED, HOWEVER, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an
office or agency in each Place of Payment for Securities of any series for
such purposes. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any
such other office or agency.
Section 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of
the principal of or any premium or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and any premium and interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or
any premium or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay such amount, such sum to be held as
provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will (i) comply
with the provisions of the Trust Indenture Act applicable to it as a Paying
Agent and (ii) during the continuance of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any
payment in respect of the Securities of that series, and upon the written
request of the Trustee, forthwith pay to the Trustee all sums held in trust
by such Paying Agent for payment in respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent;
<PAGE>
and, upon such payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of or any
premium or interest on any Security of any series and remaining unclaimed for
two years after such principal, premium or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee
or such Paying Agent, before being required to make any such repayment, may
at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not
be less than 30 days from the date of such publication, any unclaimed balance
of such money then remaining will be repaid to the Company.
Section 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, one of the signers of which shall be the principal
executive officer, principal financial officer or principal accounting
officer of the Company, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance
of any of the terms, provisions and conditions of this Indenture (without
regard to any period of grace or requirement of notice provided hereunder)
and, if the Company shall be in default, specifying all such defaults and the
nature and status thereof of which they may have knowledge.
<PAGE>
Section 1005. EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; PROVIDED, HOWEVER,
that the Company shall not be required to preserve any such right or
franchise if the Board of Director shall determine that the presentation
thereof is no longer desirable in the conduct of the business of the Company
and that the loss thereof is not disadvantageous in any material respect to
the Holders.
Section 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all material properties used or useful in
the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary or appropriate in connection with
its business; PROVIDED, HOWEVER, that nothing in this Section shall prevent
the Company from discontinuing the operation or maintenance of, or selling,
abandoning or otherwise disposing of, any of such properties if such
discontinuance or disposal is, in the judgment of the Company, desirable in
the conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
Section 1007. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all material taxes,
assessments and governmental charges levied or imposed upon the Company or
any Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (2) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of the Company
or any Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required
to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
<PAGE>
Section 1008. LIMITATION ON LIENS.
Unless otherwise indicated with respect to any series of
Securities, the Company agrees as to each series of Securities, that it will
not, and will not permit any Restricted Subsidiary to, create, incur, issue,
assume or guarantee any notes, bonds, debentures or other similar evidences
of indebtedness for money borrowed ("Debt"), secured by a Mortgage upon any
Operating Property, or upon shares of capital stock or Debt issued by any
Restricted Subsidiary and owned by the Company or any Restricted Subsidiary,
whether owned at the date of this Indenture or hereafter acquired, without
effectively providing concurrently that the Outstanding Securities (together
with, if the Company shall so determine, any other Debt of the Company or
such Restricted Subsidiary then existing or thereafter created which is not
subordinate to the Securities) shall be secured equally and ratably with or,
at the option of the Company, prior to such Debt so long as such Debt shall
be so secured, unless, at the time of such creation, incurrence, issuance,
assumption or guarantee, after giving effect thereto and to the retirement of
any Debt which is concurrently being retired, the aggregate amount of all
such Debt secured by Mortgages which would otherwise be subject to such
restrictions (other than any Debt secured by Mortgages permitted in Clauses
(1) through (7) of this Section 1008) plus all Attributable Debt of the
Company and its Restricted Subsidiaries in respect of Sale and Leaseback
Transactions with respect to Operating Properties (with the exception of such
Sale and Leaseback Transactions permitted under Clauses (1) through (4) of
Section 1009) would not exceed the greater of (i) 10% of Consolidated Net
Assets and (ii) $150,000,000; PROVIDED, HOWEVER, that this Section shall not
apply to, and there shall be excluded from Debt in any computation under this
Section, Debt secured by:
(1) Mortgages on property existing at the time of the acquisition
thereof;
(2) Mortgages on property of a corporation existing at the time such
corporation is merged into or consolidated with the Company or a Restricted
Subsidiary or at the time of a sale, lease or other disposition of the
properties of such corporation (or a division thereof) as an entirety or
substantially as an entirety to the Company or a Restricted Subsidiary,
PROVIDED that any such Mortgage does not extend to any property owned by
the Company or any Restricted Subsidiary immediately prior to such merger,
consolidation, sale, lease or disposition;
<PAGE>
(3) Mortgages on property of a corporation existing at the time such
corporation becomes a Restricted Subsidiary;
(4) Mortgages in favor of the Company or a Restricted Subsidiary;
(5) Mortgages to secure all or part of the cost of acquisition,
construction, development or improvement of the underlying property, or to
secure Debt incurred to provide funds for any such purpose, PROVIDED that
the commitment of the creditor to extend the credit secured by any such
Mortgage shall have been obtained not later than 365 days after the later
of (A) the completion of the acquisition, construction, development or
improvement of such property or (B) the placing in operation of such
property;
(6) Mortgages in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political
subdivision thereof, to secure partial, progress, advance or other
payments; and
(7) Mortgages existing on the date of this Indenture or any
extension, renewal, replacement or refunding of any Debt secured by a
Mortgage existing on the date of this Indenture or referred to in clauses
(1) to (3) or (5) of this Section 1008, PROVIDED that the principal amount
of Debt secured thereby and not otherwise authorized by clauses (1) to (3)
or (5) shall not exceed the principal amount of Debt, plus any premium or
fee payable in connection with any such extension, renewal, replacement or
refunding, so secured at the time of such extension, renewal, replacement
or refunding.
Section 1009. LIMITATION ON SALES AND LEASEBACKS.
Unless otherwise indicated with respect to any series of Securities,
the Company agrees as to each series of Securities, that it will not, and it
will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction with respect to any Operating Property unless:
(1) the Sale and Leaseback Transaction is solely with the Company or
another Restricted Subsidiary;
(2) the lease is for a period not in excess of twenty-four months,
including renewals;
<PAGE>
(3) the Company or such Restricted Subsidiary would (at the time of
entering into such arrangement) be entitled as described in clauses (1)
through (7) of Section 1008, without equally and ratably securing the
Securities of each series then outstanding, to create, incur, issue, assume
or guarantee Debt secured by a Mortgage on such Operating Property in the
amount of the Attributable Debt arising from such Sale and Leaseback
Transaction;
(4) the Company or such Restricted Subsidiary within 365 days after
the sale of such Operating Property in connection with such Sale and
Leaseback Transaction is completed, applies an amount equal to the greater
of (i) the net proceeds of the sale of such Operating Property or (ii) the
fair market value of such Operating Property to (A) the retirement of
Securities, other Funded Debt of the Company ranking on a parity with the
Securities or Funded Debt of a Restricted Subsidiary or (B) the purchase of
Operating Property; or
(5) the Attributable Debt of the Company and its Restricted
Subsidiaries in respect of such Sale and Leaseback Transaction and all
other Sale and Leaseback Transactions entered into after the date of this
Indenture (other than any such Sale and Leaseback Transactions as would be
permitted as described in clauses (1) through (4) of this Section 1009),
plus the aggregate principal amount of Debt secured by Mortgages on
Operating Properties then outstanding (not including any such Debt secured
by Mortgages described in clauses (1) through (7) of Section 1008) which do
not equally and ratably secure such Outstanding Securities (or secure such
Outstanding Securities on a basis that is prior to other Debt secured
thereby), would not exceed the greater of (i) 10% of Consolidated Net
Assets and (ii) $150,000,000.
