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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
For the transition period from _____ to _____
Commission file Number 1-13645
HOWMET INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1946684
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
Address of Principal Executive Offices: 475 Steamboat Road, Greenwich, CT
06830
Registrant's telephone number, including area code: 203-661-4600
------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, par value New York Stock Exchange
$.01 per share
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. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant:
$264,205,333 AS OF MARCH 16, 1998
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date. COMMON STOCK, $0.01
PAR VALUE, AS OF MARCH 16, 1998 : 100,000,000 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Annual Report to Stockholders for the fiscal year ended
December 31, 1997 is incorporated by reference in Parts I, II and IV hereof.
Registrant's definitive Proxy Statement dated March 24, 1998 is incorporated by
reference in Part III hereof.
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TABLE OF CONTENTS
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Part I
Item 1 -- BUSINESS....................................................................................... 1
Item 2 -- PROPERTIES..................................................................................... 5
Item 3 -- LEGAL MATTERS.................................................................................. 5
Item 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................ 6
EXECUTIVE OFFICERS OF THE REGISTRANT (as required by Instruction 3 to Item 401(b) of Regulation S-K)..... 7
Part II
Item 5 -- MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............................. 9
Item 6 -- SELECTED FINANCIAL DATA........................................................................ 9
Item 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......... 9
Item 7A-- QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK...................................... 9
Item 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................................... 9
Item 9 -- CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.............. 10
Part III
Item 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY............................................... 10
Item 11 -- EXECUTIVE COMPENSATION........................................................................ 10
Item 12 -- PRINCIPAL STOCKHOLDERS........................................................................ 10
Item 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................ 10
Part IV
Item 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.............................. 11
SIGNATURES.................................................................................................. 16
REPORTS OF PRICE WATERHOUSE.................................................................................A-1
FINANCIAL STATEMENT SCHEDULES...............................................................................I-1
EXHIBITS
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PART I
ITEM 1 -- BUSINESS
Howmet International Inc. is a Delaware corporation organized in 1995
(together with its subsidiaries the "Company"). Through its subsidiary, Howmet
Corporation, the Company is the largest manufacturer in the world of investment
cast turbine engine components for the jet aircraft and industrial gas turbine
("IGT") markets. The Company uses investment casting techniques to produce high-
performance and high-reliability superalloy and titanium components to the
exacting specifications of the major aerospace and IGT engine manufacturers. The
Company is also the world's largest producer of aluminum investment castings,
which it produces principally for the commercial aerospace and defense
electronics industries.
Howmet Corporation, the Company's principal operating subsidiary, was founded
in 1926. The Company was formed in 1995 under the name Blade Acquisition Corp.
("Blade") as a joint venture between Thiokol Corporation ("Thiokol"), which
owned 49% of its Common Stock and Carlyle-Blade Acquisition Partners, L.P.
("Carlyle-Blade Partners"), which owned 51% of its Common Stock. The Company
was formed to purchase Howmet Corporation and the Cercast companies from
Pechiney International, a French corporation, which has now merged into its
parent company, Pechiney, S.A. The acquisition of Howmet Corporation and the
Cercast companies was accomplished on December 13, 1995 through the purchase of
the capital stock of Pechiney Corporation, Howmet Corporation's parent holding
company, and the capital stock of the Cercast companies (the "Acquisition").
The Cercast companies became subsidiaries of Howmet Corporation, and Pechiney
Corporation's name was changed to Howmet Holdings Corporation ("Holdings").
On December 2, 1997, in two separate transactions, Thiokol acquired 13 million
shares of the Company's Common Stock from Carlyle-Blade Partners, increasing its
ownership interest in the Company to 62%. This was done concurrently with a
public offering of stock of the Company by Carlyle-Blade Partners, pursuant to
which public stockholders acquired a 15.35% interest in the Company and Carlyle-
Blade Partners' interest was reduced to 22.65%.
Howmet Corporation operates in one business segment, investment castings.
Financial information with respect to foreign and domestic operations and export
sales is hereby incorporated by reference to information contained in Note 15 of
"Notes to Financial Statements" on page 34 of the Company's 1997 Annual Report
to Stockholders. This information is attached hereto as part of Exhibit 13.
PRODUCTS AND SERVICES
The Company uses the investment casting process to manufacture superalloy,
titanium and aluminum components for aircraft and industrial gas turbine engines
and airframe applications for customers worldwide. These products are
manufactured to precise specifications provided by customers. The table below
describes the Company's major products:
MAJOR PRODUCTS SUMMARY PRODUCT DESCRIPTION AND APPLICATION
- -------------- -------------------------------------------
Blades High temperature superalloy rotating turbine engine
components. Blades act as air foils which are driven
by the hot gas flow.
Vanes High temperature superalloy non-rotating turbine
engine components. Vanes are the fixed airfoils which
direct the gas flow.
IGT shroud blocks Vane holders that provide a seal to fix each vane in
position.
Turbine rotors Integrated cast rotating wheels of blades primarily
for use in smaller engines. Rotors are like blades but
are manufactured as a single part instead of being
built of separate parts.
Nozzle rings Integrated cast non-rotating rings of vanes primarily
for use in smaller engines. Nozzle rings are like
vanes but are manufactured as a single integral
component.
Compressor stators Integrated cast non-rotating rings of compressor vanes
for use in both small and large engines. Compressor
stators are like vanes but are manufactured as a
single component.
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Frames Large diameter thin-wall cases used to support their
respective sections of turbine engines such as fans,
compressors and turbines.
Bearing housings Large diameter, heavy structural supports for
bearings.
Airframe components Titanium and aluminum structures for commercial and
military aircraft, including door frames, flap tracks,
nacelles, longerons, wing tips, and nose and tail
cones.
Electronics packaging Aluminum boxes with card slots and cooling fins for
electronic avionics packages.
Electro-optical
system housings Heads-up displays, gimbals and other housings.
Engine parts Gear boxes, front frames, and blocker doors for small
engines.
Other aircraft parts Aircraft fuel pump, a/c blower, oil tank and surge
tank components.
JOINT VENTURES
Howmet currently is participating in two joint ventures, one in Japan with
Komatsu Ltd. and the other in the United States with a subsidiary of United
Technologies Corporation. The Japanese joint venture, Komatsu-Howmet Ltd.
("KHL"), manufactures investment cast components for IGT and aerospace
customers, primarily in Japan. Howmet currently holds an option to purchase
Komatsu's interest in this venture. The joint venture with United Technologies
Corporation, Sprayform Technologies International, L.L.C. ("Sprayform"), was
organized to develop and commercialize the Spraycast-X(R) technology, in which
atomized metal is sprayed onto a rotating mandrel to form products such as cases
and rings.
RAW MATERIALS
The Company's raw materials include a number of metals and minerals, including
titanium, hafnium, aluminum, nickel, cobalt, molybdenum and chromium, among
others. The Company has multiple sources of supply for most of these materials
and has not experienced any significant supply interruption for more than twenty
years. Prices of these materials, however, can be volatile, and the Company
engages in forward purchases of some of these materials under certain market
conditions, and passes certain price fluctuations through to customers pursuant
to its long-term agreements. The Company ordinarily does not otherwise attempt
to hedge the price risk of its raw materials.
PATENTS
The Company has obtained numerous patents, licenses, and other proprietary
information, which it believes provide it with a competitive advantage,
including proprietary modifications and applications of the directional
solidification and single crystal casting processes. To protect its proprietary
information, the Company requires its employees to sign confidentiality
agreements, reminds employees of this confidentiality obligation upon their
departure from the Company, and builds some of its own specialized equipment,
such as casting furnaces, to prevent competitors from learning about Howmet's
newly developed processes. Competitors in the Company's business also hold
patents and other forms of proprietary information, and there is active
technical competition in that business. No assurances can be given that one
company or another will not obtain a technological advantage from time to time,
in one aspect of the industry's technology or another.
MAJOR CUSTOMERS
The Company is the leading supplier of precision investment cast components to
the producers of aircraft and industrial gas turbine engines. Most of the
turbine engine market is characterized by a limited number of large
manufacturers of engines. The Company's top ten customers represented
approximately 62% of the Company's net sales in 1997. The Company's principal
customers are The General Electric Company through its aircraft engine (GEAE)
and power systems (GEPS) groups and United Technologies Corporation's Pratt &
Whitney aircraft operations (Pratt & Whitney Division and Pratt & Whitney
Canada). Sales to these customers represented 20% and 15%, respectively, of the
Company's 1997 net sales. The Company's principal other aerospace engine
customers (none of which represented more than
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10% of 1997 net sales) include AlliedSignal Inc., FiatAvio, S.p.A., Allison
Engine Company, MTU Munchen GmbH (a subsidiary of Daimler-Benz Aerospace),
Rolls-Royce PLC, Walbar (a division of Coltec Industries Inc.) and SNECMA. The
Company's principal other IGT customers (none of which represented more than 10%
of 1997 net sales) include European Gas Turbine (which manufactures GEPS-
designed engines), ABB Power Generation Ltd., Siemens AG, Westinghouse Electric
Corp., Nuovo Pignone, Solar Turbines Incorporated, and Westinghouse Canada Inc.
Orders for components are primarily awarded through a competitive bidding
process. Contractual relationships with the Company's principal customers vary.
Approximately half of the Company's casting business is derived from multi-year
contracts, typically three years in length. Under these contracts, the Company's
customers agree to order from the Company, and the Company agrees to supply,
specified percentages of specified parts at specified pricing over the life of
the contracts. The customers are not required to order fixed numbers of parts,
although pricing may be subject to certain threshold quantities. Some of these
contracts include provisions requiring specified price reductions over the term
of the contract, based on lower production costs as programs mature, shared
benefits from other cost reductions resulting from joint production decisions,
and negotiated reductions. The Company typically renegotiates these contracts
during the last year of the contract period and, during the process, customers
frequently solicit bids from the Company's competitors. See "Concentrated
Customer Base" and "Competition" in Exhibit 99.1 attached hereto.
BACKLOG
The Company's backlog of orders as of December 31, 1997 was $793 million.
Because of the short lead and delivery times often involved and because
deferrals and cancellations often affect the Company's orders, backlog may not
be a significant indicator of the Company's future performance.
RESEARCH AND DEVELOPMENT
The Company has made a substantial investment in research and development to
establish a technology leadership position in the investment casting industry.
The Company believes it has significant opportunities for growth by developing
new products and new applications, which offer its customers greater performance
and significant cost savings. A portion of the Company's total research and
development budget comes from the Company's customers, which regularly retain
the Company for specific projects. The Company also provides research and
development services by contract to governmental agencies. The Company's
research center staff includes 75 degreed engineers and scientists. Cercast
also maintains a research and development staff to improve the aluminum
investment casting process. This staff develops casting processes and specialty
materials which enable Cercast to produce a diverse range of large, thin wall
and complex geometry castings. The Company's research and development expenses
for the years ended December 31, 1997, 1996 and 1995 were $24.6 million, $24.2
million and $26.4 million respectively. The amount spent during the same periods
for customer-sponsored research and development (primarily U.S. Government
funded) was $8.8 million, $8.5 million, and $4.8 respectively.
COMPETITION
The Company believes it has a majority market share in the overall turbine
engine airfoil investment casting market. Precision Castparts Corp. ("PCC"), a
publicly held company based in Portland, Oregon, is the Company's primary
competitor. Management believes that the Company and PCC account for most of the
total aerospace turbine engine and IGT investment casting production. The
Company competes with PCC and other smaller participants primarily on
technological sophistication, quality, price, service and delivery time for
orders from large, well-capitalized customers with significant market power.
Certain of the Company's customers, principally in Europe, have their own
investment casting foundries, which produce parts similar to those manufactured
by the Company. The Company knows of no plans by its major North American
customers to establish such captive facilities, nor any significant expansion
plans by those customers that have such foundries now.
The Company's aluminum casting operations compete with a large number of
smaller competitors, also on the basis of price, quality and service.
See "Major Customers" above for discussion of competition in the contract
award process.
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ENVIRONMENTAL MATTERS
The Company is subject to comprehensive and changing environmental laws, which
are discussed more fully in Exhibit 99.1 attached hereto.
The Company has received test results indicating levels of polychlorinated
biphenyls ("PCBs") at its Dover, New Jersey facility which will require
remediation. These levels have been reported to the New Jersey Department of
Environmental Protection ("NJDEP"). The Company is preparing a work plan to
define the risk and to test possible clean-up options. The statement of work
must be approved by the NJDEP pursuant to an administrative consent order
entered into between the Company and the NJDEP on May 20, 1991 regarding clean-
up of the site. Various remedies are possible and could involve expenditures
ranging from $2 million to $22 million or more. The Company has recorded a $2
million long-term liability as of December 31, 1997 for this matter. Given the
uncertainties, it is possible that the estimated range of this cost and the
amount accrued will change within the next year. The indemnification discussed
below applies to the costs associated with this matter.
In addition to the above, liabilities arising for clean-up costs associated
with hazardous types of materials in several waste disposal facilities exist.
In particular, the Company has been or may be named a potentially responsible
party under the Comprehensive Environmental Response, Compensation and Liability
Act or similar state laws at eleven on-site and off-site locations. At December
31, 1997, $4.4 million of accrued environmental liabilities are included in the
consolidated balance sheet for such matters.
In connection with the Acquisition, Pechiney, S.A. is required to indemnify
the Company for environmental liabilities and obligations relating to Howmet
Corporation stemming from events occurring or conditions existing prior to
December 13, 1995, the date of the Acquisition, to the extent that such
liabilities exceed a cumulative $6 million. This indemnification applies to all
of the aforementioned environmental matters.
In addition, unrelated to Howmet Corporation's operations, the Company's
subsidiary Howmet Holdings Corporation and Pechiney, S.A. are jointly and
severally liable for environmental contamination and related costs associated
with certain discontinued mining operations owned and/or operated by a
predecessor-in-interest until the early 1960s. These liabilities include
approximately $21.3 million in remediation and natural resource damage
liabilities at the Blackbird Mine Site in Idaho and at least $8 million in
investigation and remediation costs at the Holden Mine Site in Washington.
Pechiney, S.A. has agreed to indemnify the Company for such environmental
liabilities. The Company has recorded a liability and an asset for an equal
amount related to these matters.
In the event that Pechiney, S.A. does not honor its indemnification
obligations described in any of the preceding paragraphs, the Company would
likely be responsible for such matters and the cost of addressing those matters
could be material.
EMPLOYEES
As of December 31, 1997, the Company had 10,352 employees.
* * *
The statements made herein that are not historical facts may be forward
looking statements. In connection with the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company hereby cautions
readers that the forward looking statements are subject to certain risks and
uncertainties, including without limitation those identified in Exhibit 99.1
hereto, which could cause actual results to differ materially from historical
results or those anticipated, and urges readers to review Exhibit 99.1
carefully. Factors discussed in Exhibit 99.1 include, among others, the effects
of aerospace industry economic conditions and cyclicality, concentrated customer
base, competition, pricing pressures, availability and cost of raw materials,
relationship with Thiokol, and environmental matters.
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ITEM 2 -- PROPERTIES
The Company has nineteen facilities in the United States, four in France, two
in Great Britain and two in Canada, all of which are reasonably expected to meet
the production needs of the Company. Its KHL joint venture in Japan owns one
facility. Except as indicated, the facilities described below are all owned by
Howmet Corporation or its subsidiaries:
Location (No. of Facilities) Size (Sq. Ft.)
- ----------------------------- --------------
Bethlehem, Pennsylvania 47,200 (leased)
Branford, Connecticut 138,420
City of Industry, California 50,000 (leased)
Cleveland, Ohio 100,000
Dover, New Jersey (2) 240,737
115,292
Hampton, Virginia 284,800
4,090 (leased)
Hillsboro, Texas 51,000 (leased)
LaPorte, Indiana (2) 186,100
132,748(a)
Morristown, Tennessee 85,000
Whitehall, Michigan (6) 253,018
114,270
89,461
83,208
57,605
43,029
Wichita Falls, Texas 206,300
Winsted, Connecticut 81,000
Overseas
- --------
Dives, France (capital lease) 255,858
Evron, France 81,000
Exeter, U.K. (2) 184,350
65,650
Gennevilliers, France 47,361
Georgetown, Ontario 37,000 (leased)
Le Creusot, France 156,077
Montreal, Quebec 11,200
86,194(leased)
Terai, Japan 53,000(b)
(a) Howmet Transport Services Warehouse
(b) Factory owned by Komatsu-Howmet Ltd.
ITEM 3 -- LEGAL MATTERS
The Company is a party to certain pending proceedings regarding environmental
matters. See "Environmental Matters", above. The Company, in its ordinary course
of business, is party to various other legal actions. Management believes these
are routine in nature and incidental to its operations. Management believes
that the outcome of any proceedings to which the Company currently is a party
will not have material adverse effects upon its operations, financial condition
or liquidity.
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ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 8, 1997, Thiokol and Carlyle-Blade Partners, as holders of all of
the then outstanding shares of voting stock of the Company, by written consent,
approved a resolution amending the Certificate of Incorporation of the Company
to change the name of the Company from "Blade Acquisition Corp." to "Howmet
International Inc." and to increase the authorized shares of capital stock of
the Company to 410,000,000 shares, of which 10,000,000 would be shares of
preferred stock, par value $.01 per share, and 400,000,000 would be shares of
Common Stock.
Also on October 8, 1997, Thiokol and Carlyle-Blade Partners, as holders of all
of the then outstanding shares of voting stock of the Company, by written
consent, approved a resolution amending the Certificate of Incorporation of the
Company to make the following changes:
(a) The Board of Directors was given authority to grant preferential or
preemptive rights to subscribe for or purchase shares of capital stock to
Thiokol or its subsidiaries.
(b) The designation, preferences and rights relating to the 9.0% Series A
Senior Cumulative Preferred Stock (the "Preferred Stock") theretofore set
forth in a separate Certificate of Designations were incorporated into the
Certificate of Incorporation.
(c) The obligation of the Company to redeem the Preferred Stock upon a sale by
Carlyle-Blade Partners of 25% or more of the outstanding shares of the
Company was eliminated.
(d) Provisions were added relating to the allocation of corporate
opportunities between the Company and Thiokol and the responsibilities of
persons who may be directors and/or officers of both the Company and
Thiokol when presented with certain corporate opportunities that may be
appropriate for both companies. Under these provisions, Thiokol may
pursue or engage in the same or similar activities or lines of business as
the Company without Thiokol's or any of Thiokol's officers' or directors'
incurring liability for breach of any fiduciary duty to the Company,
except as follows. A director or officer of the Company who is also a
director or officer of Thiokol who acquires knowledge of a potential
transaction or matter which may be a corporate opportunity for both the
Company and Thiokol will have satisfied his or her fiduciary duty to the
Company and its stockholders with respect to such corporate opportunity if
such director or officer acts in a manner consistent with certain policies
set forth in the Certificate of Incorporation.
(e) A provision was added expressly permitting stockholders to act by written
consent in lieu of a meeting but only for so long as Thiokol beneficially
owns 50% or more of the voting power of all classes of stock.
Thiokol, on October 8, 1997, and Carlyle-Blade Partners on November 20, 1997,
as holders of all of the then outstanding shares of voting stock of the Company,
by written consent, ratified the Company's Stock Appreciation Rights agreements
("SARs") entered into with certain key employees in 1997, reapproved all of the
SARs entered into in 1996, and specifically approved provisions of those
agreements which provided for accelerated payments in the event of certain
changes in the ownership or control of the Company or Howmet Corporation.
On November 20, 1997, Thiokol and Carlyle-Blade Partners, as holders of all of
the then outstanding shares of voting stock of the Company, by written consent,
adopted resolutions authorizing the following matters:
(a) Amendment to the SARs program (the "Amended SARs Program"). Pursuant to
this amendment, the maximum per share value of the outstanding SARs has
been limited to the difference between the initial public offering price
and the base price per share (generally $2) of the SARs and, in exchange
for accepting such limitation, each holder of SARs was granted a non-
qualified stock option to purchase, at the initial public offering price
of $15 per share, a number of shares of Common Stock equal to the number
of shares with respect to which such employee has SARs. In addition, the
Company offered holders of SARs the opportunity to cash out 20% of their
SARs (which represented the vested portion of the SARs) at the initial
public offering price.
(b) Adoption of the 1997 Stock Awards Plan and the grant of stock options
under the Plan. The 1997 Stock
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Awards Plan provides for the grant of stock options, SARs and restricted
stock (collectively, "Awards") with respect to up to 5,000,000 shares of
Common Stock. Of this amount, 4,377,500 were granted to participants under
the Amended SARs Program as discussed above. The exercise price of all
options and the base price of all SARs granted under the 1997 Stock Awards
Plan must be at not less than 100 percent of the fair market value of the
Common Stock on the date of grant. The maximum number of shares of Common
Stock with respect to which awards may be granted under the 1997 Stock
Awards Plan during any calendar year to a single plan participant shall
not exceed 400,000 shares, except in connection with options granted
pursuant to the Amended SARs Program. The 1997 Stock Awards Plan is
administered by a subcommittee of the Compensation Committee, which
consists of two Directors of the Company who are "outside Directors" as
the term is used in Internal Revenue Code ("Code") Section 162(m) and
"non-employee Directors" for the purpose of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended ("Exchange Act").
(c) Adoption of the Directors Deferred Compensation Plan. Under this Plan each
Director who is entitled to a Director's fee from the Company may elect to
have payment of part or all of his Director's compensation deferred until
such time as he ceases to be a Director. Each Director has the option of
electing the deferral of his Director's fees into a cash or phantom stock
credit account. Amounts credited to the cash account are credited with
increments (equivalent to interest at the prime rate), and amounts
credited to the phantom stock account are credited or debited with amounts
reflecting the change in the price of the Company's Common Stock and
payment of dividends, if any, from the date of the grant. All
distributions of a Director's cash or phantom stock account are made only
in cash.
EXECUTIVE OFFICERS OF THE REGISTRANT
(AS REQUIRED BY INSTRUCTION 3 TO ITEM 401(b) OF REGULATION S-K)
The By-Laws of the Company provide that the directors will be elected
annually. All directors of the Company hold office until the election and
qualification of their successors. Executive officers of the Company are chosen
by the Board of Directors of the Company or Howmet Corporation, as the case may
be, and serve at its discretion.
The following paragraphs list certain information with respect to the
executive officers of the Company as of the filing date of this Report.
David L. Squier, age 52, has been President and Chief Executive Officer of
Howmet Corporation since 1992 and has been President and Chief Executive Officer
of the Company since October 1997. Mr. Squier began his association with Howmet
Corporation when he joined the Corporate Planning department of its predecessor
in December 1971. He was involved in manufacturing management from 1976 to 1978,
became General Manager of Howmet's Wichita Falls casting facility in 1979, and
was promoted to Vice President of Operations in 1983. He was elected a Director
of Howmet Corporation in 1987. He has been a Director of the Company since
consummation of the Acquisition.
Marklin Lasker, age 60, has been a Senior Vice President of Howmet
Corporation since February 1992 and has been Senior Vice President-International
Operations of the Company since October 1997. Before joining Howmet, Mr. Lasker
was Vice President and General Manager for International Operations for the
AlliedSignal Turbocharger Division from April 1984 to September 1991. He also
held other managerial positions for AlliedSignal Aerospace Groups over a 20 year
period.
John C. Ritter, age 50, has been Senior Vice President and Chief Financial
Officer of the Company since October 1997. From April 1996 until October 1997,
Mr. Ritter was Vice President-Finance and Chief Financial Officer of Howmet
Corporation. Prior to his employment at Howmet, he served as Vice President,
Finance and Contracts, for AlliedSignal Government Electronics from 1994 to
1996, and as Vice President, Finance and Administration of Norden Systems, a
subsidiary of United Technologies Corporation, from 1991 to 1994. He has also
held the positions of Vice President, Finance and Administration, Chemical
Systems Division, and Manager, Business Analysis, Pratt & Whitney Aircraft-
Government Products Division of United Technologies Corporation.
James R. Stanley, age 56, has been Senior Vice President of Howmet
Corporation since 1992 and has been Senior
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Vice President-United States Operations of the Company since October 1997.
Previous to his employment at Howmet, Mr. Stanley was the Vice President and
General Manager of Customer Support and Marketing at the Textron Turbine Engine
Division of Textron, Inc. from August 1990 to January 1992. He also held the
position of Vice President of Operations for Textron Lycoming and held numerous
managerial positions for nearly 20 years at General Electric - Aircraft Engines.
Roland A. Paul, age 61, has been Vice President-General Counsel and
Secretary of Howmet Corporation since 1976 and has been Vice President-General
Counsel and Secretary of the Company since October 1997. Mr. Paul was previously
in private practice as an attorney at law firms in New York and Paris and served
as counsel to the United States Senate Foreign Relations Subcommittee on United
States Security Commitments Abroad.
B. Dennis Albrechtsen, age 53, has been Vice President - Manufacturing of
Howmet Corporation since September 1997. Prior to that he held the position of
General Manager of the Howmet Whitehall Castings facility beginning in 1994.
Prior to this, he served Howmet Corporation as Vice President, Airfoil
Operations beginning in October 1988. He has also held managerial positions at
Howmet Corporation's Whitehall, Michigan; Dover, New Jersey; and Wichita Falls,
Texas casting plants.
EMPLOYMENT AGREEMENTS
In October 1995 Howmet Corporation entered into employment agreements (the
"Employment Agreements") with thirteen management employees (each, an
"Executive"), including each of the executive officers listed above except Mr.
Ritter, who joined Howmet Corporation in April 1996, and Mr. Albrechtsen. The
Employment Agreements set base salary levels and provide a specified percentage
(generally from 30-60%) of base salary as a target annual bonus amount. The
Employment Agreements generally provide that in the event the Executive's
employment is terminated by Howmet other than for "cause" or by the Executive
with "good reason" (each as defined therein) within 18 months following the
Acquisition (or prior to the Executive's 62nd birthday in the case of Mr. Squier
and Mr. Paul), the Executive will be entitled to the amount of the Executive's
base pay and target bonus for a specified period ranging from 18 to 36 months,
a prorated portion of the annual bonus and any long-term incentive awards that
would have been payable in the year of termination, and certain other benefits.
In February 1996 Howmet Corporation entered into an employment agreement with
Mr. Ritter that sets a base salary and an annual bonus targeted at 40% of that
amount. In the event Mr. Ritter is terminated within the first 24 months of his
employment, he is entitled to receive, in lieu of any other severance
arrangements, 12 months base pay and target bonus, paid in a lump sum.
Mr. Albrechtsen has an employment agreement that sets a base salary and 35% of
that amount as an annual bonus target, and is generally effective until his 62nd
birthday (in 2008). In the event that Mr. Albrechtsen's employment is terminated
by Howmet Corporation without "cause" or by Mr. Albrechtsen with "good reason"
(each as defined therein), Mr. Albrechtsen is generally entitled to the amount
of his base salary and annual bonus for a period of 24 months; and if such
termination occurs after his 55th birthday, he is entitled to such amounts for a
period of 36 months.
8
<PAGE>
PART II
ITEM 5 -- MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
The Company's Common Stock, $.01 par value, trades on the New York Stock
Exchange. Other information required with respect to this Item 5 (a) is hereby
incorporated by reference to information under "Recent Market Prices and
Dividends" on page 46 of the Company's 1997 Annual Report to Stockholders. This
information is attached hereto as part of Exhibit 13.
(b) Holders.
As of March 16, 1998 there were 122 stockholders of record of the Company's
Common Stock.
(c) Dividends
During 1996 and 1997 the Company did not declare or pay any dividends. The
Company does not expect to pay cash dividends on the Common Stock for the
foreseeable future. Certain of the Company's debt instruments contain financial
covenants and other restrictions that prohibit or restrict the payment of
dividends by the Company to its stockholders. Information with respect to
restrictions on the payment of dividends is incorporated by reference to
information contained in Note 7 of "Notes to Financial Statements" on pages 25-
27 of the Company's 1997 Annual Report to Stockholders. This information is
attached hereto as part of Exhibit 13.
ITEM 6 -- SELECTED FINANCIAL DATA
Information required with respect to this Item 6 is hereby incorporated by
reference to information under "Selected Financial Data" on page 47 of the
Company's 1997 Annual Report to Stockholders. This information is attached
hereto as part of Exhibit 13.
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required with respect to this Item 7 is hereby incorporated by
reference to information under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 41- 46 of the Company's
1997 Annual Report to Stockholders. This information is attached hereto as part
of Exhibit 13.
ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Information with respect to this Item 7A is not required pursuant to
Instruction 1 of the General Instructions to Paragraphs 305(a), 305(b), 305(c),
305(d), and 305(e) of Item 305 of Regulation S-K.
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required with respect to this Item 8 are hereby
incorporated by reference to the Financial Statements of the Company included on
pages 17 through 40 of the Company's 1997 Annual Report to Stockholders. This
information is attached hereto as part of Exhibit 13. See "Item 14 -- Documents
Filed as Part of this Report--(1) Financial Statements", page 11. The
supplemental financial information required with respect to this Item 8 is filed
as "Financial Statement Schedules" pursuant to Item 14. See "Item 14 --
Documents Filed as Part of this Report--(2) Financial Statement Schedules", page
11.
9
<PAGE>
Information with respect to quarterly financial highlights is incorporated by
reference to information contained in Note 22 of "Notes to Financial Statements"
on page 38 of the Company's 1997 Annual Report to Stockholders. This information
is attached hereto as part of Exhibit 13.
ITEM 9 -- CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information concerning the Company's directors and nominees for Director is
included on pages 2 through 5 of the Company's definitive Proxy Statement dated
March 24, 1998, and is incorporated herein by reference. Information concerning
the Company's officers is included on pages 7 through 8 of Part I hereof.
Information concerning disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is set forth on page 6 of the Company's definitive Proxy
Statement dated March 24, 1998, and is incorporated herein by reference.
ITEM 11 -- EXECUTIVE COMPENSATION
Information required with respect to this Item 11 is hereby incorporated by
reference to information under "Executive Compensation" on pages 7-15 of the
Company's definitive Proxy Statement dated March 24, 1998.
ITEM 12 -- PRINCIPAL STOCKHOLDERS
Information required with respect to this Item 12 is hereby incorporated by
reference to information under "Voting Securities and Principal Holders Thereof"
on pages 5-6 of the Company's definitive Proxy Statement dated March 24, 1998.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required with respect to this Item 13 is hereby incorporated by
reference to information under "Thiokol Stock Options," and "Employment
Agreements" on page 12, "Transactions with Management" on page 13 and
"Arrangements Among the Company, Thiokol and Carlyle" on pages 13-15 of the
Company's definitive Proxy Statement dated March 24, 1998.
10
<PAGE>
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
(1) -- FINANCIAL STATEMENTS
The following Financial Statements of the Company and its subsidiaries are
included on pages 17 through 40 of the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1997. This information is attached as
part of Exhibit 13 and is incorporated herein by reference:
Statements of Income -- Years Ended December 31, 1997 and December 31, 1996,
the Period from December 14, 1995 to December 31, 1995 (Howmet International
Inc. Consolidated), and the Period from January 1, 1995 to December 13, 1995
(Howmet Predecessor Company Combined)
Consolidated Balance Sheets -- December 31, 1997 and December 31, 1996
Statements of Cash Flows -- Years Ended December 31, 1997 and December 31, 1996,
the Period from December 14, 1995 to December 31, 1995 (Howmet International
Inc. Consolidated), and the Period from January 1, 1995 to December 13, 1995
(Howmet Predecessor Company Combined)
Statements of Common Stockholders' Equity and Redeemable Preferred Stock --Years
Ended December 31, 1997 and December 31, 1996, the Period from December 14, 1995
to December 31, 1995 (Howmet International Inc. Consolidated), and the Period
from January 1, 1995 to December 13, 1995 (Howmet Predecessor Company Combined)
Notes to Financial Statements
Management's Report on Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The following reports of Price Waterhouse and Befec-Price Waterhouse for the
year ended December 31, 1995 are included as a separate section of Item 14 (a)
(1) on pages A-1 to A-3 of this Report:
Report of Price Waterhouse, Independent Accountants of Howmet
Limited A-1
Auditor's Report on the Annual Accounts of Howmet S.A. by Befec-
Price Waterhouse A-2
Auditor's Report on the Annual Accounts of CIRAL SNC by Befec-
Price Waterhouse A-3
(2) -- FINANCIAL STATEMENT SCHEDULES
The Financial Statement Schedules of the Company and its subsidiaries listed
below are filed as part of this Report on Form 10-K and should be read in
conjunction with the Financial Statements of the Company:
Schedule I -- Condensed Financial Information of Howmet
International Inc. (Parent Company) I-1 to I-4
Schedule II -- Valuation and Qualifying
Accounts and Reserves II-1
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are otherwise inapplicable, and therefore have been
omitted.
11
<PAGE>
(3) -- EXHIBITS
Regulation S-K
Exhibit No. Description
- ----------- -----------
3.1 Restated Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 filed October 9, 1997 (registration no. 333-
37573)).
3.2 Restated By-Laws of the Company.
4.1 Specimen Certificate of Common Stock of the Company (incorporated
herein by reference to Exhibit 4.1 to Amendment No. 3 to the Company's
Registration Statement on Form S-1 filed November 21, 1997
(registration no. 333-37573)).
4.2 Specimen Certificate of the 9.0% Series A Senior Cumulative Preferred
Stock.
4.3 IPO Agreement dated as of October 8, 1997 by and among the Company,
Thiokol Corporation, Thiokol Holding Company and Carlyle-Blade
Acquisition Partners, L.P. (incorporated herein by reference to Exhibit
4.2 to Amendment No. 2 to the Company's Registration Statement on Form
S-1 filed November 12, 1997 (registration no. 333-37573)).
4.4 Amended and Restated Shareholders Agreement dated as of December 2,
1997 by and among the Company, Thiokol Corporation, Thiokol Holding
Corporation and Carlyle-Blade Acquisition Partners, L.P.
4.5 Corporate Agreement dated as of December 2, 1997 by and among the
Company, Thiokol Corporation and Thiokol Holding Corporation.
4.6 Registration Rights Agreement dated as of December 2, 1997 by and
between the Company and Carlyle-Blade Acquisition Partners, L.P.
4.7 Registration Rights Agreement dated as of December 7, 1995, among
Howmet Corporation, BT Securities Corporation, and Lehman Brothers,
Inc. (incorporated herein by reference to Exhibit 4.1 to Howmet
Corporation's Registration Statement on Form S-4 filed January 9, 1996
(registration no. 333-00200)).
4.8(a) Indenture dated as of December 7, 1995 between Howmet Corporation and
Marine Midland Bank, as Trustee (incorporated herein by reference to
Exhibit 4.2(a) to Howmet Corporation's Registration Statement on Form
S-4 filed January 9, 1996 (registration no. 333-00200)).
4.8(b) Supplemental Indenture dated as of December 13, 1995 between Howmet
Corporation and Marine Midland Bank, as Trustee (incorporated herein by
reference to Exhibit 4.2 to Amendment no. 2 to Howmet Corporation's
Registration Statement on Form S-4 filed April 1, 1996 (registration
no. 333-00200)).
4.8(c) Supplemental Indenture dated as of December 15, 1997 supplementing
Indenture dated December 7, 1995 between Howmet Corporation, as Issuer
and Marine Midland Bank, as Trustee.
4.9 Copies of the executed original 10% Senior Subordinated Notes due 2003
of Howmet Corporation (the "Original Notes"), authenticated and
delivered by Marine Midland Bank as Trustee on December 7, 1995
(incorporated herein by reference to Exhibit 4.4 to Howmet
Corporation's Registration Statement on Form S-4 filed January 9, 1996
(registration no. 333-00200)).
4.10 Form of 10% Senior Subordinated Notes due 2003 of Howmet Corporation
offered in exchange for the Original Notes (included in Exhibit
4.8(a)).
4.11 Credit Agreement dated as of December 16, 1997 among Howmet
Corporation, various institutions as Lenders, ABN AMRO Bank N.V. and
Bankers Trust Company as Co-Documentation Agents, and The First
National Bank of Chicago as Agent, together with certain collateral
documents attached thereto as exhibits, including the Pledge Agreements
among Howmet Ltd. and, Howmet S.A., Howmet Corporation, and the First
National Bank of Chicago.
4.12 Blade Receivables Master Trust Amended and Restated Pooling and
Servicing Agreement dated April 18, 1996 among Blade Receivables
Corporation as Transferor, Howmet Corporation as Servicer
12
<PAGE>
and Manufacturers and Traders Trust Company as Trustee together with
certain collateral documents attached thereto as exhibits, including
the Amended and Restated Receivables Purchase Agreement dated as of
April 18, 1996 between Howmet Corporation and certain subsidiaries of
Howmet Corporation, as Settlors, and Blade Receivables Corporation as
Buyer (incorporated herein by reference to Exhibit 4.7 to Howmet
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 filed March 31, 1997.)
4.13 Repurchase Agreement dated May 16, 1997 (under the Blade Receivables
Master Trust Amended and Restated Pooling and Servicing Agreement dated
April 16, 1996 (Exhibit 4.12)), among Howmet Corporation, Howmet
Cercast (U.S.A.), Inc., Howmet Refurbishment, Inc., Howmet-Tempcraft,
Inc., Turbine Components Corporation, Blade Receivables Corporation,
and Manufacturers and Traders Trust Company, as Trustee (incorporated
herein by reference to Exhibit 4.14 to the Company's Registration
Statement on Form S-1 filed October 9, 1997 (registration no. 333-
37573)).