Section 1010. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 1005 to 1009, inclusive, with
respect to the Securities of any series if before or after the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
term, provision or condition, but no such waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such
<PAGE>
waiver shall become effective, the obligations of the Company and the duties
of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
Section 1011. CALCULATION OF ORIGINAL ISSUE DISCOUNT.
If the Trustee is requested or required to send Form 1099 (or any
successor form) to Holders of Original Issue Discount Securities, the Company
shall file with the Trustee promptly at the end of each calendar year (i) a
written notice specifying the amount of original issue discount (including daily
rates and accrual periods) accrued on Outstanding Securities as of the end of
such year and (ii) such other specific information relating to such original
issue discount as may then be relevant under the Internal Revenue Code of 1986,
as amended from time to time.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. APPLICABILITY OF ARTICLE.
Securities of any series which are redeemable in whole or in part
before their Stated Maturity shall be redeemable in accordance with their terms
and (except as otherwise specified as contemplated by Section 301 for Securities
of any series) in accordance with this Article.
Section 1102. ELECTION TO REDEEM: NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution OR OFFICERS' CERTIFICATE. In
case of any redemption at the election of the Company of the Securities of any
series, the Company shall, at least 60 days prior to the Redemption Date fixed
by the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
<PAGE>
Section 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series are to be redeemed
(unless all of the Securities of such series and of a specified tenor are to be
redeemed), the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption a portion of the principal amount of any Security of
such series, provided that the unredeemed portion of the principal amount of any
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security. If less than all of the
Securities of such series and of a specified tenor are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series and specified tenor not previously called for redemption in
accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
<PAGE>
Section 1104. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including CUSIP numbers) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security, or portion thereof, to be redeemed
and, if applicable, that interest thereon will cease to accrue on and after
said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
<PAGE>
Section 1105. DEPOSIT OF REDEMPTION PRICE.
Prior to 12:00 noon New York City time on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in the currency or currencies in
which the Securities of such series are payable (except as otherwise specified
pursuant to Section 301 for the Securities of such series) sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities or portions thereof which
are to be redeemed on that date.
Section 1106. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; PROVIDED, HOWEVER, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
Section 1107. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver or make available for delivery to the Holder of
such Security without service charge, a new Security or
<PAGE>
Securities of the same series and of like tenor, of any authorized
denomination as requested by such Holder, in aggregate principal amount equal
to and in exchange for the unredeemed portion of the principal of the
Security so surrendered.
ARTICLE TWELVE
Sinking Funds
Section 1201. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 1202. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
Section 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; PROVIDED that such Securities have not been previously so credited.
Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
Section 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.
<PAGE>
Not less than 45 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202 and will also deliver to the Trustee any Securities to
be so delivered. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. APPLICABILITY OF ARTICLE; COMPANY'S OPTION TO EFFECT DEFEASANCE
OR COVENANT DEFEASANCE.
If pursuant to Section 301 provision is made for either or both of (a)
defeasance of the Securities of a series under Section 1302 or (b) covenant
defeasance of the Securities of a series under Section 1303, then the provisions
of such Section or Sections, as the case may be, together with the other
provisions of this Article Thirteen, with such modifications thereto as may be
specified pursuant to Section 301 with respect to any Securities, shall be
applicable to the Securities of such series, and the Company may at its option
by Board Resolution, at any time, with respect to the Securities of such series,
elect to have either Section 1302 (if applicable) or Section 1303 (if
applicable) applied to the Outstanding Securities of such series upon compliance
with the conditions set forth below in this Article Thirteen.
<PAGE>
Section 1302. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise of its option to have this Section applied
to any series of Securities the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities of such series
on and after the date the conditions precedent set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities of such series which shall thereafter
be deemed to be "Outstanding" only for the purposes of the Sections of this
Indenture referred to in clauses (A) and (B) of this Section, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Securities of such series to
receive, solely from the trust fund described in Section 1304 as more fully set
forth in such Section, payments of the principal of (and premium, if any) and
interest on such Securities when such payments are due, (B) the Company's
obligations with respect to such Securities under Sections 305, 306, 1002 and
1003 and such obligations as shall be ancillary thereto, (C) the rights, powers,
trusts, duties, immunities and other provisions in respect of the Trustee
hereunder and (D) this Article Thirteen. Subject to compliance with this
Article Thirteen, the Company may exercise its option under this Section 1302
notwithstanding the prior exercise of its option under Section 1303 with respect
to the Securities of such series. Following a defeasance, payment of such
Securities may not be accelerated because of an Event of Default.
<PAGE>
Section 1303. COVENANT DEFEASANCE.
Upon the Company's exercise of its option (if any) to have this
Section applied to any series of Securities, the Company shall be released from
its obligations under Sections 801, 1008 and 1009 (and any covenant made
applicable to such Securities pursuant to Section 301 and the occurrence of an
event specified in Section 501(4) (with respect to any of Sections 801, 1008 or
1009) (and any other Event of Default applicable to such Securities that are
determined pursuant to Section 301 to be subject to this provision) shall not be
deemed to be an Event of Default with respect to the Outstanding Securities of
such series on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), and such Securities shall thereafter be
deemed not to be "Outstanding" for the purposes of any direction, waiver,
consent or declaration or Act of Holders (and the consequences of any thereof)
in connection with Sections 801, 1008 or 1009 (and any other covenant made
applicable to such Security pursuant to Section 301), but shall continue to be
deemed "Outstanding" for all other purposes hereunder. For this purpose, such
covenant defeasance means that, with respect to the Outstanding Securities of
such series, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Section or
such other covenant whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or such other covenant or by reason of any
reference in any such Section or such other covenant to any other provision
herein or in any other document, but the remainder of this Indenture and such
Securities shall be unaffected thereby.