4.14 Amending Agreement dated August 29, 1997 (amending the Blade
Receivables Master Trust Amended and Restated Pooling and Servicing
Agreement dated April 18, 1996 (Exhibit 4.12)) among Blade Receivables
Corporation, Howmet Corporation, Manufacturers and Traders Trust
Company, as Trustee, Falcon Asset Securitization Corporation, Alpine
Securitization Corp., Credit Suisse First Boston, New York Branch, and
The First National Bank of Chicago, as Agent for Falcon Asset
Securitization Corporation and Alpine Securitization Corp.
(incorporated herein by reference to Exhibit 4.15 to the Company's
Registration Statement on Form S-1 filed October 9, 1997 (registration
no. 333-37573)).
4.15(a) Form of Amended Series A Note Due 1999 (incorporated herein by
reference to Exhibit 4.16(a) to Amendment No. 3 to the Company's
Registration Statement on Form S-1 filed November 21, 1997
(registration no. 333-37573)).
4.15(b) Form of Series B Note Due 1999 (incorporated herein by reference to
Exhibit 4.16(b) to Amendment No. 3 to the Company's Registration
Statement on Form S-1 filed November 21, 1997 (registration no. 333-
37573)).
4.15(c) Form of Amendment No. 1 to Series B Notes (incorporated herein by
reference to Exhibit 4.16(c) to Amendment No. 3 to the Company's
Registration Statement on Form S-1 filed November 21, 1997
(registration no. 333-37573)).
4.15(d) Form of Amended and Restated Series B Note Due 1999 (incorporated
herein by reference to Exhibit 4.16(d) to Amendment No. 3 to the
Company's Registration Statement on Form S-1 filed November 21, 1997
(registration no. 333-37573)).
4.15(e) Form of Amended Series C Note Due 1999 (incorporated herein by
reference to Exhibit 4.16(e) to Amendment No. 3 to the Company's
Registration Statement on Form S-1 filed November 21, 1997
(registration no. 333-37573)).
10.1 Howmet Corporation Annual Bonus Plan (incorporated herein by reference
to Exhibit 10.1 to Amendment No. 1 to Howmet Corporation's Registration
Statement on Form S-4 filed January 17, 1996 (registration no. 333-
00200)).
10.2 Howmet Restructuring Cash Incentive Plan (incorporated herein by
reference to Exhibit 10.2 to Amendment No. 1 to Howmet Corporation's
Registration Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.3 Howmet Corporation Excess Benefit Plan (incorporated herein by
reference to Exhibit 10.4 to Amendment No. 1 to Howmet Corporation's
Registration Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.4 Howmet Corporation Transaction Incentive Payments Plan (incorporated
herein by reference to Exhibit 10.5 to Amendment No. 1 to Howmet
Corporation's Registration Statement on Form S-4 filed January 17, 1996
(registration no. 333-00200)).
10.5 Howmet Corporation Enhanced Bonus Program for Employees Grade 22 and
Above (incorporated herein by reference to Exhibit 10.6 to Amendment
No. 1 to Howmet Corporation's Registration Statement on Form S-4 filed
January 17, 1996 (registration no. 333-00200)).
13
<PAGE>
10.6 1986 Howmet Corporation Deferred Compensation Plan (incorporated herein
by reference to Exhibit 10.7 to Amendment No. 1 to Howmet Corporation's
Registration Statement on Form S-4 filed January 17, 1996
(registration no. 333-00200)).
10.7 Howmet Corporation 1995 Executive Deferred Compensation Plan
(incorporated herein by reference to Exhibit 10.8 to Amendment No. 1 to
Howmet Corporation's Registration Statement on Form S-4 filed January
17, 1996 (registration no. 333-00200)).
10.8 Employment Agreement dated October 4, 1995, between Howmet Corporation
and Mark Lasker (incorporated herein by reference to Exhibit 10.11 to
Howmet Corporation's Registration Statement on Form S-4 filed January
9, 1996 (registration no. 333-00200)).
10.9 Employment Agreement dated October 4, 1995, between Howmet Corporation
and James Stanley (incorporated herein by reference to Exhibit 10.13 to
Howmet Corporation's Registration Statement on Form S-4 filed January
9, 1996 (registration no. 333-00200)).
10.10 Employment Agreement dated October 4, 1995, between Howmet Corporation
and David Squier (incorporated herein by reference to Exhibit 10.17 to
Howmet Corporation's Registration Statement on Form S-4 filed January
9, 1996 (registration no. 333-00200)).
10.11 Employment Agreement dated July 1, 1984, between Howmet Turbine
Components Corporation and B. Dennis Albrechtsen (incorporated herein
by reference to Exhibit 10.18 to Howmet Corporation's Registration
Statement on Form S-4 filed January 9, 1996 (registration no. 333-
00200)).
10.12 Letter Agreement regarding payment of life insurance between Howmet
Corporation and David L. Squier (incorporated herein by reference to
Exhibit 10.19 to Amendment No. 1 to Howmet Corporation's Registration
Statement on Form S-4 filed January 17, 1996 (registration no. 333-
00200)).
10.13(a) Tax Sharing Agreement among Howmet Corporation, Howmet Management
Services, Inc., Howmet-Tempcraft, Inc., Howmet Thermatech Canada, Inc.,
Howmet Transport Services, Inc., Howmet Sales, Inc., Howmet
Refurbishment, Inc., Turbine Components Corporation, Blade Receivables
Corporation, a Nevada corporation, and Howmet Cercast (USA), Inc.,
dated as of December 13, 1995 (incorporated herein by reference to
Exhibit 10.20(a) to Howmet Corporation's Registration Statement on Form
S-4 filed January 9, 1996 (registration no. 333-00200)).
10.13(b) Tax Sharing Agreement among Blade Acquisition Corp., Pechiney
Corporation, Howmet Insurance Co., Inc., Howmet Corporation and all of
its directly and indirectly owned subsidiaries, dated as of December
13, 1995 (incorporated herein by reference to Exhibit 10.20(b) to
Howmet Corporation's Registration Statement on Form S-4 filed January
9, 1996 (registration no. 333-00200)).
10.14 Amended and Restated Management Agreement between Howmet Corporation
and TCG Holdings, L.L.C., dated as of December 2, 1997.
10.15 Assignment and Assumption Agreement between Howmet Holdings Acquisition
Corp. and Howmet Acquisition Corp., dated as of December 6, 1995 and
Indemnification Provisions of the Stock Purchase Agreement among
Pechiney, Pechiney International S.A., Howmet Cercast S.A. and Blade
Acquisition Corp., dated as of October 12, 1995 (incorporated herein by
reference to Exhibit 10.23 to Amendment No. 1 to Howmet Corporation's
Registration Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.16 Revised Employment Letter dated February 13, 1996, between Howmet
Corporation and John C. Ritter (incorporated herein by reference to
Exhibit 10.24 to Amendment No. 3 to Howmet Corporation's Registration
Statement on Form S-4 filed June 11, 1996 (registration no. 333-
00200)).
10.17 Stock Appreciation Right Agreement between Howmet Corporation and David
L. Squier dated May 17, 1996 (incorporated herein by reference to
Exhibit 10.24 to Howmet Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 29, 1996, filed August 28, 1996.)
10.18 Stock Appreciation Right Agreement between Howmet Corporation and James
Stanley dated May 17, 1996 (incorporated herein by reference to Exhibit
10.25 to Howmet Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 29, 1996, filed August 28, 1996.)
10.19 Stock Appreciation Right Agreement between Howmet Corporation and
Marklin Lasker dated May 17, 1996 (incorporated herein by reference to
Exhibit 10.26 to Howmet Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 29, 1996, filed August 28, 1996.)
14
<PAGE>
10.20 Stock Appreciation Right Agreement between Howmet Corporation and John
C. Ritter dated May 17, 1996 (incorporated herein by reference to
Exhibit 10.27 to Howmet Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 29, 1996, filed August 28, 1996).
10.21 Stock Appreciation Right Agreement between Howmet Corporation and B.
Dennis Albrechtsen dated May 17, 1996 (incorporated herein by reference
to Exhibit 10.29 to Howmet Corporation's Quarterly Report on Form 10-Q
for the quarter ended June 29, 1996, filed August 28, 1996).
10.22 Howmet Corporation Amended and Restated Special 1995 Executive Deferred
Compensation Plan effective as of November 1, 1995 (incorporated herein
by reference to Exhibit 10.30 to Howmet Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 29, 1996, filed August 28,
1996).
10.23 The Howmet Corporation Nonqualified Deferred Compensation Trust dated
April 29, 1996 (incorporated herein by reference to Exhibit 10.31 to
Howmet Corporation's Quarterly Report on Form 10-Q for the quarter
ended June 29, 1996, filed August 28, 1996).
10.24 Howmet International Inc. 1997 Stock Awards Plan (incorporated herein
by reference to Exhibit 10.27 to Amendment No. 3 to the Company's
Registration Statement on Form S-1 filed November 21, 1997
(registration no. 333-37573)).
10.25 Intercompany Services Agreement between the Company and Thiokol
Corporation dated December 2, 1997.
10.26 Agreement and Amendment to Stock Appreciation Right Agreement between
Howmet Corporation and David L. Squier dated November 1997.
10.27 Agreement and Amendment to Stock Appreciation Right Agreement between
Howmet Corporation and Marklin Lasker dated November 10, 1997.
10.28 Agreement and Amendment to Stock Appreciation Right Agreement between
Howmet Corporation and James Stanley dated November 10, 1997.
10.29 Agreement and Amendment to Stock Appreciation Right Agreement between
Howmet Corporation and John C. Ritter dated November 1997.
10.30 Agreement and Amendment to Stock Appreciation Right Agreement between
Howmet Corporation and B. Dennis Albrechtsen dated November 8, 1997.
13 Portions of the 1997 Annual Report to Stockholders of the Company.
21 List of Significant Subsidiaries
23 Consent of Ernst & Young LLP, Independent Auditors
27.1 Financial Data Schedule
99.1 Cautionary Statement for Purposes of the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the last quarter of
1997.
15
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
HOWMET INTERNATIONAL INC.
Dated: March 20, 1998 By: /s/ John C. Ritter
-----------------------------------
John C. Ritter
Senior Vice President and Chief
Financial Officer
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.
NAME TITLE DATE
---- ----- ----
/s/ James R. Wilson Chairman of the Board and February 9, 1998
- ------------------- Director
James R. Wilson
/s/ David L. Squier Director, President and Chief February 9, 1998
- ------------------- Executive Officer (principal
David L. Squier executive officer)
/s/ John C. Ritter Senior Vice President and February 9, 1998
- ------------------ Chief Financial Officer
John C. Ritter (principal financial officer)
/s/ George T. Milano Corporate Controller February 9, 1998
- -------------------- (principal accounting officer)
George T. Milano
/s/ William E. Conway, Jr. Director February 9, 1998
- --------------------------
William E. Conway, Jr.
/s/ Richard L. Corbin Director February 9, 1998
- ---------------------
Richard L. Corbin
/s/ Edsel D. Dunford Director February 9, 1998
- --------------------
Edsel D. Dunford
/s/ James R. Mellor Director February 9, 1998
- -------------------
James R. Mellor
/s/ D. Larry Moore Director February 9, 1998
- ------------------
D. Larry Moore
/s/ James D. Woods Director February 9, 1998
- ------------------
James D. Woods
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
11 July 1996
To the Board of Directors of Howmet Limited
We have audited the balance sheet of Howmet Limited ("the Company") as of 31
December 1995, and the related profit and loss account and statements of changes
in cash flows and changes in shareholders' equity for the year ended 31 December
1995, all expressed in pounds sterling and prepared on the basis set forth in
the financial statements (not separately presented herein). Those financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with United Kingdom generally accepted
auditing standards which do not differ in any material respect from auditing
standards generally accepted in the United States. These 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, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at 31 December 1995
and the results of the Company's operations and its cash flows for the year
ended 31 December 1995 in conformity with generally accepted accounting
principles in the United Kingdom.
/s/ Price Waterhouse
Bristol, England
A-1
<PAGE>
AUDITOR'S REPORT ON THE ANNUAL ACCOUNTS
(YEAR ENDED DECEMBER 31, 1995)
To the Stockholders
Howmet SA
68 Rue du Moulin du Cage
92230 Gennevilliers
The following report is a free translation of the statutory auditor's report
issued in France except with respect to the reference to generally accepted
auditing standards in the United States (see paragraph 1, below).
In accordance with the terms of our appointment by the General Meeting, we
hereby present our report for the year ended December 31, 1995 on:
- the audit of the annual accounts (balance sheet and income statement) of
Howmet SA (not separately presented herein);
- the specific procedures and disclosures required by law.
The Board of Directors is responsible for the preparation of the annual
accounts. Our responsibility is to express an opinion on these accounts based
on our audit.
1. OPINION ON THE ANNUAL ACCOUNTS
We conducted our audit in accordance with generally accepted auditing
standards (GAAS) in France (which are substantially similar to generally
accepted auditing standards in the United States). These standards require the
auditor to perform such tests and procedures as give reasonable assurance that
the annual accounts are free from material misstatement. An audit includes
examination, on a test basis, of evidence relevant to the information contained
in these accounts. It also includes an assessment of the accounting policies
used and of significant estimates made by the Board of Directors in the
preparation of the annual accounts, and an evaluation of the overall adequacy of
the presentation of these accounts. We believe that our audit provides a
reasonable basis for the opinion expressed below.
In our opinion, the annual accounts have been properly prepared and present
fairly the company's results for the year ended December 31, 1995, and its
assets, liabilities and financial position as at that date in accordance with
accounting principles generally accepted in France.
2. SPECIFIC PROCEDURES AND DISCLOSURES
We have also performed the specific procedures required by the law, in
accordance with auditing standards.
We have no comments to make on the fair presentation or on the consistency
with the annual accounts of the information given in the Management Report of
the Board of Directors or in documents sent to the stockholders on the company's
financial position and annual accounts.
In accordance with the law, we have ensured that the necessary disclosures on
acquisitions of participating and controlling interests and on the identity of
stockholders have been provided in the Management Report.
Signed in Paris on May 23, 1996
The Auditor
/s/ Befec-Price Waterhouse
A-2
<PAGE>
AUDITOR'S REPORT ON THE ANNUAL ACCOUNTS
(YEAR ENDED DECEMBER 31, 1995)
To the Stockholders
CIRAL SNC
ZAC de la Presaie
53600 Evron
The following report is a free translation of the statutory auditor's report
issued in France except with respect to the reference to generally accepted
auditing standards in the United States (see paragraph 1, below).
In accordance with the terms of our appointment by the General Meeting, we
hereby present our report for the year ended December 31, 1995 on:
- the audit of the annual accounts (balance sheet and income statement) of
Ciral SNC (not separately presented herein);
- the specific procedures and disclosures required by law.
The manager is responsible for the preparation of the annual accounts. Our
responsibility is to express an opinion on these accounts based on our audit.
1. OPINION ON THE ANNUAL ACCOUNTS
We conducted our audit in accordance with generally accepted auditing
standards (GAAS) in France (which are substantially similar to generally
accepted auditing standards in the United States). These standards require the
auditor to perform such tests and procedures as to give reasonable assurance
that the annual accounts are free from material misstatement. An audit includes
examination, on a test basis, of evidence relevant to the information contained
in these accounts. It also includes an assessment of the accounting policies
used and of significant estimates made by the manager in the preparation of the
annual accounts, and an evaluation of the overall adequacy of the presentation
of these accounts. We believe that our audit provides a reasonable basis for the
opinion expressed below.
In our opinion, the annual accounts have been properly prepared and present
fairly the company's results for the year ended December 31, 1995, and its
assets, liabilities and financial position as at that date in accordance with
accounting principles generally accepted in France.
2. SPECIFIC PROCEDURES AND DISCLOSURES
We have also performed the specific procedures required by the law, in
accordance with auditing standards.
We have no comments to make on the fair presentation or on the consistency
with the annual accounts of the information given in the Management Report of
the manager or in documents sent to the stockholders on the company's financial
position and annual accounts.
Signed in Paris on May 15, 1996
The Auditor
/s/ Befec-Price Waterhouse
A-3
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF
HOWMET INTERNATIONAL INC. (PARENT COMPANY)
CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------------------- -------------------
<S> <C> <C>
ASSETS
Current deferred income taxes $ 1.0 $ -
Investment in subsidiaries 327.6 273.7
--------------------- ------------------
Total assets $328.6 $273.7
===================== ==================
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current accrued liabilities $ 2.9 $ -
Redeemable preferred stock 60.0 54.9
Stockholders' equity 265.7 218.8
--------------------- ------------------
Total liabilities, redeemable preferred stock and
stockholders' equity $328.6 $273.7
===================== ==================
</TABLE>
See notes to the condensed financial statements.
I-1
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF
HOWMET INTERNATIONAL INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 11, 1995
YEAR ENDED DECEMBER 31, (INCEPTION) TO
1997 1996 DECEMBER 31, 1995
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Public stock offering costs $(2.9) $ - $ -
Income tax benefit 1.0 - -
Equity in earnings of subsidiaries before
extraordinary item 73.9 25.6 -
-------------------- -------------------- --------------------
Income before extraordinary item 72.0 25.6 -
Extraordinary item subsidiary's loss on early
retirement of debt, net of income taxes of $7.9 (12.3) - -
-------------------- -------------------- --------------------
Net income 59.7 25.6
Payment-in-kind dividends on redeemable
preferred stock (5.1) (4.6) (.2)
-------------------- -------------------- --------------------
Net income (loss) applicable to common stock $54.6 $21.0 $(.2)
==================== ==================== ====================
Per common share amounts, basic and diluted:
Income before extraordinary item $ .67 $ .21 $ -
Extraordinary item (.12) - -
-------------------- -------------------- --------------------
Net income $ .55 $ .21 $ -
==================== ==================== ====================
</TABLE>
See notes to the condensed financial statements.
I-2
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF
HOWMET INTERNATIONAL INC. (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the parent company only financial statements, Howmet International Inc.'s
("HII") investments in its wholly-owned subsidiaries are stated at cost plus the
undistributed earnings and cumulative translation adjustments of the
subsidiaries, net of a $4 million payable to a subsidiary.
The parent company only financial statements should be read in conjunction with
HII's consolidated financial statements, included elsewhere in this Form 10K.
2. CONTINGENCIES
HII's wholly-owned subsidiary, Howmet Corporation, has received test results
indicating levels of polychlorinated biphenyls ("PCBs") at its Dover, New Jersey
facility which will require remediation. These levels have been reported to the
New Jersey Department of Environmental Protection ("NJDEP"), and Howmet
Corporation is preparing a work plan to define the risk and to test possible
clean-up options. The statement of work must be approved by the NJDEP pursuant
to an Administrative Consent Order entered into between Howmet Corporation and
NJDEP on May 20, 1991 regarding clean-up of the site. Various remedies are
possible and could involve expenditures ranging from $2 million to $22 million
or more. Howmet Corporation has recorded a $2 million long-term liability as of
December 31, 1997 and 1996 for this matter. Given the uncertainties, it is
possible that the estimated range of this cost and the amount accrued will
change within a one year period. The indemnification discussed below applies to
the costs associated with this matter.
In addition to the above, liabilities arising for clean-up costs associated with
hazardous types of materials in several waste disposal facilities exist. In
particular, Howmet Corporation has been or may be named a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act or similar state laws at eleven on-site and off-site
locations. At December 31, 1997 and 1996, $4.4 million of accrued environmental
liabilities are included in the consolidated balance sheet for such matters.
In connection with the acquisition by HII of Howmet Corporation's parent holding
company, Howmet Holdings Corporation, and the Cercast group of companies (the
"Acquisition"), Pechiney, S.A. indemnified HII for environmental liabilities
relating to Howmet Corporation and stemming from events occurring or conditions
existing on or prior to the Acquisition, to the extent that such liabilities
exceed a cumulative $6 million. This indemnification applies to all of the
aforementioned environmental matters. It is highly probable that changes in any
of the aforementioned accrued liabilities will result in an equal change in the
amount receivable from Pechiney, S.A. pursuant to this indemnification.
In addition to the above environmental matters, and unrelated to Howmet
Corporation, Howmet Holdings Corporation, HII's wholly-owned subsidiary, and
Pechiney, S.A. are jointly and severally liable for environmental contamination
and related costs associated with certain discontinued mining operations owned
and/or operated by a predecessor-in-interest until the early 1960s. These
liabilities include approximately $21.3 million in remediation and natural
resource damage liabilities at the Blackbird Mine site in Idaho and a minimum of
$8 million in investigation and remediation costs at the Holden Mine site in
Washington. Pechiney, S.A. has agreed to indemnify HII for such liabilities.
HII has assigned this indemnification to Howmet Holdings Corporation. In
connection with these environmental matters, Howmet Holdings Corporation
recorded a $29.3 million liability and an equal $29.3 million receivable from
Pechiney, S.A. as of December 31, 1997 and $24.7 million for both the liability
and receivable as of December 31, 1996.
I-3
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF
HOWMET INTERNATIONAL INC. (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
2. CONTINGENCIES (CONTINUED)
Estimated environmental costs are not expected to materially impact the
financial position or the results of HII's subsidiaries' operations in future
periods. However, environmental clean-up periods are protracted in length and
environmental costs in future periods are subject to changes in environmental
remediation regulations. Any losses which are not covered by the Pechiney, S.A.
indemnifications and which are in excess of amounts currently accrued will be
charged to operations in the periods in which they occur.
3. CASH FLOWS INFORMATION
HII had no cash flows for the years ended December 31, 1997 and 1996. In the
October 11, 1995 to December 31, 1995 period, HII: (i) received $50 million
from the issuance of redeemable preferred stock, (ii) received $200 million from
the issuance of common stock, (iii) returned $4 million to common stockholders
and (iv) invested $246 million in its subsidiaries.
I-4
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
HOWMET INTERNATIONAL INC.
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT COSTS CHARGED TO DEDUCTIONS BALANCE AT
DESCRIPTION BEGINNING OF PERIOD AND EXPENSES OTHER ACCOUNTS FROM RESERVES END OF PERIOD
- ---------------------------------- ------------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
HOWMET INTERNATIONAL INC. CONSOLIDATED:
FOR THE YEAR ENDED DECEMBER 31, 1997
Reserves:
Accounts Receivable $ 5.6 6.0 (.7) (6.5) $ 4.4
Inventories $ 7.3 6.7 (1.9) (4.6) $ 7.5
Deferred income tax
valuation allowance $22.2 (1.6) (1.3) (1.3) (a) $18.0
FOR THE YEAR ENDED DECEMBER 31, 1996
Reserves:
Accounts Receivable $ 8.2 4.4 (7.0) $ 5.6
Inventories $12.0 4.5 (2.2) (7.0) $ 7.3
Deferred income tax
valuation allowance $26.4 (2.2) (1.1) (.9) (a) $22.2
PERIOD DECEMBER 14, 1995 TO DECEMBER 31, 1995
Reserves:
Accounts Receivable $ 8.3 - (.1) - $ 8.2
Inventories $ 8.6 1.2 2.2 - $12.0
Deferred income tax
valuation allowance $26.3 .1 - - $26.4
HOWMET PREDECESSOR COMPANY COMBINED:
PERIOD JANUARY 1, 1995 TO DECEMBER 13, 1995
Reserves:
Accounts Receivable $ 6.1 1.3 1.9 (1.0) $ 8.3
Inventories $ 5.1 7.9 (1.3) (3.1) $ 8.6
Deferred income tax
valuation allowance $18.0 8.3 - - $26.3
</TABLE>
(a) Expired net operating loss ("NOL").
(b) Amounts for periods prior to 1997 have been adjusted to include valuation
allowances for state NOLs and to exclude intercompany profit elimination
reserves previously presented herein.
II-1
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
HOWMET INTERNATIONAL INC.
As of December 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - OFFICES.......................................................... 1
Section 1. Registered Office............................................ 1
Section 2. Other Offices................................................ 1
ARTICLE II - MEETINGS OF STOCKHOLDERS........................................ 1
Section 1. Place of Meetings............................................ 1
Section 2. Annual Meeting of Stockholders............................... 1
Section 3. Quorum; Adjourned Meetings and Notice Thereof................ 1
Section 4. Voting....................................................... 2
Section 5. Proxies...................................................... 2
Section 6. Special Meetings............................................. 2
Section 7. Notice of Stockholder's Meetings............................. 2
Section 8. Notice of Stockholder Business and Nominations............... 3
Section 9. Maintenance and Inspection of Stockholder List............... 5
Section 10. Stockholder Action by Written Consent........................ 6
ARTICLE III - DIRECTORS...................................................... 6
Section 1. Number of Directors.......................................... 6
Section 2. Vacancies.................................................... 6
Section 3. Powers....................................................... 6
Section 4. Place of Directors' Meetings................................. 7
Section 5. Regular Meetings............................................. 7
Section 6. Special Meetings............................................. 7
Section 7. Quorum....................................................... 7
Section 8. Action Without Meeting....................................... 7
Section 9. Telephonic Meetings.......................................... 7
Section 10. Committees of Directors...................................... 8
Section 11. Compensation................................................. 8
ARTICLE IV - OFFICERS........................................................ 9
Section 1. Officers..................................................... 9
Section 2. Election of Officers......................................... 9
Section 3. Subordinate Officers......................................... 9
Section 4. Compensation of Officers..................................... 9
Section 5. Term of Office; Removal and Vacancies........................ 9
Section 6. Chairman of the Board........................................ 9
Section 7. President.................................................... 9
Section 8. Vice Presidents..............................................10
i
<PAGE>
Section 9. Secretary....................................................10
Section 10. Assistant Secretaries........................................11
Section 11. Treasurer....................................................11
Section 12. Assistant Treasurer..........................................11
ARTICLE V - CERTIFICATES OF STOCK............................................11
Section 1. Certificates.................................................11
Section 2. Signatures on Certificates...................................11
Section 3. Statement of Stock Rights, Preferences, Privileges...........12
Section 4. Lost Certificates............................................12
Section 5. Transfer of Stock............................................12
Section 6. Fixing Record Date...........................................13
Section 7. Registered Stockholders......................................13
ARTICLE VI - INDEMNIFICATION.................................................13
Section 1. Actions by Others............................................13
Section 2. Actions by or in the Right of the Corporation................14
Section 3. Successful Defense...........................................14
Section 4. Right to Indemnification.....................................15
Section 5. Specific Authorization.......................................15
Section 6. Suit Against Corporation.....................................15
Section 7. Corporation Bound............................................16
Section 8. Preclusion...................................................16
Section 9. Right of Indemnity Not Exclusive.............................16
Section 10. Insurance....................................................17
Section 11. Invalidity of any Provisions of this Article.................17
Section 12. Definitions..................................................17
Section 13. Notice.......................................................19
ARTICLE VII - GENERAL PROVISIONS.............................................20
Section 1. Dividends....................................................20
Section 2. Funds Available for Contingencies............................20
Section 3. Checks.......................................................20
Section 4. Fiscal Year..................................................20
Section 5. Corporate Seal...............................................20
Section 6. Manner of Giving Notice......................................20
Section 7. Waiver of Notice.............................................21
Section 8. Annual Statement.............................................21
ARTICLE VIII - AMENDMENTS....................................................21
Section 1. Amendment by Directors or Stockholders.......................21
ii
<PAGE>
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The address of the registered office of
-----------------
the Corporation in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
name of its registered agent at such address is The Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have offices at
-------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of stockholders shall be held
-----------------
at any place within or outside the State of Delaware designated by the Board of
Directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the Corporation.
Section 2. Annual Meeting of Stockholders. The annual meeting of
------------------------------
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 3. Quorum; Adjourned Meetings and Notice Thereof. A majority
---------------------------------------------
of the stock issued and outstanding and entitled to vote at any meeting of
stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these By-
Laws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum and the votes present may continue to
transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the Chairman of a
meeting or a majority of the voting stock represented in person or by proxy may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the ad
1
<PAGE>
journed meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote thereat.
Section 4. Voting. When a quorum is present at any meeting, the vote
------
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 5. Proxies. At each meeting of the stockholders, each
-------
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the Corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power (unless a
different number of votes is specified in the Certificate of Incorporation with
respect to the class or series of stock represented by such share), registered
in his name on the books of the Corporation on the record date set by the Board
of Directors as provided in Article V, Section 6 hereof. All elections shall be
had and all questions decided by a plurality vote.
Section 6. Special Meetings. Special meetings of the stockholders,
----------------
for any purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called only by the Chairman of the Board of
Directors or by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. Notice of Stockholder's Meetings. Whenever stockholders
--------------------------------
are required or permitted to take any action at a meeting, a written notice of
the meeting shall be given which notice shall state the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. The written notice of any meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
2
<PAGE>
Section 8. Notice of Stockholder Business and Nominations. (A) Annual
---------------------------------------------- ------
Meeting of Stockholders. (1) Nominations of persons for election to the Board of
- -----------------------
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a) pursuant
to the Corporation's notice of meeting, (b) by or at the direction of the Board
of Directors or (c) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this Section 8, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Section 8.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Section 8, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice as described above. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the
3
<PAGE>
nomination or proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 8 to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this By-Law shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
(B) Special Meeting of Stockholders. Only such business shall
-------------------------------
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting. Nominations
of persons for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 8, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this Section 8. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Section 8 shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
4
<PAGE>
(C) General. (1) Only such persons who are nominated in
-------
accordance with the procedures set forth in this Section 8 shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this By-Law. Except as otherwise provided by law,
the Certificate of Incorporation or these By-Laws, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this By-Law and, if any
proposed nomination or business is not in compliance with this By-Law, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section 8, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 8,
a stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-Law. Nothing in this Section 8 shall be deemed to affect any
rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
Section 9. Maintenance and Inspection of Stockholder List. The
----------------------------------------------
officer who has charge of the stock ledger of the Corporation shall prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
5
<PAGE>
Section 10. Stockholder Action by Written Consent. Stockholders may
-------------------------------------
act by written consent in lieu of a meeting only in accordance with Article VIII
of the Certificate of Incorporation.
ARTICLE III
DIRECTORS
---------
Section 1. Number of Directors. Subject to the rights of holders of
-------------------
preferred stock of the Corporation, the number of directors which shall
constitute the whole Board of Directors shall be not less than three (3) and not
more than twelve (12). The exact number of directors shall be determined by
resolution adopted by a majority of the number of directors the Board would have
if there were no vacancies, and the initial number of directors shall be eight
(8). The directors need not be stockholders. The directors shall be elected at
the annual meeting of the stockholders and, except as provided in Section 2 of
this Article III, each director elected shall hold office until his successor is
elected and qualified; provided, however, that unless otherwise restricted by
-------- -------
the Certificate of Incorporation or By-Laws, any director or the entire Board of
Directors may be removed, either with or without cause, from the Board of
Directors by holders of a majority of the voting power of the shares of capital
stock of the Corporation entitled to vote at an election of directors.
Section 2. Vacancies. Subject to the rights of holders of preferred
---------
stock of the Corporation, vacancies on the Board of Directors by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify, unless
sooner replaced by a vote of the shareholders. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
Section 3. Powers. The property and business of the Corporation shall
------
be managed by or under the direction of its Board of Directors. In addition to
the powers and authorities by these By-Laws expressly conferred upon them, the
Board may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws directed or required to be exercised or done by the
stockholders.
6
<PAGE>
Section 4. Place of Directors' Meetings. The directors may hold their
----------------------------
meetings and have one or more offices, and keep the books of the Corporation
outside of the State of Delaware.
Section 5. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 6. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the Chairman of the Board on forty-eight hours'
notice to each director, sent personally, by mail, by telegram, by telecopier,
by electronic mail or by courier service; special meetings shall be called by
the Chairman of the Board or the Secretary in like manner and on like notice on
the written request of two directors.
Section 7. Quorum. At all meetings of the Board of Directors a
------
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum,
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these By-Laws. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. If only one director is authorized, such sole director shall
constitute a quorum. At any meeting, a director shall have the right to be
accompanied by counsel, provided that such counsel shall agree to any
confidentiality restrictions reasonably imposed by the Corporation.
Section 8. Action Without Meeting. Unless otherwise restricted by the
----------------------
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 9. Telephonic Meetings. Unless otherwise restricted by the
-------------------
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
par-
7
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ticipation in a meeting shall constitute presence in person at such meeting.
Section 10. Committees of Directors. (a) The Board of Directors may,
-----------------------
by resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the By-Laws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
(b) Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
Section 11. Compensation. Unless otherwise restricted by the
------------
Certificate of Incorporation or these By-Laws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
8
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ARTICLE IV
OFFICERS
--------
Section 1. Officers. The officers of this corporation shall be chosen
by the Board of Directors and shall include a President, a Secretary, and a
Treasurer. The Corporation may also have, at the discretion of the Board of
Directors, such other officers as are desired, including a Chairman of the
Board, one or more Vice Presidents, one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 hereof. In the event there are two or more Vice
Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person unless the
Certificate of Incorporation or these By-Laws otherwise provide.
Section 2. Election of Officers. The Board of Directors, at its first
--------------------
meeting after each annual meeting of stockholders, shall choose the officers of
the Corporation.
Section 3. Subordinate Officers. The Board of Directors or the
--------------------
President may appoint such other officers and agents as it shall deem necessary
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board.
Section 4. Compensation of Officers. The salaries of all officers and
------------------------
agents of the Corporation shall be fixed by the Board of Directors.
Section 5. Term of Office; Removal and Vacancies. The officers of the
-------------------------------------
Corporation shall hold office until their successors are chosen and qualify in
their stead. Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers elected or appointed by the
Board of Directors becomes vacant for any reason, the vacancy shall be filled by
the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board, if any,
---------------------
shall, if present, preside at all meetings of the Board of Directors and of
stockholders and exercise and perform such other powers and duties as may be
from time to time assigned to him by the Board of Directors or prescribed by
these By-Laws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the Corporation and
Section 7. President. Subject to such supervisory powers, if any, as
---------
may be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the Chief Executive Officer of the
Corporation and
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<PAGE>
shall have the powers and duties prescribed in Section 7 of this Article IV.
shall, subject to the control of the Board of Directors, have general
supervision, direction and control of the business and officers of the
Corporation. In the absence of the Chairman of the Board, or if there be none,
the President shall preside at all meetings of stockholders and at all meetings
of the Board of Directors. He shall have the general powers and duties of
management usually vested in the office of President and Chief Executive Officer
of corporations, and shall have such other powers and duties as may be
prescribed by the Board of Directors or these By-Laws.
Section 8. Vice Presidents. In the absence or disability of the
---------------
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors or the President, or if not so designated, in the order of their
seniority of service in the position, shall perform all the duties of the
President, and when so acting shall have all the powers of and be subject to all
the restrictions upon the President. Without limiting the authority of any other
officer, each Vice President shall have authority to execute contracts and
similar documents on behalf of the Corporation and shall have such other duties
as from time to time may be prescribed for him or her by the Board of Directors.
Section 9. Secretary. The Secretary shall attend all sessions of the
---------
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws.
He shall keep in safe custody the seal of the Corporation, and when
authorized by the Board, affix the same to any instrument requiring it, and when
so affixed it shall be attested by his signature or by the signature of an
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
his signature.
10
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Section 10. Assistant Secretaries. The Assistant Secretary, or if
---------------------
there be more than one, any Assistant Secretary shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 11. Treasurer. The Treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as Treasurer
and of the financial condition of the Corporation. If required by the Board of
Directors, he shall give the Corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 12. Assistant Treasurer. The Assistant Treasurer, or if there
-------------------
shall be more than one, any Assistant Treasurer shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
---------------------
Section 1. Certificates. Every holder of stock of the Corporation
------------
shall be entitled to have a certificate signed by, or in the name of the
Corporation by, the Chairman or Vice Chairman of the Board of Directors, or the
President or a Vice President, and by the Secretary or an Assistant Secretary,
or the Treasurer or an Assistant Treasurer of the Corporation, certifying the
number of shares represented by the certificate owned by such stockholder in the
Corporation.
Section 2. Signature on Certificates. Any or all of the signatures on
-------------------------
the certificate may be a facsimile. In case
11
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any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. any officer, transfer agent,
or registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 3. Statement of Stock Rights, Preferences, Privileges. If the
--------------------------------------------------
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating,
Section 3. Statement of Stock Rights, Preferences, Privileges. If the
--------------------------------------------------
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in
Section 202 of the General Corporation Law of Delaware (the "DGCL"), in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 4. Lost Certificates. The Board of Directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Stock. Upon surrender to the Corporation, or
-----------------
the transfer agent of the Corporation, of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its book.
12
<PAGE>
Section 6. Fixing Record Date. In order that the Corporation may
------------------
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7. Registered Stockholders. The Corporation shall be entitled
-----------------------
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and accordingly shall not be bound to recognize any equitable or
other claim or interest in such share on the part of any other person, whether
or not it shall have express or other notice thereof, save as expressly provided
by the laws of the State of Delaware.
ARTICLE VI
INDEMNIFICATION
---------------
Section 1. Actions by Others. The Corporation (1) shall indemnify any
-----------------
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director or
an officer of the Corporation and (2) except as otherwise required by Section 3
of this Article VI, may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
agent of or participant in another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no
13
<PAGE>
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
---------------------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of
the fact that he or she is or was a director or officer of the Corporation, and
the Corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that he or she is or was an employee or agent of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee, agent of or participant in another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection with the defense
or settlement of such action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his or her duty to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Delaware Court of Chancery or such other court shall deem proper.
Section 3. Successful Defense. To the extent that a person who is or
------------------
was a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 or Section 2 of this Article, or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
14
<PAGE>
Section 4. Right to Indemnification. The right to indemnification
------------------------
conferred in this Article VI shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition, such expenses to be paid by the
Corporation within 20 days after the receipt by the Corporation of a statement
or statements from the claimant requesting such payment or payments of expenses
from time to time; provided, however, that if the DGCL requires, the payment of
-------- -------
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Article VI or otherwise.
Section 5. Specific Authorization. To obtain indemnification under
----------------------
this Article VI, a claimant shall submit to the Corporation a written request,
including therein or therewith such documentation and information as is
reasonably available to the claimant and is reasonably necessary to determine
whether and to what extent the claimant is entitled to indemnification. Any
indemnification under Section 1 or Section 2 of this Article VI (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Sections 1 and 2 of this
Article VI. Such determination shall be made by (a) the stockholders, (b) the
Disinterested Directors or a committee of such Disinterested Directors
designated by the Disinterested Directors by majority vote, in either case even
though less than a quorum, or (c) if (1) there are no Disinterested Directors or
if the Disinterested Directors by majority vote so direct, or (2) a Change of
Control shall have occurred, then, in the case of either of clauses (1) and (2)
of this clause (c), by an Independent Counsel in a written opinion, which
Independent Counsel shall be selected by a majority vote of a quorum of
Disinterested Directors or, if there are no Disinterested Directors or if a
Change of Control shall have occurred, by the claimant. If it is so determined
that the claimant is entitled to indemnification, payment to the claimant shall
be made within 10 days after such determination.
Section 6. Suit Against Corporation. If a claim under Section 1 or 2
------------------------
of this Article VI is not paid in full by the Corporation within 30 days after a
written claim pursuant to Section
15
<PAGE>
5 of this Article VI has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the DGCL or this Article VI for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, Independent Counsel or
stockholders) to have made a de-termination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
DGCL or this Article VI, nor an actual determination by the Corporation
(including its Board of Directors, Independent Counsel or stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 7. Corporation Bound. If a determination shall have been made
-----------------
pursuant to Section 5 of this Article VI that the claimant is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to Section 6 of this Article VI.
Section 8. Preclusion. The Corporation shall be precluded from
----------
asserting in any judicial proceeding commenced pursuant to Section 6 of this
Article VI that the procedures and presumptions of this Article VI are not
valid, binding and enforceable and shall stipulate in such proceeding that the
Corporation is bound by all the provisions of this Article VI.
Section 9. Right of Indemnity Not Exclusive. The indemnification and
--------------------------------
advancement of expenses provided by this Article shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
16
<PAGE>
Section 10. Insurance. The Corporation may purchase and maintain
---------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of or participant in another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article, Section 145 of the DGCL or otherwise.
Section 11. Invalidity of any Provisions of this Article. The
--------------------------------------------
invalidity or unenforceability of any provision of this Article VI shall not
affect the validity or enforceability of the remaining provisions of this
Article VI, and, to the fullest extent possible, such provisions of this Article
VI (in-cluding, without limitation, each such portion of any Section of this
Article VI containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
Section 12. Definitions. For purposes of this Article VI:
-----------
(A) "Change of Control" means:
(1) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of voting securities of the Corporation
where such acquisition causes such Person to own 20% or more of the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"); provided, however, that for
-------- -------
purposes of this paragraph (1), the following acquisitions shall not be
deemed to result in a Change of Control: (i) any acquisition by Thiokol
Corporation, a Delaware corporation("Thiokol"), (ii) any acquisition
directly from the Corporation, (iii) any acquisition by the Corporation,
(iv) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Corporation or any corporation controlled by
the Corporation or (v) any acquisition by any corporation pursuant to a
transaction that complies with clauses (i), (ii) and (iii) of paragraph (3)
below; provided, further, that if any Person's beneficial ownership of
-------- -------
the Outstanding Corporation Voting Securities reaches or ex-
17
<PAGE>
ceeds 20% as a result of a transaction described in clause (ii) or (iii)
above, and such Person subsequently acquires beneficial ownership of
additional voting securities of the Corporation, such subsequent
acquisition shall be treated as an acquisition that causes such Person to
own 20% or more of the Outstanding Corporation Voting Securities; and
provided, further, that if at least a majority of the members of the
-------- -------
Incumbent Board (as defined below) determines in good faith that a Person
has acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the Outstanding
Corporation Voting Securities inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares so that such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) less than 20% of the Outstanding Corporation Voting
Securities, then no Change of Control shall have occurred as a result of
such Person's acquisition; or
(2) individuals who, as of November 20, 1997, constitute the
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors; provided,
--------
however, that any individual becoming a director subsequent to November 20,
-------
1997, whose election, or nomination for election by the Corporation's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board, or by Thiokol, shall be
considered a member of the Incumbent Board, except that, for this purpose,
any such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board of Directors
shall not be considered a member of the Incumbent Board; or
(3) the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Corporation or the acquisition of assets of another
corporation ("Business Combination"); excluding, however, such a Business
Combination (i) involving Thiokol or any of its affiliates or (ii) pursuant
to which (A) all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors,
as the case may
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<PAGE>
be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation that as a result of such transaction owns
the Corporation or all or substantially all of the Corporation's assets
either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Corporation Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of the Corporation
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (C) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board of Directors, providing for such Business Combination;
or
(4) approval by the stockholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
(B) "Disinterested Director" means a director of the Corporation
who is not and was not a party to the matter in respect of which
indemnification is sought by the claimant.
(C) "Independent Counsel" means a law firm, a member of a law firm,
or an independent practitioner, that is experienced in matters of corporation
law and shall include any person who, under the applicable standards of
professional conduct then prevailing, would not have a conflict of interest in
representing either the Corporation or the claimant in an action to determine
the claimant's rights under this Article VI.
Section 13. Notice. Any notice, request or other communication
------
required or permitted to be given to the Corporation under this Article VI shall
be in writing and either delivered in person or sent by telecopy, telex,
telegram, overnight mail or courier service, or certified or registered mail,
postage prepaid, return receipt requested, to the Secretary of the Corporation
and shall be effective only upon receipt by the Secretary.
19
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ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
---------
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Funds Available for Contingencies. Before payment of any
---------------------------------
dividend there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the directors shall think conducive to
the interests of the Corporation, and the directors may abolish any such
reserve.
Section 3. Checks. All checks or demands for money and notes of the
------
Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
-----------
the calendar year.
Section 5. Corporate Seal. The corporate seal shall have inscribed
--------------
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". Said seal may be used by causing it, a facsimile
thereof or a recitation of the words on it to be impressed or affixed or
reproduced or otherwise.
Section 6. Manner of Giving Notice. Whenever, under the provisions of
-----------------------
the statutes or of the Certificate of Incorporation or of these By-Laws, notice
is required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given, and shall be given in
the case of any notice of meeting sent less than 96 hours prior to such meeting,
by telegram, telecopier, electronic mail or courier service.
20
<PAGE>
Section 7. Waiver of Notice. Whenever any notice is required to be
----------------
given under the provisions of the statutes or of the Certificate of
Incorporation or of these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Presence at a meeting
without objection to the absence or form of notice shall also constitute a
waiver of such notice.
Section 8. Annual Statement. The Board of Directors shall present at
----------------
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
ARTICLE VIII
AMENDMENTS
----------
Section 1. Amendment by Directors or Stockholders. These By-Laws may
--------------------------------------
be altered, amended or repealed or new By-Laws may be adopted by the
stockholders or by the Board of Directors at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal By-Laws is conferred
upon the Board of Directors by the Certificate of Incorporation it shall not
divest or limit the power of the stockholders to adopt, amend or repeal By-Laws.
21
<PAGE>
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
HOWMET INTERNATIONAL INC.
See Reverse for
Certain Definitions
10,000,000 SHARES PAR VALUE $.01 EACH
PREFERRED STOCK
This is to Certify that SPECIMEN is the owner of
-----------------------------------
- -----------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF PREFERRED STOCK OF
HOWMET INTERNATIONAL INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed. Witness, the seal of the Corporation and the signatures of its duly
authorized officers.
DATED
- ----------------------- ------------------------
SECRETARY PRESIDENT
[LOGO]
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT-......Custodian.......
(Cust) (Minor)
TEN ENT -as tenants by the under uniform Gifts to Minors
entireties Act..........................
(State)
JT TEN -as joint tenants with right of
survivorship and not as tenants
in common
Additional abbreviations may also be used though not in the above list
For value received hereby sell, assign and transfer unto
---------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
- --------------------------------------------------------------------Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated 19
---------------------------- -------------------
In presence of
-----------------------------------
- ----------------------------------
<PAGE>
EXHIBIT 4.4
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
Amended and Restated Shareholders Agreement (the "Agreement"), dated as of
December 2, 1997, by and among Howmet International Inc., a Delaware corporation
(the "Company"), Thiokol Corporation, a Delaware corporation ("Thiokol"),
Thiokol Holding Company ("Holding"), a Delaware corporation and a wholly-owned
subsidiary of Thiokol, and Carlyle-Blade Acquisition Partners, L.P., a Delaware
limited partnership ("Carlyle") (individually, a "Party" and collectively, the
"Parties").
WHEREAS, the Parties entered into a Shareholders Agreement dated as of
December 13, 1995 (the "Shareholders Agreement") in connection with the
acquisition by Carlyle of 51% of the outstanding shares of Common Stock, par
value $.01 per share (the "Common Stock"), of the Company and by Holding of 49%
of the outstanding shares of Common Stock and all of the outstanding shares of
9% Series A Senior Cumulative Preferred Stock (the "Preferred Stock") of the
Company;
WHEREAS, Holding, Thiokol, the Company and Carlyle entered into the IPO
Agreement, dated as of October 8, 1997 (the "IPO Agreement"), in connection
with, among other things, an initial public offering (the "IPO") of Common Stock
by Carlyle;
WHEREAS, in connection with the transactions contemplated by the IPO
Agreement, and effective as of this date (the "IPO Closing Date"), Carlyle and
Holding desire to amend and restate the Shareholders Agreement;
NOW THEREFORE, in consideration of the above premises and mutual agreements
set forth in this Agreement and subject to the terms and conditions stated
herein, the Parties hereby agree as follows:
<PAGE>
ARTICLE I
CARLYLE NOMINEE
So long as Carlyle or an Affiliate of Carlyle has Beneficial Ownership
of 5% or more of the issued and outstanding Common Stock, the Company shall
nominate, and Holding shall vote its shares of Common Stock for, a duly
qualified Director nominee selected by Carlyle (or such Affiliate) and
reasonably acceptable to Holding and the Board of Directors of the Company (the
"Carlyle Director"). The Carlyle Director shall be either a director or
managing director of Carlyle or an Affiliate of Carlyle. The Carlyle Director
shall have no director interlocks with material customers, suppliers, or
competitors of the Company.
ARTICLE II
TRANSFERS OF SECURITIES
2.01 GENERAL RESTRICTION.
(a) Carlyle shall not sell, transfer, assign, pledge, hypothecate, or
otherwise alienate ("Transfer") any Securities until the first business day
following the date of the fourth anniversary of the IPO Closing (or, with
respect to any Securities as to which Holding has theretofore exercised the Call
Option (as defined below), the Option Closing Date with respect to such
exercise, if later) (the "Free Transfer Date") other than (i) a Transfer to an
Affiliate of Carlyle made in compliance with SECTION 2.04(A), (ii) pursuant to
SECTION 2.04(C), (iii) pursuant to ARTICLE III of this Agreement or (iv)
pursuant to the transactions contemplated by the IPO Agreement.
(b) Holding shall not Transfer any Securities prior to the Free Transfer
Date other than (i) a Transfer to an Affiliate of Holding made in compliance
with SECTION 2.04(B), (ii) pursuant to SECTION 2.04(C) or (iii) in compliance
with SECTION 3.05.
2.02 LEGEND.
(a) The certificates of Common Stock held by Carlyle and Holding
subsequent to the IPO Closing Date will be endorsed with the following legends:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OR ANY OTHER
ALIENATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF
THE HOLDERS OF SUCH SECURITIES IN RESPECT OF THE ELECTION OF DIRECTORS ARE
SUBJECT TO THE TERMS AND CONDITIONS OF AN AMENDED AND RESTATED SHAREHOLDERS
AGREEMENT DATED AS OF DECEMBER 2,
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1997. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF HOWMET INTERNATIONAL
INC."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR SOLD
WITHOUT COMPLIANCE WITH SUCH ACT."
(b) Upon the delivery to the Company by Carlyle or its Affiliates or
Holding or its Affiliates of such legended certificate in connection with a sale
under Rule 144 (including the delivery of customary documents with respect to
the applicability of an exemption from registration) or pursuant to an effective
registration statement, the Company shall issue in exchange therefor a
certificate for such shares without such legend.
2.03 CERTAIN RESTRICTIONS.
Notwithstanding any other provision of this Agreement to the contrary, no
Transfer of Securities pursuant to SECTION 2.04(A) of this Agreement may be
effected by Carlyle prior to the Free Transfer Date unless and until the
intended transferee(s) has acknowledged that the Securities to be transferred
are being transferred subject to provisions of this Agreement and the IPO
Agreement, and the intended transferee(s) has agreed to be bound by the
provisions of this Agreement (including, without limitation, those related to
Security Interests under ARTICLE V, the 4% Option (as defined in the IPO
Agreement), the Call Option (as defined below), the Right of First Refusal (as
defined below) and Transfers to the extent then applicable), in writing in a
form reasonably satisfactory to Holding. In addition, until the Free Transfer
Date (or, if later, the day after the last day on which Holding may purchase the
Call Option Shares pursuant to the Call Option), no Transfer of Securities
pursuant to SECTION 2.04(A) of this Agreement may be effected unless and until
(i) the Security Interest in the transferred Securities continues and remains
after the Transfer a perfected, first priority security interest in the
transferred Securities, securing the obligations under ARTICLE II and ARTICLE
III of this Agreement and ARTICLE III of the IPO Agreement and (ii) Holding
receives an opinion of counsel of national repute to Carlyle (or its transferee)
to the effect that the agreement of the transferee is enforceable against it in
accordance with its terms and as to matters set forth in clause (i) above
(subject to customary qualifications and exceptions). Each such transferee
shall succeed to the obligations, and the rights, of the transferring
shareholder hereunder; provided, however, that Carlyle's right to designate a
director under Article I will not be transferable other than to an Affiliate of
Carlyle as provided in Article I.
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<PAGE>
2.04 EXEMPT TRANSFERS.
(a) The provisions of SECTION 2.01(A) shall not apply to the Transfer of
Securities by Carlyle to any of its Affiliates (provided that the provisions of
SECTION 2.03 have been strictly complied with and that no more than ten (10)
Affiliates of Carlyle own Securities at any one time).
(b) The provisions of SECTION 2.01(B) shall not apply to the Transfer of
Securities by Holding to any of its Affiliates; provided that no more than ten
(10) Affiliates of Holding own Securities at any one time; and provided,
further, that the intended transferee(s) has acknowledged that the Securities to
be transferred are being transferred subject to the provisions of this
Agreement, and the intended transferee(s) has agreed to be bound by the
provisions of this Agreement (including, without limitation, ARTICLE I and
SECTION 3.05), in writing in a form reasonably satisfactory to Carlyle. Each
such transferee shall succeed to the obligations, and the rights, of the
transferring shareholder hereunder; provided, however, that the rights under the
Call Option or the Right of First Refusal may be transferred only in strict
compliance with SECTION 3.04.
(c) The provisions of SECTION 2.01 shall not apply to the Transfer of
Securities to the public pursuant to an effective registration statement under
the Securities Act of 1933, as amended, or Rule 144 (provided, in the case of a
Transfer by Carlyle or any of its Affiliates prior to the Free Transfer Date,
that the provisions of SECTION 3.02 have been strictly complied with).
2.05 IMPROPER TRANSFER.
Any attempted transfer of any Securities by Carlyle or Holding (or their
respective transferees) not in accordance with SECTION 2.01 shall be null and
void. The Parties shall cause the Company to provide stop transfer instructions
to any transfer agent for the Common Stock.
ARTICLE III
CALL OPTION; RIGHT OF FIRST REFUSAL; TAG-ALONG
3.01 HOLDING'S CALL OPTION.
(a) Carlyle hereby grants to Holding an option (the "Call Option"),
exercisable from time to time during the Option Period (as defined below), to
purchase up to all of the shares of Common Stock owned by Carlyle not otherwise
purchased by Holding or the underwriters of the IPO pursuant to the IPO
Agreement. Holding may exercise its Call Option in whole or in part (in
increments of 25% of the Common Stock owned by Carlyle at the beginning of the
Option Period or any multiple of 25%) at any time during the period (the "Option
Period") beginning on the date of the second anniversary of the IPO
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<PAGE>
Closing Date and ending at the close of business on the date of the fourth
anniversary of the IPO Closing Date; provided, however, that if there occurs a
change in the ultimate Beneficial Ownership of TCG Holdings, L.L.C. of more than
50% as a result of a single transaction (or series of related transactions),
from and after such Change of Beneficial Ownership until the end of the Option
Period, Holding shall have the right to exercise the Call Option in accordance
with this SECTION 3.01; and provided, further, that Holding may not exercise its
Call Option if, at the time of such exercise, senior management of Thiokol is
engaged in serious discussions with a third party (other than an Affiliate of
Thiokol) relating to the sale, transfer or assignment by Thiokol and its
Subsidiaries (other than the Company) of 10% or more of the outstanding
Securities of the Company thereto.
(b) The purchase price of the Option Shares shall be equal to the Market
Price (as defined below) of the Common Stock as of the date the Option Exercise
Notice (as defined below) is delivered to Carlyle. "Market Price" shall mean,
as of any date of determination, the volume-weighted average of the prices per
share of Common Stock for all trades reported on the New York Stock Exchange,
Inc. ("NYSE") during the 20 consecutive trading days ending immediately prior to
the date of determination. Consecutive trading days shall include such dates
that shares of Common Stock do not trade on a NYSE regularly scheduled trading
day.
(c) The Call Option may be exercised during the Option Period by Holding
delivering a written notice of exercise (the "Option Exercise Notice") to
Carlyle specifying the number of Shares of Common Stock to be purchased and the
date (the "Exercise Date"), which date shall be at least five days after the
date of the Option Exercise Notice but no later than 15 business days after such
date, upon which Holding shall acquire the Option Shares specified in the Option
Exercise Notice (the "Option Closing Date"). Any exercise of the Call Option
may be subject to the conditions set forth in SECTION 3.03 below. If the Option
Shares are not purchased because any of the conditions in SECTION 3.03 are not
met, none of the rights and remedies of any Person will be lost as a result of
the purchase not occurring.
3.02 HOLDING'S FIRST RIGHT OF REFUSAL.
(a) During the period beginning at the earlier of (i) the second
anniversary of the IPO Closing Date or (ii) a Change of Control of Thiokol and
ending at the fourth anniversary of the IPO Closing Date, Carlyle may Transfer
shares of Common Stock provided that it shall have delivered to Holding during
the Option Period a written notice (the "Right of First Refusal Notice") of
Carlyle's intent to Transfer up to all of the remaining shares of Common Stock
(in increments of 25% of the outstanding shares of Common Stock owned by Carlyle
on the first day of the Option Period or any multiple of 25%) then owned by
Carlyle. The Right of First Refusal Notice shall specify the number of shares
proposed to be
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<PAGE>
Transferred (the "Transfer Shares"), the identity of the proposed transferee
(other than in connection with the exercise of its registration rights pursuant
to the Registration Rights Agreement dated as of the date hereof between Carlyle
and the Company (the "Registration Rights Agreement") or in connection with
sales under Rule 144) and the proposed purchase price (which may simply be
"market price" in the case of sales under a registration statement or pursuant
to Rule 144).
(b) Holding shall have the right (the "Right of First Refusal"),
exercisable at any time within 10 business days (the "Refusal Period") from the
date that Holding receives the Right of First Refusal Notice from Carlyle
("Right of First Refusal Date"), to purchase all, but not less than all, of the
Transfer Shares at the Market Price determined as of the Right of First Refusal
Date. The Right of First Refusal may be exercised by Holding delivering a
written notice of exercise (the "Refusal Exercise Notice") during the Refusal
Period specifying the date, which date shall be at least five business days
after the date of the Refusal Exercise Notice but no later than 20 business days
after such date, upon which Holding shall acquire the Transfer Shares specified
in the Refusal Exercise Notice (the "Refusal Closing Date"). Any exercise of
the Right of First Refusal may be subject to the conditions set forth in SECTION
3.03 below. If the Transfer Shares are not purchased because any of the
conditions in SECTION 3.03 are not met, none of the rights and remedies of any
Person will be lost as a result of the purchase not occurring.
(c) In the event Holding does not exercise the Right of First Refusal (or
fails to consummate any purchase during the specified periods following such
exercise other than due to a breach by Carlyle), Carlyle shall have the right to
consummate the Transfer specified in the Right of First Refusal Notice within 90
days after the expiration of the Refusal Period or, in the case of sales
pursuant to the Registration Rights Agreement, until such sales are made or the
registration statement is withdrawn.
3.03 CLOSING OF THE CALL OPTION OR THE RIGHT OF FIRST REFUSAL.
The closing of Holding's acquisition of Option Shares pursuant to Holding's
exercise of the Call Option or the Transfer Shares pursuant to Holding's
exercise of the Right of First Refusal shall take place at the office of counsel
to Holding at 10:00 a.m. on the Option Closing Date or the Refusal Closing Date,
as the case may be. Holding shall deliver to Carlyle the purchase price of the
Option Shares or the Transfer Shares by wire transfer of immediately available
funds to the account number specified by Carlyle at least two business days
prior to the closing, and Carlyle shall deliver to Holding certificates
evidencing the shares being acquired by Holding, duly endorsed for transfer. It
shall be a condition of Holding's obligation at such closing that (i) the
representations and warranties set forth in clause (i) of the second sentence of
SECTION 4.01 shall be true and correct as of the Option Closing Date or the
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Refusal Closing Date, as the case may be, (ii) Holding shall have received a
certificate of Carlyle, signed by each of its general partners, to such effect,
and (iii) Holding shall have received the opinion of counsel of national repute
to Carlyle as to the matters set forth in clauses (i) and (ii) of the second
sentence of SECTION 4.01, which counsel and opinion shall be reasonably
satisfactory to Holding (it being agreed that an opinion of counsel in the form
provided by Carlyle's counsel to the underwriters of the IPO shall be deemed
satisfactory). It shall be a condition to the obligation of each of Holding and
Carlyle to consummate the sale of the Option Shares or the Transfer Shares being
sold to Holding that all necessary consents, approvals and authorizations of
third parties and governmental agencies required to be obtained with respect to
such acquisition shall have been obtained as of the Option Closing Date or the
Refusal Closing Date, as the case may be; provided that each of Holding and
Carlyle shall take whatever steps are reasonably necessary to obtain such
consents, approvals and authorizations to permit the legal transfer to Holding
of such shares and to ensure that Holding's consummation of such purchases will
not create an event of default under the Company's or any of its Subsidiaries'
credit agreements or give rise to an acceleration or requirement to make a
change of control offer with respect to any indebtedness of the Company or any
of its Subsidiaries (provided that Holding shall not be obligated to dispose of
any assets to obtain any such consent, authorization or approval). Holding and
Carlyle shall share equally all reasonable expenses incurred in connection with
obtaining such consents, approvals and authorizations. Holding and Carlyle
shall share equally all U.S. federal, state and local transfer taxes (which term
shall include any governmental fees or assessments generally applicable to
capital stock transfers), if any, attributable to the delivery of the Option
Shares or the Transfer Shares, as the case may be. Any foreign transfer taxes
shall be paid (i) by Carlyle, if such taxes are imposed by virtue of Carlyle's
foreign residence or activities or removal of the Option Shares or the Transfer
Shares to a foreign jurisdiction, and (ii) by Holding, if such taxes are imposed
by virtue of Holding's (or its transferee's) foreign residence or activities.
3.04 NON-ASSIGNMENT OF CALL OPTION AND FIRST RIGHT OF REFUSAL.
Holding shall not assign or transfer its rights under the Call Option or
First Right of Refusal without Carlyle's prior written consent (which consent
may be withheld by Carlyle in its sole and absolute discretion), provided that
Holding may so transfer the Call Option and Right of First Refusal to any
parent corporation or any direct or indirect wholly owned Affiliate of Thiokol
without such consent.
3.05 TAG-ALONG RIGHT.
(a) Holding agrees that, prior to the Free Transfer Date, it shall not
Transfer shares of Common Stock held by it to an unaffiliated third party or
parties ("Third Party") (other than pursuant to SECTION 2.04(B) or SECTION
2.04(C) or a bona fide pledge of the shares of Common Stock to a financial
institution as
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<PAGE>
security for borrowings, to which the provisions of this SECTION 3.05 do not
apply), unless the terms and conditions of such Transfer shall include an offer
to each of Carlyle and its Affiliate transferees ("Carlyle Shareholders") to
include in the transfer to the Third Party, at such Carlyle Shareholder's option
and on the Third Party Terms (as defined below), an amount of the shares of
Common Stock determined in accordance with SECTION 3.05(C) (the "Tag-Along
Rights").
(b) Holding shall deliver notice to the Company, Carlyle and each other
Carlyle Shareholder of any proposed Transfer to which the provisions of this
SECTION 3.05 apply (a "Sale Notice"). Each Sale Notice shall set forth: (i)
the name of the Third Party and the number of shares of Common Stock proposed to
be transferred, (ii) the address of the Third Party, (iii) the proposed amount
and form of consideration and terms and conditions of payment offered by the
Third Party, and any other material terms pertaining to the Transfer (the "Third
Party Terms"), and (iv) that the Third Party has been informed of the Tag-Along
Rights provided for in this SECTION 3.05 and has agreed to abide by the terms of
the Tag-Along Rights.
(c) Following delivery of a Sale Notice, each of the Carlyle Shareholders
shall have the option to sell to the Third Party on the Third Party Terms an
amount of shares of Common Stock calculated as follows: The Third Party shall
be required to purchase from each Carlyle Shareholder desiring to participate in
such transaction the number of shares of Common Stock owned by such Carlyle
Shareholder equaling the lesser of (x) the number derived by multiplying (i) the
total number of shares of Common Stock to be purchased by the Third Party by
(ii) a fraction, the numerator of which is the aggregate number of shares owned
by such Carlyle Shareholder and the denominator of which is the number of shares
of Common Stock then owned in the aggregate by Holding (and its Affiliate
transferees) and all Carlyle Shareholders, or (y) such lesser number of shares
as the Carlyle Shareholder shall designate in the Tag-Along Notice (defined
below). The Tag-Along Rights set forth in SECTION 3.05 may be exercised by any
Carlyle Shareholder by delivery of a written notice to the Company and Selling
Shareholder (the "Tag-Along Notice") within ten (10) business days following
receipt of a Sale Notice (the "Tag-Along Period"). The Tag-Along Notice shall
state the number of shares that such Carlyle Shareholder wishes to include in
such transfer to the Third Party. Upon the giving of a Tag-Along Notice, such
Carlyle Shareholder shall be entitled and obligated to sell the number of shares
set forth in the Tag-Along Notice to the Third Party on the Third Party Terms;
provided, however, that neither Holding nor any such Carlyle Shareholder shall
consummate the sale of any shares offered by it if the Third Party does not (i)
purchase all shares which Holding and the Carlyle Shareholders are entitled and
desire to sell pursuant hereto and (ii) agree to be bound by the obligations of
Holding pursuant to ARTICLE I of this Agreement until the third anniversary of
the IPO Closing Date.
At the closing of the Transfer to any Third Party (of which Holding shall
give each Carlyle Shareholder who has elected to exercise the Tag-Along Right
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provided by this SECTION 3.05 at least five business days' prior written
notice), the Third Party shall remit to Holding and each Carlyle Shareholder who
has elected the Tag-Along Right (collectively the "Selling Shareholders") the
consideration for the total sales price of the shares of such Selling
Shareholder sold pursuant thereto, against delivery by such Selling Shareholder
of certificates for such shares, duly endorsed or with duly executed stock
powers and the compliance by such Selling Shareholder with any other conditions
to closing generally applicable to the Selling Shareholders.
(d) If the provisions of this SECTION 3.05 have been complied with in all
respects, Holding shall have the right for a 120-day period following delivery
of the Sale Notice to transfer the shares of Common Stock to the Third Party on
the Third Party Terms (or on other terms no more favorable to the Selling
Shareholder) without further notice to Carlyle Shareholders who have not given a
Tag-Along Notice, but after such 120-day period no such transfer may be made
without again giving notice to all Carlyle Shareholders of the proposed transfer
and complying with the requirements of this SECTION 3.05.
(e) Thiokol shall cause Holding to comply with its obligations under this
SECTION 3.05.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 CARLYLE REPRESENTATIONS AND WARRANTIES.
Carlyle represents and warrants to Holding that it owns all of the shares
of Common Stock free and clear of all liens, encumbrances, security agreements,
options, claims, charges, restrictions and rights of third parties of any type
or description whatsoever (except restrictions of general applicability imposed
by federal and state securities laws and those restrictions and the security
interest created by this Agreement) ("Liens"). Carlyle agrees that, except in
the case of sales of Common Stock permitted under this Agreement to Persons
other than Holding, it will not create any Lien on the Common Stock until after
the last day of the Option Period and Carlyle represents and warrants that (i)
upon the purchase by Holding of the shares of Common Stock and payment in full
of the purchase price therefor, Holding will acquire Common Stock free and clear
of any Liens and (ii) the sale of the Common Stock to Holding by Carlyle
pursuant to exercise of any of its rights to purchase the Common Stock subject
to the terms of this Agreement will not result in a default under or breach of
or conflict with any agreement to which Carlyle is a party or by which it or any
of its assets is bound or result in the violation of any law, rule or regulation
applicable to Carlyle.
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4.02 HOLDING REPRESENTATION AND WARRANTIES.
Holding represents and warrants to Carlyle that (i) Holding, upon the
exercise of any of its rights to purchase Common Stock subject to the Agreement
is acquiring and will acquire the Common Stock for its own account and not with
a view to distribution and (ii) the sale of the Common Stock to Holding by
Carlyle pursuant to his Agreement will not result in a default under or breach
of or conflict with any agreement to which Holding or Thiokol is a party or by
which it or any of its assets are bound or result in the violation of any law,
rule or regulation applicable to Holding. Holding acknowledges that the Common
Stock acquired pursuant to this Agreement has not been registered or qualified
under the Securities Act of 1933 or any state securities law, and therefore
cannot be resold by Holding unless they have been so registered or qualified or
an exemption from registration and qualification is available.
ARTICLE V
SECURITY AGREEMENT
To secure the obligations of Carlyle to Holding under ARTICLE II and
ARTICLE III of this Agreement and ARTICLE III of the IPO Agreement for any
damages arising from (i) the breach by Carlyle of any of such provisions and/or
(ii) the rejection by Carlyle, as debtor or debtor in possession, or by any
trustee in bankruptcy for Carlyle, of Carlyle's obligations under ARTICLE II and
ARTICLE III of this Agreement and ARTICLE III of the IPO Agreement, Carlyle
hereby grants to Holding a continuing security interest in the shares of Common
Stock held by Carlyle subsequent to the IPO. To perfect such security interest,
the Common Stock and stock powers executed in blank by Carlyle with respect
thereto will at all times commencing with the IPO Closing Date to the Security
Interest Termination Date (as hereinafter defined) be held by First National
Bank of Chicago (or another institution) pursuant to the Collateral Custodial
Agreement (the "Collateral Custodial Agreement") in the Form of EXHIBIT J
attached to the Stock Purchase Agreement dated as of December 13, 1995 by and
among Holding, Carlyle and the Company (the "Stock Purchase Agreement") which
shall remain in full force and effect notwithstanding this Agreement and the IPO
Agreement. Carlyle represents and warrants to Holding that at all times through
the Security Interest Termination Date, such security interests will be a first
priority, preferred, non-preferential security interest in favor of Holding.
The Security Interest Termination Date will occur upon the earlier of (i) the
purchase by Holding of all of the Common Stock owned by Carlyle, (ii) after the
last date of the Option Period described in SECTION 3.01 under which the Call
Option or the Right of First Refusal may be exercised or (iii) with respect to
any shares of Common Stock permitted to be sold under this Agreement, upon the
consummation of such sale. This ARTICLE V is the Security Agreement. In
addition to any other rights and remedies Holding may have, Holding will have
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the rights of a secured party upon default under the applicable Uniform
Commercial Code with respect to such Common Stock. In connection with any
transfer of shares by Carlyle permitted by this Agreement (other than to an
Affiliate of Carlyle pursuant to SECTION 2.04(A)), Thiokol will cooperate
promptly to take all actions necessary to release such shares from the
provisions of this ARTICLE V and the Collateral Custodial Agreement. Any shares
not previously released shall be released on the Free Transfer Date, and the
Parties shall take all actions necessary to effect such release. In addition,
as promptly as practicable after the date of this Agreement, the Parties shall
take all actions necessary to release any shares owned by Holding from the
Collateral Custodial Agreement and the security provisions under the Stock
Purchase Agreement.
ARTICLE VI
CONFIDENTIALITY AND NON-COMPETE
6.01 CONFIDENTIALITY.
During the period that a Carlyle Director is a member of the Board of
Directors of the Company, and for one year thereafter, except as required by
law, Carlyle and its Affiliates, and their respective principals, directors,
employees and agents (collectively "Representatives") shall hold and not use
(other than in the capacity as a director of or an investor in the Company) or
disclose any and all competition sensitive, business confidential, proprietary,
trade secret information ("Confidential Information") of the Company obtained as
an investor or in the capacity as a director or officer of the Company prior to
and subsequent to the IPO; provided, that this obligation shall not apply to
Confidential Information that (a) is generally available in the public domain,
(b) is known to Carlyle and its representatives other than through the
investment relationship and directorship with the Company or (c) becomes
publicly disclosed through no breach of this confidentiality obligation by
Carlyle or its representatives. In the event that Carlyle is requested to
disclose any Confidential Information through a formal judicial proceeding in a
court of competent jurisdiction, Carlyle shall give Holding prompt notice of
such request so that Holding may seek an appropriate protective order.
6.02 NON-COMPETE.
During the period of time that a Carlyle Director is a member of the
Board of Directors of the Company and for one year thereafter, Carlyle shall
not, and shall cause its Affiliates not to, make an investment in any Person
identified on Schedule I or any Person that is a direct and substantial
competitor with the business of the Company, other than (i) investments of less
than 2% of the outstanding equity securities of any Person or (ii) investments
in any Person
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<PAGE>
(other than a Person identified on Schedule I) for which the annual revenues and
assets relating to the business of such Person that competes with the Company
are less than 15% of such Person's total annual revenues and assets.
6.03 EQUITABLE RELIEF.
Holding shall be entitled to equitable relief including an injunction
in addition to all other remedies available to enforce the obligations of
Carlyle under this ARTICLE VI.
ARTICLE VII
MISCELLANOUS
7.01 NOTICES.
Any notice or other communication required or permitted hereunder shall be
in writing and shall be delivered personally, or sent by facsimile transmission
or sent by certified, registered or express mail, postage prepaid. Any such
notice shall be deemed given when so delivered personally, or sent by facsimile
transmission or, if mailed, three (3) business days after the date of deposit in
the United States mail, by certified mail return receipt requested (if also sent
by facsimile if available at the office of the recipient), as follows:
If to Carlyle, to:
Carlyle-Blade Acquisition Partners, L.P.
1001 Pennsylvania Avenue
Suite 200 South
Washington, D.C. 20004-2505
Attention: William E. Conway, Jr.
Telecopier: (202) 347-1818
With a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Bruce E. Rosenblum
Telecopier: (202) 637-2201
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<PAGE>
If to Holding, to:
Thiokol Holding Company
1105 North Market Street
Suite 1132
Wilmington, Delaware 19899
Attention: Edward T. Hendrixson
Director
Telecopier: (302) 427-4605
With copies to:
Thiokol Corporation
2475 Washington Boulevard
Ogden, UT 84401-2398
Attention: Daniel S. Hapke, Jr.
Corporate Vice President
and General Counsel
Telecopier: (801) 629-2279
and:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-6150
Attention: Eric S. Robinson
Telecopier: (212) 403-2000
Any Party, by notice given in accordance with this SECTION 7.01 to the
other Parties, may designate another address or Person for receipt of notices
hereunder.
7.02 RECLASSIFICATION, REORGANIZATION, MERGER, ETC.
The rights and restrictions contained in this Agreement with respect
to Common Stock apply to all Securities held on the date hereof and any
Securities acquired in the future whether by purchase, exchange,
reclassification, reorganization, stock split, dividend, any other change in the
Company's capital structure or otherwise.
7.03 WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES; PRESERVATION OF
REMEDIES.
ARTICLE VII of this Agreement may be amended, superseded, cancelled,
renewed or extended, and the terms hereof may be waived only by a written
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<PAGE>
instrument signed by the Parties or in the case of a waiver, by the Party
waiving compliance. Any other provision of this Agreement may be amended,
superseded, cancelled, renewed or extended, and the terms thereof may be waived
only by a written instrument signed by Carlyle and Holding or in the case of a
waiver, by such of Carlyle or Holding waiving compliance. No delay on the part
of any Party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof except as expressly provided herein. No waiver on the part
of any Party of any right, power or privilege, nor any single or partial
exercise of any such right, power or privilege, shall preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
7.04 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the substantive and procedural laws of the State of New York applicable to
agreements made and to be performed entirely within such State (without giving
effect to any conflict of laws principles which might require application of the
law of a different jurisdiction), except as to any matters relating to the
corporate governance or the capital stock of the Company, which shall be
governed by the law of the State of Delaware.