Section 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions precedent to application of
either Section 1302 or Section 1303 to the Outstanding Securities of or within
such series:
<PAGE>
(1) The Company shall irrevocably have deposited
or caused to be deposited with the Trustee (or another trustee satisfying
the requirements of Section 609 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount (in such currency,
currencies or currency units in which such Securities are then specified as
payable at Maturity), or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof
in an amount, sufficient, without reinvestment, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge, (i) the principal of (and premium, if any)
and interest on the Outstanding Securities of such series on the Maturity
of such principal, premium, if any, or interest and (ii) any mandatory
sinking fund payments applicable to such Securities on the day on which
such payments are due and payable in accordance with the terms of this
Indenture and such Securities. Before such a deposit the Company may make
arrangements satisfactory to the Trustee for the redemption of Securities
at a future date or dates in accordance with Article Eleven, which shall be
given effect in applying the foregoing. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the United
States of America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended) as custodian with
respect to any such U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government Obligation held by
such custodian for the account of the holder of such depositary
<PAGE>
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder
of such depositary receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of
principal of or interest on the U.S. Government Obligation evidenced by
such depositary receipt.
(2) No Event of Default or event which with notice or lapse of time
or both would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing (A) on the date of such
deposit or (B) insofar as subsections 501(6) and (7) are concerned, at any
time during the period ending on the 91st day after the date of such
deposit or, if longer, ending on the day following the expiration of the
longest preference period applicable to the Company in respect of such
deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not (A) cause the
Trustee for the Securities of such series to have a conflicting interest as
defined in Section 608 or for purposes of the Trust Indenture Act with
respect to any securities of the Company or (B) result in the trust
arising from such deposit to constitute, unless it is qualified as, a
regulated investment company under the Investment Company Act of 1940, as
amended.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company is a party
or by which it is bound.
(5) In the case of an election under Section 1302, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such defeasance had not occurred.
<PAGE>
(6) In the case of an election under Section 1303, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred.
(7) Such defeasance or covenant defeasance shall be effected in
compliance with any additional terms, conditions or limitations which may
be imposed on the Company in connection therewith pursuant to Section 301.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 1302
or the covenant defeasance under Section 1303 (as the case may be) have
been complied with.
Section 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (collectively, for purposes of this
Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Outstanding Securities of such series shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (but not
including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the money or U.S. Government
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof.
Anything herein to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to
<PAGE>
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Section 1304 which in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance.
Section 1306. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1305 by reason of any order or judgment or any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under the Securities of such series
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article Thirteen until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 1305; PROVIDED,
HOWEVER, that if the Company makes any payment of principal of (and premium, if
any) or interest on any such Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
the Paying Agent.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
UNOVA, INC.
By: /s/ LORI J. SEGALE
---------------------
Name: Lori J. Segale
Title: Treasurer
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ JOHN R. PRENDIVILLE
--------------------------
Name: John R. Prendiville
Title: Vice President
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On March 10, 1998, before me, BJ Brock, Notary Public, personally
appeared Lori J. Segale, personally known to me to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ BJ BROCK
-------------
Notary Public
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On the 11th day of March, 1998, before me personally came John R.
Prendiville, to me known, who, being by me duly sworn, did depose and say that
he is Vice President of The First National Bank of Chicago, one of the companies
described in and which executed the foregoing instrument; that it was so affixed
by authority of the Board of Directors of said corporation, and that he/she
signed his/her name thereto by like authority of the Board of Directors of said
corporation.
/s/ MICHELLE R. IVY
-------------------
Notary Public
<PAGE>
EXHIBIT 4.6
THIS SECURITY IS A BOOK-ENTRY SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNOVA, INC.
6.875% Notes due March 15, 2005
No. B-1 $100,000,000
CUSIP No.
UNOVA, Inc., a corporation duly organized and existing under the laws of
Delaware (herein called the "Company", which term includes any successor Person
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal sum of One
Hundred Million Dollars on March 15, 2005, and to pay interest thereon from
March 11, 1998 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually on March 15 and September 15
in each year, commencing September 15, 1998, at the rate of 8.875% per annum,
until the principal hereof is paid or made available for payment and (to the
extent that the payment of such interest shall be legally enforceable) at the
rate of 6.875% per annum on any overdue principal and premium and on any overdue
installment of interest. The interest so payable, and punctually paid or duly
provided for,
<PAGE>
on any Interest Payment Date will, as provided in such Indenture, be paid to
the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the March 1 or September 1 (whether or not
a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for
that purpose in New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; PROVIDED, HOWEVER, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register
or by wire transfer to an account maintained by the Person entitled thereto
as specified in the Security Register, provided that such Person shall have
given the Trustee written wire instructions.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET
FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
UNOVA, Inc.
By:
Name:
Title:
Attest:
Name:
Title:
3
<PAGE>
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of March 11, 1998 (herein called the
"Indenture"), between the Company and The First National Bank of Chicago, as
Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $100,000,000.
The Securities of this series are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, in whole or in part, at the
option of the Company at any time at a redemption price equal to the greater
of (i) 100% of the principal amount of such Securities or (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon (not including the portion of any such payments of interest accrued
as of the redemption date) discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (determined on the third Business Day preceding such
redemption date), plus, in each case, accrued and unpaid interest thereon to
the redemption date.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.20%.
"Comparable Treasury Issue" means the United State Treasury security
selected by a Reference Treasury Dealer as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date,
the average of the Reference Treasury Dealer Quotations for such redemption
date. "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 6:00 p.m. (New
York City time) on the third Business Day preceding such redemption date.
"Reference Treasury Dealer" means each of Goldman, Sachs & Co., Credit
Suisse First Boston Corporation and J.P. Morgan Securities Inc. and their
respective successors;
4
<PAGE>
provided, however, that if any of the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer") or is no longer quoting prices for United States Treasury
securities, the Company shall substitute therfor another Primary Treasury
Dealer.
In the event of redemption of this Security in part only, a new Security
or Securities of this series and of like tenor for the unredeemed portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may
be declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with
the consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and any premium
and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities
of this
5
<PAGE>
series and of like tenor, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a
different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to
the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
This security shall be governed by and construed in accordance with the
laws of the State of New York.
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION:
Dated: March 11, 1998
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:____________________________
6
<PAGE>
EXHIBIT 4.7
THIS SECURITY IS A BOOK-ENTRY SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNOVA, INC.
7.00% Notes due March 15, 2008
No. A-1 $100,000,000
CUSIP No. 91529BAA4
UNOVA, Inc., a corporation duly organized and existing under the laws of
Delaware (herein called the "Company", which term includes any successor
Person under the Indenture hereinafter referred to), for value received,
hereby promises to pay to Cede & Co., or registered assigns, the principal
sum of One Hundred Million Dollars on March 15, 2008, and to pay interest
thereon from March 11, 1998 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on March 15
and September 15 in each year, commencing September 15, 1998, at the rate of
9.00% per annum, until the principal hereof is paid or made available for
payment and (to the extent that the payment of such interest shall be legally
enforceable) at the rate of 7.00% per annum on any overdue principal and
premium and on any overdue installment of interest. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will,
as provided in such Indenture, be paid to the Person in whose
<PAGE>
name this Security (or one or more Predecessor Securities) is registered at
the close of business on the Regular Record Date for such interest, which
shall be the March 1 or September 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid or duly provided for will forthwith cease to be payable to
the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall
be given to Holders of Securities of this series not less than 10 days prior
to such Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for
that purpose in New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; PROVIDED, HOWEVER, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register
or by wire transfer to an account maintained by the Person entitled thereto
as specified in the Security Register, provided that such Person shall have
given the Trustee written wire instructions.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET
FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
UNOVA, Inc.
By:
--------------------------------
Name:
Title:
Attest:
-------------------------
Name:
Title:
<PAGE>
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of March 11, 1998 (herein called the
"Indenture"), between the Company and The First National Bank of Chicago, as
Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $100,000,000.
The Securities of this series are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, in whole or in part, at the
option of the Company at any time at a redemption price equal to the greater
of (i) 100% of the principal amount of such Securities or (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon (not including the portion of any such payments of interest accrued
as of the redemption date) discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (determined on the third Business Day preceding such
redemption date), plus, in each case, accrued and unpaid interest thereon to
the redemption date.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.20%.
"Comparable Treasury Issue" means the United State Treasury security
selected by a Reference Treasury Dealer as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date,
the average of the Reference Treasury Dealer Quotations for such redemption
date. "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 6:00 p.m. (New
York City time) on the third Business Day preceding such redemption date.
"Reference Treasury Dealer" means each of Goldman, Sachs & Co., Credit
Suisse First Boston Corporation and J.P. Morgan Securities Inc. and their
respective successors;
<PAGE>
provided, however, that if any of the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer") or is no longer quoting prices for United States Treasury
securities, the Company shall substitute therfor another Primary Treasury
Dealer.
In the event of redemption of this Security in part only, a new Security
or Securities of this series and of like tenor for the unredeemed portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may
be declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with
the consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and any premium
and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place
<PAGE>
where the principal of and any premium and interest on this Security are
payable, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a
different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to
the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
This security shall be governed by and construed in accordance with the
laws of the State of New York.
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION:
Dated: March 11, 1998
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:
-------------------------------
<PAGE>
EXHIBIT 10.16
UNOVA, INC.
MANAGEMENT INCENTIVE COMPENSATION PLAN
I
PURPOSE
This UNOVA, Inc. Management Incentive Compensation Plan (the "Plan") is
intended to provide a significant but variable economic opportunity to
selected officers and employees of UNOVA, Inc. as a reflection of their
individual and group contributions to the success of UNOVA, Inc. and its
subsidiaries. Payments pursuant to Section IX of the Plan are intended to
qualify under Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as
amended, as excluded from the term "applicable employee remuneration" as used
in such Section (such payments are hereinafter referred to as "Excluded
Income").
II
DEFINITIONS
"Approved Leave of Absence" shall have the meaning set forth in rules to
be adopted by the Committee and shall include in any event a leave of absence
for purposes of service in the Armed Forces of the United States.
"Board" shall mean the Board of Directors of the Company.
"Bonus" shall mean a cash award payable to a Participant pursuant to the
terms of the Plan, including an Incentive Award.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board.
"Company" shall mean UNOVA, Inc., a Delaware corporation, and its
subsidiaries.
<PAGE>
"Covered Employees" shall mean Participants designated by the Committee
prior to the award of a Bonus opportunity hereunder who are or are expected
to be "covered employees" within the meaning of Section 162(m)(3) of the Code
for the Measurement Period in which a Bonus hereunder is payable and for whom
the Committee intends that amounts payable hereunder shall constitute
Excluded Income.
"Disability" shall mean permanent and total disability as determined for
purposes of the Company Long-Term Disability Plan for the staff of the
Company's corporate headquarters as in effect from time to time.
"Disinterested Person" shall mean a member of the Board who qualifies as
an "outside director" for purposes of Section 162(m) of the Code.
"Incentive Award" shall have the meaning set forth in Article IX hereof.
"Maximum Potential Bonus" shall mean the amount determined by
multiplying the amount of a Participant's base salary actually paid during
the applicable Measurement Period by a percentage designated by the Committee
in its sole discretion prior to the commencement of such Measurement Period,
or within the first 90 days thereof, which percentage need not be the same
for each Participant. Notwithstanding the foregoing, in the case of a
Participant who is a Covered Employee, such Maximum Potential Bonus shall be
determined based upon the Participant's base salary as of the day immediately
preceding the commencement of the applicable Measurement Period. The Maximum
Potential Bonus payable to a Participant for any Measurement Period shall be
150 percent of such Participant's annual base salary (as determined above)
appropriately adjusted if necessary to reflect the length of such Measurement
Period.
"Measurement Period" shall have the meaning set forth in Article IX
hereof.
"Participant" shall have the meaning set forth in Article IV hereof.
"Payment Date" or "Payment Dates" shall mean the date or dates
designated by the Committee (following the conclusion of a particular
Measurement Period and the Committee's certification in writing that
applicable Performance Goals, if any, have been satisfied) on which a
particular Bonus or Incentive Award shall be payable to the recipient of such
Bonus or Incentive Award.
"Performance Goals" shall have the meaning set forth in Article IX
hereof.
"Retirement" shall mean either (i) retirement from active employment
with the Company or a subsidiary at or after age 65 or (ii) early retirement
from active
2
<PAGE>
employment with the Company or a subsidiary pursuant to the early
retirement provisions of the applicable pension plan of such employer.
III
ADMINISTRATION
The Plan shall be administered by the Committee or such other committee
of the Board designated by the Board which is composed of not less than two
Disinterested Persons, each of whom shall be appointed by and serve at the
pleasure of the Board.
In administering the Plan the Committee may at its option employ
compensation consultants, accountants, and counsel (who may be the
compensation consultants, independent auditors, or outside counsel of the
Company) and other persons to assist or render advice to the Committee, all
at the expense of the Company.
Except as limited by law or by the Company's Certificate of
Incorporation or By-laws, and subject to the provisions hereof, the Committee
shall have authority to select Participants in the Plan upon the
recommendation of the Chief Executive Officer; determine the size and types
of awards; determine the terms and conditions of earning awards; interpret
the Plan; establish, amend, or waive rules and regulations for the Plan's
administration; and, subject to Article VI, amend the terms and conditions of
the Plan. Further, the Committee shall make all other determinations which
may be necessary or advisable for the administration of the Plan. Subject to
the provisions hereof, the Committee may adopt written guidelines for the
implementation and administration of the Plan. All determinations and
decisions of the Committee arising under the Plan shall be final, binding,
and conclusive upon all parties.
IV
ELIGIBILITY
The Committee shall, in its sole discretion, determine for each
Measurement Period those officers and other key employees of the Company who
shall be eligible to participate in the Plan (the "Participants") for such
Measurement Period. Nothing contained in the Plan shall be construed as or
be evidence of any contract of employment with any Participant for a term of
any length, nor shall participation in the Plan in any Measurement Period by
any Participant give any person the right to participate in the Plan in any
subsequent Measurement Period.