7.05 ARBITRATION OF DISPUTES.
Except for controversies, claims or enforcement of the confidentiality
and covenant not to compete provisions set forth in ARTICLE VI, any other
controversy or claim arising out of this Agreement, or any other breach of this
Agreement, including any controversy or claim as to arbitrability or rescission,
shall be settled by arbitration in accordance with the commercial arbitration
rules of the Judicial Arbitration and Mediation Service.
(a) Such arbitration shall be conducted in the District of Columbia.
(b) Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators shall not,
under any circumstances, have any authority to award punitive, exemplary or
similar damages.
(c) Any Party may pursue the remedy of specific performance of the
Agreement or seek a preliminary or permanent injunction against the breach of
the Agreement or in aid of the exercise of any power granted hereunder, or any
combination thereof in any of the federal courts located within the District of
Columbia without resort to arbitration.
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<PAGE>
(d) For the purposes of adjudicating any controversy, claim or the
enforcement of confidentiality and covenant not to compete provisions in ARTICLE
VI hereof and for the enforcement of the Arbitration of Dispute in this SECTION
7.05, the Parties hereby consent to the jurisdiction of the federal courts
located within the District of Columbia.
7.06 BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY BENEFICIARIES.
Except as expressly provided herein, neither this Agreement, nor any right
hereunder, may be assigned by any Party without the written consent of the other
Parties. Any such assignment or attempted assignment in violation of the
foregoing shall be void. Subject to the foregoing, this Agreement shall be
binding upon and inure solely for the benefit of the Parties and their permitted
successors and assigns and nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
7.07 COUNTERPARTS.
This Agreement may be executed by the Parties in separate counterparts,
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all of the Parties.
7.08 HEADINGS.
The headings in the Agreement are for reference only, and shall not affect
the interpretation of this Agreement.
7.09 SEVERABILITY.
If any portion of this Agreement shall be deemed unenforceable, the
remaining portions shall be valid and enforceable.
7.10 TIME OF ESSENCE.
Time is of the essence for each and every provision of this Agreement.
7.11 ATTORNEYS' FEES.
If any legal action, arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
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<PAGE>
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
7.12 SURVIVAL.
All representations, warranties, covenants and agreements of the parties
shall survive the consummation of the transactions contemplated by this
Agreement.
7.13 DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set
forth below:
(a) "Affiliate" or "Affiliates" as applied to any Person, shall mean any
other Person directly or indirectly controlling, controlled by, or under
common control with that Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or otherwise.
(b) "Beneficially Own" and "Beneficial Ownership" have the meanings given
to these terms in Rule 13d-3 of the Rules and Regulations of the Securities
and Exchange Commission under the Exchange Act, as in effect on the date
hereof.
(c) "Change of Control" means any of the following: (i) the sale, lease,
conveyance or other disposition of all or substantially all of the assets
of Thiokol as an entirety or substantially as an entirety to any Person or
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) in one
or a series of transactions, provided that a transaction where the holders
of all classes of capital stock of Thiokol generally entitled to vote in
the election of directors ("Common Equity") immediately prior to such
transaction own, directly or indirectly, 50 percent or more of all classes
of Common Equity of such Person or group immediately after such
transaction(s) shall not be a Change of Control; (ii) the liquidation or
dissolution of Thiokol, provided that a liquidation or dissolution of
Thiokol which is part of a transaction or series or related transactions
that does not constitute a Change of Control under the "provided" clause of
clause (i) above shall not constitute a Change of Control under this clause
(ii); (iii) any transaction or series of transactions (as a result of a
tender offer, merger, consolidation or otherwise) that results in, or that
is in
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<PAGE>
connection with any Person, including a "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) that includes such Person, not
theretofore having "beneficial ownership" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 50 percent or more of the
aggregate voting power of all classes of Common Equity of Thiokol,
acquiring such 50 percent or more direct or indirect "beneficial
ownership," provided that transfers of securities among corporations that
are affiliated by 100% common ownership (such as a contribution by a parent
corporation to a wholly owned subsidiary) shall not, of themselves, result
in a Change of Control; or (iv) any Person, including such a group, elects
as directors of Thiokol Persons who were not theretofore directors, were
not nominees of the Nominating Committee of the Board of Directors of
Thiokol and after election constitute a majority of the Board of Directors
of Thiokol.
(d) "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
(e) "Securities" shall mean any shares of capital stock of the Company
(other than the 9% Series A Cumulative Preferred Stock of the Company),
whether now authorized or not, and any rights, options or warrants to
purchase securities of any type which are, or may become, convertible into
such capital stock of the Company.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed on the date first above written.
CARLYLE-BLADE ACQUISITION
PARTNERS, L.P., a Delaware limited
partnership.
By: Carlyle Partners II, L.P.
Its: General Partner
By: TC Group, L.L.C.
Its: General Partner
By: TCG Holdings, L.L.C.
Its: Managing Member
By: /s/
_____________________
Name:_____________________
Title:____________________
THIOKOL CORPORATION
a Delaware corporation
By: /s/ Richard L. Corbin
---------------------
Name: Richard L. Corbin
---------------------
Title:Senior Vice President
---------------------
THIOKOL HOLDING COMPANY
a Delaware corporation
By: /s/ Richard L. Corbin
---------------------
Name: Richard L. Corbin
---------------------
Title: President
---------------------
HOWMET INTERNATIONAL INC.
a Delaware corporation
By: /s/ Roland A. Paul
-------------------
Name: Roland A. Paul
-------------------
Title: Secretary
-------------------
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<PAGE>
EXHIBIT 4.5
CORPORATE AGREEMENT
Corporate Agreement, dated as of December 2, 1997 ("this Agreement"), by and
among Thiokol Corporation, a Delaware corporation ("Thiokol'), Thiokol Holding
Company, a Delaware corporation and a wholly owned subsidiary of Thiokol
("Holding"), and Howmet International Inc., a Delaware corporation (the
"Company") (individually, a "Party" and collectively, the "Parties").
WHEREAS, Holding, Thiokol, the Company and Carlyle-Blade Acquisition
Partners, L.P., a Delaware limited partnership (together with its affiliates,
"Carlyle") entered into the IPO Agreement, dated as of October 8, 1997 (the "IPO
Agreement"), in connection with, among other things, an initial public offering
(the "IPO") and, simultaneously with the consummation of the IPO (the "IPO
Closing Date"), the sale by Carlyle of 13,000,000 shares of Common Stock to
Holding (the "Sale");
WHEREAS, upon consummation of the transactions contemplated by the IPO
Agreement, Thiokol will own 62,000,000 shares of Common Stock, par value $.01
per share (the "Common Stock"), of the Company;
WHEREAS, in connection with the transactions contemplated by the IPO
Agreement, the Parties desire to enter into this Agreement;
NOW THEREFORE, in consideration of the above premises and mutual agreements
set forth in this Agreement and subject to the terms and conditions stated
herein, the Parties hereby agree as follows:
ARTICLE I
RESTRICTION ON ACQUISITIONS
Neither Thiokol, Holding nor any of their Affiliates shall, without the
consent of (i) a majority (but not less than two) of the non-employee directors
of the Company who are not directors or employees of Thiokol, Holding, Carlyle
or their respective Affiliates and (ii) if Carlyle has a representative on the
Board of Directors of the Company (the "Carlyle Director"), the Carlyle
Director, acquire Publicly Held Shares (as defined below) if, after such
acquisition, the number of Publicly Held Shares would be less than 14% of the
total number of shares of Common Stock outstanding other than (i) pursuant to a
tender offer to acquire all of the outstanding shares of Common Stock not then
Beneficially Owned by Thiokol and/or Holding or (ii) pursuant to a merger or
other business combination in which holders of all outstanding Publicly Held
Shares are treated
<PAGE>
the same. For purposes of this ARTICLE I, "Publicly Held Shares" shall mean
outstanding shares of Common Stock other than shares held by Thiokol, Holding,
Carlyle or any of their Affiliates.
ARTICLE II
PREEMPTIVE RIGHT
2.01 Grant of Preemptive Right.
The Company hereby grants to Holding, on the terms and conditions set forth
herein, a continuing right (the "Preemptive Right") to purchase from the
Company, at the times set forth herein, such number of shares of Common Stock as
is necessary to allow Thiokol and its Subsidiaries (other than the Company and
its Subsidiaries) (collectively, the "Thiokol Entities") to maintain the then-
current Ownership Percentage (as defined below). The Preemptive Right shall be
assignable, in whole or in part and from time to time, by Holding to any Thiokol
Entity. The exercise price for the shares of Common Stock purchased pursuant to
the Preemptive Right shall be the volume-weighted average of the prices per
share of Common Stock for all trades reported on the New York Stock Exchange,
Inc. ("NYSE") during the 20 consecutive trading days ending immediately prior to
the date of first delivery of notice of exercise of the Preemptive Right by
Holding (or its permitted transferee) to the Company, or, in the case of any
public offering of Common Stock for cash, a price per share equal to the net
proceeds per share to the Company from such offering. Consecutive trading days
shall include such dates that shares of Common Stock do not trade on a New York
Stock Exchange regularly scheduled trading day. For purposes of this Agreement,
"Ownership Percentage" means, at any time, the fraction, expressed as a
percentage and rounded to the next highest thousandth of a percent, whose
numerator is the number of shares of Common Stock owned by the Thiokol Entities
and whose denominator is the number of outstanding shares of Common Stock;
provided, however, that any shares of Common Stock issued by the Company in
violation of its obligations under ARTICLE II of this Agreement shall not be
deemed outstanding for the purpose of determining the Ownership Percentage.
2.02 NOTICE.
As promptly as practicable, but in any event within ten business days,
after the issuance of any shares of Common Stock that results in a reduction in
the Ownership Percentage, the Company will notify Holding in writing (a
"Preemptive Right Notice"). Each Preemptive Right Notice must specify the date
on which the Company issued such additional shares (such issuance being referred
to herein as an "Issuance Event" and the date of such issuance or event
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<PAGE>
as an "Issuance Event Date"), the number of shares the Company issued and the
other terms and conditions of such Issuance Event.
2.03 PREEMPTIVE RIGHT EXERCISE AND PRICE.
The Preemptive Right may be exercised by Holding (or any Thiokol Entity to
which all or any part of the Preemptive Right have been assigned) for a number
of shares equal to or less than the number of shares that are necessary for the
Thiokol Entities to maintain, in the aggregate, the Ownership Percentage. The
Preemptive Right may be exercised at any time within 20 business after receipt
of a Preemptive Right Notice by the delivery to the Company of a written notice
to such effect specifying (i) the number of shares of Common Stock to be
purchased by Holding, or any of the Thiokol Entities, and (ii) a calculation of
the exercise price for such shares. Upon any such exercise of the Preemptive
Right, the Company will, on the fifth business day after the receipt of such
notice of exercise, deliver to Holding (or any Thiokol Entity designated by
Holding), against payment therefor, certificates (issued in the name of Holding
or its permitted assignee hereunder, or as directed by Holding) representing the
shares of Common Stock being purchased upon such exercise. Payment for such
shares shall be made by wire transfer or intrabank transfer to such account as
shall be specified by the Company, for the full purchase price for such shares.
2.04 TERMINATION OF PREEMPTIVE RIGHT.
The Preemptive Right shall terminate in the event the Thiokol Entities shall
not Beneficially Own at least 20% of the outstanding shares of Common Stock.
ARTICLE III
INDEPENDENT DIRECTORS
The Company, Thiokol and Holding shall each use its good faith efforts to
(i) as promptly as practicable, but in any event within three months following
the IPO Closing Date, cause at least two members of the Company's Board of
Directors to be independent directors within the meaning of the rules of the New
York Stock Exchange regarding who may serve on the audit committee of a company
listed on such exchange (as such rules are in effect as of the date of this
Agreement) and (ii) establish a Committee of Independent Directors of the
Company's Board of Directors which will be responsible for approving the terms
of all material agreements and transactions, and any material amendments to such
agreements, between the Company and Thiokol or any of its Affiliates (other than
the Company and its Subsidiaries) after the IPO Closing Date.
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<PAGE>
ARTICLE IV
MISCELLANEOUS
4.01 NOTICES.
Any notice or other communication required or permitted hereunder shall be
in writing and shall be delivered personally, or sent by facsimile transmission
or sent by certified, registered or express mail, postage prepaid. Any such
notice shall be deemed given when so delivered personally, or sent by facsimile
transmission or, if mailed, three (3) business days after the date of deposit in
the United States mail, by certified mail return receipt requested (if also sent
by facsimile if available at the office of the recipient), as follows:
If to the Company, to:
Howmet International Inc.
475 Steamboat Road
Greenwich, CT 06830
Attention: Roland Paul
Vice President and
General Counsel
Telecopier: (203) 625-8771
If to Thiokol, to:
Thiokol Corporation
2475 Washington Boulevard
Ogden, UT 84401-2398
Attention: Daniel S. Hapke, Jr.
Corporate Vice President
and General Counsel
Telecopier: (801) 629-2279
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<PAGE>
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-6150
Attention: Eric S. Robinson
Telecopier: (212) 403-2000
If to Holding, to:
Thiokol Holding Company
1105 North Market Street
Suite 1132
Wilmington, Delaware 19899
Attention: Edward T. Hendrixson
Director
Telecopier: (302) 427-4605
With copies to:
Thiokol Corporation
2475 Washington Boulevard
Ogden, UT 84401-2398
Attention: Daniel S. Hapke, Jr.
Corporate Vice President
and General Counsel
Telecopier: (801) 629-2279
and:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-6150
Attention: Eric S. Robinson
Telecopier: (212) 403-2000
Any Party, by notice given in accordance with this SECTION 4.01 to the
other Parties, may designate another address or person for receipt of notices
hereunder.
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<PAGE>
4.02 RECLASSIFICATION, REORGANIZATION, MERGER, ETC.
The rights and restrictions contained in this Agreement with respect to the
Common Stock apply to all Securities held on the date hereof and any Securities
acquired in the future whether by purchase, exchange, reclassification,
reorganization, stock split, dividend, any other change in the Company's capital
structure or otherwise.
4.03 WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES; PRESERVATION OF
REMEDIES.
This Agreement may be amended, superseded, cancelled, renewed or extended,
and the terms hereof may be waived only by a written instrument signed by the
Parties or in the case of a waiver, by the Party waiving compliance; provided,
however, that ARTICLE I of this Agreement may not be amended or the provisions
thereof waived without the consent of (i) a majority (but not less than two) of
the non-employee directors of the Company who are not directors or employees of
Thiokol, Holding, Carlyle or their respective Affiliates and (ii) if Carlyle has
a representative on the Board of Directors of the Company, the Carlyle Director.
No delay on the part of any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof except as expressly provided herein.
No waiver on the part of any Party of any right, power or privilege, nor any
single or partial exercise of any such right, power or privilege, shall preclude
any further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party may otherwise have at law or
in equity.
4.04 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
substantive and procedural laws of the State of New York applicable to
agreements made and to be performed entirely within such State (without giving
effect to any conflict of laws principles which might require application of the
law of a different jurisdiction), except as to any matters relating to the
corporate governance or the capital stock of the Company, which shall be
governed by the law of the State of Delaware.
4.05 BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY BENEFICIARIES.
Except as expressly provided herein, neither this Agreement, nor any right
hereunder, may be assigned by any Party without the written consent of the other
Parties. Any such assignment or attempted assignment in violation of the
foregoing shall be void. This Agreement shall be binding upon and inure solely
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<PAGE>
to the benefit of the Parties hereto and their permitted successors and assigns
and nothing in this Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
4.06 COUNTERPARTS.
This Agreement may be executed by the Parties in separate counterparts,
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all of the Parties.
4.07 HEADINGS.
The headings in the Agreement are for reference only, and shall not affect
the interpretation of this Agreement.
4.08 SEVERABILITY.
If any portion of this Agreement shall be deemed unenforceable, the remaining
portions shall be valid and enforceable.
4.09 TIME OF ESSENCE.
Time is of the essence for each and every provision of this Agreement.
4.10 EXPENSES.
If any legal action, arbitration or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
4.11 DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set
forth below:
(a) "Affiliate" or "Affiliates" as applied to any Person, shall mean any other
Person directly or indirectly controlling, controlled by, or under common
control with that Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling,"
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<PAGE>
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that person, whether
through the ownership of voting securities or by contract or otherwise.
(b) "Beneficially Own" and "Beneficial Ownership" have the meanings given to
these terms in Rule 13d-3 of the Rules and Regulations of the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as
amended, as in effect on the date hereof.
(c) "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
(d) "Securities" shall mean any shares of capital stock of the Company (other
than the 9% Series A Cumulative Preferred Stock of the Company) whether now
authorized or not, and any rights, options or warrants to purchase
securities of any type which are, or may become, convertible into such
capital stock of the Company.
(e) "Subsidiary" means any corporation, association partnership, limited
partnership, limited liability partnership, limited liability company,
business trust or other business entity of which 50% or more of the total
voting power of shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company or one or more of the other
subsidiaries of the Company or a combination thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed on the date first above written.
HOWMET INTERNATIONAL INC.
a Delaware corporation
By: /s/ Roland A. Paul
------------------
Name: Roland A. Paul
------------------
Title: Secretary
----------------
THIOKOL HOLDING COMPANY
a Delaware corporation
By: /s/ Richard L. Corbin
---------------------
Name: Richard L. Corbin
-----------------
Title: President
-----------------
THIOKOL CORPORATION
a Delaware corporation
By: /s/ Richard L. Corbin
---------------------
Name: Richard L. Corbin
-----------------
Title: Senior Vice President
---------------------
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EXHIBIT 4.6
-----------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and
entered into as of December 2, 1997, by and between HOWMET INTERNATIONAL INC., a
Delaware corporation (the "Company"), and CARLYLE-BLADE ACQUISITION PARTNERS,
L.P., a Delaware limited partnership ("CBAP").
This Agreement is made pursuant to the IPO Agreement, dated as of
October 8, 1997 (the "IPO Agreement"), by and among the Company, CBAP, Thiokol
Corporation, a Delaware corporation ("Thiokol") and Thiokol Holding Company, a
Delaware corporation and a wholly-owned subsidiary of Thiokol ("Holding"). In
order to induce CBAP to enter into the IPO Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. (a) Specific Definitions.
----------- --------------------
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Agent: Any Person authorized to act and who acts on behalf of a
-----
Holder with respect to the transactions contemplated by this Agreement.
Business Days: All days other than Saturday or Sunday or any day on
-------------
which banking institutions in Washington, D.C. are authorized or obligated by
law to close.
Common Stock: Common Stock, par value $.0l per share, of the Company.
------------
Demand Registration: A registration pursuant to Section 3(a) hereof.
-------------------
Effective Date: The date the IPO is completed.
--------------
Exchange Act: The Securities Exchange Act of 1934, as amended from
------------
time to time.
Holder: CBAP and, subject to Section 10(j), any affiliate of CBAP or
------
any other Person acquiring Registrable Securities representing at least 5% of
the then outstanding shares of Common Stock; provided, however, that the term
"Holder" shall not include any Person who then holds fewer than 5% of the
outstanding shares of Common Stock and who may then sell Registrable Securities
in reliance upon Rule 144 promulgated under the Securities Act or any successor
rule or regulation.
<PAGE>
IPO: The initial public offering of the Common Stock pursuant to the
---
IPO Agreement.
Minimum Number: A number of Registrable Securities equal to 25% of
--------------
the Registrable Securities held by CBAP immediately after giving effect to the
transactions contemplated by the IPO Agreement (i.e., the IPO, the Sale and any
----
exercise of the Over-allotment Option and/or the 4% Option (as such terms are
defined in the IPO Agreement)), such number to be adjusted for any stock splits,
stock dividends or combinations of Registrable Securities after the date of this
Agreement.
NASD: The National Association of Securities Dealers, Inc.
----
NYSE: The New York Stock Exchange, Inc.
----
Person: An individual, firm, partnership, limited liability
------
partnership, corporation, limited liability company, trust, incorporated or
unincorporated association, joint venture, joint stock company or a government
or agency or political subdivision thereof.
Piggy-Back Registration: A registration pursuant to Section 3(e)
-----------------------
hereof.
Prospectus: The prospectus included in any Registration Statement, as
----------
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
Registrable Securities: (a) All shares of Common Stock owned after
----------------------
the Effective Date by a Holder, and (b) any shares of capital stock of the
Company issued or issuable with respect to such Common Stock by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or reorganization; provided, however,
-------- -------
that any such share or other security shall be deemed to be a Registrable
Security only if and so long as it is a Transfer Restricted Security.
Registration Statement: Any registration statement of the Company
----------------------
which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such Registration Statement.
Securities Act: The Securities Act of 1933, as amended from time to
--------------
time.
SEC: The United States Securities and Exchange Commission.
---
2
<PAGE>
Shareholders Agreement: The Shareholders Agreement, dated as of the
----------------------
date hereof, by and among Holding, CBAP and the Company.
Transfer Restricted Securities: Securities acquired by a Holder other
------------------------------
than pursuant to an effective registration under Section 5 of the Securities Act
or pursuant to Rule 144; provided that a Security that has ceased to be a
--------
Transfer Restricted Security cannot thereafter become a Transfer Restricted
Security.
Underwritten Registration or Underwritten Offering: A registration in
--------------------------------------------------
which securities of the Company are sold (whether by the Company or by selling
stockholders) to an underwriter for reoffering to the public.
(b) Other Definitions. Other terms used herein may be defined
-----------------
elsewhere in this Agreement and, unless otherwise indicated, shall have such
defined meaning through this Agreement.
2. Securities Subject to this Agreement
------------------------------------
The securities entitled to the benefits of this Agreement are the
Registrable Securities.
3. Demand Registration and Piggy-Back Registration
-----------------------------------------------
(a) Request for Registration by Holders of Registrable Securities.
-------------------------------------------------------------
At any time following the earlier of the second anniversary of the Effective
Date or a Change of Control (as defined in the Shareholders Agreement) of
Thiokol and prior to the fifth anniversary of the Effective Date (the "Demand
Period"), a Holder or Holders may deliver to the Company a written request that
the Company effect a registration or qualification with respect to up to all of
the Registrable Securities, but in no event for an amount of Registrable
Securities less than the Minimum Number (a "Request"). Upon receipt of a
Request, the Company will
(1) within ten (10) days of receipt of such a request, give written
notice of the proposed registration or qualification to all other Holders; and
(2) as soon as practicable use its best efforts to effect such
registration or qualification (including, without limitation, the execution in
the applicable Registration Statement of an undertaking to file required post-
effective amendments, appropriate qualification under the applicable blue sky
or other state securities laws and appropriate compliance with exemptive
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as are reasonably
necessary to permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder joining in such Request, Holding or the Company in the case of primary
Registrable Securities requested by the
3
<PAGE>
Company to be registered as are specified in a written notice given to the
Company within 20 days after the date of such written notice from the Company
pursuant to Section 3(a)(1); provided, however, that the Company will not be
obligated to effect more than two registrations pursuant to this Section 3(a)
(plus up to an additional two registrations on Form S-3 (or successor Forms
thereto)).
Notwithstanding anything to the contrary set forth in this Agreement,
the Company shall not be required to effect a Demand Registration within six
months after the effective date of any other Registration Statement of the
Company. In addition, notwithstanding anything to the contrary, if at the time
of any request to register Registrable Securities pursuant to this Section 3(a),
the Company is actively engaging, with the prior approval of the Company's Board
of Directors, in an Underwritten Offering as to which a Holder is eligible to
include Registrable Securities pursuant to Section 3(e) (subject to the
limitations and restrictions set forth in such Section 3(e)) or is engaged in
any other activity which, in the good faith determination of the Board of
Directors of the Company, would be adversely affected by the requested
registration to the substantial detriment of the Company, then the Company may
at its option direct (a "Directive") in writing within ten (10) days of receipt
of such Request that such Request be delayed (and, if the Holders of a majority
of the Registrable Securities initiating such request so elect, withdrawn) for a
period not in excess of six months from the date of such Directive, which right
to delay a Request may be exercised by the Company not more than once during any
two-year period.
Subject to the foregoing provisions, the Company will file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the Request, and shall use
its best efforts to cause such registration statement and prospectus through
which such Demand Registration is effected to remain effective, (i) in the case
of a firm commitment underwritten public offering, until each underwriter has
completed the distribution of all securities purchased by it and, (ii) in the
case of any other offering, until the earlier of the sale of all Registrable
Securities covered thereby or 120 days after the effective date thereof.
(b) Effective Registration and Expenses. A registration of Registrable
-----------------------------------
Securities will not count as a Demand Registration until it has become effective
and has remained effective for the applicable period specified in Section 3(a).
The Company will pay Registration Expenses (as hereinafter defined) in
accordance with Section 6(a).
(c) Underwriter's Cutback. If the Holders of a majority in number of
---------------------
the Registrable Securities to be registered in a Demand Registration under this
Section 3 (or the Holder or Holders who initiated the Demand Registration) so
elect, the offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of an Underwritten Offering. In such event, if
the managing underwriter or underwriters of such offering advise the Company and
the Holders in writing that in their opinion the Registrable Securities
requested to be included in such offering is sufficiently large so as to
materially and adversely affect the success of the offering, the
4
<PAGE>
Company will include in such registration the maximum amount of Registrable
Securities which in the opinion of such managing underwriter or underwriters can
be sold without any such material adverse effect (pro rata among the Holders who
have requested to be included in such registration pursuant to Section 3(a)).
(d) Selection of Underwriters. If any Demand Registration shall be
-------------------------
in the form of an Underwritten Offering, the investment banker or bankers and
manager or managers that will administer the offering will be selected by
Holders of a majority in number of the Registrable Securities to be included in
such offering; provided that such investment bankers and managers must be
--------
reasonably satisfactory to the Company.
(e) Piggy-Back Registration. If during the Demand Period the Company
-----------------------
determines to file a registration statement under the Securities Act relating to
a proposed sale to the public of shares of its securities (but excluding
registrations relating solely to employees' stock option or purchase plans or
relating solely to a transaction employing SEC Form S-4 or Form S-8 or successor
Forms thereto), either for its own account or the account of a security holder
or holders, the Company shall:
(1) promptly give each Holder written notice thereof (which will
include, to the extent known at the time, a list of the jurisdictions in which
the Company intends to attempt to qualify such securities under the applicable
blue sky or other state securities laws, the proposed offering price or price
range, and the plan of distribution);
(2) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests,
made within 25 days after such written notice from the Company, by any Holder;
and
(3) use its best efforts to cause the managing underwriter or
underwriters of such proposed Underwritten Offering to permit the Registrable
Securities requested to be included in the registration statement for such
offering to be included on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering deliver a written
opinion to the Company and the Holders that marketing considerations require a
limitation on the number of shares of Common Stock offered pursuant to any
Registration Statement filed under this Section, the Company will include in
such registration (i) first, the securities the Company proposes to sell and
(ii) second, the Registrable Securities requested to be included therein,
which in the opinion of such underwriters (after taking into account the
securities to be sold pursuant to clause (i)) can be sold without having a
material adverse effect on the offering, pro rata among the Holders on the
basis of the number of Registrable Securities owned by such Holders requested
to be included in such registration. The
5
<PAGE>
Company will bear all Registration Expenses in connection with such a Piggy-
Back Registration. Notwithstanding anything to the contrary herein, if the
managing underwriter or underwriters of such offering deliver a written
opinion to the Company and the Holders that marketing considerations require
that no shares of Registrable Securities be included in such offering, then
the Company may, after notice thereof to the Holders of Registrable Securities
requested to be included in such registration, proceed with such offering
without including therein such Registrable Securities.
(f) Holding Rights Under Call Option and Right of First Refusal.
-----------------------------------------------------------
The rights of any Holder to register shares under this Section 3 shall be
subject to any rights Holding may have under Article III of the Shareholders
Agreement.
4. Hold-Back Agreements
--------------------
(a) Restrictions on Public Sales by Holders. Each Holder agrees, if
---------------------------------------
requested in writing by the managing underwriters in an Underwritten Offering,
with respect to any Underwritten Offering in which such Holder's Registrable
Securities are covered by a Registration Statement filed pursuant to Section 3
hereof, not to effect any public sale or distribution of securities of the
Company of the same class as the securities included in such Registration
Statement, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such Underwritten Registration), during the 90-day period
following the effective date of the Registration Statement for each Underwritten
Offering made pursuant to such Registration Statement, in each case to the
extent timely notified in writing by the Company or the managing underwriters .
(b) Restrictions on Public Sale by the Company and Others. The
-----------------------------------------------------
Company agrees:
(1) not to effect any public sale or distribution of its equity
securities during the 30-day period prior to, and during the 90-day period
after, the effective date of any Underwritten Offering made pursuant to a
Registration Statement filed under Section 3 hereof, to the extent timely
requested in writing by the managing underwriters (except as part of such
Underwritten Registration or pursuant to registrations on Forms S-4 or S-8 or
any successor form to such Forms); and
(2) to cause each holder of its privately placed equity securities who
beneficially owns at least one percent of any class of the Company's
outstanding equity securities issued by the Company at any time on or after
the date of this Agreement to agree not to effect any public sale or
distribution of any such securities during the period described in Section
4(b)(i) above, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such Underwritten Registration, if permitted).
6
<PAGE>
5. Registration Procedures
-----------------------
In connection with the Company's registration obligations pursuant to
Section 3 hereof, the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company will as expeditiously as possible:
(a) before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, furnish to the Holders of the Registrable
Securities covered by such registration statement and the managing underwriters,
if any, copies of all such documents proposed to be filed, which documents will
be made available for review by such Holders and managing underwriters, and the
Company will not file any Registration Statement or amendment thereto or any
Prospectus or any supplement thereto to which the Holders of a majority in
number of the Registrable Securities covered by the Registration Statement or
the underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to any Registration Statement, and such supplements to the
Prospectus, as may be reasonably requested by the Holder or any managing
underwriter of Registrable Securities or as may be required by the rules,
regulations or instructions applicable to the registration form utilized by the
Company or by the Securities Act or otherwise necessary to keep such
Registration Statement effective for the applicable period and cause the
Prospectus as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act;
(c) notify the selling Holders and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such advice in writing,
(1) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement or
any post-effective amendment, when the same has become effective,
(2) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information,
(3) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) if at any time the representations and warranties of the Company
contemplated by paragraph (n) below cease to be true and correct,
7
<PAGE>
(5) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, and
(6) of the existence of any fact which results in the Registration
Statement, the Prospectus or any document incorporated therein by reference
containing an untrue statement of material fact or omitting to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading ;
(d) use best efforts to obtain the withdrawal of any order suspending
the effectiveness of the Registration Statement at the earliest possible moment;
(e) if reasonably requested by the managing underwriter or underwriters
or a selling Holder, as promptly as practicable incorporate in a Prospectus
supplement or post-effective amendment such necessary information as the
managing underwriters and the Holders of a majority in number of the Registrable
Securities being sold reasonably request to have included therein relating to
the plan of distribution with respect to such Registrable Securities, including,
without limitation, information with respect to the amount of Registrable
Securities being sold to such underwriters, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as promptly as practicable
after being notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(f) at the request of any selling Holder, furnish to such Holder and
each managing underwriter, without charge, such number of conformed copies of
the Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference) as such
Holder may reasonably request;
(g) deliver to each selling Holder and the underwriters, if any,
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; the Company consents to the use of the Prospectus or any
amendment or supplement thereto by each of the selling Holder and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto;
(h) in connection with any public offering of Registrable Securities,
register or qualify or cooperate with the selling Holders, the managing
underwriters, if any, and their respective counsel in connection with the
registration or qualification of
8
<PAGE>
such Registrable Securities for offer and sale under the securities or blue sky
laws of such jurisdictions as any seller or underwriter reasonably requests in
writing and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Registrable Securities covered by
the Registration Statement; provided that the Company will not be required to
--------
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject ;
(i) cooperate with the selling Holders and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and, if not required by
applicable law, not bearing any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters may request at least two business days prior to any sale
of Registrable Securities to the underwriters;
(j) use its best efforts to cause the Registrable Securities covered by
the applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities;
(k) if any fact contemplated by paragraph (c)(6) above shall exist, use
its best efforts to prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the Holders of the Registrable Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading;
(l) use its best efforts to cause all Registrable Securities covered by
the Registration Statement to be listed on the NYSE;
(m) not later than the effective date of the applicable Registration
Statement, provide a CUSIP number for all Registrable Securities and provide the
applicable trustees or transfer agents with printed certificates for the
Registrable Securities which are in a form eligible for deposit with Depositary
Trust Company;
(n) with respect to an Underwritten Offering or other transaction in
which an investment banking firm significantly participates, enter into
customary agreements with investment bankers and underwriters (including
underwriting agreements in customary form) and take all other appropriate
actions that the underwriter or investment banker may reasonably request in
order to expedite or facilitate the disposition of such Registrable Securities
and in such connection:
9
<PAGE>
(1) make such representations and warranties to the selling Holders and
the underwriters, if any, in form, substance and scope as are customarily made
by issuers to underwriters in primary Underwritten Offerings or in the type of
offering in which the investment bank is significantly participating;
(2) obtain opinions of counsel to the Company and updates thereof
addressed to each selling Holder and the underwriters, if any, covering the
matters customarily covered in opinions requested in Underwritten Offerings or
in the type of offering in which the investment bank is significantly
participating and such other matters as may be reasonably requested by such
underwriters or other participating investment banks;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to selling
Holders and the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters to
underwriters in connection with primary Underwritten Offerings;
(4) if an underwriting agreement is entered into, cause the same to set
forth in full the indemnification provisions and procedures of Section 7
hereof (or such other substantially similar provisions and procedures as the
underwriters shall reasonably request) with respect to all parties to be
indemnified pursuant to said Section; and
(5) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable Securities being
sold and the managing underwriters, if any, to evidence compliance with
paragraph (k) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The above shall be done at the effectiveness of such Registration Statement,
each closing under any underwriting or similar agreement as and to the extent
required thereunder and from time to time as may reasonably be requested by the
underwriter or other participating investment bank, all in a manner consistent
with customary industry practice;
(o) make available to a representative of the Holders of a majority in
number of the Registrable Securities, any managing underwriter participating in
any disposition pursuant to such Registration Statement, and any attorney or
accountant retained by the sellers or managing underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all information
reasonably requested (taking into account the number of Registrable Securities
held by the requesting Holder) by any such representative, underwriter, attorney
or accountant in connection with the registration, with respect to each at such
time or times as the Company shall reasonably determine; provided that any
--------
records, information or
10
<PAGE>
documents that are designated by the Company in writing as confidential shall be
kept confidential by such Persons unless disclosure of such records, information
or documents is required by court or administrative order;
(p) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make generally available to its security
holders, earnings statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder;
(q) cooperate and assist in any filings required to be made with the
NASD and/or the NYSE and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD); and
(r) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) provide copies of such
document to counsel to the selling Holders and to the managing underwriters, if
any, make the Company's representatives available for discussion of such
document and make such changes in such document prior to the filing thereof as
counsel for such selling Holder or underwriters may reasonably request.
The Company may require each selling Holder to furnish to the Company
such information regarding such Holder and the distribution of such securities
as the Company may from time to time reasonably request in writing.
Each Holder agrees by acquisition of such Registrable Securities that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in paragraph (k) above, such Holder will forthwith discontinue
disposition of Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by paragraph (k) above,
or until it is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the Prospectus, and, if so
directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time periods mentioned in Section 4(a) hereof shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each selling Holder
either receives the copies of the supplemented or amended prospectus
contemplated by paragraph (k) above or is advised in writing by the Company that
the use of the Prospectus may be resumed.
Nothing set forth in this Section 5 is intended to impair the Company
from making filings required under the Exchange Act on a timely basis; provided,
--------
however,
- -------
11
<PAGE>
that the Company shall provide drafts of such filings to selling Holders at
least five Business Days prior to the date the filing thereof is due and shall
cooperate with such Holders with respect to such filings and make such changes
or modifications to such filings as may be reasonably requested (in light of the
requirements of applicable law) by such Holders or its counsel.
6. Registration Expenses
---------------------
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be paid by the Company, regardless whether the
Registration Statement becomes effective (unless (i) the offering to which the
Registration Statement applies shall be withdrawn at the request of the Holder
who initiated the Demand Registration not as a result of a breach by the Company
of its obligations hereunder and (ii) such Holder notifies the Company that such
offering shall not count as a Demand Registration, in which case all such
expenses shall be paid by such Holder). Without limiting the foregoing, the
Company shall pay all expenses incident to a Demand Registration that has not
become and remained effective for the period specified in Section 3(a), other
than as a result of a withdrawal at the request of the Holders. The expenses to
be paid by the Company shall include, without limitation:
(1) all registration and filing fees (including, without limitation,
with respect to filings and registrations required to be made with the NASD
and/or NYSE);
(2) fees and expenses of compliance with securities or blue sky laws
(including, without limitation, fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities and determination of their eligibility for investment under the
laws of such jurisdictions as the managing underwriters or the Holders of a
majority of the Registrable Securities being sold may designate);
(3) printing (including, without limitation, expenses of printing or
engraving certificates for the Registrable Securities in a form eligible for
deposit with Depositary Trust Company and of printing prospectuses),
messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company, the underwriters
and for the selling Holders;
(5) fees and disbursements of all independent certified public
accountants of the Company (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance);
(6) fees and expenses of other Persons retained by the Company; and
12
<PAGE>
(7) fees and expenses associated with any NASD and/or NYSE filing
required to be made in connection with the Registration Statement (all such
expenses being herein called "Registration Expenses").