3
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V
DETERMINATION OF BONUS
Subject to Article IX hereof, the form and amount of each Bonus award to
a Participant shall be determined by and in the discretion of the Committee.
The Committee may (but shall not, in the case of Participants who are not
Covered Employees, be required to) condition the earning of a Bonus upon the
attainment of specified Performance Goals (or other factors or criteria)
measured over a period not greater than one year relating to the Participant
or the Company, or a subsidiary or division of the Company for or within
which the Participant is primarily employed, or upon such other factors or
criteria as the Committee shall determine, which Performance Goals (or other
factors or criteria) may be different for each Participant. Bonuses payable
under the Plan will consist of a cash award from the Company, based upon a
percentage of the Maximum Potential Bonus and the degree of achievement of
such Performance Goals over the Measurement Period. Bonuses under this Plan
for Covered Employees shall be subject to preestablished Performance Goals in
accordance with Article IX hereof. The Committee may, in its sole
discretion, increase or decrease the amount of any Bonus payable to a
Participant (but may not increase the amount of any Bonus payable to Covered
Employees) and may award Bonuses to Participants (other than Covered
Employees except as provided in Article VI) even though the Performance Goals
applicable to the award of the Bonuses are not achieved. Bonuses earned or
otherwise awarded will be paid on the applicable Payment Date or Payment
Dates specified by the Committee with respect to each Bonus at the time of
its award (which may be payable in a single installment or in two or more
installments but in any event shall, subject to the provisions of Article VI,
be payable in full not later than two years following the date of the award
of the Bonus).
VI
TERMINATION OF EMPLOYMENT
In the event a Participant's employment is terminated by reason of
death, Disability, or Retirement, or the Participant shall have commenced an
Approved Leave of Absence, the Bonus determined in accordance with Article V
hereof shall be calculated to reflect participation prior to employment
termination only. The reduced award shall be determined by multiplying such
Bonus by a fraction, the numerator of which is the number of full months of
employment in the Measurement Period through the date of employment termination,
and the denominator of which is 12. In the case of a Participant's Disability,
the employment termination shall be deemed to have occurred on the date all of
the conditions of Disability have been satisfied, as determined by the
Committee. The Bonus thus determined shall be paid in cash in a single
installment within 30 days following the determination thereof. Except as
otherwise provided in any
4
<PAGE>
agreement or plan of the Company to which the Participant is party or in
which he or she participates providing for payments following a change of
control of the Company, in the event that a Participant's employment is
terminated prior to completion of a Measurement Period for any reason other
than death, Disability, or Retirement, and the Participant shall not have
been on an Approved Leave of Absence at the time the Participant's Bonus
would have been determined, all of the Participant's rights to a Bonus for
such Measurement Period shall be forfeited. However, the Committee may, in
its sole discretion, pay a prorated award for the portion of the Measurement
Period that the Participant was employed by the Company, computed as
determined by the Committee.
Except as otherwise provided in any agreement or plan referred to in the
foregoing paragraph, in order to be entitled to receive any Bonus under
Article V (including any Incentive Award as described in Article IX) or any
installment thereof (or to have the amount thereof paid to his or her
beneficiary) a Participant must on any relevant Payment Date (1) be in the
active employ of the Company or a subsidiary thereof; (2) have terminated
employment by reason of death, Disability, or Retirement; or (3) be on an
Approved Leave of Absence.
VII
AMENDMENT AND TERMINATION
The Board shall have the right to modify the Plan from time to time but
no such modification made after March 31, 1998, shall, without prior approval
of the Company's shareholders, change Article IX of this Plan to alter the
criteria on which the Performance Goals applicable to Incentive Awards are
based or to increase the amount set forth in Section (e) of Article IX,
materially increase the benefits accruing to Participants hereunder who are
Covered Employees, materially modify the requirements regarding eligibility
for participation in the Plan by an employee who is a Covered Employee or,
without the consent of the Participant affected, impair any Bonus award made
prior to the effective date of the modification.
VIII
MISCELLANEOUS
Bonus payments shall be made from the general funds of the Company and
no special or separate fund shall be established or other segregation of
assets made to assure payment. No Participant or other person shall have
under any circumstances any interest in any particular property or assets of
the Company. The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to its principles of
conflicts of law.
5
<PAGE>
IX
PROCEDURES FOR CERTAIN DESIGNATED PARTICIPANTS
Bonuses under the Plan awarded to Participants who are Covered Employees
shall be subject to preestablished Performance Goals as set forth herein.
Notwithstanding Article V hereof, the Committee shall not have discretion to
modify the terms of awards to Participants who are Covered Employees except
as specifically set forth in this Article IX.
(a) MAXIMUM POTENTIAL BONUS. Prior to the commencement of a
Measurement Period, or within the first 90 days thereof, the Committee shall,
in its sole discretion, grant bonus award opportunities to such of the
Participants who may be Covered Employees, payment of which shall be
conditioned upon satisfaction of specific Performance Goals measured over a
period not greater than one year established by the Committee in writing at
the time of grant of the award opportunities. An award to a Covered Employee
(an "Incentive Award") shall consist of a cash award from the Company to be
based upon a percentage of a Maximum Potential Bonus. The extent, if any, to
which an Incentive Award will be payable will be based upon the degree of
achievement of preestablished Performance Goals over a specified Measurement
Period; provided, however, that the Committee may, in its sole discretion,
reduce the amount which would otherwise be payable with respect to a
Measurement Period (under which circumstances the Participant will have no
right to receive the amount of such reduction even if the Performance Goals
are achieved or exceeded).
(b) MEASUREMENT PERIOD. The Measurement Period will be a period of
one fiscal year, unless a shorter period is otherwise selected and
established in writing by the Committee at the time the Performance Goals are
established with respect to a particular Incentive Award (the period so
specified being herein referred to as the "Measurement Period").
(c) PERFORMANCE GOALS. The performance goals ("Performance Goals")
established by the Committee at the time an opportunity to receive an
Incentive Award is granted shall comprise specified levels of one or more of
the following factors: basic earnings per share ("BEPS"), diluted earnings
per share ("DEPS"), return on capital utilized ("ROCU"), return on tangible
equity ("ROTE""), return on equity ("ROE"), return on assets ("ROA"), return
on capital ("ROC"), cash flow ("CF"), revenue growth ("RG"), revenue ("RV"),
or return on revenue ("ROR") of the Company or of its applicable business
unit, as appropriate. For purposes of this Plan, BEPS, DEPS, ROCU, ROTE,
ROE, ROA, ROC, CF, RG, RV, or ROR shall have the meanings set forth in
Exhibit A hereto.