Registration Expenses shall not include fees, discounts, commissions
or disbursements of underwriters, selling brokers, dealer managers or similar
securities professionals relating to the distribution of the Registrable
Securities or legal expenses of any Person other than the Company and the
selling Holders.
(b) The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed, rating agency fees and the
fees and expenses of any Person, including special experts, retained by the
Company.
7. Indemnification
---------------
(a) Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless each Holder, its officers, directors, employees and Agents and
each Person who controls the Holder within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Holder") from and against
all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation and legal expenses) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or allegation thereof based
upon information furnished in writing to the Company by such holder expressly
for use therein; provided, however, that the Company shall not be liable in any
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such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any preliminary prospectus if (i) such
Holder failed to send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale of Registrable Securities and (ii)
the Prospectus would have corrected such untrue statement or omission; and
provided, further, that the Company shall not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the Prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and if, having previously been furnished
13
<PAGE>
by or on behalf of the Company with copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to or concurrently with the sale of a Registrable
Security to the person asserting such loss, claim, damage, liability or expense
who purchased such Registrable Security which is the subject thereof from such
Holder. This indemnity will be in addition to any liability which the Company
may otherwise have. The Company will also indemnify underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers and directors and each Person
who controls such Persons (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Indemnified Holders of Registrable
Securities.
If any action or proceeding (including any governmental investigation
or inquiry) shall be brought or asserted against an Indemnified Holder in
respect of which indemnity may be sought from the Company, such Indemnified
Holder shall promptly notify the Company in writing, and the Company shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the payment of all expenses. Such
Indemnified Holder shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be the expense of such Indemnified Holder unless (a) the
Company has agreed to pay such fees and expenses or (b) the Company shall have
failed to assume the defense of such action or proceeding or has failed to
employ counsel reasonably satisfactory to such Indemnified Holder in any such
action or proceeding or (c) if the representation of such Indemnified Holder by
the counsel retained by the Company would be inappropriate due to actual or
potential differing interests between the Indemnified Holder and any other party
represented by such counsel in such proceeding (in which case, if such
Indemnified Holder notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Holder, it being understood, however, that the Company shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time for
such Indemnified Holder and any other Indemnified Holders, which firm shall be
designated in writing by such Indemnified Holders). The Company shall not be
liable for any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Company agrees
to indemnify and hold harmless such Indemnified Holders from and against any
loss or liability by reason of such settlement or judgment.
(b) Indemnification by Holder of Registrable Securities. Each Holder
---------------------------------------------------
agrees to indemnify and hold harmless the Company, its directors and officers
and each Person, if any, who controls the Company within the meaning of either
Section 15
14
<PAGE>
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Holder, but only with respect
to information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement or Prospectus, or any amendment
or supplement thereto, or any preliminary prospectus. In case any action or
proceeding shall be brought against the Company or its directors or officers or
any such controlling person, in respect of which indemnity may be sought against
a Holder, such Holder shall have the rights and duties given the Company and the
Company or its directors or officers or such controlling person shall have the
rights and duties given to each Holder by the preceding paragraph. In no event
shall the liability of any selling Holder under this Section 7(b) be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information so furnished in writing by such Persons specifically for
inclusion in any Prospectus or Registration Statement or any amendment or
supplement thereto, or any preliminary prospectus.
(c) Contribution. If the indemnification provided for in this Section
------------
7 is unavailable to an indemnified party under Section 7(a) or Section 7(b)
hereof (other than by reason of exceptions provided in those Sections) in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand, and of the Indemnified Holder, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Indemnified Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Indemnified Holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 7(a), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7(c) were determined by pro
rata
15
<PAGE>
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7(c), an Indemnified
Holder shall not be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities sold by such
Indemnified Holder or its affiliated Indemnified Holders and distributed to the
public were offered to the public exceeds the amount of any damages which such
Indemnified Holder, or its affiliated Indemnified Holders, has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Rule 144
--------
The Company will use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Exchange Act or the Securities Act and, at the request of any Holder who
proposes to sell securities in compliance with Rule 144 promulgated under the
Securities Act (or any successor rule), as such rule may be amended from time to
time, the Company will (i) forthwith furnish to the Holder a written statement
of compliance with the filing requirements of the Commission as set forth in
Rule 144, and (ii) make available to the public and such Holder such information
as will enable such Holder to make sales pursuant to Rule 144 (or any successor
rule).
9. Participation in Underwritten Registrations
-------------------------------------------
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Registrable Securities on
the basis provided in any underwriting arrangements approved by the underwriters
and other Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) Remedies. Each Holder, in addition to being entitled to exercise
--------
all rights provided herein and granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
--------------------------
date of this Agreement enter into any agreement with respect to its securities
which is
16
<PAGE>
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof or impairs the rights granted
hereunder. The Company has not previously entered into any agreement with
respect to its securities granting any registration rights to any Person which
has not been terminated on or prior to the date hereof .
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least 85% of the outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by the Holders of 50% or more of
the Registrable Securities being sold.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to CBAP or any affiliate of CBAP, The Carlyle Group, 1001
Pennsylvania Avenue, N.W., Washington, D.C. 20004, Attention: John F. Harris,
with a copy to: Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite 1300,
Washington, D.C. 20004, Attention: Bruce E. Rosenblum;
(2) if to any other Holder, at the most current address given by such
Holder to the Company; and
(3) if to the Company, to Howmet International Inc., 475 Steamboat
Road, Greenwich, Connecticut 06836-1960, Attention: General Counsel, with a
copy to: Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New
York 10019, Attention: Eric S. Robinson.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when received if
deposited in the mail, postage prepaid, if mailed; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
17
<PAGE>
(g) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York.
(h) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(i) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings as to the subject matter, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the securities sold pursuant to the Purchase Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(j) Successors and Assigns. The rights and obligations granted to CBAP
----------------------
pursuant to this Agreement may be transferred to any affiliate of CBAP or to any
Person acquiring Registrable Securities representing at least 5% of the then
outstanding shares of Common Stock; provided, however, that the transferee will
provide written notice to the Company stating the name and address of the
transferee, identifying the securities with respect to which such rights have
been assigned and agreeing to be bound by this Agreement.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HOWMET INTERNATIONAL INC.
By /s/ Roland A. Paul
------------------
Name:
Title:
CARLYLE-BLADE ACQUISITION
PARTNERS, L.P.
By: CARLYLE PARTNERS II, L.P.
Its: General Partner
By: TC GROUP, L.L.C.
Its: General Partner
By: TCG HOLDINGS, L.L.C.
Its: Managing Member
By:____________________________
Name:
Title:
19
<PAGE>
EXHIBIT 4.8(c)
HOWMET CORPORATION,
as Issuer
and
MARINE MIDLAND BANK,
as Trustee
____________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of December 15, 1997
Supplementing Indenture Dated
as of December 7, 1995
____________________
$125,000,000
10% Senior Subordinated Notes Due 2003
<PAGE>
-2-
FIRST SUPPLEMENTAL INDENTURE, dated as of December 15, 1997 (this
"Supplemental Indenture"), between HOWMET CORPORATION, a Delaware corporation
and successor to Howmet Acquisition Corp., as issuer (the "Company"), and MARINE
MIDLAND BANK, as trustee (the "Trustee").
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture, dated as of December 7, 1995 (the "Indenture"), providing
for the creation and issuance by the Company of its 10% Senior Subordinated
Notes due 2003 (the "Notes", and together with the Exchange Notes, in each case,
issued, authenticated and delivered under the Indenture, in each case, as
amended or supplemented from time to time pursuant to the terms of the
Indenture, the "Securities");
WHEREAS, Section 9.02 of the Indenture provides that the Company and
the Trustee may amend or supplement the Indenture or the Securities with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding, subject to certain exceptions
specified in Section 9.02 of the Indenture;
WHEREAS, the parties hereto are entering into this Supplemental
Indenture to, among other things, (i) eliminate certain of the definitions
contained in Section 1.01 of the Indenture, (ii) eliminate certain restrictive
covenants contained in Article Four of the Indenture, (iii) amend certain
provisions contained in Articles Four, Five, Six and Eight of the Indenture; and
(iv) eliminate all references in the Indenture to sections and definitions to be
deleted in accordance with the preceding clauses (i), (ii) and (iii)
(collectively, the "Proposed Amendments");
WHEREAS, the Holders of at least a majority in aggregate principal
amount of the Securities have duly consented to the Proposed Amendments in the
manner provided in Section 9.02 of the Indenture; and
WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture a valid, binding and legal instrument enforceable in
accordance with its terms have been performed and fulfilled by the parties
hereto and the execution and delivery of this Supplemental Indenture have been
in all respects duly authorized by the parties hereto.
NOW, THEREFORE, in consideration of the above premises, each party
hereto agrees, for the benefit of the other party and for the equal and ratable
benefit of the Holders of the Securities, as follows:
<PAGE>
-3-
SECTION 1. Definitions.
-----------
For all purposes of this Supplemental Indenture, except as otherwise
expressly provided or unless the context otherwise requires, the terms used
herein shall have the respective meanings assigned to them in the Indenture.
SECTION 2. Elimination of Definitions from the Indenture.
----------------------------------------------
The definitions of the following terms and any references thereto are
hereby deleted in their entireties from Section 1.01 of the Indenture and from
the other sections of the Indenture where such terms or definitions are
referenced:
(i) Acquired Indebtedness;
(ii) Acquisition Date;
(iii) Affiliate Transaction;
(iv) Asset Sales;
(v) Capital Stock;
(vi) Change of Control;
(vii) Change of Control Date;
(viii) Change of Control Offer;
(ix) Change of Control Payment Date;
(x) Collateral;
(xi) Collateral Account;
(xii) Collateral Funds;
(xiii) Consolidated EBITDA;
(xiv) Consolidated Net Income;
(xv) Excess Net Proceeds;
(xvi) Holdings Intercompany Note;
(xvii) Independent;
(xviii) Independent Financial Advisor;
(xix) Initial Amount;
(xx) Initial Distribution;
(xxi) Investment;
(xxii) Management Agreements;
(xxiii) Money Market Account;
(xxiv) Net Cash Proceeds;
(xxv) Net Offering Proceeds;
(xxvi) Net Proceeds Offer;
(xxvii) Operating Coverage Ratio;
(xxviii) Permitted Investment;
(xxix) Permitted Liens;
(xxx) Preferred Stock;
(xxxi) Proceeds Purchase Date;
(xxxii) Purchase Money Note;
(xxxiii) Qualified Receivables Transaction;
(xxxiv) Receivables Subsidiary;
<PAGE>
-4-
(xxxv) Reference Date;
(xxxvi) Refinancing Indebtedness;
(xxxvii) Restricted Payment;
(xxxviii) Restricted Subsidiary;
(xxxix) Significant Stockholder;
(xl) Significant Subsidiary;
(xli) Special Redemption Amount;
(xlii) Standard Securitization Undertakings;
(xliii) Subordinated Obligations;
(xliv) Tax Sharing Agreement;
(xlv) Unrestricted Subsidiary; and
(xlvi) Weighted Average Life to Maturity.
SECTION 3. Elimination or Amendment of Certain Provisions of the
-----------------
Indenture.
----------
(a) Section 4.08 of the Indenture is hereby amended to state, in its
entirety, the following:
"SECTION 4.08. Reports.
-------
(a) The Company shall comply with the provisions of TIA (S) 314(a).
(b) [Intentionally Omitted].
(c) [Intentionally Omitted]."
(b) Section 4.10 of the Indenture entitled "Limitation on Restricted
Payments" is hereby deleted in its entirety, together with any references
thereto in the Indenture, and replaced with the words: "SECTION 4.10.
[Intentionally Omitted]."
(c) Section 4.11 of the Indenture entitled "Limitation on
Transactions with Affiliates" is hereby deleted in its entirety, together with
any references thereto in the Indenture, and replaced with the words: "SECTION
4.11. [Intentionally Omitted]."
(d) Section 4.12 of the Indenture entitled "Limitation on
Indebtedness" is hereby deleted in its entirety, together with any references
thereto in the Indenture, and replaced with the words: "SECTION 4.12.
[Intentionally Omitted]."
(e) Section 4.13 of the Indenture entitled "Limitation on Payment
Restrictions Affecting Subsidiaries" is hereby deleted in its entirety, together
with any references
<PAGE>
-5-
thereto in the Indenture, and replaced with the words:
"SECTION 4.13. [Intentionally Omitted]."
(f) Section 4.14 of the Indenture entitled "Limitation on Additional
Senior Subordinated Indebtedness" is hereby deleted in its entirety, together
with any references thereto in the Indenture, and replaced with the words:
"SECTION 4.14. [Intentionally Omitted]."
(g) Section 4.15 of the Indenture entitled "Limitation on Change of
Control" is hereby deleted in its entirety, together with any references thereto
in the Indenture, and replaced with the words: "SECTION 4.15. [Intentionally
Omitted]."
(h) Section 4.16 of the Indenture entitled "Limitation on Asset
Sales" is hereby deleted in its entirety, together with any references thereto
in the Indenture, and replaced with the words: "SECTION 4.16. [Intentionally
Omitted]."
(i) Section 4.17 of the Indenture entitled "Limitation on Capital
Stock of Restricted Subsidiaries" is hereby deleted in its entirety, together
with any references thereto in the Indenture, and replaced with the words:
"SECTION 4.17. [Intentionally Omitted]."
(j) Section 4.18 of the Indenture entitled "Limitation on Liens" is
hereby deleted in its entirety, together with any references thereto in the
Indenture, and replaced with the words: "SECTION 4.18. [Intentionally
Omitted]."
(k) Section 4.19 of the Indenture entitled "Limitation on Transfer
of Assets to Certain Subsidiaries" is hereby deleted in its entirety, together
with any references thereto in the Indenture, and replaced with the words: "
SECTION 4.19. [Intentionally Omitted]."
(l) Section 4.20 of the Indenture entitled "Deposit of Proceeds
with Trustee Pending Consummation of the Acquisition" is hereby deleted in its
entirety, together with any references thereto in the Indenture, and replaced
with the words: "SECTION 4.20. [Intentionally Omitted]."
(m) Section 5.01 of the Indenture is hereby amended to state, in
its entirety, the following:
<PAGE>
-6-
"SECTION 5.01. Merger, Consolidation
and Sale of Assets.
---------------------
(a) The Company shall not in a single transaction or through a series
of related transactions consolidate with or merge with or into any other
Person, or transfer (by lease, assignment, sale or otherwise) all or
substantially all of its Properties and assets unless:
(1) either the Company shall be the continuing Person, or the
Person (if other than the Company) formed by such consolidation or
into which the Company is merged or to which all or substantially all
of the properties and assets of the Company are transferred (the
Company or such other Person being hereinafter referred to as the
"Surviving Person") shall be a corporation organized and validly
----------------
existing under the laws of the United States, 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, all of the Obligations of the Company
under the Notes and this Indenture.
(2) [Intentionally Omitted];
(3) immediately before or immediately after and giving effect to
such transaction no Default or Event of Default shall have occurred or
be continuing; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer or adoption and such supplemental
indenture comply with this Article Five, that the Surviving Person
agrees to be bound hereby, and that all conditions precedent herein
provided (which, in the case of the Opinion of Counsel, may be limited
to the condition specified in clause (1) of this Section 5.01(a))
relating to such transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single
<PAGE>
-7-
transaction or series of transactions) of all or substantially all of the
Properties and assets of one or more Subsidiaries the Capital Stock of
which constitutes all or substantially all of the Properties and assets of
the Company shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company.
(c) [Intentionally Omitted]."
(n) Section 6.01 of the Indenture is hereby amended to state, in
its entirety, the following:
"SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company defaults in the payment of any installment of
interest on any Notes as and when the same becomes due and payable and
the Default continues for a period of 30 days (whether or not
prohibited by the subordination provisions of this Indenture);
(2) the Company defaults in payment of all or any part of the
principal on any Notes when the same becomes due and payable at
maturity, upon any redemption, by declaration or otherwise (whether or
not prohibited by the subordination provisions of this Indenture);
(3) the Company or any Subsidiary Guarantor fails duly to observe
or comply with any of its other covenants or agreements contained in
the Notes or this Indenture and the Default continues for a 30-day
period and after the notice specified below;
(4) [Intentionally Omitted];
(5) the Company (A) commences a voluntary case or proceeding
under any Bankruptcy Law with respect to itself; (B) consents to the
entry of a judgment, decree or order for relief against it in an
involuntary case or proceeding under any Bankruptcy Law, (C) consents
to the appointment of a Custodian of it or for substantially all of
its property, (D) consents to or acquiesces in the institution of a
<PAGE>
-8-
bankruptcy or an insolvency proceeding against it, (E) makes a general
assignment for the benefit of its creditors; or (F) takes any
corporate action to authorize or effect any of the foregoing;
(6) a court of competent jurisdiction enters a judgment, decree
or order for relief in respect of the Company in an involuntary case
or proceeding under any Bankruptcy Law, which shall (A) approve as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company, (B) appoint a
Custodian of the Company or for substantially all of its property or
(C) order the winding-up or liquidation of its affairs; and such
judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days;
(7) [Intentionally Omitted]; or
(8) [Intentionally Omitted].
A Default under clause (3) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 50% in principal
amount of the then outstanding Notes notify the Company and the Trustee, of
the Default, and the Company does not cure the Default within 30 days after
receipt of the notice. The notice must specify the Default, demand that it
be remedied and state that the notice is a "Notice of Default." Such
notice shall be given by the Trustee if so requested by the Holders of at
least 50% in principal amount of the Notes then outstanding. Such notice
shall be given by registered or certified mail, return receipt requested."
(o) Section 6.02 of the Indenture is hereby amended to state, in
its entirety, the following:
<PAGE>
-9-
"SECTION 6.02. Acceleration.
------------
If an Event of Default occurs and is continuing and has not been
waived pursuant to Section 6.04, then the Trustee or the Holders of at
least 50% in principal amount of outstanding Notes may declare the
principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective
Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
--------------------
payable or (ii) if there are any amounts outstanding under the New Bank
Credit Facility, shall become immediately due and payable upon the first to
occur of an acceleration under the New Bank Credit Facility or 5 Business
Days after receipt by the Company and the Representative under the New Bank
Credit Facility of such Acceleration Notice unless all Events of Default
specified in such Acceleration Notice (other than any Event of Default
described in clause (2) of Section 6.01) shall have been cured. If an
Event of Default specified in Section 6.01(5) or (6) occurs with respect to
the Company, all unpaid principal and accrued interest on the Notes then
outstanding shall ipso facto become and be immediately due and payable
----------
without any declaration or other act on the part of the Trustee or any
Noteholder.
The declaration of acceleration is subject to the condition that if,
at any time after the principal of the Notes shall have been so declared
due and payable, and before any judgment or decree for the payment of the
moneys due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all the Notes and the principal
of any and all Notes which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that
payment of such interest is enforceable under applicable law, on overdue
installments of interest, at the same rate as the rate of interest
specified in the Notes, to the date of such payment or deposit) and such
amount as shall be sufficient to cover reasonable compensation to the
Trustee and each predecessor Trustee, their respective agents, attorneys
and counsel, and all other expenses and liabilities incurred, and all
<PAGE>
-10-
advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith, and if any and all Events of Default,
other than the non-payment of the principal of Notes which shall have
become due by acceleration, shall have been cured, waived or otherwise
remedied as provided herein, then and in every such case the holders of a
majority in aggregate principal amount of the Notes then outstanding, by
written notice to the Company and to the Trustee, may waive all defaults
and rescind and annul such declaration and its consequences, but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon."
(p) Section 8.02 of the Indenture is hereby amended to state, in
its entirety, the following:
"SECTION 8.02. Defeasance and Discharge
of Indenture.
------------------------
The Company shall be deemed to have paid and discharged the entire
Indebtedness on all the outstanding Notes on the 91st day after the date of
the deposit referred to in subparagraph (a) hereof, and the provisions of
this Indenture, as it relates to such outstanding Notes, shall no longer be
in effect (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except as to: (1) rights of
registration of transfer and exchange, and the Company's right of optional
redemption, (2) substitution of mutilated, defaced, destroyed, lost or
stolen Notes, (3) rights of Holders to receive payments of principal
thereof and interest thereon, (4) the rights, obligations and immunities of
the Trustee hereunder and (5) the rights of the Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Trustee payable to all or any of them; provided that all of the following
--------
conditions shall have been satisfied:
(a) the Company has deposited or caused to be irrevocably
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 who shall agree to comply with the
provisions of this Article) as trust funds in trust, specifically
pledged as security for, and
<PAGE>
-11-
dedicated solely to, the benefit of the Holders of the Notes, (i) U.S.
Legal Tender in an amount, or (ii) U.S. Government Obligations which
through the payment of interest and principal in respect thereof in
accordance with their terms will provide not later than one business
Day before the due date of any payment referred to below U.S. Legal
Tender in an amount, or (iii) a combination thereof, sufficient, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, without consideration of the
reinvestment of such interest and after payment of all federal, state
and local taxes or other charges and assessments in respect thereof
payable by the Trustee, the principal of and each installment of
principal and interest on the outstanding Notes as of the maturity
date of such principal or installment of interest;
(b) such deposit shall not cause the Trustee to have a
conflicting interest as defined in the TIA;
(c) such deposit shall not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company or any Subsidiary Guarantor, if any,
is a party or by which it is bound;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 91st day after such date;
(e) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (i) the Holders of the Notes shall not
recognize income, gain or loss for Federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject
to Federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit, defeasance
and discharge had not occurred, and (ii) the
<PAGE>
-12-
creation of the trust will not violate the Investment Company Act of
1940, as amended; and
(f) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the defeasance
contemplated by this provision have been complied with."
SECTION 4. Operation of Supplemental Indenture.
-----------------------------------
This Supplemental Indenture shall become effective upon execution by
the parties hereto and the Proposed Amendments shall become operative upon the
delivery to the Trustee of an Officers' Certificate certifying that the Company
has purchased, by accepting for payment, all Securities that have been validly
tendered (and not withdrawn) pursuant to the Company's offer to purchase
Securities on the terms and conditions set forth in the Company's Offer to
Purchase and Consent Solicitation Statement, dated November 24, 1997, as it may
be supplemented from time to time, and the related Consent and Letter of
Transmittal.
SECTION 5. Concerning the Trustee.
----------------------
The Trustee accepts the trusts of the Indenture, as supplemented by
this Supplemental Indenture, and agrees to perform the same, but only upon the
terms and conditions set forth in the Indenture, as supplemented by this
Supplemental Indenture, to which the parties hereto and the Holders from time to
time of the Securities agree and, except as expressly set forth in the
Indenture, as supplemented by this Supplemental Indenture, shall incur no
liability or responsibility in respect thereof. The Trustee makes no
representation and shall have no responsibility as to the validity or
sufficiency of this Supplemental Indenture, or for or in respect to the recitals
contained herein, all of which recitals are made solely by the Company.
SECTION 6. Miscellaneous.
-------------
(a) Except as hereby expressly amended, the Indenture is in all
respects ratified and confirmed and all the terms, provisions and conditions
thereof shall be and remain in full force and effect.
(b) All agreements of the Company in this Supplemental Indenture
shall bind the Company's successors.
<PAGE>
-13-
All agreements of the Trustee in this Supplemental Indenture shall bind its
successors.
(c) THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE.
(d) If and to the extent that any provision of this Supplemental
Indenture limits, qualifies or conflicts with another provision that is required
to be included in this Supplemental Indenture or in the Indenture by the TIA,
the required provision shall control.
(e) The titles and headings of the sections of this Supplemental
Indenture have been inserted for convenience of reference only, and are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
(f) This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall represent one and the same agreement.
(g) In case any provision of this Supplemental Indenture shall be
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof or of the Indenture shall not
in any way be affected or impaired thereby.
[Signature page follows]
<PAGE>
-14-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first written above.
HOWMET CORPORATION,
as Issuer
By: /s/ Roland A. Paul
------------------
Name: Roland A. Paul
Title: Vice President
MARINE MIDLAND BANK,
as Trustee
By: /s/ Robert A. Conrad
--------------------
Name: Robert A. Conrad
Title: Vice President
<PAGE>
EXHIBIT 4.11
CREDIT AGREEMENT
Dated as of December 16, 1997
among
HOWMET CORPORATION,
THE INSTITUTIONS FROM TIME TO TIME
PARTIES HERETO AS LENDERS
ABN AMRO BANK, N.V.
and
BANKERS TRUST COMPANY
As Co-Documentation Agents
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Swing Line Lender, LC Issuer and Agent
<PAGE>
TABLE OF CONTENTS
ARTICLE I: DEFINITIONS 1
ARTICLE II: THE CREDITS 18
2.1. Commitment 18
2.2 Swing Line Loans 19
2.3. Required Payments; Termination 20
2.4. Ratable Loans 21
2.5. Types of Advances 21
2.6. Facility Fee; Reductions in Aggregate
Commitment 21
2.7. Minimum Amount of Each Advance 21
2.8. Optional Principal Payments 21
2.9. Method of Selecting Types and Interest
Periods for New Advances 21
2.10. Conversion and Continuation of Outstanding
Advances 22
2.11. Changes in Interest Rate, Etc. 22
2.12. Rates Applicable After Default 23
2.13. Method of Payment 23
2.14. Noteless Agreement; Evidence of Indebtedness 24
2.15. Telephonic Notices 24
2.16. Interest Payment Dates; Interest and Fee
Basis 24
2.17. Notification of Advances, Interest Rates,
Prepayments and Commitment
Reductions 25
2.18. Lending Installations 25
2.19. Non-Receipt of Funds by the Agent 25
2.20 Replacement of Certain Lenders 26
ARTICLE III: THE LETTER OF CREDIT FACILITY 27
3.1 Obligation to Issue 27
3.2 Transitional Provision 27
3.3 Types and Amounts 27
3.4 Conditions. 27
3.5 Procedure for Issuance of Facility LCs 28
3.6 Facility LC Participation 28
3.7 Reimbursement Obligation 29
3.8 Cash Collateral 29
3.9 Facility LC Fees 30
3.10 LC Issuer Reporting Requirements. 30
3.11 Indemnification; Exoneration 30
<PAGE>
ARTICLE IV: YIELD PROTECTION; TAXES 32
4.1. Yield Protection 32
4.2. Changes in Capital Adequacy Regulations 32
4.3. Availability of Types of Advances 33
4.4. Funding Indemnification 33
4.5. Taxes 34
4.6. Lender Statements; Survival of Indemnity 35
ARTICLE V: CONDITIONS PRECEDENT 36
5.1. Initial Credit Extensions 36
5.2. Each Credit Extension 37
ARTICLE VI: REPRESENTATIONS AND WARRANTIES 38
6.1. Existence and Standing 38
6.2. Authorization and Validity 38
6.3. No Conflict; Government Consent 39
6.4. Financial Statements 39
6.5. Material Adverse Change 39
6.6. Taxes 39
6.7. Litigation and Contingent Obligations 40
6.8. Subsidiaries 40
6.9. ERISA; Foreign Pension Plan Matters 40
6.10. Accuracy of Information 40
6.11. Regulation U 41
6.12. Material Agreements 41
6.13. Compliance With Laws 41
6.14. Ownership of Properties 41
6.15. Plan Assets; Prohibited Transactions 41
6.16. Environmental Matters. 42
6.17. Investment Company Act 42
6.18. Public Utility Holding Company Act 42
ARTICLE VII: COVENANTS 42
7.1. Financial Reporting 42
7.2. Use of Proceeds 44
7.3. Notice of Default 44
7.4. Conduct of Business 44
7.5. Taxes 45
7.6. Insurance 45
7.7. Compliance with Laws 45
7.8. Maintenance of Properties 45
7.9. Inspection 45
7.10. Indebtedness 45
7.11. Merger 46
7.12. Sale of Assets 46
<PAGE>
7.13. Investments and Acquisitions; New Subsidiaries 47
7.14. Liens 49
7.15. Affiliates 53
7.16. Incorporation of Senior Subordinated Note
Indenture Restrictions 53
7.17. Subordinated Indebtedness 53
7.18. Financial Contracts 53
7.19. Pledge Agreements 54
7.20. Financial Covenants 54
7.20.1. Interest Coverage Ratio 54
7.20.2. Leverage Ratio 54
7.20.3. Minimum Net Worth 54
7.21 Subsidiary Covenants 54
ARTICLE VIII: DEFAULTS 55
ARTICLE IX: ACCELERATION, WAIVERS, AMENDMENTS AND
REMEDIES 57
9.1. Acceleration 57
9.2. Amendments 58
9.3. Preservation of Rights 59
ARTICLE X: GENERAL PROVISIONS 59
10.1. Survival of Representations 59
10.2. Governmental Regulation 60
10.3. Headings 60
10.4. Entire Agreement 60
10.5. Several Obligations; Benefits of this
Agreement 60
10.6. Expenses; Indemnification 60
10.7. Numbers of Documents 61
10.8. Accounting 61
10.9. Severability of Provisions 61
10.10. Nonliability of Lenders 61
10.11. Confidentiality 62
10.12. Nonreliance 62
ARTICLE XI: THE AGENT 62
11.1. Appointment; Nature of Relationship 62
11.2. Powers 63
11.3. General Immunity 63
11.4. No Responsibility for Loans, Recitals, etc. 63
11.5. Action on Instructions of Lenders 63
11.6. Employment of Agents and Counsel 64
11.7. Reliance on Documents; Counsel 64
11.8. Agent's Reimbursement and Indemnification 64
11.9. Notice of Default 65
<PAGE>
11.10. Rights as a Lender 65
11.11. Lender Credit Decision 65
11.12. Successor Agent 65
11.13. Agent's Fee. 66
11.14. Delegation to Affiliates. 66
11.15. Execution of Collateral Documents 66
11.16. Collateral and Guaranty Releases 66
ARTICLE XII: SETOFF; RATABLE PAYMENTS 67
12.1. Setoff 67
12.2. Ratable Payments 67
ARTICLE XIII: BENEFIT OF AGREEMENT; ASSIGNMENTS;
PARTICIPATIONS
13.1. Successors and Assigns 67
13.2. Participations 68
13.2.1 Permitted Participants; Effect 68
13.2.2. Voting Rights 68
13.2.3. Benefit of Setoff 68
13.3. Assignments 68
13.3.1. Permitted Assignments 69
13.3.2. Effect; Effective Date 69
13.4. Dissemination of Information 69
13.5. Tax Treatment 70
ARTICLE XIV: NOTICES 70
14.1. Notices 70
14.2. Change of Address 70
ARTICLE XV: COUNTERPARTS 70
ARTICLE XVI: CHOICE OF LAW; CONSENT TO JURISDICTION;
WAIVER OFJURY TRIAL 70
16.1. CHOICE OF LAW 71
16.2. CONSENT TO JURISDICTION 71
(A) EXCLUSIVE JURISDICTION 71
(B) OTHER JURISDICTIONS 71
16.3. WAIVER OF JURY TRIAL 71
<PAGE>
SCHEDULES AND EXHIBITS
PRICING SCHEDULE
COMMITMENT SCHEDULE
SCHEDULE 1 Existing LCs
SCHEDULE 2 Litigation and Contingent Obligations
SCHEDULE 3 Subsidiaries
SCHEDULE 4 Indebtedness and Liens
SCHEDULE 5 Investments
SCHEDULE 6 Transactions with Affiliates
EXHIBIT A Form of Note
EXHIBIT B Form of Pledge Agreement
EXHIBIT C Form of Subsidiary Guaranty
EXHIBIT D Form of Swing Line Note
EXHIBIT E Form of Assignment Agreement
EXHIBIT F Money Transfer Instructions
EXHIBIT G Form of Compliance Certificate
<PAGE>
CREDIT AGREEMENT
This Agreement, dated as of December 16, 1997, is among Howmet Corporation,
a Delaware corporation, the Lenders and The First National Bank of Chicago, as a
LC Issuer, the Swing Line Lender, and the Agent. The parties hereto agree as
follows:
ARTICLE I: DEFINITIONS
As used in this Agreement:
"ACQUISITION" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (i) acquires any going business concern or all or
substantially all of the assets of any firm, corporation or limited liability
company, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
"ADVANCE" means a borrowing hereunder (or conversion or continuation
thereof) consisting of the aggregate amount of the several Syndicated Loans made
on the same Borrowing Date (or date of conversion or continuation) by the
Lenders to the Borrower of the same Type and, in the case of Eurodollar
Advances, for the same Interest Period.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"AGENT" means The First National Bank of Chicago in its capacity as
contractual representative of the Lenders pursuant to Article XI, and not in its
----------
individual capacity as a Lender, and any successor Agent appointed pursuant to
Article XI.
- ----------
"AGGREGATE COMMITMENT" means the aggregate of the Commitments of all the
Lenders, as reduced from time to time pursuant to the terms hereof.
<PAGE>
"AGGREGATE OUTSTANDING LC EXPOSURE" means, as of any day, the aggregate of
the Outstanding LC Exposure of all the Lenders.
"AGGREGATE OUTSTANDING CREDIT EXPOSURE" means, as of any day, the aggregate
of the Outstanding Credit Exposure of all the Lenders.
"AGREEMENT" means this credit agreement, as it may be amended, modified,
supplemented or restated and in effect from time to time.
"ALTERNATE BASE RATE" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"APPLICABLE FACILITY FEE RATE" means, at any time, the percentage rate per
annum at which facility fees are accruing on the Aggregate Commitment (without
regard to usage) at such time as set forth in the Pricing Schedule.
"APPLICABLE LC FEE PERCENTAGE" means, at any time, the percentage rate per
annum equal to the Applicable Margin with respect to Eurodollar Advances in
effect on such date as set forth in the Pricing Schedule.
"APPLICABLE MARGIN" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.
"ARRANGER" means First Chicago Capital Markets, Inc., a Delaware
corporation, and its successors.
"ARTICLE" means an article of this Agreement unless another document is
specifically referenced.
"AUTHORIZED OFFICER" means any of the President, any Vice President, the
Chief Financial Officer or the Treasurer of the Borrower, acting singly.
"AVAILABLE AGGREGATE COMMITMENT" means, for any day, the Aggregate
Commitment then in effect minus the sum of (i) the aggregate outstanding
-----
principal amount of the Advances; (ii) the aggregate outstanding principal
amount of the Swing Line Loans; and (iii) the Aggregate Outstanding LC
Exposure.
"BLADE" means, Blade Receivables Corporation, a Nevada corporation, and its
successors and assigns.
<PAGE>
"BORROWER" means Howmet Corporation, a Delaware corporation, and its
successors and assigns.
"BORROWING DATE" means a date on which an Advance or Swing Line Loan is
made hereunder.
"BORROWING NOTICE" is defined in Section 2.9.
-----------
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"CAPITALIZED LEASE" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.
"CASH EQUIVALENT INVESTMENTS" means, as to any Person, (i) securities
issued or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full faith and credit of
--------
the United States is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) time deposits and certificates
of deposit of any investment grade commercial bank having, or which is the
principal banking subsidiary of an investment grade bank holding company
organized under the laws of the United States, any State thereof, the District
of Columbia or any foreign jurisdiction having capital, surplus and undivided
profits aggregating in excess of $200,000,000, with maturities of not more than
one year from the date of acquisition by such Person, (iii) repurchase
obligations with a term of not more than 90 days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, provided that such repurchase
obligations are secured by a first priority security interest in such underlying
securities which have, on the date of purchase thereof, a fair market value of
at least 100% of the amount of the repurchase obligations, (iv) commercial paper
issued by any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by Standard & Poor's Ratings Group or at least P-1 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
not more than one year after the date of acquisition by such Person, (v)
investments in money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (i) through (iv) above
and (vi) demand deposit accounts maintained in the ordinary course of business.
<PAGE>
"CHANGE" is defined in Section 4.2.
-----------
"CHANGE IN CONTROL" means:
(i) Thiokol Corporation shall cease to own, free and clear of
all Liens or other encumbrances, on a fully diluted basis, at least 51% of
the combined voting power of the outstanding capital stock of Howmet
International, Inc. ordinarily having the right to vote at an election of
directors, or shall not have the right to elect, or shall for any reason
not have elected, a majority of the directors of Howmet International,
Inc.;
(ii) during any period of twelve consecutive calendar months,
individuals (a) who were directors of Howmet International, Inc. on the
first day of such period, or (b) whose election or nomination for election
to the board of directors of Howmet International, Inc. was recommended or
approved by at least a majority of the directors then still in office who
were directors of Howmet International, Inc. on the first day of such
period, or whose election or nomination for election was so approved, shall
cease to constitute a majority of the board of directors of Howmet
International, Inc. ;
(iii) Howmet International, Inc. shall cease to own, free and
clear of all Liens or other encumbrances, on a fully diluted basis, 100% of
the outstanding capital stock of Howmet Holdings Corporation;
(iv) Howmet Holdings Corporation shall cease to own, free and
clear of all Liens or other encumbrances, on a fully diluted basis, 100% of
the outstanding capital stock of the Borrower; or
(v) for so long as Senior Subordinated Notes in an amount
aggregating at least $10,000,000 are outstanding, any "Change of Control"
under and as defined in the Senior Subordinated Note Indenture shall occur
provided the effect of such "Change of Control" thereunder is to cause, or
to permit the holder or holders of such Senior Subordinated Notes cause,
the Indebtedness evidenced by the Senior Subordinated Notes or any part
thereof to become due prior to its stated maturity or any such Indebtedness
shall as a result thereof be declared to be due and payable or required to
be prepaid or repurchased prior to the stated maturity thereof.
"CLOSING DATE" means the date on which the initial Loans are advanced
hereunder.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
<PAGE>
"COLLATERAL DOCUMENTS" means, collectively, each of the Pledge Agreements,
together with the documents, instruments and agreements executed in connection
therewith.
"COMMITMENT" means, for each Lender, the obligation of such Lender to make
Syndicated Loans, participate in Facility LCs and participate in Swing Line
Loans in the aggregate not exceeding the amount set forth opposite its name on
the Commitment Schedule attached hereto and made a part hereof or as set forth
in any Notice of Assignment relating to any assignment that has become effective
pursuant to Section 13.3.2, as such amount may be modified from time to time
--------------
pursuant to the terms hereof.
"CONSOLIDATED EBIT" means, for any period, Consolidated Net Income plus,
(a) to the extent deducted from revenues in determining Consolidated Net Income,
(i) Consolidated Interest Expense and (ii) expense for income taxes paid or
accrued, adjusted by adding thereto (b) the amount of all Receivables Facility
Financing Costs (to the extent not otherwise included), all calculated for the
Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED EBITDA" means, for any period, Consolidated EBIT plus, to the
extent deducted from revenues in determining Consolidated Net Income, all
amortization of intangibles and depreciation, all calculated for the Borrower
and its Consolidated Subsidiaries on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with reference to any period, the
interest expense of the Borrower and its Consolidated Subsidiaries for such
period, all calculated for the Borrower and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with reference to any period, the net
after-tax income (or loss) of the Borrower and its Consolidated Subsidiaries
calculated on a consolidated basis for such period; provided, that there shall
--------
be excluded (i) the income (or loss) of any Affiliate of the Borrower or other
Person (other than the Borrower's Consolidated Subsidiaries) in which any Person
(other than the Borrower or any of its Consolidated Subsidiaries) has a joint
interest or which is not consolidated with the Borrower for financial reporting
purposes in accordance with GAAP, except to the extent of the amount of
dividends or other distributions actually paid to the Borrower or any of its
Consolidated Subsidiaries by such affiliate or other Person during such period
and (ii) the income (or loss) of any Person accrued prior to the date it becomes
a Consolidated Subsidiary of the Borrower or is merged into or consolidated with
the Borrower or any of its Consolidated Subsidiaries or that Person's assets are
acquired by the Borrower or any of its Consolidated Subsidiaries, all calculated
for the Borrower and its Consolidated Subsidiaries on a consolidated basis in
accordance with GAAP.
<PAGE>
"CONSOLIDATED NET WORTH" means at any time the consolidated stockholders'
equity of the Borrower and its Consolidated Subsidiaries calculated on a
consolidated basis as of such time in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means any Subsidiary that is consolidated on a
balance sheet of the Borrower in accordance with GAAP.
"CONSOLIDATED TOTAL DEBT" means the sum, without duplication, of (a) all
Indebtedness of the Borrower and its Consolidated Subsidiaries which, on the
date of determination, would be required to be shown on the Borrower's
consolidated balance sheet prepared in accordance with GAAP, plus (b) all
Receivables Facility Attributed Indebtedness of the Borrower and its
Consolidated Subsidiaries on the date of determination regardless of its
treatment under GAAP, plus (c) all Off Balance Sheet Liabilities of the Borrower
and its Consolidated Subsidiaries on the date of determination regardless of its
treatment under GAAP.
"CONVERSION/CONTINUATION NOTICE" is defined in Section 2.10.
------------
"CONTROLLED GROUP" means all members of a controlled group of corporations
or other business entities and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any of
its Subsidiaries, are treated as a single employer under Section 414 of the
-----------
Code.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.
"CREDIT EXTENSION" means either the funding of an Advance or Swing Line
Loan or the issuance of a Facility LC hereunder.
"CREDIT EXTENSION DATE" means the Borrowing Date for an Advance or the
issuance date for a Facility LC.
"DEFAULT" means an event described in Article VIII.
------------
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to (i) the
protection of the environment, (ii) the effect of the environment on human
health, (iii) emissions, discharges or releases of pollutants, contaminants,
hazardous substances or wastes into surface water, ground water or land, or (iv)
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous substances or
wastes or the clean-up or other remediation thereof.
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"EURODOLLAR ADVANCE" means an Advance which bears interest at the
applicable Eurodollar Rate.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the applicable London interbank offered rate for
deposits in U.S. dollars appearing on Dow Jones Markets (Telerate) Page 3750 as
of 11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, and having a maturity approximately equal to such Interest
Period. If no London interbank offered rate of such maturity then appears on
Dow Jones Markets (Telerate) Page 3750, then the Eurodollar Base Rate shall be
equal to the London interbank offered rate for deposits in U.S. dollars maturing
immediately before or immediately after such maturity, whichever is higher, as
determined by the Agent from Dow Jones Markets (Telerate) Page 3750. If Dow
Jones Markets (Telerate) Page 3750 is not available, the applicable Eurodollar
Base Rate for the relevant Interest Period shall be the rate determined by the
Agent to be the rate at which First Chicago offers to place deposits in U.S.
dollars with first-class banks in the London interbank market at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, in the approximate amount of First Chicago's relevant portion
of the Eurodollar Advance and having a maturity approximately equal to such
Interest Period.
"EURODOLLAR LOAN" means a Syndicated Loan which bears interest at the
applicable Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal), if any, applicable to such Interest
Period, plus the Applicable Margin. The Eurodollar Rate shall be rounded to the
next higher multiple of 1/100 of 1% if the rate is not such a multiple.
"EXCLUDED TAXES" means, in the case of each Lender or applicable Lending
Installation and the Agent, taxes imposed on its net income, and franchise taxes
imposed on it, by (i) the jurisdiction under the laws of which such Lender or
the Agent is incorporated or organized or any political combination or
subdivision or taxing authority thereof or (ii) any jurisdiction in which the
Agent's or such Lender's principal executive office or such Lender's applicable
Lending Installation is located or in which, other than as a result of the
transaction evidenced by this Agreement, the Agent or such Lender otherwise is,
or at any time was, engaged in business.
"EXHIBIT" refers to an exhibit to this Agreement, unless another document
is specifically referenced.
<PAGE>
"EXISTING CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement dated as of December 13, 1995 as amended and restated as of December
5, 1996, among the Borrower, the lenders named therein and The First National
Bank of Chicago, as agent for said lenders (as it may have been amended,
restated, supplemented or otherwise modified from time to time) and including
any and all related guaranties and collateral documents.
"EXISTING LCS" means each of the Letters of Credit issued under and
pursuant to the Existing Credit Agreement and which are described in Schedule 1
----------
hereto.
"FACILITY LC" means each Existing LC and each Letter of Credit issued under
Article III.
- -----------
"FACILITY TERMINATION DATE" means December 16, 2002 or any earlier date on
which the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"FINANCIAL CONTRACT" of a Person means (i) any exchange-traded or over-the-
counter futures, forward, swap or option contract or other financial instrument
with similar characteristics or (ii) any agreements, devices or arrangements
providing for payments related to fluctuations of interest rates, exchange rates
or forward rates, including, but not limited to, interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency, interest rate options or other
Rate Hedging Agreements.
"FIRST CHICAGO" means The First National Bank of Chicago in its individual
capacity, and its successors.
"FLOATING RATE" means, for any day, a rate per annum equal to the Alternate
Base Rate for such day, in each case changing when and as the Alternate Base
Rate changes.
"FLOATING RATE ADVANCE" means an Advance which bears interest at the
Floating Rate.
<PAGE>
"FLOATING RATE LOAN" means (a) the Swing Line Loans and (b) a Syndicated
Loan which bears interest at the Floating Rate.
"FOREIGN PENSION PLAN" means any employee pension benefit plan (as defined
in Section 3(2) of ERISA) which (i) is maintained or contributed to for the
benefit of employees of the Borrower or any other member of the Controlled
Group, (ii) is not covered by ERISA pursuant to Section 4(b)(4) thereof and
(iii) under applicable local law, is required to be funded through a trust or
other funding vehicle.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied in a manner consistent with that used in preparing the
financial statements referred to in Section 6.4.
-----------
"GOVERNMENTAL ACTS" is defined in Section 3.11.
------------
"GUARANTY" of any Person means any agreement by which such Person assumes,
guarantees, endorses, contingently agrees to purchase or provide funds for the
payment of, or otherwise becomes liable upon, the obligation of any other
Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person or otherwise assure any creditor of such
other Person against loss, and shall include, without limitation, the contingent
liability or reimbursement obligation of such Person under or with respect to
any Letter of Credit.
"INDEBTEDNESS" of any Person means, without duplication, (a) the
obligations of such Person (i) for borrowed money, (ii) under or with respect to
notes payable and drafts accepted which represent extensions of credit (whether
or not representing obligations for borrowed money) to such Person, (iii)
reimbursement obligations with respect to letters of credit issued for the
account of such Person or (iv) for the deferred purchase price of property or
services other than current accounts payable arising in the ordinary course of
business on terms customary in the trade, (b) the obligations of others, whether
or not assumed, secured by Liens on property of such Person or payable out of
the proceeds of or production from property now or hereafter owned or acquired
by such Person, (c) the Capitalized Lease Obligations of such Person, (d) the
obligations of such Person under Guaranties by such Person of any Indebtedness
(other than obligations for borrowed money incurred to finance the purchase of
property leased to such Person pursuant to a Capitalized Lease of such Person)
of any other Person, (e) all Receivables Facility Attributed Indebtedness of
such Person on the date of determination and (f) Off Balance Sheet Liabilities
of such Person.
"INTEREST PERIOD" means, with respect to a Eurodollar Advance, a period of
one, two, three, six or (in either case, subject to availability) nine or twelve
months commencing on a Business Day selected by the Borrower pursuant to this
Agreement. Such Interest Period shall end on the day which corresponds
numerically to such date one, two, three, six, nine or twelve months thereafter,
provided, however, that if there is no such numerically corresponding day in
such next, second, third, sixth, ninth or twelve succeeding month, such Interest
Period shall end on the last Business Day of such next,
<PAGE>
second, third, sixth, ninth or twelfth succeeding month. If an Interest Period
would otherwise end on a day which is not a Business Day, such Interest Period
shall end on the next succeeding Business Day, provided, however, that if said
next succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.
"INVESTMENT" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade) or
contribution of capital by such Person; stocks, bonds, mutual funds, partnership
interests, notes, debentures or other securities owned by such Person; any
deposit accounts and certificate of deposit owned by such Person; and structured
notes, Financial Contracts, derivative financial instruments and other similar
instruments or contracts owned by such Person.
"JOINT VENTURE" means any Affiliate of the Borrower which is accounted for
by the Borrower on the equity method of accounting.
"LC DOCUMENTS" is defined in Section 3.4(i).
--------------
"LC DRAFT" means a draft, or other form of demand, drawn or made on an LC
Issuer pursuant to a Facility LC.
"LC INTEREST" is defined in Section 3.6.
-----------
"LC ISSUER" means (i) First Chicago in its capacity as LC Issuer hereunder
with respect to each Facility LC issued by First Chicago and (ii) any Lender
(other than First Chicago) reasonably acceptable to the Agent, in such Lender's
capacity as LC Issuer hereunder with respect to any and all Facility LCs issued
by such Lender in its sole discretion upon the Borrower's request. All
references contained in this Agreement and the other Loan Documents to the "LC
Issuer" shall be deemed to apply equally to each of the institutions referred to
in clauses (i) and (ii) of this definition in their respective capacities as LC
----------- ----
Issuer of any and all Facility LCs issued by each such institution.
"LC OBLIGATIONS" means, without duplication, an amount equal to the sum of
(i) the aggregate of the amount then available for drawing under each of the
Facility LCs, (ii) the face amount of all outstanding LC Drafts corresponding to
the Facility LCs, which drafts have been accepted by the applicable LC Issuer,
(iii) the aggregate outstanding amount of all Reimbursement Obligations at such
time and (iv) the aggregate face amount of all Facility LCs requested by the
Borrower but not yet issued (unless the request for an unissued Facility LC has
been denied).
"LENDERS" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
<PAGE>
"LENDING INSTALLATION" means, with respect to a Lender, LC Issuer or the
Agent, the office, branch, subsidiary or affiliate of such Lender or LC Issuer
or the Agent listed on the signature pages hereof or on a Schedule or otherwise
selected by such Lender or LC Issuer or the Agent pursuant to Section 2.18.
------------
"LETTER OF CREDIT" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"LEVERAGE RATIO" means, as of any date of calculation, the ratio of (i)
Consolidated Total Debt outstanding on such date to (ii) Consolidated EBITDA for
the Borrower's then most-recently ended four fiscal quarters.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"LOAN(S)" means, with respect to a Lender, such Lender's Syndicated Loan,
and in the case of the Swing Line Lender, any Swing Line Loan made pursuant to
Section 2.2 hereof, and collectively all Syndicated Loans and Swing Line Loans,
- -----------
whether made or continued as or converted to Floating Rate Loans or Eurodollar
Loans.
"LOAN DOCUMENTS" means this Agreement and Notes, if any, issued pursuant to
Section 2.14, the Pledge Agreements and the Subsidiary Guaranties.
- ------------
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower and its Subsidiaries taken as a whole to perform their
respective obligations under the Loan Documents to which it is a party, or (iii)
the validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent, the LC Issuers or the Lenders thereunder.
"MATERIAL FOREIGN SUBSIDIARY(IES)" means each Consolidated Subsidiary of
the Borrower (a) incorporated under the laws of any foreign jurisdiction and (b)
the total assets of which exceed, at any time, three percent (3.0%) of the
consolidated total assets of the Borrower and its Consolidated Subsidiaries;
provided, however, in the event that one or more of such Consolidated
Subsidiaries are owned through another foreign Subsidiary, then the Agent shall
notify the Borrower whether the "Material Foreign Subsidiary" shall be the
holding company foreign Subsidiary or such holding company's Subsidiary or
Subsidiaries, it being the intention of the parties that the Agent and the
Lenders shall be provided with the maximum collateral protection without
resulting in the
<PAGE>
net income of any foreign subsidiary being deemed to have been repatriated under
the provisions of the Code.
"MATERIAL INDEBTEDNESS" is defined in Section 8.5.
-----------
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"NEW SUBSIDIARY" is defined in Section 7.13.
------------
"NON-U.S. LENDER" is defined in Section 4.5(iv).
---------------
"NOTE" means any promissory note issued at the request of a Lender pursuant
to Section 2.14 in the form of Exhibit A and the Swing Line Note.
------------ ---------
"NOTICE OF ASSIGNMENT" is defined in Section 13.3.2.
--------------
"OBLIGATIONS" means all Loans, advances, debts, liabilities, obligations,
covenants and duties owing by the Borrower to the Agent, any Lender, any
affiliate of the Agent or any Lender, the Swing Line Lender, any LC Issuer, or
any indemnitee under the provisions of Section 10.6 or any other provisions of
------------
the Loan Documents, in each case of any kind or nature, present or future,
arising under this Agreement, any Facility LC application agreements, the
Collateral Documents or any other Loan Document, whether or not evidenced by any
note, guaranty or other instrument, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guaranty,
indemnification, or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements, paralegals' fees (in each case whether or not allowed), and any
other sum chargeable to the Borrower under this Agreement or any other Loan
Document.
"OBLIGOR GROUP" shall mean (a) the Borrower, (b) the Subsidiary Guarantors,
and (c) each Subsidiary the stock of which is subject to a Pledge Agreement and
its respective Consolidated Subsidiaries.
"OFF-BALANCE SHEET LIABILITY" of a Person means (i) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (ii) any liability under any Sale and Leaseback
Transaction which does not create a liability on the balance sheet of such
Person, (iii) any liability under any financing lease or so-called "synthetic
lease" transaction entered into by such Person, or (iv) any obligation arising
with respect to any other transaction which is the functional equivalent
<PAGE>
of or takes the place of borrowing but which does not constitute a liability on
the balance sheets of such Person, but excluding Operating Leases.
"OPERATING LEASE" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
"OTHER TAXES" is defined in Section 4.5(ii).
---------------
"OUTSTANDING CREDIT EXPOSURE" means, as to any Lender at any time, the sum
of (i) the aggregate principal amount of its Loans outstanding at such time plus
(ii) its Outstanding LC Exposure at such time.
"OUTSTANDING LC EXPOSURE" means, as to any Lender at any time, an amount
equal to its Percentage of the LC Obligations at such time.
"PARTICIPANTS" is defined in Section 13.2.1.
--------------
"PAYMENT DATE" means the last day of each March, June, September and
December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PERCENTAGE" means, with respect to each Lender, the percentage that such
Lender's Commitment constitutes of the Aggregate Commitment.
"PERMITTED ACQUIRED DEBT" shall mean Indebtedness of any Subsidiary of the
Borrower acquired pursuant to a Permitted Acquisition, which Indebtedness
existed at the time of the consummation of the Permitted Acquisition and was not
created in contemplation thereof (and the provisions of which were not altered
in contemplation thereof), so long as (i) the Borrower and its other
Subsidiaries shall have no liability with respect to such Indebtedness and (ii)
any Liens securing such Indebtedness apply only to assets of the Subsidiary so
acquired (and so long as additional assets of such Subsidiary are not granted as
security following, or in contemplation of, the respective Permitted
Acquisition; provided, however if a floating Lien on any category of after-
acquired property of such Subsidiary was in existence at the time of the
Permitted Acquisition and was not created in contemplation thereof, then such
Lien may apply to such after-acquired property).
"PERMITTED ACQUISITION" is defined in Section 7.13.
------------
"PERMITTED RECEIVABLES TRANSFER" means (i) a sale or other transfer by the
Borrower or its Subsidiaries to Blade of "Receivables" and "Related Security"
under and
<PAGE>
as such terms are defined in the Receivables Purchase Agreement, in accordance
with the terms thereof and/or (ii) a sale by Blade to purchasers in accordance
with the terms of the Receivables Purchase Documents.
"PERSON" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"PLAN" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
-----------
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"PLEDGE AGREEMENT" means a Pledge Agreement, containing substantially the
terms set forth in Exhibit B hereto, duly executed and delivered by the Borrower
---------
to and in favor of the Agent, the LC Issuers and the Lenders, as it may from
time to time be amended, supplemented or otherwise modified with respect to
sixty-five percent (65%) of the outstanding capital stock of each of the
Borrower's Material Foreign Subsidiaries, modified as deemed reasonably
acceptable by the Agent to reflect foreign law provisions, customs and
practices, in each case as amended, modified, supplemented or restated from time
to time.
"PRICING SCHEDULE" means the Schedule attached hereto identified as such.
"PROPERTY" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"PURCHASERS" is defined in Section 13.3.1.
--------------
"RATE HEDGING AGREEMENT" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to, dollar-
denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"RATE HEDGING OBLIGATIONS" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Hedging Agreements, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
<PAGE>
"RECEIVABLES FACILITY ATTRIBUTED INDEBTEDNESS" means the amount of
obligations outstanding under a receivables purchase facility on any date of
determination that would be characterized as principal if such facility were
structured as a secured lending transaction rather than as a purchase.
"RECEIVABLES FACILITY FINANCING COSTS" means all cash fees, service
charges, and other costs, as well as all collections or other amounts retained
by purchasers of receivables pursuant to a receivables purchase facility, which
are in excess of amounts paid to the Borrower and its Consolidated Subsidiaries
under any receivables purchase facility for the purchase of receivables pursuant
to such facility.
"RECEIVABLES PURCHASE AGREEMENT" means that certain Receivables Purchase
Agreement dated as of December 13, 1995, among the Borrower, certain
Subsidiaries of the Borrower and Blade, pursuant to which the Borrower and such
Subsidiaries sell to Blade certain of their "Receivables" and "Related Security"
(as such terms are defined therein), as such agreement has been or may hereafter
be amended, restated or otherwise modified from time to time, or any replacement
or substitution therefor.
"RECEIVABLES PURCHASE DOCUMENTS" means the Receivables Purchase Agreement
and the other documents, instruments and agreements executed in connection
therewith.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"REIMBURSEMENT OBLIGATIONS" means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Article III to reimburse the
-----------
LC Issuers for amounts paid by the LC Issuers in respect of any one or more
drawings under Facility LCs.
"REPLACEMENT LENDER" is defined in Section 2.20 hereof.
------------
"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
------------
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
---------------
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
----------- -----------
shall be a Reportable Event regardless of
<PAGE>
the issuance of any such waiver of the notice requirement in accordance with
either Section 4043(a) of ERISA or Section 412(d) of the Code.
"REPORTS" is defined in Section 10.6.
------------
"REQUIRED LENDERS" means Lenders in the aggregate having at least 51% of
the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 51% of the Aggregate Outstanding
Credit Exposure.
"RESERVE REQUIREMENT" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"RISK-BASED CAPITAL GUIDELINES" is defined in Section 4.2.
-----------
"S&P" means Standard and Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc.
"SALE AND LEASEBACK TRANSACTION" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"SCHEDULE" refers to a specific schedule to this Agreement, unless another
document is specifically referenced.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SECURED OBLIGATIONS" means, collectively, (i) the Obligations and (ii) all
Rate Hedging Obligations owing to one or more Lenders.
"SENIOR SUBORDINATED NOTES" means those certain 10% Senior Subordinated
Notes due 2003 issued by the Borrower in the aggregate principal of $125,000,000
pursuant to the Senior Subordinated Note Indenture.
"SENIOR SUBORDINATED NOTE INDENTURE" means that certain Indenture dated as
of December 7, 1995 between the Borrower and Marine Midland Bank, as Trustee.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"SUBORDINATED INDEBTEDNESS" of a Person means any Indebtedness of such
Person the payment of which is subordinated to payment of the Obligations to the
written satisfaction of the Required Lenders, and shall include the Indebtedness
of the Borrower under the Senior Subordinated Notes.
<PAGE>
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"SUBSIDIARY GUARANTORS" means all of the Borrower's domestic Consolidated
Subsidiaries as of the Closing Date and any other New Subsidiaries (other than
foreign corporations) which have satisfied the provisions of the final
paragraph of Section 7.13(v) hereof, and their respective successors and
---------------
assigns.
"SUBSIDIARY GUARANTY" means a Subsidiary Guaranty, substantially in the
form of Exhibit C hereto, duly executed by the Subsidiary Guarantors in favor of
---------
the Agent, for the ratable benefit of the Agent, the Swing Line Lender, the LC
Issuers and the Lenders, as it may be amended, modified, supplemented and/or
restated (including to add new Subsidiary Guarantors), and as in effect from
time to time.
"SUBSIDIARY GUARANTY SUPPLEMENT" means a supplement to the Subsidiary
Guaranty, substantially in the form of Annex I attached to the Subsidiary
-------
Guaranty.
"SUBSTANTIAL PORTION" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of the Borrower and its Consolidated Subsidiaries as would
be shown in the consolidated financial statements of the Borrower and its
Consolidated Subsidiaries as at the beginning of the twelve-month period ending
with the month in which such determination is made.
"SWING LINE COMMITMENT" means the obligation of the Swing Line Lender to
make Swing Line Loans up to a maximum principal amount of $10,000,000 at any one
time outstanding.
"SWING LINE LENDER" means First Chicago or any other Lender as a successor
Swing Line Lender.
"SWING LINE LOAN" means a Loan made available to the Borrower by the Swing
Line Lender pursuant to Section 2.2 hereof.
-----------
"SWING LINE NOTE" means a promissory note, in substantially the form of
Exhibit D hereto, duly executed by the Borrower and payable to the order of the
- ----------
Swing Line Lender in the amount of its Swing Line Commitment, including any
amendment, restatement, modification, renewal or replacement of such Swing Line
Note.
<PAGE>
"SYNDICATED LOAN(S)" means, with respect to a Lender, that portion of any
Advance made by such Lender pursuant to Section 2.1 hereof, as applicable.
-----------
"TAXES" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings, and any and all liabilities with respect to
the foregoing, but excluding Excluded Taxes.
"TRANSFEREE" is defined in Section 13.4.
------------
"TYPE" means, with respect to any Advance, its nature as a Floating Rate
Advance or a Eurodollar Advance.
"UNFUNDED LIABILITIES" means the amount (if any) by which the present value
of all vested and unvested accrued benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"WHOLLY-OWNED SUBSIDIARY" of a Person means (i) any Consolidated Subsidiary
all of the outstanding voting securities of which (other than directors'
qualifying shares) shall at the time be owned or controlled, directly or
indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such
Person, or (ii) any partnership, limited liability company, association, joint
venture or similar business organization 100% of the ownership interests of
which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II: THE CREDITS
2.1. Commitment. From and including the date of this Agreement and prior
----------
to the Facility Termination Date, each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make Syndicated Loans to the Borrower
from time to time; provided, that upon giving effect to each such Syndicated
--------
Loan, the sum of (i) the aggregate outstanding principal amount of all
Syndicated Loans made by such Lender plus (ii) such Lender's Outstanding LC
Exposure, shall not exceed such Lender's Commitment. Subject to the terms of
this Agreement, the Borrower may borrow, repay and reborrow at any time prior to
the Facility Termination Date. The Commitments to lend hereunder shall expire
automatically on the Facility Termination Date.
<PAGE>
2.2 Swing Line Loans. (a) Amount of Swing Line Loans. Upon the
---------------- --------------------------
satisfaction of the conditions precedent set forth in Section 5.1 and 5.2, from
----------- ---
and including the date of this Agreement and prior to the Facility Termination
Date, the Swing Line Lender agrees, on the terms and conditions set forth in
this Agreement, to make swing line loans to the Borrower from time to time, in
Dollars, in an aggregate amount outstanding at any time not to exceed the Swing
Line Commitment (each, individually, a "SWING LINE LOAN" and collectively, the
"SWING LINE LOANS"); provided, however, at no time shall the Aggregate
-------- -------
Outstanding Credit Exposure exceed the Aggregate Commitments; and provided,
--------
further, that at no time shall the sum of (a) the outstanding amount of the
- -------
Swing Line Loans, plus (b) the outstanding amount of Syndicated Loans made by
----
the Swing Line Lender pursuant to Section 2.1 (after giving effect to any
-----------
concurrent repayment of Loans) plus (c) the Swing Line Lender's Outstanding LC
----
Exposure, exceed the Swing Line Lender's Commitment at such time. Subject to
the terms of this Agreement, the Borrower may borrow, repay and reborrow Swing
Line Loans at any time prior to the Facility Termination Date.
(b) Borrowing Notice. The Borrower shall deliver to the Agent and the
----------------
Swing Line Lender a notice of borrowing, signed by it, not later than 11:00 a.m.
(Chicago time) on the Borrowing Date of each Swing Line Loan, specifying (i) the
applicable Credit Extension Date (which shall be a Business Day), and (ii) the
aggregate amount of the requested Swing Line Loan. The Swing Line Loans shall
at all times be Floating Rate Loans, which shall be in an amount not less than
$1,000,000 and multiples of $100,000 in excess thereof. The Agent shall
promptly notify each Lender of such request.
(c) Making of Swing Line Loans. Promptly after receipt of the Borrowing
--------------------------
Notice under Section 2.2(b) in respect of Swing Line Loans, the Agent shall
--------------
notify each Lender by telex or telecopy, or other similar form of transmission,
of the requested Swing Line Loan. Not later than 2:00 p.m. (Chicago time) on
the applicable Borrowing Date, the Swing Line Lender shall make available its
Swing Line Loan, in funds immediately available in Chicago to the Agent at its
address specified pursuant to Article XIV. The Agent will promptly make the
-----------
funds so received from the Swing Line Lender available to the Borrower at the
Agent's aforesaid address.
(d) Repayment of Swing Line Loans. The Swing Line Loans shall be
-----------------------------
evidenced by the Swing Line Note, and each Swing Line Loan shall be paid in full
by the Borrower on or before the fifth Business Day after the Borrowing Date for
such Swing Line Loan. The Borrower may at any time repay or prepay, without
penalty or premium, all outstanding Swing Line Loans or, in a minimum amount of
$1,000,000 (with increments of $100,000 in excess thereof), any portion of the
outstanding Swing Line Loans, upon notice to the Agent and the Swing Line
Lender. In addition, the Agent (i) may at any time in its sole discretion with
respect to any outstanding Swing Line Loan, or (ii) shall on the fifth Business
Day after the Borrowing Date of any Swing Line Loan, require each Lender
(including the Swing Line Lender in its capacity as a Lender) to make a
Syndicated Loan under Section 2.1 in the amount of such Lender's Percentage of
-----------
such Swing Line Loan, for the purpose of repaying such Swing Line Loan. Not
later than 3:00
<PAGE>
p.m. (Chicago time) on the date of any notice received pursuant to this Section
-------
2.2(d), each Lender shall make available its required Syndicated Loan or
- ------
Syndicated Loans, in funds immediately available in Chicago to the Agent at its
address specified pursuant to Article XIV. Syndicated Loans made pursuant to
-----------
this Section 2.2(d) shall initially be Floating Rate Loans and thereafter may be
--------------
continued as Floating Rate Loans or converted into Eurodollar Rate Loans in the
manner provided in Section 2.10 and subject to the other conditions and
------------
limitations therein set forth and set forth in this Article II. Unless a Lender
shall have notified the Swing Line Lender, prior to its making any Swing Line
Loan, that any applicable condition precedent set forth in Sections 5.1 and 5.2
------------ ---
had not then been satisfied, such Lender's obligation to make Syndicated Loans
pursuant to this Section 2.2(d) to repay Swing Line Loans shall be
--------------
unconditional, continuing, irrevocable and absolute and shall not be affected by
any circumstances, including, without limitation, (A) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the Agent,
the Swing Line Lender or any other Person, (B) the occurrence or continuance of
a Default or Unmatured Default, (C) any adverse change in the condition
(financial or otherwise) of the Borrower or any of its Subsidiaries, or (D) any
other circumstances, happening or event whatsoever. In the event that any Lender
fails to make payment to the Agent of any amount due under this Section 2.2(d),
--------------
the Agent shall be entitled to receive, retain and apply against such obligation
the principal and interest otherwise payable to such Lender hereunder until the
Agent receives such payment from such Lender or such obligation is otherwise
fully satisfied. In addition to the foregoing, if for any reason any Lender
fails to make payment to the Agent of any amount due under this Section 2.2(d),
--------------
such Lender shall be deemed, at the option of the Agent, to have unconditionally
and irrevocably purchased from the Swing Line Lender, without recourse or
warranty, an undivided interest and participation in the applicable Swing Line
Loan in the amount of such Syndicated Loan, and such interest and participation
may be recovered from such Lender together with interest thereon at the Federal
Funds Effective Rate for each day during the period commencing on the date of
demand and ending on the date such amount is received. On the Termination Date,
the Borrower shall repay in full the outstanding principal balance of the Swing
Line Loans.
2.3. Required Payments; Termination. This Agreement shall be effective
------------------------------
until the Facility Termination Date. Any outstanding Loans and all other unpaid
Obligations shall be paid in full by the Borrower on the Facility Termination
Date and the Borrower shall cause the beneficiaries to cancel all Facility LCs
or shall otherwise provide cash collateral or other credit support therefor on
terms and conditions acceptable to the LC Issuers and the Required Lenders.
Notwithstanding the termination of this Agreement on the Facility Termination
Date, until all of the Obligations (other than contingent indemnity obligations)
shall have been fully paid and satisfied, all financing arrangements among the
Borrower and the Lenders shall have been terminated and all of the Letters of
Credit shall have expired, been canceled or terminated (or credit support
provided therefor as set forth above), all of the rights and remedies under this
Agreement and the other Loan Documents shall survive and the Agent shall be
entitled to retain its security interest in and to all existing and future
collateral.
<PAGE>
2.4. Ratable Loans. Each Advance hereunder shall consist of Syndicated
-------------
Loans made from the several Lenders ratably in proportion to the ratio that
their respective Commitments bear to the Aggregate Commitment.
2.5. Types of Advances. The Advances may be Floating Rate Advances or
-----------------
Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.9 and 2.10.
------------ ----
2.6. Facility Fee; Reductions in Aggregate Commitment. The Borrower
------------------------------------------------
agrees to pay to the Agent for the ratable benefit of the Lenders a facility fee
at a per annum rate equal to the Applicable Facility Fee Rate multiplied by the
Aggregate Commitment from the date hereof to and including the Facility
Termination Date, payable on each Payment Date hereafter and on the Facility
Termination Date. The Borrower may permanently reduce the Aggregate Commitment
in whole, or in part ratably among the Lenders in integral multiples of
$5,000,000, upon at least three Business Days' written notice to the Agent,
which notice shall specify the amount of any such reduction, provided, however,
that the amount of the Aggregate Commitment may not be reduced below the
aggregate principal amount of the Aggregate Outstanding Credit Exposures. All
accrued facility fees shall be payable on the effective date of any termination
of the obligations of the Lenders to make Syndicated Loans hereunder.
2.7. Minimum Amount of Each Advance. Each Advance (other than an Advance
------------------------------
to repay Swing Line Loans pursuant to Section 2.2(d) or a Reimbursement
--------------
Obligation pursuant to Section 3.7) shall be in the minimum amount of $5,000,000
-----------
(and in multiples of $1,000,000 if in excess thereof), provided, however, that
any Floating Rate Advance may be in the amount of the Available Aggregate
Commitment.
2.8. Optional Principal Payments. The Borrower may from time to time pay,
---------------------------
without penalty or premium, all outstanding Floating Rate Advances, or, in a
minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in
excess thereof, any portion of the outstanding Floating Rate Advances upon one
Business Day's prior notice to the Agent. The Borrower may from time to time
pay, subject to the payment of any funding indemnification and breakage cost
amounts required by Section 4.4 but without penalty or premium, any or all
-----------
outstanding Eurodollar Advances upon three Business Days' prior notice to the
Agent.
2.9. Method of Selecting Types and Interest Periods for New Advances. The
---------------------------------------------------------------
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable thereto from time to time. The Borrower
shall give the Agent irrevocable notice (a "BORROWING NOTICE") not later than
11:00 a.m. (Chicago time) at least one Business Day before the Borrowing Date of
each Floating Rate Advance and three Business Days before the Borrowing Date for
each Eurodollar Advance, specifying:
<PAGE>
(i) the Borrowing Date, which shall be a Business Day, of such Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) Schedule
Promptly after receipt of any Borrowing Notice, the Agent shall provide the
Lenders with notice thereof. Not later than 1:00 p.m. (Chicago time) on each
Borrowing Date, each Lender shall make available its Syndicated Loan or
Syndicated Loans in funds immediately available in Chicago to the Agent at its
address specified pursuant to Article XIV. The Agent will make the funds so
-----------
received from the Lenders available to the Borrower at the Agent's aforesaid
address.
2.10. Conversion and Continuation of Outstanding Advances. Floating Rate
---------------------------------------------------
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into Eurodollar Advances pursuant to this Section
-------
2.10 or are repaid in accordance with Section 2.8. Each Eurodollar Advance
- ---- -----------
shall continue as a Eurodollar Advance until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Advance shall be
automatically converted into a Floating Rate Advance unless (x) such Eurodollar
Advance is or was repaid in accordance with Section 2.8 or (y) the Borrower
-----------
shall have given the Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Interest Period, such Eurodollar Advance
continue as a Eurodollar Advance for the same or another Interest Period.
Subject to the terms of Section 2.10, the Borrower may elect from time to time
------------
to convert all or any part of a Floating Rate Advance into a Eurodollar Advance.
The Borrower shall give the Agent irrevocable notice (a "CONVERSION/CONTINUATION
NOTICE") of each conversion of a Floating Rate Advance into a Eurodollar Advance
or continuation of a Eurodollar Advance not later than 11:00 a.m. (Chicago time)
at least three Business Days prior to the date of the requested conversion or
continuation, specifying:
(i) the requested date, which shall be a Business Day, of such conversion
or continuation,
(ii) the aggregate amount and Type of the Advance which is to be converted
or continued, and
(iii) the amount of such Advance which is to be converted into or
continued as a Eurodollar Advance and the duration of the Interest
Period applicable thereto.
<PAGE>
Promptly after receipt of any Conversion/Continuation Notice, the Agent shall
provide the Lenders with notice thereof.
2.11. Changes in Interest Rate, Etc. Each Floating Rate Advance and Swing
------------------------------
Line Loan shall bear interest on the outstanding principal amount thereof, for
each day from and including the date such Advance or Swing Line Loan is made or
is automatically converted from a Eurodollar Advance into a Floating Rate
Advance pursuant to Section 2.10, to but excluding the date it is paid or, for
------------
Floating Rate Advances, is converted into a Eurodollar Advance pursuant to
Section 2.10 hereof, at a rate per annum equal to the Floating Rate for such
- ------------
day. Changes in the rate of interest on that portion of any Advance maintained
as a Floating Rate Advance and each Swing Line Loan will take effect
simultaneously with each change in the Alternate Base Rate. Each Eurodollar
Advance shall bear interest on the outstanding principal amount thereof from and
including the first day of the Interest Period applicable thereto to (but not
including) the last day of such Interest Period at the interest rate determined
by the Agent as applicable to such Eurodollar Advance based upon the Borrower's
selections under Section 2.9 and 2.10 and otherwise in accordance with the terms
----------- ----
hereof. No Interest Period may end after the Facility Termination Date.