(d) PAYMENT OF AN INCENTIVE AWARD. At the time the opportunity to
receive an Incentive Award is granted, the Committee shall prescribe a formula
6
<PAGE>
to determine the percentage of the Maximum Potential Bonus, which may be
payable based upon the degree of attainment of the Performance Goals during
the Measurement Period. If the minimum Performance Goals established by the
Committee are not met, no payment will be made to a Participant who is a
Covered Employee. To the extent that the minimum Performance Goals are
satisfied or surpassed, and upon written certification by the Committee that
the Performance Goals have been satisfied to a particular extent and any
other material terms and conditions of the Incentive Awards have been
satisfied, an Incentive Award shall be made in accordance with the prescribed
formula based upon a percentage of the Maximum Potential Bonus unless the
Committee determines, in its sole discretion, to reduce the payment to be
made.
(e) MAXIMUM PAYABLE. The maximum amount payable to a Covered Employee
for any fiscal year of the Company shall be $2,000,000.
(f) PAYMENT DATE. Incentive Awards will be paid on the applicable
Payment Date or Payment Dates specified by the Committee with respect to each
Incentive Award (which may be payable in a single installment or in two more
installments but in any event shall, subject to the provisions of Article VI,
be payable in full not later than two years following the date of its award).
X
DEFERRAL ELECTIONS
The Committee may at its option establish procedures pursuant to which
Participants are permitted to defer the receipt of Bonuses payable hereunder.
XI
EFFECTIVE DATE
This Plan shall become effective on the date of its adoption by the
Board, and the initial Measurement Period hereunder shall be the 1998
calendar year. The Plan (as it may be hereafter amended from time to time in
accordance with Article VII) shall be submitted to the shareholders of the
Company for approval at the 1999 Annual Meeting of Shareholders.
XII
OTHER AWARDS
Nothing in this Plan shall limit the power of the Company to award any
annual or longer-term incentive compensation, whether payable in cash, Common
Stock of the Company, or otherwise, to any employee of the Company or any
subsidiary thereof under any other arrangement, contract, or understanding,
whether written or not, regardless of whether or not such employee is a
Participant in this Plan.
7
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XIII
BENEFICIARY DESIGNATION
Each Participant under the Plan may name, from time to time, any
beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under the Plan is to be paid in case of the Participant's
death before he or she receives any or all of such benefit. Each designation
will revoke all prior designations by the same Participant, shall be in a
form prescribed by the Committee, and shall be effective only when filed by
the Participant in writing with the Company during the Participant's
lifetime. In the absence of any such designation, or if the designated
beneficiary is no longer living, benefits shall be paid to the surviving
member(s) of the following classes of beneficiaries, with preference for
classes in the order listed below:
(a) Participant's spouse (unless the parties were divorced or legally
separated by court decree at the time a Bonus is awarded);
(b) Participant's children (including children by adoption);
(c) Participant's parents (including parents by adoption); or
(d) Participant's executor or administrator.
Payment of benefits under the Plan following a Participant's death shall
be made exclusively to the member(s) of the first class, in the order listed
above, which has surviving member(s). If that class has more than one
member, benefit payments shall be made in equal shares among members of that
class.
8
<PAGE>
EXHIBIT A
DEFINITIONS
RETURN ON CAPITAL UTILIZED (ROCU)
Business Operating Profit (BOP) divided by average Capital Utilized
(computed on a monthly basis).
CAPITAL UTILIZED
Total equity, plus Notes Payable, plus Current Portion of Long-Term Debt
plus Long-Term Debt, plus Advances from Corporate (less if net Advances
are to Corporate), less Investments in Consolidated Subsidiaries.
BUSINESS OPERATING PROFIT (BOP)
Total Sales less Total Cost of Sales less Marketing expense less General
and Administrative Expenses plus Other Income or minus Other Expense.
NET INCOME
Net Income (Loss) shall include income (loss) from continuing operations
before provision for income taxes; provision for income taxes; income from
discontinued operations net of applicable income taxes; and effect on
income from extraordinary items net of applicable income taxes. Net Income
shall not include the cumulative effect on prior years of an accounting
change net of income taxes and the after tax charges that may result from
the acquisition of research and development associated with acquiring a
business entity, a line of business, or a technology.
RETURN ON TANGIBLE EQUITY (ROTE)
Net Income divided by beginning tangible equity.
CONSOLIDATED PRE-TAX INCOME
Net Income of the Company and its Consolidated Subsidiaries before taxes
and before giving effect to extraordinary items.
CASH FLOW (CF)
The sum of Net Income plus depreciation and amortization.
REVENUE (RV)
Revenue as reported on the Company's annual financial statements.
REVENUE GROWTH (RG)
The increase in revenue for the current fiscal year, expressed as a
percent, above a specified base line period.
RETURN ON ASSETS (ROA)
BOP divided by average assets (computed on a monthly basis).
9
<PAGE>
CAPITAL
The sum of all interest-bearing debt, including debt with imputed
interest, and total equity.
RETURN ON CAPITAL (ROC)
Income before interest and taxes divided by average annual capital
(computed on a monthly basis).
RETURN ON EQUITY (ROE)
Net Income divided by beginning equity.
RETURN ON REVENUE (ROR)
BOP divided by total Net Revenue expressed as a percent.
NET REVENUE (NR)
Total net sales and service revenue after adjustments for all discounts,
returns, and allowances.
BASIC EARNINGS PER SHARE (BEPS)
Income available to common stockholders of the Company excluding the
cumulative effect on prior years of an accounting change net of income
taxes and the after tax charges that may result from the acquisition of
research and development associated with acquiring a business entity, a
line of business, or a technology, divided by the weighted-average number
of common shares of the Company outstanding during the applicable period.
Shares issued during the applicable period and shares reacquired during
the applicable period shall be weighted for the portion of the period
that they were outstanding.
DILUTED EARNINGS PER SHARE (DEPS)
DEPS is computed in the same manner as BEPS; however, the weighted-average
number of common shares of the Company outstanding during the applicable
period is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares
resulting from stock options or other common stock equivalents had been
issued.
10
<PAGE>
<PAGE>
EXHIBIT 10.17
EXECUTIVE SURVIVOR
BENEFIT PLAN
______________________
THE FOLLOWING IS A SUMMARY OF YOUR BENEFITS UNDER THE
UNOVA, INC. EXECUTIVE SURVIVOR BENEFIT PLAN. THIS PLAN HAS BEEN
DESIGNED TO MINIMIZE THE IMPUTED INCOME YOU MUST REPORT
FOR TAX PURPOSES EACH YEAR AND TO GIVE YOU FLEXIBILITY IN THE
FORM IN WHICH BENEFITS ARE PAID OUT.
PREPARED FOR
______________________________________________
UNOVA, INC.
<PAGE>
EXECUTIVE SURVIVOR BENEFIT PLAN
PRE-RETIREMENT SURVIVOR BENEFIT
AMOUNT OF BENEFIT
Prior to retirement you will have survivor benefit coverage equal to four times
your base salary, rounded up to the next higher $1,000. On June 1 of each year
your coverage will adjust to reflect your salary as of December 31 of the prior
year.
FORM OF BENEFIT
GROUP TERM COVERAGE
The first $50,000 of your pre-retirement coverage will be provided by group
term life insurance. The group term benefit is a lump sum amount paid income
tax-free to your beneficiary. This is the largest amount of group term
coverage that can be provided without resulting in imputed income to you.
SPLIT-DOLLAR COVERAGE
The balance of your pre-retirement coverage will be provided by split-dollar
insurance. The split-dollar benefit is a lump-sum amount paid income tax-free
to your beneficiary.
The split-dollar coverage will result in imputed income to you each year;
however, this imputed income will be substantially less than if your survivor
benefit coverage were completely provided by group insurance. The actual
mechanics of the split-dollar plan will be that:
- - You contribute an amount each year equal to the imputed income for your
coverage.
- - You receive a bonus from UNOVA, Inc. equal to your contribution.
- - Your net cost is the tax liability on this bonus.
__________________________________UNOVA, Inc.__________________________________
2
<PAGE>
Executive Survivor Benefit Plan
PRE-RETIREMENT SURVIVOR BENEFIT(cont.)
PRE-RETIREMENT SALARY CONTINUATION ELECTION
To facilitate your personal planning needs as well as reduce or eliminate
imputed income, you may elect salary continuation in lieu of split-dollar
coverage.
The salary continuation benefit will be paid to your beneficiary in equal
payments over 10 or 15 years, and in total shall be actuarially equivalent to
the split-dollar benefit foregone. These salary continuation payments will
be income taxable to your beneficiary as received. The payments will,
however, be "grossed up" to ensure that after income taxes are paid, the
salary continuation and split-dollar benefits are equivalent. The "grossed
up" rate will be based on the highest combined net state and Federal income
tax rate in effect at the time of each payment.
When you enroll in the Plan you will be given the opportunity to elect in 25%
increments any percentage of split-dollar coverage you wish to decline in
favor of salary continuation. In addition, prior to December 31 each year
you may change your election for the upcoming calendar year.
There is no imputed income for any portion of your coverage provided by
salary continuation.
__________________________________UNOVA, Inc.__________________________________
3
<PAGE>
Executive Survivor Benefit Plan
POST-RETIREMENT SURVIVOR BENEFIT
AMOUNT OF BENEFIT
After you retire, if you have completed five years of service and are at
least age 62, your survivor benefit coverage will continue at one times your
final base salary as defined by the Agreement. This level of coverage will
continue until the earlier of five years after retirement or your age 70.
After such time, a salary continuation benefit, equal to the lesser of one
times your final base salary or $100,000, will be paid to your beneficiary.
FORM OF BENEFIT
Your post-retirement coverage will be provided by split-dollar insurance.
The split-dollar benefit is a lump-sum amount paid income tax-free to your
beneficiary.
This coverage will result in imputed income to you each year; however, again,
this imputed income will be substantially less than if your survivor benefit
coverage were provided by group insurance.
Your post-retirement salary continuation benefit will be taxable to your
beneficiary. Therefore, the benefit paid to your beneficiary shall be
"grossed up" such that it is actuarially equivalent to the lesser of one
times your final base salary or $100,000. There is no imputed income for the
salary continuation benefit.
POST-RETIREMENT SALARY CONTINUATION ELECTION
In lieu of the post-retirement split-dollar coverage you may elect salary
continuation.
The salary continuation benefit will be paid to your beneficiary in equal
payments over five years, or in a lump-sum if the benefit amount is $100,000
or less. The benefit in total shall be actuarially equivalent to the
split-dollar benefit foregone, and the salary continuation payments will be
"grossed up" to offset the income taxes payable.
The salary continuation election for post-retirement coverage must be made
prior to retirement. This election applies to the entire amount of
post-retirement coverage and may not be changed once you have retired.
There is no imputed income for the salary continuation benefit.
__________________________________UNOVA, Inc.__________________________________
4
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Executive Survivor Benefit Plan
DISABILITY PROVISION
PRE-RETIREMENT DISABILITY
If you have become totally and permanently disabled and terminate employment
because of your disability, survivor benefits will continue to be provided
until you are at least age 62 and have completed five years of service at the
time you terminate.
AMOUNT OF BENEFIT
Prior to age 65, you will have survivor benefit coverage equal to four times
your base salary (as defined by the Agreement), rounded up to the next higher
$1,000.
SALARY CONTINUATION ELECTION
Instead of receiving this benefit in a lump sum, you may elect salary
continuation. The salary continuation benefit will be paid out in the same
manner as if you had not terminated because of disability.
POST RETIREMENT DISABILITY PROVISION
At age 65, if you were eligible for pre-retirement benefits, you are eligible
for post-retirement benefits.
AMOUNT OF BENEFIT
Prior to age 70, you will have survivor benefit coverage equal to one times
final base salary as of your termination date. At age 70, your benefit
reduces to the lesser of one times final base salary as of your termination
date or $100,000.
SALARY CONTINUATION ELECTION
You may elect to receive the post-retirement benefit in the form of salary
continuation instead of in one lump sum. The salary continuation benefit is
paid out in the same manner as if you had not terminated because of
disability but this election must be made before age 65.
__________________________________UNOVA, Inc.__________________________________
5
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Executive Survivor Benefit Plan
ADDITIONAL INFORMATION
CHANGE OF TITLE
A participant who experiences a change of title which would preclude him from
participating in the Plan ceases to be eligible for pre-retirement survivor
benefits. However, post-retirement survivor benefits are provided if you
experience a change of title on or after age 62 with five years of service.
Your survivor benefit coverage is one times your final base salary (as
defined by the Agreement). This level of coverage will continue until the
earlier of five years after change of title retirement or your age 70. This
benefit can be paid in the form of a lump sum or salary continuation. The
salary continuation benefit will be paid to your beneficiary in equal
payments over five years, or in a lump sum if the benefit amount is $100,000
or less.
INCOME TAXATION OF BENEFITS
The group and split-dollar benefits under the Plan will be paid to your
beneficiary income tax-free. The salary continuation payments (if elected)
will be income taxable to your beneficiary upon receipt. These payments,
however, will be "grossed up" to ensure that after income taxes are paid, the
salary continuation and split-dollar benefits are equivalent.
BENEFICIARY DESIGNATION
When you enroll in the Plan you will designate a beneficiary to receive any
benefits payable under the Plan. You may change your beneficiary from time
to time by submitting a new beneficiary designation form.
ASSIGNMENT OF BENEFITS
You have the right to make an absolute assignment of the split-dollar benefit
so as to keep the proceeds out of your and your spouse's estate. Once you
assign your benefit you no longer may elect salary continuation.
The assignment must be made more than three years prior to death in order to
assure that the split-dollar benefit will not be taxed in your or your
spouse's estate.