2.12. Rates Applicable After Default. Notwithstanding anything to the
------------------------------
contrary contained in Section 2.9 or 2.10, during the continuance of a Default
----------- ----
the Agent or the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 9.2 requiring unanimous consent of the
-----------
Lenders to changes in interest rates), declare that no Advance may be made as,
converted into or continued as a Eurodollar Advance. During the continuance of
a Default, the Agent or the Required Lenders may, at their option, by notice to
the Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 9.2 requiring unanimous consent of the
-----------
Lenders to changes in interest rates), declare that (i) each Advance shall bear
interest at a rate per annum equal to the Floating Rate in effect from time to
time plus 2% per annum and (ii) the fees payable with respect to Letters of
Credit pursuant to Section 3.9 shall be increased by 2% per annum, provided
-----------
that, during the continuance of a Default under Sections 8.2, 8.6 or 8.7, the
------------ --- ---
interest rate described in clause (i) above and the letter of credit fee
----------
described in clause (ii) above shall be applicable without any election or
-----------
action on the part of the Agent or any Lender.
2.13. Method of Payment. All payments of the Obligations hereunder shall
-----------------
be made, without setoff, deduction, or counterclaim, in immediately available
funds to the Agent at the Agent's address specified pursuant to Article XIV, or
-----------
at any other Lending Installation of the Agent specified in writing by the Agent
to the Borrower, by noon (local time) on the date when due and shall be applied
ratably by the Agent among the Lenders. Each payment delivered to the Agent for
the account of any Lender shall be delivered promptly by the Agent to such
Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIV or at any Lending Installation specified in a
-----------
notice received by the Agent from such Lender. The Agent is hereby
<PAGE>
authorized to charge the account of the Borrower maintained with First Chicago
for each payment of principal, interest and fees as it becomes due hereunder.
Each reference to the Agent in this Section 2.13 shall also be deemed to refer,
------------
and shall apply equally, to a LC Issuer, in the case of payments required to be
made by the Borrower to such LC Issuer pursuant to Article III.
-----------
2.14. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender
--------------------------------------------
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each
Loan made by such Lender from time to time, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(ii) The Agent shall also maintain accounts in which it will record (a)
the amount of each Loan made hereunder, the Type thereof and the Interest Period
with respect thereto, (b) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (c) the amount of any sum received by the Agent hereunder from the Borrower
and each Lender's share thereof.
(iii) The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the failure
of the Agent or any Lender to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrower to repay the Obligations
in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a promissory
note (a "NOTE"). In such event, the Borrower shall prepare, execute and deliver
to such Lender a Note payable to the order of such Lender in a form supplied by
the Agent. Thereafter, the Loans evidenced by such Note and interest thereon
shall at all times (including after any assignment pursuant to Section 13.3) be
------------
represented by one or more Notes payable to the order of the payee named therein
or any assignee pursuant to Section 13.3, except to the extent that any such
------------
Lender or assignee subsequently returns any such Note for cancellation and
requests that such Loans once again be evidenced as described in paragraphs (i)
and (ii) above.
2.15. Telephonic Notices. The Borrower hereby authorizes the Lenders, the
------------------
Swing Line Lender and the Agent to extend, convert or continue Advances and
Swing Line Loans, effect selections of Types of Advances and to transfer funds
based on telephonic notices made by any person or persons the Agent, the Swing
Line Lender or any Lender in good faith believes to be acting on behalf of the
Borrower. The Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent, the Swing Line
Lender or any Lender, of each telephonic notice signed by an Authorized Officer.
If the written confirmation differs in any material respect from the action
taken by the Agent, the Swing Line Lender and the Lenders, the records of the
Agent and the Lenders shall govern absent manifest error.
<PAGE>
2.16. Interest Payment Dates; Interest and Fee Basis. Interest accrued on
----------------------------------------------
each Floating Rate Advance and Swing Line Loan shall be payable on each Payment
Date, commencing with the first such date to occur after the date hereof and at
maturity. Interest accrued on each Eurodollar Advance shall be payable on the
last day of its applicable Interest Period, on any date on which the Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and at maturity.
Interest accrued on each Eurodollar Advance having an Interest Period longer
than three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest accrued on Eurodollar Advances,
fees payable with respect to Facility LCs and facility fees shall be calculated
for actual days elapsed on the basis of a year of 360 days, and interest accrued
on Floating Rate Advances and Swing Line Loans shall be calculated for actual
days elapsed on the basis of a year or 365, or when appropriate 366, days.
Interest shall be payable for the day an Advance or Swing Line Loan is made but
not for the day of any payment on the amount paid if payment is received prior
to noon (local time) at the place of payment. If any payment of principal of or
interest on an Advance or Swing Line Loan or any fee shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
2.17. Notification of Advances, Interest Rates, Prepayments and Commitment
--------------------------------------------------------------------
Reductions. Promptly after receipt thereof, the Agent will notify each Lender
- ----------
of the contents of each Aggregate Commitment reduction notice, Borrowing Notice,
Conversion/Continuation Notice, and repayment notice received by it hereunder.
The Agent will notify each Lender of the interest rate applicable to each
Eurodollar Advance promptly upon determination of such interest rate and will
give each Lender prompt notice of each change in the Alternate Base Rate.
2.18. Lending Installations. Each Lender may book its Loans at any
---------------------
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Loans and any Notes issued hereunder shall be
deemed held by each Lender for the benefit of such Lending Installation. Each
Lender may, by written notice to the Agent and the Borrower in accordance with
Article XIV, designate replacement or additional Lending Installations through
- -----------
which Loans will be made by it and for whose account Loan payments are to be
made.
2.19. Non-Receipt of Funds by the Agent-. Unless the Borrower or a
---------------------------------
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Swing Line Lender or any of
the Lenders, that it does not intend to make such payment, the Agent may assume
that such payment has been made. The Agent may, but shall not be obligated to,
make the amount of such payment available to the intended recipient in reliance
upon such assumption. If such Lender or the Borrower, as the case
<PAGE>
may be, has not in fact made such payment to the Agent, the recipient of such
payment shall, on demand by the Agent, repay to the Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to (x)
in the case of payment by a Lender, the Federal Funds Effective Rate for such
day or (y) in the case of payment by the Borrower, the interest rate applicable
to the relevant Loan.
2.20 Replacement of Certain Lenders. In the event a Lender ("AFFECTED
------------------------------
LENDER") shall have: (i) failed to fund its pro rata share of any Advance
requested by the Borrower, or to fund a Syndicated Loan in order to repay Swing
Line Loans pursuant to Section 2.2(d) or Reimbursement Obligations or
--------------
participations with respect to Letters of Credit pursuant to Section 3.6 or
-----------
Section 3.7, which such Lender is obligated to fund under the terms of this
- -----------
Agreement and which failure has not been cured, (ii) requested compensation from
the Borrower under Sections 4.1, 4.2 or 4.5 to recover Taxes, Other Taxes or
------------ --- ---
other additional costs incurred by such Lender which are not being incurred
generally by the other Lenders, (iii) delivered a notice pursuant to Section 4.3
-----------
claiming that such Lender is unable to extend Eurodollar Rate Loans to the
Borrower for reasons not generally applicable to the other Lenders or (iv) has
invoked Section 10.2, then, in any such case, the Borrower or the Agent may make
------------
written demand on such Affected Lender (with a copy to the Agent in the case of
a demand by the Borrower and a copy to the Borrower in the case of a demand by
the Agent) for the Affected Lender to assign, and such Affected Lender shall
assign pursuant to one or more duly executed assignments and acceptances in
substantially the form of Exhibit E five (5) Business Days after the date of
---------
such demand, to one or more financial institutions that comply with the
provisions of Section 13.3.1 which the Borrower or the Agent, as the case may
--------------
be, shall have engaged for such purpose ("REPLACEMENT LENDER"), all of such
Affected Lender's rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, its Commitment, all Loans owing to it,
all of its participation interests in existing Letters of Credit, and its
obligation to participate in additional Letters of Credit hereunder) in
accordance with Section 13.3. With respect to such assignment, the Affected
------------
Lender shall not be obligated to effect such an assignment unless it has
concurrently received, in cash, all amounts due and owing to the Affected Lender
hereunder or under any other Loan Document, including, without limitation, the
aggregate outstanding principal amount of the Loans owed to such Lender,
together with accrued interest thereon through the date of such assignment,
amounts payable under Sections 4.1, 4.2 and 4.5 with respect to such Affected
------------ --- ---
Lender and compensation payable under Section 2.6 in the event of any
-----------
replacement of any Affected Lender under clause (ii) or clause (iii) of this
----------- ------------
Section 2.20; provided that upon such Affected Lender's replacement, such
- ------------ --------
Affected Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 4.1, 4.2, 4.4, 4.5 and 10.6, as well as to
------------ --- --- --- ----
any fees accrued for its account hereunder and not yet paid, and shall continue
to be obligated under Section 11.8 with respect to amounts not reimbursed by the
------------
Borrower, expenses or other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements imposed
on, incurred by or asserted against the Agent in any
<PAGE>
way relating to matters which occurred prior to such assignment. The Agent
agrees, upon the occurrence of such events with respect to an Affected Lender
and upon the written request of the Borrower, to use its reasonable efforts to
obtain commitments from one or more financial institutions to act as a
Replacement Lender.
ARTICLE III: THE LETTER OF CREDIT FACILITY
3.1 Obligation to Issue. Subject to the terms and conditions of this
-------------------
Agreement and in reliance upon the representations, warranties and covenants of
the Borrower herein set forth, each LC Issuer hereby agrees to issue for the
account of the Borrower through such LC Issuer's branches as it and the Borrower
may jointly agree, one or more Letters of Credit as Facility LCs in accordance
with this Article III, from time to time during the period, commencing on the
-----------
date hereof and ending on the Business Day prior to the Termination Date.
3.2 Transitional Provision. Schedule 1 contains a schedule of certain
---------------------- ----------
letters of credit issued for the account of the Borrower prior to the Closing
Date. Subject to the satisfaction of the conditions contained in Sections 5.1
------------
and 5.2, from and after the Closing Date such letters of credit shall be deemed
---
to be Facility LCs issued pursuant to this Article III.
-----------
3.3 Types and Amounts. No LC Issuer shall have any obligation to and no
-----------------
LC Issuer shall:
(i) issue any Facility LC if on the date of issuance, before or
after giving effect to the Facility LC requested hereunder, (a) Aggregate
Outstanding Credit Exposure at such time would exceed the Commitments at
such time, or (b) the Aggregate Outstanding LC Exposure would exceed
$50,000,000;
(ii) issue any Facility LC which has an expiration date later than
the date which is one (1) year after the date of issuance thereof; provided
that any Facility LC with a one-year tenor may provide for the automatic
extension of the expiration date for successive periods of up to one-year
(which shall in no event extend beyond the date set forth in clause (iii)
below);
(iii) issue any Facility LC which has an expiration date later than
five (5) Business Days immediately preceding the Termination Date; or
(iv) issue any Facility LC denominated in any currency other than
U.S. Dollars
<PAGE>
3.4 Conditions. In addition to being subject to the satisfaction of the
----------
conditions contained in Sections 5.1 and 5.2, the obligation of a LC Issuer to
------------ ---
issue any Facility LC is subject to the satisfaction in full of the following
conditions:
(i) the Borrower shall have delivered to the applicable LC Issuer at
such times and in such manner as such LC Issuer may reasonably prescribe, a
request for issuance of such Facility LC in such form as shall be
reasonably required by such LC Issuer, duly executed applications for such
Facility LC, and such other customary documents, instructions and
agreements as may be required pursuant to the terms thereof (all such
applications, documents, instructions, and agreements being referred to
herein as the "LC DOCUMENTS"), and the proposed Facility LC shall be
reasonably satisfactory to such LC Issuer as to form and content; and
(ii) as of the date of issuance no order, judgment or decree of any
court, arbitrator or Governmental Authority shall purport by its terms to
enjoin or restrain the applicable LC Issuer from issuing such Facility LC
and no law, rule or regulation applicable to such LC Issuer and no request
or directive (whether or not having the force of law) from a Governmental
Authority with jurisdiction over such LC Issuer shall prohibit or request
that such LC Issuer refrain from the issuance of Facility LCs generally or
the issuance of that Facility LC.
To the extent that any provision of any LC Document cannot reasonably be
construed to be consistent with this Agreement, requires greater collateral
security or imposes additional obligations not reasonably related to customary
letter of credit arrangements, such provision shall be invalid and this
Agreement shall control.
3.5 Procedure for Issuance of Facility LCs. (a) Subject to the terms and
--------------------------------------
conditions of this Article III and provided that the applicable conditions set
-----------
forth in Sections 5.1 and 5.2 hereof have been satisfied, the applicable LC
------------ ---
Issuer shall, on the requested date, issue a Facility LC on behalf of the
Borrower in accordance with such LC Issuer's usual and customary business
practices and, in this connection, such LC Issuer may assume that the applicable
conditions set forth in Section 5.2 hereof have been satisfied unless it shall
-----------
have received notice to the contrary from the Agent or a Lender or has knowledge
that the applicable conditions have not been met.
(b) The applicable LC Issuer shall give the Agent written or telex notice,
or telephonic notice confirmed promptly thereafter in writing, of the issuance
of a Facility LC, provided, however, that the failure to provide such notice
-------- -------
shall not result in any liability on the part of such LC Issuer. Promptly after
receipt thereof, the Agent shall provide the Lenders with any such notice from
any LC Issuer.
<PAGE>
(c) No LC Issuer shall extend or amend or otherwise modify any Facility LC
unless the requirements of this Article III are met as though a new Facility LC
-----------
was being requested and issued.
3.6 Facility LC Participation. On the Closing Date with respect to each
-------------------------
Existing LC and immediately upon the issuance of each Facility LC hereunder,
each Lender shall be deemed to have automatically, irrevocably and
unconditionally purchased and received from the applicable LC Issuer an
undivided interest and participation in and to such Facility LC, the obligations
of the Borrower in respect thereof, and the liability of such LC Issuer
thereunder (collectively, an "LC INTEREST") in an amount equal to the amount
available for drawing under such Facility LC multiplied by such Lender's
Percentage. Each LC Issuer will notify each Lender promptly upon presentation
to it of an LC Draft or upon any other draw under a Facility LC. On or before
the Business Day on which a LC Issuer makes payment of each such LC Draft or, in
the case of any other draw on a Facility LC, on demand by the Agent, each Lender
shall make payment to the Agent, for the account of the applicable LC Issuer, in
immediately available funds in an amount equal to such Lender's Percentage of
the amount of such payment or draw. The obligation of each Lender to reimburse
the LC Issuers under this Section 3.6 shall be unconditional, continuing,
-----------
irrevocable and absolute. In the event that any Lender fails to make payment to
the Agent of any amount due under this Section 3.6, the Agent shall be entitled
-----------
to receive, retain and apply against such obligation the principal and interest
otherwise payable to such Lender hereunder until the Agent receives such payment
from such Lender or such obligation is otherwise fully satisfied; provided,
--------
however, that nothing contained in this sentence shall relieve such Lender of
- -------
its obligation to reimburse the applicable LC Issuer for such amount in
accordance with this Section 3.6.
-----------
3.7 Reimbursement Obligation. The Borrower agrees unconditionally,
------------------------
irrevocably and absolutely to pay immediately to the Agent, for the account of
the Lenders, the amount of each advance which may be drawn under or pursuant to
a Facility LC or an LC Draft related thereto (such obligation of the Borrower to
reimburse the Agent for an advance made under a Facility LC or LC Draft being
hereinafter referred to as a "REIMBURSEMENT OBLIGATION" with respect to such
Facility LC or LC Draft). If the Borrower at any time fails to repay a
Reimbursement Obligation pursuant to this Section 3.7, the Borrower shall be
-----------
deemed to have elected to borrow Syndicated Loans from the Lenders, as of the
date of the advance giving rise to the Reimbursement Obligation, equal in amount
to the amount of the unpaid Reimbursement Obligation. Such Syndicated Loans
shall be made as of the date of the payment giving rise to such Reimbursement
Obligation, automatically, without notice and without any requirement to satisfy
the conditions precedent otherwise applicable to an Advance. Such Syndicated
Loans shall constitute a Floating Rate Advance, the proceeds of which Advance
shall be used to repay such Reimbursement Obligation. If, for any reason, the
Borrower fails to repay a Reimbursement Obligation on the day such
Reimbursement Obligation arises and, for any reason, the Lenders are unable to
make or have no obligation to make Syndicated Loans, then such Reimbursement
Obligation shall bear interest from and after such day, until paid in full, at
the interest rate applicable to a Floating Rate Advance.
<PAGE>
3.8 Cash Collateral. Notwithstanding anything to the contrary herein or
---------------
in any application for a Facility LC, after acceleration of the Obligations
pursuant to Section 9.1, the Borrower shall, upon the Agent's demand, deliver to
-----------
the Agent for the benefit of the Lenders and the LC Issuers, cash, or other
collateral of a type satisfactory to the Required Lenders, having a value, as
determined by such Lenders, equal to the aggregate outstanding LC Obligations.
Any such collateral shall be held by the Agent in a separate interest bearing
account appropriately designated as a cash collateral account in relation to
this Agreement and the Facility LCs and retained by the Agent for the benefit of
the Lenders and the LC Issuers as collateral security for the Borrower's
obligations in respect of this Agreement and each of the Facility LCs and LC
Drafts. Such amounts shall be applied to reimburse the LC Issuers for drawings
or payments under or pursuant to Facility LCs or LC Drafts, or if no such
reimbursement is required, to payment of such of the other Obligations as the
Agent shall determine. If such acceleration of the Obligations shall be
rescinded, amounts (including interest income) remaining in any cash collateral
account established pursuant to this Section 3.8 which are not to be applied to
-----------
reimburse a LC Issuer for amounts actually paid or to be paid by such LC Issuer
in respect of a Facility LC or LC Draft, shall be returned to the Borrower
(after deduction of the Agent's expenses incurred in connection with such cash
collateral account).
3.9 Facility LC Fees. The Borrower agrees to pay (i) on each Payment Date
----------------
and on the Termination Date, in arrears, to the Agent for the ratable benefit of
the Lenders, a letter of credit fee at a rate per annum equal to the Applicable
LC Fee Percentage on the weighted average daily outstanding face amount
available for drawing under all standby Facility LCs, (ii) on each Payment Date
and on the Termination Date, in arrears, to the Agent for the sole account of
each LC Issuer, a letter of credit fronting fee on the weighted average daily
outstanding face amount available for drawing under all Facility LCs issued by
such LC Issuer in an amount or at a rate as agreed to between the Borrower and
such LC Issuer, (iii) at the time of invoice of such amounts by the applicable
Issuing Bank, to the Agent for the ratable benefit of the Lenders, standard
commissions (as established by the applicable Issuing Bank) with respect to
commercial Facility LCs, and (iv) to the Agent for the benefit of each LC
Issuer, all customary fees and other issuance, amendment, document examination,
negotiation and presentment expenses and related charges in connection with the
issuance, amendment, presentation of LC Drafts, and the like customarily charged
by such LC Issuer with respect to standby and commercial Facility LCs, payable
at the time of invoice of such amounts.
3.10 LC Issuer Reporting Requirements. In addition to the notices
--------------------------------
required by Section 3.5(b), each LC Issuer shall, no later than the tenth
--------------
Business Day following the last day of each month, provide to the Agent, upon
the Agent's or any Lender's request, schedules, in form and substance reasonably
satisfactory to the Agent, showing the date of issue, account party, amount,
expiration date and the reference number of each Facility LC issued by it
outstanding at any time during such month and the aggregate amount payable by
the Borrower during such month. In addition, upon the request of the Agent,
<PAGE>
each LC Issuer shall furnish to the Agent copies of any Facility LC and any
application for or reimbursement agreement with respect to a Facility LC to
which the LC Issuer is party and such other documentation as may reasonably be
requested by the Agent. Upon the request of any Lender, the Agent will provide
to such Lender information concerning such Facility LCs.
3.11 Indemnification; Exoneration. (a) In addition to amounts payable as
----------------------------
elsewhere provided in this Article III, the Borrower hereby agrees to protect,
-----------
indemnify, pay and save harmless the Agent, each LC Issuer and each Lender from
and against any and all liabilities and costs which the Agent, such LC Issuer or
such Lender may incur or be subject to as a consequence, direct or indirect, of
(i) the issuance of any Facility LC other than, in the case of the applicable LC
Issuer, as a result of its gross negligence or willful misconduct, as determined
by the final judgment of a court of competent jurisdiction, or (ii) the failure
of the applicable LC Issuer to honor a drawing under a Facility LC as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto governmental authority (all such acts or omissions herein
- ------- --------
called "GOVERNMENTAL ACTS").
(b) As among the Borrower, the Lenders, the Agent and the LC Issuers, the
Borrower assumes all risks of the acts and omissions of, or misuse of such
Facility LC by, the beneficiary of any Facility LCs. In furtherance and not in
limitation of the foregoing, subject to the provisions of the Facility LC
applications and Facility LC reimbursement agreements executed by the Borrower
at the time of request for any Facility LC, neither the Agent, any LC Issuer nor
any Lender shall be responsible (in the absence of gross negligence or willful
misconduct in connection therewith, as determined by the final judgment of a
court of competent jurisdiction): (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of the Facility LCs, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Facility LC or the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any reason; (iii)
for failure of the beneficiary of a Facility LC to comply duly with conditions
required in order to draw upon such Facility LC; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, or other similar form of teletransmission or otherwise;
(v) for errors in interpretation of technical trade terms; (vi) for any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any Facility LC or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of a Facility LC of the proceeds of any
drawing under such Facility LC; and (viii) for any consequences arising from
causes beyond the control of the Agent, the LC Issuers and the Lenders,
including, without limitation, any Governmental Acts. None of the above shall
affect, impair, or prevent the vesting of any LC Issuer's rights or powers under
this Section 3.11.
------------
<PAGE>
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by any LC Issuer
under or in connection with the Facility LCs or any related certificates shall
not, in the absence of gross negligence or willful misconduct, as determined by
the final judgment of a court of competent jurisdiction, put the applicable LC
Issuer, the Agent or any Lender under any resulting liability to the Borrower or
relieve the Borrower of any of its obligations hereunder to any such Person.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 3.11 shall survive the payment in full of principal and interest
------------
hereunder, the termination of the Facility LCs and the termination of this
Agreement.
ARTICLE IV: YIELD PROTECTION; TAXES
4.1. Yield Protection. If, on or after the date of this Agreement, the
----------------
adoption of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender, LC Issuer
or applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender or LC Issuer or any applicable Lending
Installation to any Taxes, or changes the basis of taxation of
payments (other than with respect to Excluded Taxes) to any Lender in
respect of its Loans, its LC Interests, the Facility LCs or other
amounts due hereunder or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
any Lender, Swing Line Lender, LC Issuer or any applicable Lending
Installation (other than reserves and assessments taken into account
in determining the interest rate applicable to Eurodollar Advances),
or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender, Swing Line Lender, LC Issuer or any applicable
Lending Installation of making, funding or maintaining its Loans, LC
Interests or the Facility LCs or reduces any amount receivable by any
Lender or any applicable Lending Installation in connection with its
Loans, LC Interests or the Facility LCs or requires any Lender or any
applicable Lending Installation to make any payment calculated by
<PAGE>
reference to the amount of Loans, LC Interests or Facility LCs held or
interest received by it, by an amount deemed material by such Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Loans, LC
Interests, Facility LCs or Commitment or to reduce the return received by such
Lender or applicable Lending Installation in connection with such Loans, LC
Interests, Facility LCs or Commitment, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender such additional amount or amounts as
will compensate such Lender for such increased cost or reduction in amount
received.
4.2. Changes in Capital Adequacy Regulations. If a Lender, LC Issuer or
---------------------------------------
the Swing Line Lender determines the amount of capital required or expected to
be maintained by such Lender, LC Issuer or the Swing Line Lender, any Lending
Installation of such Lender or any corporation controlling such Lender, LC
Issuer or Swing Line Lender is increased as a result of a Change, then, within
15 days of demand by such Lender, LC Issuer or Swing Line Lender, the Borrower
shall pay such Lender, LC Issuer or Swing Line Lenders the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender, LC Issuer or Swing Line Lenders determines
is attributable to this Agreement, its Loans, LC Interests, Facility LCs or its
Commitment to make Loans hereunder (after taking into account such Lender's, LC
Issuer's or Swing Line Lender's policies as to capital adequacy). No Lender, LC
Issuer or Swing Line Lender shall be entitled to demand payment under this
Section 4.2 to the extent that such payment relates to a period of time more
- -----------
than 90 days prior to the date upon which such Lender, LC Issuer or Swing Line
Lender first notified the Borrower of the occurrence of the event entitling such
Bank to such payment. "CHANGE" means (i) any change after the date of this
Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change
in any other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of law)
after the date of this Agreement which affects the amount of capital required or
expected to be maintained by any Lender, the LC Issuers, the Swing Line Lenders
or any Lending Installation or any corporation controlling any Lender, LC Issuer
or Swing Line Lender. "RISK-BASED CAPITAL GUIDELINES" means (i) the risk-based
capital guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding capital regulations
promulgated by regulatory authorities outside the United States implementing the
July 1988 report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital Measurements and
Capital Standards," including transition rules, and any amendments to such
regulations adopted prior to the date of this Agreement.
4.3. Availability of Types of Advances. If any Lender determines that
---------------------------------
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to
<PAGE>
match fund Eurodollar Advances are not available or (ii) the interest rate
applicable to a Type of Advance does not adequately or fairly reflect the cost
of making or maintaining such Advance and the Borrower, the Agent and the
Lenders shall not have entered into a written agreement providing to the Lenders
compensation satisfactory to the Lenders for such inadequate or unfairly
reflected cost, then the Agent shall suspend the availability of the affected
Type of Advance and require any affected Eurodollar Advances to be repaid or
converted to Floating Rate Advances, subject to the payment of any funding
indemnification amounts required by Section 4.4.
-----------
4.4. Funding Indemnification. If any payment of a Eurodollar Advance
-----------------------
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Advance.
4.5. Taxes. (i) All payments by the Borrower to or for the account of
-----
any Lender, LC Issuer, the Swing Line Lender or the Agent hereunder or under any
Note shall be made free and clear of and without deduction for any and all
Taxes. If the Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to any Lender, any LC Issuer, the Swing
Line Lenders or the Agent, (a) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.5) such Lender, LC Issuer, Swing
-----------
Line Lender or the Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (b) the Borrower
shall make such deductions, (c) the Borrower shall pay the full amount deducted
to the relevant authority in accordance with applicable law and (d) the Borrower
shall furnish to the Agent the original copy of a receipt evidencing payment
thereof within 30 days after such payment is made.
(ii) In addition, the Borrower hereby agrees to pay any present or future
stamp or documentary taxes and any other excise taxes, charges or similar
levies, in each case other than Excluded Taxes, which arise from any payment
made hereunder or under any Note or from the execution or delivery of, or
otherwise with respect to, this Agreement or any Note ("OTHER TAXES").
(iii) The Borrower hereby agrees to indemnify the Agent, the LC Issuers,
the Swing Line Lenders and each Lender for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes imposed on
amounts payable under this Section 4.5) paid by the Agent or such Lender and any
-----------
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. Payments due under this indemnification shall be made within
30 days of the date the Agent, the Swing Line Lenders, such LC Issuer or such
Lender makes demand therefor pursuant to Section 4.6.
-----------
<PAGE>
(iv) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a "NON-U.S. LENDER") agrees that it
will, not less than ten Business Days after the date of this Agreement or the
date it becomes a Lender hereunder, (i) deliver to each of the Borrower and the
Agent two duly completed copies of United States Internal Revenue Service Form
1001 or 4224, certifying in either case that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, and (ii) deliver to each of the Borrower and the
Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and
certify that it is entitled to an exemption from United States backup
withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of
the Borrower and the Agent (x) renewals or additional copies of such form (or
any successor form) on or before the date that such form expires or becomes
obsolete, and (y) after the occurrence of any event requiring a change in the
most recent forms so delivered by it, such additional forms or amendments
thereto as may be reasonably requested by the Borrower or the Agent. All forms
or amendments described in the preceding sentence shall certify that such Lender
is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless a change in
treaty, law or regulation has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form or amendment with respect to it and such Lender advises the Borrower and
the Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed to provide
the Borrower with an appropriate form pursuant to clause (iv), above (unless
-----------
such failure is due to a change in treaty, law or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 4.5 with respect to Taxes imposed by the United States; provided
-----------
that, should a Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of its failure
to deliver a form required under clause (iv), above, the Borrower shall take
-----------
such steps as such Non-U.S. Lender shall reasonably request to assist such Non-
U.S. Lender to recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at
a reduced rate.
<PAGE>
4.6. Lender Statements; Survival of Indemnity. To the extent reasonably
----------------------------------------
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 4.1, 4.2 and 4.5 or to avoid the unavailability of
------------ --- ---
Eurodollar Advances under Section 4.3, so long as such designation is not, in
-----------
the judgment of such Lender, disadvantageous to such Lender. Each Lender, Swing
Line Lender or LC Issuer, as applicable, shall deliver a written statement of
such Lender, LC Issuer or Swing Line Lenders to the Borrower (with a copy to the
Agent) as to the amount due, if any, under Section 4.1, 4.2, 4.4 or 4.5. Such
----------- --- --- ---
written statement shall set forth in reasonable detail the calculations upon
which such Lender, LC Issuer or Swing Line Lender determined such amount and
shall be final, conclusive and binding on the Borrower in the absence of
manifest error. Determination of amounts payable under such Sections in
connection with a Eurodollar Loan shall be calculated as though each Lender
funded its Eurodollar Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Eurodollar Rate applicable to such Loan, whether in fact that is the case or
not. Unless otherwise provided herein, the amount specified in the written
statement of any Lender, Swing Line Lender or LC Issuer shall be payable on
demand after receipt by the Borrower of such written statement. The obligations
of the Borrower under Sections 4.1, 4.2, 4.4 and 4.5 shall survive payment of
------------ --- --- ---
the Obligations, termination or expiration of the Facility LCs and termination
of this Agreement.
ARTICLE V: CONDITIONS PRECEDENT
5.1. Initial Credit Extensions. The Lenders shall not be required to make
-------------------------
the initial Advance hereunder, the Swing Line Lender shall not be required to
make the initial Swing Line Loan and the LC Issuers shall not be required to
issue the initial Facility LC hereunder, unless (a) the representation and
warranty contained in Section 6.5 is true and correct as of such date and (b)
-----------
the Borrower has furnished to the Agent (with sufficient copies for the
Lenders):
(i) Copies of the articles or certificate of incorporation of each of
the Borrower, each of its "Significant Subsidiaries" (as defined in
Regulation S-X issued pursuant to the Securities Act and the Exchange
Act) and each Subsidiary the stock of which is being pledged pursuant
to a Pledge Agreement, together, in each case, with all amendments,
and certificates of good standing, each certified by the appropriate
governmental officer in its jurisdiction of incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of the
Borrower and its Consolidated Subsidiaries, of its by-laws, articles
or certificate of incorporation and of its Board of Directors'
resolutions and of resolutions or actions of any other body
authorizing the execution of the Loan Documents to which the Borrower
or any Consolidated Subsidiary is a party.
<PAGE>
(iii) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower and its Consolidated Subsidiaries,
which shall identify by name and title and bear the signatures of the
Authorized Officers and any other officers of the Borrower and its
Consolidated Subsidiaries authorized to sign the Loan Documents to
which the Borrower or any of its Consolidated Subsidiaries is a party,
upon which certificate the Agent, the LC Issuers, the Swing Line
Lender and the Lenders shall be entitled to rely until informed of any
change in writing by the Borrower.
(iv) A certificate, signed by the chief financial officer of the
Borrower, stating that on the initial Borrowing Date no Default or
Unmatured Default has occurred and is continuing.
(v) A written opinion of the Borrower's and its Consolidated
Subsidiaries' general counsel, addressed to the Agent, the Swing Line
Lender, the LC Issuers and the Lenders in form and substance
reasonably acceptable to the Agent and the Lenders.
(vi) Any Notes requested by any Lender pursuant to Section 2.14
payable to the order of each such requesting Lender and the Swing Line
Note.
(vii) Written money transfer instructions, in substantially the form
of Exhibit F, addressed to the Agent and signed by an Authorized
---------
Officer, together with such other related money transfer
authorizations as the Agent may have reasonably requested.
(viii) The Subsidiary Guaranty executed by each of the Borrower's
domestic Consolidated Subsidiaries.
(ix) Documentation evidencing the arrangement for the termination of
the Existing Credit Agreement among the Borrower, the lenders party
thereto and the agents named therein and repayment of all obligations,
indebtedness and liabilities outstanding thereunder from the proceeds
of the initial Loans hereunder.
(x) Such other documents as any Lender or its counsel may have
reasonably requested.
5.2. Each Credit Extension. The Lenders shall not be required to make any
---------------------
Advance, the Swing Line Lender shall not be required to make any Swing Line Loan
and no LC Issuer shall be required to issue any Facility LC, unless on the
applicable Credit
<PAGE>
Extension Date, both immediately prior to, and immediately after giving effect
to, such Credit Extension:
(i) Either (a) in the case of an Advance, the Agent shall have received a
Borrowing Notice in compliance with Section 2.9, (ii) in the case of a
-----------
Swing Line Loan, the Swing Line Lender shall have received a notice of
borrowing in compliance with Section 2.2(b), and (iii) in the case of
--------------
a Facility LC, LC Issuer shall have received a request for the
issuance of a Facility LC in compliance with Section 3.4(i) (together
---------------
with any Facility LC application agreement requested by the LC Issuer
pursuant to Section 3.4(i)).
--------------
(ii) The Aggregate Outstanding Credit Exposure does not and would not
exceed the Aggregate Commitment.
(iii) There exists no Default or Unmatured Default.
(iv) For any Credit Extensions made on or after February 1, 1998, the
Borrower has furnished to the Agent (with sufficient copies for the
Lenders), the Pledge Agreements executed by the Borrower for each of
its Material Foreign Subsidiaries as of the Closing Date, together
with appropriate corporate resolutions, opinions, stock certificates,
stock powers and other documentation in form and substance
satisfactory to the Agent.
(v) The representations and warranties contained in Article VI (other
----------
than Section 6.5) are true and correct as of such Borrowing Date
-----------
except to the extent any such representation or warranty is stated to
relate solely to an earlier date, in which case such representation or
warranty shall have been true and correct on and as of such earlier
date.
(vi) All legal matters incident to the making of such Credit Extension
shall be satisfactory to the Lenders, the LC Issuers, the Swing Line
Lender and their counsel.
Each Borrowing Notice with respect to each such Advance, each notice of
borrowing with respect to any Swing Line Loan and each request for the issuance
of a Facility LC pursuant to Article III, shall constitute a representation and
-----------
warranty by the Borrower that the conditions contained in Sections 5.2(i) and
---------------
(ii) have been satisfied. Any Lender, the Swing Line Lender or any LC Issuer
- ----
may require a duly completed compliance certificate in substantially the form of
Exhibit G as a condition to making an Advance or Swing Line Loan or issuance of
- ---------
a Facility LC.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES
<PAGE>
In order to induce the Agent, the Swing Line Lender, the LC Issuers and the
Lenders to enter into this Agreement and to make the Credit Extensions to the
Borrower described herein, the Borrower represents and warrants as follows to
each Lender, each LC Issuer, the Swing Line Lender and the Agent as of the
Closing Date, and thereafter on each date as required by Section 5.2:
-----------
6.1. Existence and Standing. Each of the Borrower and its Consolidated
----------------------
Subsidiaries is a corporation or (in the case of Consolidated Subsidiaries only)
a partnership or limited liability company duly and properly incorporated or
organized, as the case may be, validly existing and (to the extent such concept
applies to such entity) in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite authority to conduct its
business in each jurisdiction in which its business is conducted unless the
failure so to qualify would not be reasonably expected to have a Material
Adverse Effect.
6.2. Authorization and Validity. Each of the Borrower and its
--------------------------
Consolidated Subsidiaries has the power and authority and legal right to execute
and deliver the Loan Documents to which it is a party and to perform its
obligations thereunder. The execution and delivery by each of the Borrower and
its Consolidated Subsidiaries of the Loan Documents to which it is a party and
the performance of each of its obligations thereunder have been duly authorized
by proper corporate proceedings (or in the case of Consolidated Subsidiaries,
partnership or company proceedings), and the Loan Documents to which each of the
Borrower and its Consolidated Subsidiaries is a party constitute legal, valid
and binding obligations of the Borrower and its Consolidated Subsidiaries
enforceable against the Borrower and its Consolidated Subsidiaries in accordance
with their terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally.
6.3. No Conflict; Government Consent. Neither the execution and delivery
-------------------------------
by the Borrower or any of its Consolidated Subsidiaries of the Loan Documents
to which it is a party, nor the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof will violate (i) any
law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on the Borrower or any of its Subsidiaries or (ii) the Borrower's or any
Subsidiary's articles or certificate of incorporation, partnership agreement,
certificate of partnership, articles or certificate of organization, by-laws, or
operating or other management agreement, as the case may be, or (iii) the
provisions of any indenture, loan agreement, credit agreement, mortgage or deed
of trust, or any other material contract, agreement or instrument to which the
Borrower or any of its Subsidiaries is a party or is subject, or by which it, or
its Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on any
material Properties of the Borrower or a Subsidiary pursuant to the terms of any
such indenture, loan agreement, credit agreement, mortgage, deed of trust or
other material contract, agreement or instrument other than pursuant to the
<PAGE>
Collateral Documents. No order, consent, adjudication, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, or other action in respect of any governmental or public body or
authority, or any subdivision thereof, which has not been obtained by the
Borrower or any of its Subsidiaries, is required to be obtained by the Borrower
or any of its Subsidiaries in connection with the execution and delivery of the
Loan Documents, the borrowings under this Agreement, the payment and performance
by the Borrower of the Obligations or the legality, validity, binding effect or
enforceability of any of the Loan Documents.