TAX CONSEQUENCES
The tax consequences of the Plan are complex and may vary according to the
State laws in effect. You may wish to consult with your tax advisor before
making elections under the Plan.
__________________________________UNOVA, Inc.__________________________________
6
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Executive Survivor Benefit Plan
ENROLLMENT PROCESS
The benefits under this Plan are not effective until the entire enrollment
process is complete.
This process consists of the following:
Participant completes the necessary enrollment forms
- Participant completes a confidential questionnaire
- Participant completes a physical examination
- Participant completes beneficiary designation and split-dollar/salary
continuation election forms
- Participant and the Company sign Plan, please contact:
MANAGER, PENSIONS AND GROUP INSURANCE
UNOVA, INC.
BEVERLY HILLS, CALIFORNIA
In the event of any discrepancies between this summary and the Plan
Agreement, the Plan Agreement shall always govern.
__________________________________UNOVA, Inc.__________________________________
7
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EXHIBIT 10.18
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
This Amendment No. 1, effective the 28th day of February 1997, is made to
that certain Employment Agreement between Intermec Corporation and Michael
Ohanian, dated the 18th day of May, 1995 (hereinafter called the "Agreement").
WHEREAS, the parties to the Agreement wish to extend the Employment Period
described in the Agreement from February 28, 1997 to February 28, 1998.
NOW THEREFORE, by mutual agreement of the parties, the Agreement is hereby
amended as follows:
1. TERM OF AGREEMENT:
The date "February 28, 1997" which appears in numbered Paragraphs 1,
EMPLOYMENT PERIOD, and 12.2, EXECUTIVE'S REMEDIES FOR TERMINATION, is hereby
changed to read "February 28, 1998."
2. COMPENSATION:
The base salary set forth in numbered Paragraph 3, BASE PAY, shall be
$300,000 for the period of March 1, 1997 through February 28, 1998. All
references to "Hiring Bonus," contained in the Agreement are deleted.
3. PERFORMANCE BONUS:
Numbered Paragraph 7, PERFORMANCE BONUS, is deleted and replaced with
the following:
7. PERFORMANCE BONUS: The Executive is eligible to receive a
Performance Bonus for each fiscal year starting January 1, 1997 during
any part of which he is employed, such Performance Bonus to be pro-rated
to reflect that portion of the year in which he was employed. The maximum
bonus payable for any given fiscal year shall be 125% of base salary
payable for that fiscal year (or the pro-rated portion thereof), provided
however, that any such Performance Bonus is subject to the
<PAGE>
provisions of the Western Atlas Inc., 1995 Incentive Compensation Plan.
<PAGE>
4. OTHER TERMS AND CONDITIONS:
Except as modified herein all other terms and conditions of the
Agreement shall remain in full force and effect as originally written.
IN WITNESS WHEREOF, the parties hereto have signed and delivered this
Amendment No. 1 as of the date first written above.
INTERMEC CORPORATION EXECUTIVE
By: By:
----------------------------- --------------------------
Michael Ohanian
Title:
--------------------------
<PAGE>
EXHIBIT 10.19
AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
This Amendment No. 2, effective the 28th day of February, 1998, is made
to that certain Employment Agreement between Intermec Technologies
Corporation (formerly, Intermec Corporation) and Michael Ohanian, dated the
18th day of May, 1995 as amended on February 28, 1997.
WHEREAS, the parties to the Agreement to extend the Employment Period
described in the Agreement from February 28, 1998 to February 28, 1999.
NOW THEREFORE, by mutual agreement of the parties, the Agreement is
hereby amended as follows:
1. TERM OF AGREEMENT:
The date "February 28, 1998" which appears in numbered Paragraphs 1
EMPLOYMENT PERIOD, and 12.2, EXECUTIVE'S REMEDIES FOR TERMINATION, is hereby
changed to read "February 28, 1999."
2. COMPENSATION:
The base salary set forth in numbered Paragraph 3, BASE PAY, shall be
$300,000 or more as determined by the Chief Executive Officer of UNOVA, the
parent of Intermec, for the period of March 1, 1997 through February 28, 1998.
3. PERFORMANCE BONUS:
Numbered Paragraph 7, PERFORMANCE BONUS, as amended by Amendment No. 1
is revised by deleting the words "Western Atlas Inc., 1995 Incentive
Compensation Plan" and replacing them with the words "UNOVA, Inc. Management
Incentive Compensation Plan."
4. "BINDING ARBITRATION," DISPUTES BETWEEN THE COMPANY AND THE
EMPLOYEE:
If any dispute under this Agreement is not resolved to the satisfaction
of each party hereto and the dispute is one that would have been justiciable
under applicable state or federal law, the dissatisfied party shall, as its
sole remedy, give written notice of that
<PAGE>
party's intention to proceed to final and binding arbitration pursuant to the
terms of the Mutual Agreement to Arbitrate Claims to which the employee and
the Company are parties, a copy of which is attached hereto as Exhibit A and
made a Part of this Agreement.
5. OTHER TERMS AND CONDITIONS:
Except as modified herein all other terms and conditions of the
Agreement as amended by Amendment No. 1 shall remain in full force and effect
as originally written.
IN WITNESS WHEREOF, the parties hereto have signed and delivered this
Amendment No. 2 as of the date first written above.
INTERMEC TECHNOLOGIES
CORPORATION EXECUTIVE
By: By:
------------------------------ ---------------------------
Michael Ohanian
Title:
--------------------------
<PAGE>
EXHIBIT 10.20
AMENDMENT
This Agreement is made as of March 24, 1998 by and between UNOVA, Inc.,
a Delaware Corporation ("UNOVA") and CLAYTON A. WILLIAMS, an individual
residing at 200 Riverfront Drive, Apartment P27K, Detroit, Michigan 48226
("Executive").
WHEREAS, Executive is employed with UNOVA pursuant to an Agreement
dated, August, 1997 ("the Agreement"); and
WHEREAS, UNOVA and Executive have agreed that the Employment terms under
the Agreement shall be extended to run till February 13, 1999.
NOW, THEREFORE, the parties do hereby agree as follows:
The third paragraph on the first page of the Agreement is hereby amended
by deleting the words "December 31, 1998" and replacing them with the words
"February 13, 1999."
Except as hereby amended, the remaining terms and conditions of the
Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of
the date first set forth above.
UNOVA, Inc.
By:
--------------------------------
Virginia S. Young
Vice President and Secretary
EXECUTIVE
By:
--------------------------------
Clayton A. Williams
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,685
<SECURITIES> 0
<RECEIVABLES> 448,079
<ALLOWANCES> 0
<INVENTORY> 150,537
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<BONDS> 0
0
0
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<FN>
<F1>TAG #31 INCLUDES WRITE-OFF OF 211,500 OF ACQUIRED IN-PROCESS
RESEARCH AND DEVELOPMENT
</FN>
</TABLE>