6.4. Financial Statements. The September 28, 1997 unaudited consolidated
--------------------
financial statements of the Borrower and its Consolidated Subsidiaries
heretofore delivered to the Lenders were prepared in accordance with generally
accepted accounting principles in effect on the date such statements were
prepared and fairly present the consolidated financial condition and operations
of the Borrower and its Consolidated Subsidiaries at such date and the
consolidated results of their operations for the period then ended, subject to
normal year-end audit adjustments.
6.5. Material Adverse Change. Since September 28, 1997 and up to the date
-----------------------
of the initial Credit Extension hereunder, there has been no change in the
business, Property, prospects, condition (financial or otherwise) or results of
operations of the Borrower or its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
6.6. Taxes. The Borrower and its Subsidiaries have filed all United
-----
States federal tax returns and all other tax returns which are required to be
filed and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by the Borrower or any of its Subsidiaries, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided in accordance with GAAP and as to which no Lien
exists. The United States income tax returns of the Borrower and its
Subsidiaries have been audited by the Internal Revenue Service through the
fiscal year ended December 31, 1985. No tax liens have been filed and no claims
are being asserted with respect to any such taxes. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of any
taxes or other governmental charges are adequate.
6.7. Litigation and Contingent Obligations. There is no litigation,
-------------------------------------
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Borrower or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect or which seeks to prevent, enjoin or delay the making of
any Loans. Other than any liability incident to any litigation, arbitration or
proceeding which could not reasonably be expected to have a Material Adverse
Effect and other than as set forth on Schedule 2, the Borrower has no material
----------
contingent obligations not provided for or disclosed in the financial statements
referred to in Section 6.4.
-----------
<PAGE>
6.8. Subsidiaries. Schedule 3 contains an accurate list of all
------------ ----------
Subsidiaries (identifying which of those Subsidiaries are Consolidated
Subsidiaries) of the Borrower as of the date of this Agreement, setting forth
their respective jurisdictions of organization and the percentage of their
respective capital stock or other ownership interests owned by the Borrower or
other Subsidiaries together with a calculation, in the case of foreign
Subsidiaries, as of the quarter ended immediately prior to the Closing Date of
such Subsidiaries' total assets as a percentage of the consolidated total assets
of the Borrower and its Consolidated Subsidiaries . All of the issued and
outstanding shares of capital stock or other ownership interests of such
Subsidiaries have been (to the extent such concepts are relevant with respect to
such ownership interests) duly authorized and issued and are fully paid and non-
assessable. After the formation or acquisition of any New Subsidiary permitted
under Section 7.13, if requested by the Agent or any Lender, the Borrower shall
------------
provide a supplement to Schedule 3 to this Agreement.
----------
6.9. ERISA; Foreign Pension Plan Matters. The sum of (a) the Unfunded
-----------------------------------
Liabilities of all Single Employer Plans and (b) the aggregate unfunded
liabilities of all Foreign Pension Plans (after giving effect to any reserves
for such liabilities) do not in the aggregate exceed $30,000,000. Neither the
Borrower nor any other member of the Controlled Group has incurred, or is
reasonably expected to incur, any withdrawal liability to Multiemployer Plans in
excess of $1,000,000 in the aggregate. Each Plan complies in all material
respects with all applicable requirements of law and regulations, no Reportable
Event has occurred with respect to any Plan, neither the Borrower nor any other
member of the Controlled Group has withdrawn from any Plan or initiated steps to
do so, and no steps have been taken to reorganize or terminate any Plan, other
than such non-compliance, Reportable Events, withdrawals, reorganizations and
terminations which are not reasonable expected to result in liability to the
Borrower and its Consolidated Subsidiaries, in the aggregate, in excess of
$5,000,000. Each Foreign Pension Plan is in compliance in all material respects
with all laws, regulations and rules applicable thereto and the respective
requirements of the governing documents for such plan.
6.10. Accuracy of Information. No factual information, exhibit or report
-----------------------
furnished by the Borrower or any of its Subsidiaries to the Agent, the Swing
Line Lender, any LC Issuer or to any Lender, including, without limitation the
November 1997 Confidential Information Memorandum entitled "Howmet Corporation
$300,000,000 Senior Unsecured Revolving Credit Facility", in connection with the
negotiation of, or compliance with, the Loan Documents contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading. The projections
furnished by the Borrower and its Subsidiaries to the Agent, the Swing Line
Lender, the LC Issuers and the Lenders prior to and in connection with the
execution of this Agreement were prepared in good faith and, at the time of the
preparation thereof, based on good faith estimates and assumptions believed by
management of the Borrower to be reasonable, subject to the uncertainties
inherent in projections.
<PAGE>
6.11. Regulation U. Margin stock (as defined in Regulation U) constitutes
------------
less than 25% of the value of those assets of the Borrower and its Subsidiaries
which are subject to any limitation on sale, pledge, or other restriction
hereunder.
6.12. Material Agreements. Neither the Borrower nor any Subsidiary is a
-------------------
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (i) any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect or (ii) any
agreement or instrument evidencing or governing Material Indebtedness.
6.13. Compliance With Laws. The Borrower and its Subsidiaries have
--------------------
complied in all respects with all applicable statutes, rules, regulations,
orders and restrictions of any domestic or foreign government or any
instrumentality or agency thereof having jurisdiction over the conduct of their
respective businesses or the ownership of their respective Property, except for
non-compliance therewith which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
6.14. Ownership of Properties. Except as set forth on Schedule 4, on the
----------------------- ----------
date of this Agreement, the Borrower and its Consolidated Subsidiaries will have
good title, free of all Liens other than those permitted by Section 7.14, to all
------------
of the Property and assets reflected in the Borrower's most recent consolidated
financial statements provided to the Agent as owned by the Borrower and its
Consolidated Subsidiaries.
6.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity
------------------------------------
deemed to hold "plan assets" within the meaning of 29 C.F.R. (S) 2510.3-101 of
an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject
------------
to Title I of ERISA or any plan (within the meaning of Section 4975 of the
------------
Code), and neither the execution of this Agreement nor the making of Loans
hereunder gives rise to a prohibited transaction within the meaning of Section
-------
406 of ERISA or Section 4975 of the Code.
- --- ------------
6.16. Environmental Matters. In the ordinary course of its business, the
----------------------
officers of the Borrower and its Subsidiaries consider the effect of
Environmental Laws on the business of the Borrower and its Subsidiaries, in the
course of which they identify and evaluate potential risks and liabilities
accruing to the Borrower and its Subsidiaries due to Environmental Laws. On the
basis of this consideration, the Borrower has concluded that Environmental Laws
cannot reasonably be expected to have a Material Adverse Effect. Neither the
Borrower nor any Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable Environmental Laws or are the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.
<PAGE>
6.17. Investment Company Act. Neither the Borrower nor any Subsidiary is
----------------------
an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
6.18. Public Utility Holding Company Act. Neither the Borrower nor any
----------------------------------
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
ARTICLE VII: COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
7.1. Financial Reporting. The Borrower will maintain, for itself and each
-------------------
Consolidated Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to the
Lenders:
(i) Within 90 days after the close of each of its fiscal years, an
unqualified audit report certified by independent certified public
accountants of nationally recognized standing or otherwise acceptable
to the Lenders, prepared in accordance with GAAP on a consolidated
basis for itself and its Consolidated Subsidiaries, including balance
sheets as of the end of such period, related profit and loss and
reconciliation of surplus statements, and a statement of cash flows,
accompanied by (a) any management letter prepared by said accountants
and (b) a certificate of said accountants that, in the course of their
examination necessary for their certification of the foregoing, they
have obtained no knowledge of any Default or Unmatured Default under
the financial terms contained in Section 7.10, 7.12, 7.13, 7.14, 7.19
------------ ---- ---- ---- ----
or 7.20, or if, in the opinion of such accountants, any such Default
----
or Unmatured Default shall exist, stating the nature and status
thereof.
(ii) Within 45 days after the close of each of the first three
quarters in each fiscal year, for itself and its Consolidated
Subsidiaries, consolidated unaudited balance sheets as at the close of
each such period and consolidated profit and loss and reconciliation
of surplus statements and a statement of cash flows for the period
from the beginning of such fiscal year to the end of such quarter
(subject in each case to normal year-end audit adjustments), all
certified by its chief financial officer or treasurer.
(iii) As soon as available, but in any event within 90 days after the
beginning of each fiscal
<PAGE>
year of the Borrower, beginning with the fiscal year commencing
January 1, 1999, a copy of the plan and forecast (including a
projected consolidated balance sheet, income statement and funds flow
statement) of the Borrower and its Consolidated Subsidiaries for such
fiscal year.
(iv) Together with the financial statements required under Sections
--------
7.1(i) and (ii), a compliance certificate in substantially the form of
------ ----
Exhibit G signed by its chief financial officer or treasurer showing
the calculations necessary to determine compliance with this Agreement
and stating that no Default or Unmatured Default exists, or if any
Default or Unmatured Default exists, stating the nature and status
thereof.
(v) Within 270 days after the close of each fiscal year, a statement
of the Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA.
(vi) As soon as possible and in any event within 10 days after the
Borrower knows that any Reportable Event has occurred with respect to
any Plan, or any material unfunded liability has arisen with respect
to any Foreign Pension Plan, a statement, signed by the chief
financial officer or treasurer of the Borrower, describing said
Reportable Event or material unfunded liability and the action which
the Borrower proposes to take with respect thereto.
(vii) As soon as possible and in any event within 30 days after
receipt by the Borrower, a copy of (a) any notice or claim to the
effect that the Borrower or any of its Subsidiaries is or may be
liable to any Person as a result of any material release by the
Borrower, any of its Subsidiaries, or any other Person of any toxic or
hazardous waste or substance into the environment, and (b) any notice
alleging any material violation of any federal, state or local
environmental, health or safety law or regulation by the Borrower or
any of its Subsidiaries.
(viii) Promptly upon the furnishing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy
statements so furnished.
(ix) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports
which the Borrower or any of its Consolidated Subsidiaries files with
the Securities and Exchange Commission.
(x) Promptly after the execution thereof, copies of all material
amendments to any of the Receivables Purchase Documents.
<PAGE>
(xi) Such other information (including non-financial information) as
the Agent or any Lender may from time to time reasonably request.
7.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary
---------------
to, use the proceeds of the Loans for working capital, capital expenditures and
other general corporate purposes (which may include refinancing certain existing
indebtedness, including, without limitation, prepayment of the Senior
Subordinated Notes and dividends by the Borrower to Howmet Holdings Corporation
for its prepayment of a large portion of the current balance of the subordinated
promissory notes issued by it as partial consideration in connection with the
transactions evidenced by the Stock Purchase Agreement dated as of October 12,
1995 among Pechiney S.A., Pechiney International, Howmet Cercast S.A. and Howmet
Holdings Corporation) or to repay outstanding Loans in accordance with the terms
of Section 2 or Reimbursement Obligations in accordance with the terms of
---------
Article III. The Company shall use the proceeds of Advances in compliance with
- -----------
all applicable legal and regulatory requirements and any use shall not result in
a violation of any such applicable regulatory requirements, including, without
limitation, Regulation U, and the Securities Act of 1933 and the Securities
Exchange Act of 1934 and the regulations thereunder. The Borrower will not, nor
will it permit any Subsidiary to, use any of the proceeds of the Advances to
purchase or carry any "margin stock" (as defined in Regulation U) or to make any
other Acquisition other than a Permitted Acquisition.
7.3. Notice of Default. The Borrower will, and will cause each Subsidiary
-----------------
to, give prompt notice in writing to the Lenders of the occurrence of any
Default or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to have a Material Adverse Effect.
7.4. Conduct of Business. The Borrower will carry on and conduct its
-------------------
business in the manner of a diversified industrial company with a commitment to
the aerospace and industrial gas turbine industries and will cause each
Subsidiary to conduct its business in a manner consistent with the Company's
objectives as such. The Borrower will, and will cause each Subsidiary to, do
all things necessary to remain duly incorporated or organized, validly existing
and (to the extent such concept applies to such entity) in good standing as a
corporation, partnership or limited liability company in its jurisdiction of
incorporation or organization, and maintain all requisite authority to conduct
its business in each jurisdiction where, because of the nature of its activities
or properties, such authority is required and the failure to maintain such
authority would materially and adversely affect its business, assets, financial
condition, operations or prospects.
7.5. Taxes. The Borrower will, and will cause each Subsidiary to, timely
-----
file complete and correct United States federal and applicable foreign, state
and local tax returns required by law and pay when due all taxes, assessments
and governmental charges and levies upon it or its income, profits or Property,
except those which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside in accordance
with GAAP.
<PAGE>
7.6. Insurance. The Borrower will, and will cause each Consolidated
---------
Subsidiary to, maintain insurance in such amounts and covering such risks as is
consistent with sound business practice.
7.7. Compliance with Laws. The Borrower will, and will cause each
--------------------
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject including,
without limitation, all Environmental Laws, except for non-compliance therewith
which individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect.
7.8. Maintenance of Properties. The Borrower will, and will cause each
-------------------------
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements, except for Property no longer
used or useful in the respective businesses of the Borrower or such Subsidiary.
7.9. Inspection. To the extent permitted by applicable law and not in
----------
violation of any agreements of the Borrower or its Subsidiaries with any third
party regarding confidential, proprietary or secret information, the Borrower
will, and will cause each Consolidated Subsidiary to, permit the Agent and the
Lenders, by their respective representatives and agents, to inspect any of the
Property, books and financial records of the Borrower and each Consolidated
Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Borrower and each Consolidated Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Consolidated
Subsidiary with, and to be advised as to the same by, their respective officers
at such reasonable times and intervals as the Agent or any Lender may designate.
7.10. Indebtedness. The Borrower will not, nor will it permit any
------------
Consolidated Subsidiary to, create, incur or suffer to exist any Indebtedness,
except:
(i) The Loans and Reimbursement Obligations.
(ii) Indebtedness existing on the date hereof and described in
Schedule 4.
----------
(iii) Indebtedness arising under Rate Hedging Agreements which at the time
of entering into such Rate Hedging Agreements were permitted under the
terms of Section 7.18.
------------
(iv) Indebtedness incurred in connection with the Receivables Purchase
Documents; provided that Receivables Facility Attributed Indebtedness
<PAGE>
incurred in connection therewith does not exceed in $75,000,000 in the
aggregate at any time.
(v) Intercompany Indebtedness between any members of the Obligor
Group.
(vi) Other Indebtedness in addition to that referred to elsewhere in
this Section 7.10 incurred by the Borrower's Consolidated
------------
Subsidiaries; provided that no Default or Unmatured Default shall have
occurred and be continuing at the date of such incurrence or would
result therefrom; and provided further that the aggregate outstanding
amount of all Indebtedness incurred by the Borrower's Consolidated
Subsidiaries (other than Indebtedness incurred pursuant to any other
clause of this Section 7.10) shall not at any time exceed $75,000,000.
-------------
(vii) Indebtedness incurred in connection with Sale-Leaseback
transactions permitted pursuant to Section 7.12.
------------
(viii) Indebtedness secured by Liens permitted pursuant to Section
-------
7.14; provided, that no Default or Unmatured Default shall have
----
occurred and be continuing at the date of such incurrence or would
result therefrom and provided, further, that to the extent that such
Indebtedness is subject to restrictions or limitations contained in
other provisions of this Agreement, such Indebtedness is in compliance
with such other restrictions or limitations.
(ix) Other unsecured Indebtedness in addition to that referred to
elsewhere in this Section 7.10 incurred by the Borrower; provided that
------------
no Default or Unmatured Default shall have occurred and be continuing
at the date of such incurrence or would result therefrom.
7.11. Merger. The Borrower will not, nor will it permit any Consolidated
------
Subsidiary to, merge or consolidate with or into any other Person, except that a
Consolidated Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary
or with any other Person in connection with a Permitted Acquisition.
7.12. Sale of Assets. Other than in connection with transactions
--------------
expressly permitted by Sections 7.11, 7.13 and 7.14, the Borrower will not, nor
------------- ---- ----
will it permit any Consolidated Subsidiary to, lease, sell or otherwise dispose
of its Property to any other Person, except:
(i) Sales of inventory in the ordinary course of business.
(ii) Leases, sales or other dispositions of its Property (other than
pursuant to clause (iii) below) that, together with all other Property
------------
of the
<PAGE>
Borrower and its Consolidated Subsidiaries previously leased,
sold or disposed of (other than inventory in the ordinary course of
business and other than pursuant to clause (iii) below) as permitted
------------
by this Section from and after the Closing Date, do not constitute a
Substantial Portion of the Property of the Borrower and its
Consolidated Subsidiaries.
(iii) Any transfer of an interest in accounts or notes receivable on a
limited recourse basis under the Receivables Purchase Documents,
provided that such transfer qualifies as a legal sale and as a sale
under GAAP and that the amount Receivables Facility Attributed
Indebtedness does not exceed $75,000,000 at any one time outstanding.
(iv) Sale Leaseback Transactions; provided that the Property subject
to all such Sale Leaseback Transactions shall not exceed an aggregate
amount in excess of five percent (5.0%) of consolidated assets of the
Borrower and its Consolidated Subsidiaries as would be shown in the
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries as at the beginning of the twelve-month period ending
with the month in which such determination is made.
7.13. Investments and Acquisitions; New Subsidiaries . The Borrower will
----------------------------------------------
not, nor will it permit any Consolidated Subsidiary to, make or suffer to exist
any Investments (including without limitation, loans and advances to, and other
Investments in, Subsidiaries), or commitments therefor, or to become or remain a
partner in any partnership or joint venture, or to make any Acquisition of any
Person, except:
(i) Cash Equivalent Investments.
(ii) Existing Investments in Consolidated Subsidiaries and other
Investments in existence on the date hereof and described in
Schedule 5.
----------
(iii) Investments in Consolidated Subsidiaries (other than Joint
Ventures).
(iv) Investments in the Joint Ventures as set forth in this clause
(iv); provided the aggregate amount of such Investments shall not
exceed:
(a) $30,000,000 in Komatsu-Howmet Ltd;
(b) $10,000,000 in Sprayform Technologies International, LLC;
(c) $45,000,000 in a Joint Venture identified to the Agent pursuant
to a confidential disclosure letter; provided such Investment is
made on or prior to September 30, 1998; and
<PAGE>
(d) $85,000,000 in the aggregate for all other Investments in Joint
Ventures (including, without limitation, Investments made in any
Consolidated Subsidiary which later becomes a Joint Venture at
such time as it becomes a Joint Venture).
For purposes of calculating the Investments in any particular Joint
Venture or group of Joint Ventures pursuant to clauses (a) through (d)
above, the Investment shall equal (1) the aggregate amount of the
Investments minus (2) the aggregate amount of all distributions
received by the Borrower and its Consolidated Subsidiaries from such
Joint Venture or group of Joint Ventures.
(v) Investments in Blade required in connection with the Receivables
Purchase Documents.
(vi) Acquisitions meeting the following requirements (each such Acquisition
constituting a "PERMITTED ACQUISITION"):
(a) No Default or Unmatured Default shall have occurred and be
continuing or would result from such Acquisition or the incurrence of any
Indebtedness in connection therewith;
(b) The businesses being acquired shall be consistent with the
Borrower's objective to carry on and conduct its business in the manner of
a diversified industrial company with a commitment to the aerospace and
industrial gas turbine industries;
(c) Material Indebtedness, if any, incurred by the Borrower or any of
its Subsidiaries to the seller as part of the consideration therefor shall
be subordinated on terms and conditions acceptable to the Agent and the
Required Lenders;
(d) The purchase is consummated pursuant to a negotiated acquisition
agreement on a non-hostile basis;
(e) After giving effect to such Acquisition, the representations and
warranties set forth in the Credit Agreement shall be true and correct in
all material respects on and as of the date of such Acquisition with the
same effect as though made on and as of such date;
(f) If the aggregate purchase price for the Acquisition (including,
without limitation, the cash portion of the purchase price, all
Indebtedness incurred and/or assumed in connection with such Acquisition,
and transaction related contractual payments, including amounts payable
under
<PAGE>
non-compete, consulting or similar agreements) (valuing all non-
cash consideration at fair value) is equal to or greater than
$100,000,000, prior to each such Acquisition, the Borrower shall
deliver to the Agent and the Lenders a certificate from one of the
authorized financial officers certifying that after giving effect to
such Acquisition and the incurrence of any Indebtedness under the
Credit Agreement or otherwise in connection therewith, on a pro forma
--- -----
basis, as if the Acquisition and such incurrence of Indebtedness had
occurred on the first day of the twelve-month period ending on the
last day of the Borrower's most recently completed fiscal quarter, the
Borrower would have been in compliance with all of the covenants
contained in this Agreement; and
(g) The written consent of the Required Lenders shall have been
obtained in connection with any Acquisition if the aggregate purchase
price (including, without limitation, the cash portion of the purchase
price, all Indebtedness incurred and/or assumed in connection with
such Acquisition, and transaction related contractual payments,
including amounts payable under non-compete, consulting or similar
agreements) (valuing all non-cash consideration at fair value) is
equal to or greater than $100,000,000.
(vii) Investments resulting from Financial Contracts entered into
in the ordinary course of business and which do not violate the terms
of Section 7.18.
------------
The Borrower will not, nor will it permit any Consolidated Subsidiary to, create
or acquire a Subsidiary (a "NEW SUBSIDIARY") other than in connection with a
Permitted Acquisition or pursuant to any transaction that is permitted by or not
otherwise prohibited by this Agreement; provided that (1) upon the creation or
--------
acquisition of each New Subsidiary which is a domestic Consolidated Subsidiary,
the Borrower shall cause each such New Subsidiary to promptly (but in any event
within 30 days ) deliver to the Agent an executed counterpart of a Guaranty
Supplement to become a Subsidiary Guarantor under the Subsidiary Guaranty in the
form of Annex I to the form of Subsidiary Guaranty attached as Exhibit C hereto;
------ ---------
(2) upon the creation or acquisition of each New Subsidiary which is a Material
Foreign Subsidiary the Borrower shall or shall cause its applicable domestic
Subsidiary promptly (but in any event within 60 days following the creation or
acquisition thereof) to execute a Pledge Agreement with respect to 65% of the
stock of such Material Foreign Subsidiary; and (3) in either case, shall deliver
appropriate corporate resolutions, opinions, stock certificates, stock powers
and other documentation in form and substance satisfactory to the Agent in
connection therewith.
7.14. Liens. The Borrower will not, nor will it permit any Consolidated
-----
Subsidiary to, create, incur, assume or suffer to exist any Lien in, of or on
the Property of the Borrower or any of its Consolidated Subsidiaries , or assign
any right to receive
<PAGE>
income or permit the filing of any financing statement under the UCC or any
other similar notice of Lien under any similar recording or notice statute,
except:
(i) Liens in favor of the Agent, for the benefit of itself, the Swing
Line Lender, the LC Issuers and the Lenders, granted pursuant to any
Collateral Document.
(ii) Liens arising under the Receivables Purchase Documents.
(iii) Inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been
established in accordance with GAAP (or the equivalent thereof in any
country in which a foreign Consolidated Subsidiary is doing business,
as applicable);
(iv) Liens in respect of property or assets of the Borrower or any of
its Consolidated Subsidiaries imposed by law, which were incurred in
the ordinary course of business and do not secure Indebtedness for
borrowed money, such as carriers', warehousemen's, materialmen's and
mechanics' liens and other similar Liens arising in the ordinary
course of business, and (x) which do not in the aggregate materially
detract from the value of the property or assets of the Borrower or
the Borrower and its Subsidiaries taken as a whole, or materially
impair the use thereof in the operation of the business of the
Borrower or the Borrower and its Subsidiaries taken as a whole or (y)
which are being contested in good faith by appropriate proceedings,
which proceedings (or orders entered in connection with such
proceedings) have the effect of preventing the forfeiture or sale of
the property or assets subject to any such Lien;
(v) Liens in existence on the Closing Date which are listed, and the
property subject thereto described, in Schedule 4, but only to the
----------
respective date, if any, set forth in such Schedule 4 for the removal
----------
and termination of any such Liens, plus renewals and extensions of
such Liens to the extent set forth on Schedule 4, provided that (x)
---------- --------
the aggregate principal amount of the Indebtedness, if any, secured by
such Liens does not increase from that amount outstanding at the time
of any such renewal or extension and (y) any such renewal or extension
does not encumber any additional assets or properties of the Borrower
or any of its Consolidated Subsidiaries;
(vi) Licenses, leases or subleases granted to other Persons in the
ordinary course of business not materially interfering with the
conduct of the business of the Borrower or the Borrower and its
Subsidiaries taken as
<PAGE>
a whole or materially diminishing the aggregate value of any
collateral for the Obligations;
(vii) Liens upon assets of the Borrower and its Consolidated
Subsidiaries subject to Capitalized Lease Obligations provided that at
no time shall the Indebtedness with respect to such Capitalized Lease
Obligations exceed $10,000,000 in the aggregate at any one time
outstanding; provided that (x) such Liens only serve to secure the
payment of Indebtedness arising under such Capitalized Lease
Obligation and (y) the Lien encumbering the asset giving rise to the
Capitalized Lease Obligation does not encumber any other asset (other
than proceeds thereof) of the Borrower or any Consolidated Subsidiary
of the Borrower;
(viii) Liens placed upon assets used in the ordinary course of
business of the Borrower or any of its Consolidated Subsidiaries at
the time of acquisition thereof by the Borrower or any such
Consolidated Subsidiary or within 120 days thereafter to secure
Indebtedness incurred to pay all or a portion of the purchase price
thereof; provided that (x) the aggregate outstanding principal amount
of all Indebtedness secured by Liens permitted by this clause (viii)
shall not at any time exceed $5,000,000 and (y) in all events, the
Lien encumbering the assets so acquired does not encumber any other
asset (other than proceeds thereof) of the Borrower or such
Consolidated Subsidiary;
(ix) Easements, rights-of-way, restrictions (including zoning
restrictions), encroachments, protrusions and other similar charges or
encumbrances, and minor title deficiencies, in each case whether now
or hereafter in existence, not securing Indebtedness, not materially
interfering with the conduct of the business of the Borrower or the
Borrower and its Subsidiaries taken as a whole and not materially
diminishing the aggregate value of any collateral for the Obligations;
(x) Liens arising from precautionary UCC financing statement filings
regarding Operating Leases entered into by the Borrower or any of its
Consolidated Subsidiaries in the ordinary course of business;
(xi) Liens arising out of the existence of judgments or awards not
constituting an Event of Default under Section 8.9, provided that no
-----------
cash or property is deposited or delivered to secure the respective
judgment or award (or any appeal bond in respect thereof, except as
permitted by following clause (xiii));
(xii) Statutory and contractual landlords' liens under leases or
subleases to which the Borrower or any of its Consolidated
Subsidiaries is a party;
<PAGE>
(xiii) Liens (other than any Lien imposed by ERISA) (x) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of
social security, (y) to secure the performance of tenders, statutory
obligations (other than excise taxes), surety, stay, customs and
appeal bonds, statutory bonds, bids, leases, government contracts,
trade contracts, performance and return of money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money) or (z) arising by virtue of deposits made in the
ordinary course of business to secure liability for premiums to
insurance carriers, provided that the aggregate amount of deposits at
any time pursuant to sub-clause (y) and sub-clause (z) shall not
exceed $5,000,000 in the aggregate;
(xiv) Any interest or title of a lessor, sublessor, licensee or
licensor under any lease or license agreement permitted by this
Agreement;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure the payment of customs duties in connection
with the importation of goods;
(xvi) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the manufacture or sale of
goods entered into by the Borrower or any of its Consolidated
Subsidiaries in the ordinary course of business in accordance with the
past practices of the Borrower and its Consolidated Subsidiaries prior
to the Closing Date;
(xvii) Deposits made to secure statutory obligations in the form of
excise taxes;
(xviii) Liens upon specific items of inventory or other goods and
proceeds thereof granted in favor of any Person (but not directly or
indirectly securing any Indebtedness) to facilitate the purchase,
shipment or storage of such inventory or other goods in the ordinary
course of business;
(xix) Liens encumbering deposits securing permitted Rate Hedging
Obligations, so long as the aggregate amount of deposits at any time
subject to Liens pursuant to this clause (xix) does not exceed
$3,000,000 in the aggregate;
(xx) Liens encumbering deposits made in the ordinary course of
business, not to exceed $5,000,000 in the aggregate at any time, to
secure nondelinquent obligations arising from statutory, regulatory,
contractual or warranty requirements of the Borrower or its
Consolidated Subsidiaries for which a reserve or other appropriate
provision, if any, as shall be required by GAAP, shall have been made;
<PAGE>
(xxi) Liens on assets of foreign Consolidated Subsidiaries, provided
that (x) such Liens do not extend to, or encumber, assets which
constitute collateral for the Obligations or the capital stock of the
Borrower or any of its Consolidated Subsidiaries and (y) such Liens
extending to the assets of any foreign Consolidated Subsidiary secure
only Indebtedness incurred by such foreign Consolidated Subsidiary in
compliance with Section 7.10(v);
---------------
(xxii) Liens on assets of any Consolidated Subsidiary of the Borrower
acquired as a result of a Permitted Acquisition and securing only
Permitted Acquired Debt of such Consolidated Subsidiary, so long as
such Liens comply with the requirements set forth in the definition of
Permitted Acquired Debt; and
(xxiii) Liens not otherwise permitted by the foregoing clauses (i)
through (xxii) to the extent attaching to properties and assets with
an aggregate fair value not in excess of, and securing liabilities not
in excess of, $10,000,000 in the aggregate at any time outstanding.
In addition, neither the Borrower nor any of its Consolidated Subsidiaries shall
become a party to any agreement, note, indenture or other instrument, or take
any other action, which would prohibit the creation of a Lien on any material
portion of its Property in favor of the Agent for the benefit of itself, the
Lenders, the Swing Line Lender and the LC Issuers, as collateral for the
Obligations.
7.15. Affiliates. Except as set forth on Schedule 6, the Borrower will
---------- ----------
not, and will not permit any Consolidated Subsidiary to, enter into any
transaction (including, without limitation, the purchase or sale of any Property
or service) with, or make any payment or transfer to, any Affiliate except in
the ordinary course of business and pursuant to the reasonable requirements of
the Borrower's or such Consolidated Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Consolidated
Subsidiary than the Borrower or such Consolidated Subsidiary would obtain in a
comparable arms-length transaction other than Permitted Receivables Transfers.
7.16. Incorporation of Senior Subordinated Note Indenture Restrictions.
----------------------------------------------------------------
Until the outstanding principal balance of the Indebtedness evidenced by the
Senior Subordinated Notes has been reduced below $10,000,000, all covenants and
defaults contained in the Senior Subordinated Note Indenture which are
applicable at any time to such Indebtedness are incorporated herein by reference
to the extent such covenants or defaults are more restrictive on the Borrower or
its Subsidiaries than those set forth herein and the Borrower and its
Subsidiaries shall be required to comply with such more restrictive terms as
though fully set forth herein.
7.17. Subordinated Indebtedness. Other than with respect to the Senior
-------------------------
Subordinated Notes, the Borrower will not, and will not permit any Subsidiary
to, make
<PAGE>
any amendment or modification to the indenture, note or other agreement
evidencing or governing any Subordinated Indebtedness of the Borrower or such
Subsidiary, or directly or indirectly voluntarily prepay, defease or in
substance defease, purchase, redeem, retire or otherwise acquire.
7.18. Financial Contracts. The Borrower shall not and shall not permit
-------------------
any of its Consolidated Subsidiaries to enter into any Financial Contract, other
than interest rate, foreign currency or commodity exchange, swap, collar, cap or
similar Rate Hedging Agreements entered into by the Borrower or such
Consolidated Subsidiaries pursuant to which the Borrower or such Consolidated
Subsidiary hedged its actual interest rate, foreign currency or commodity
exposure existing at the time thereof.
7.19. Pledge Agreements. The Borrower will not at any time permit the
-----------------
aggregate assets of all of the Borrower's foreign Consolidated Subsidiaries in
connection with which the Agent has not received a Pledge Agreement to exceed
ten percent (10%) of consolidated total assets of the Borrower and its
Consolidated Subsidiaries.
7.20. Financial Covenants.
-------------------
7.20.1. Interest Coverage Ratio. The Borrower will not permit the
-----------------------
ratio, determined as of the end of each of its fiscal quarters for the then
most-recently ended four fiscal quarters, of (i) Consolidated EBIT to (ii)
Consolidated Interest Expense to be less than 2.50 to 1.0.
7.20.2. Leverage Ratio. The Borrower will not permit its Leverage
--------------
Ratio, determined as of the end of each of its fiscal quarters, to be
greater than 3.25 to 1.0.
7.20.3. Minimum Net Worth. The Borrower will at all times maintain
-----------------
Consolidated Net Worth of not less than the sum of (i) $265,000,000 plus
(ii) fifty percent (50%) of Consolidated Net Income earned in each fiscal
quarter beginning with the quarter ending December 31, 1997 (without
deduction for losses).
7.21 Subsidiary Covenants. Except for encumbrances or restrictions
--------------------
existing under or by reason of (i) applicable law, (ii) this Agreement or the
other Loan Documents, (iii) the Receivables Purchase Documents, (iv) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest, and (v) restrictions imposed by the holder of any Lien
permitted under Section 7.14 on the transfer of the assets subject thereto, the
------------
Borrower will not, and will not permit any Consolidated Subsidiary to, create or
otherwise cause to become effective or permit to exist any consensual
encumbrance or restriction of any kind on the ability of any Consolidated
Subsidiary to pay dividends or make any other distribution on its stock, redeem
or repurchase its stock, make any other similar payment or distribution, pay any
Indebtedness or other Obligation owed by the Borrower or any other Consolidated
Subsidiary, make loans or advances or other Investments in the Borrower or any
other
<PAGE>
Consolidated Subsidiary, or sell, transfer or otherwise convey any of its
property to the Borrower or any other Consolidated Subsidiary.
ARTICLE VIII: DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
8.1. Any representation or warranty made or deemed made by or on behalf of
the Borrower or any of its Subsidiaries to the Lenders, the Swing Line Lender,
the LC Issuer or the Agent under or in connection with this Agreement, any
Credit Extension, or any certificate or information delivered in connection with
this Agreement, any Credit Extension or any other Loan Document shall be
materially false on the date as of which made.
8.2. Nonpayment of principal of any Loan or Reimbursement Obligation when
due, or nonpayment of interest upon any Loan or of any facility fee, letter of
credit fee or other obligations under any of the Loan Documents within five days
after the same becomes due.
8.3. The breach by the Borrower of any of the terms or provisions of
Section 7.2 (only as to the last sentence thereof), 7.3, 7.10, 7.11, 7.12, 7.13,
- ----------- --- ---- ---- ---- ----
7.14, 7.16, 7.17, or 7.20.
- ---- ---- ---- ----
8.4. The breach by the Borrower (other than a breach which constitutes a
Default under another Section of this Article VIII) of any of the terms or
------------
provisions of this Agreement which is not remedied within fifteen days after
written notice from the Agent or any Lender.
8.5. Failure of the Borrower or any of its Consolidated Subsidiaries to
pay when due any Indebtedness aggregating in excess of $10,000,000 ("MATERIAL
INDEBTEDNESS"); or the default by the Borrower or any of its Consolidated
Subsidiaries in the performance (beyond the applicable grace period with respect
thereto, if any) of any term, provision or condition contained in any agreement
under which any such Material Indebtedness was created or is governed, or any
other event shall occur or condition exist, the effect of which default or event
is to cause, or to permit the holder or holders of such Material Indebtedness to
cause, such Material Indebtedness to become due prior to its stated maturity; or
any Material Indebtedness of the Borrower or any of its Consolidated
Subsidiaries shall be declared to be due and payable or required to be prepaid
or repurchased (other than by a regularly scheduled payment) prior to the stated
maturity thereof; or the Borrower or any of its Consolidated Subsidiaries shall
not pay, or admit in writing its inability to pay, its debts generally as they
become due.
8.6. The Borrower or any of its Consolidated Subsidiaries shall (i) have
an order for relief entered with respect to it under the Federal bankruptcy laws
or other applicable
<PAGE>
bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the
benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or similar
official for it or any Substantial Portion of its Property, (iv) institute any
proceeding seeking an order for relief under the Federal bankruptcy laws or
other applicable bankruptcy laws as now or hereafter in effect or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (v) take any
corporate or partnership action to authorize or effect any of the foregoing
actions set forth in this Section 8.6 or (vi) fail to contest in good faith any
-----------
appointment or proceeding described in Section 8.7.
------------
8.7. Without the application, approval or consent of the Borrower or any
of its Consolidated Subsidiaries, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any of its Consolidated
Subsidiaries or any Substantial Portion of its Property, or a proceeding
described in Section 8.6(iv) shall be instituted against the Borrower or any of
---------------
its Consolidated Subsidiaries and such appointment continues undischarged or
such proceeding continues undismissed or unstayed for a period of 60 consecutive
days.
8.8. Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of, all or any portion of the
Property of the Borrower and its Consolidated Subsidiaries which, when taken
together with all other Property of the Borrower and its Consolidated
Subsidiaries so condemned, seized, appropriated, or taken custody or control of,
during the twelve-month period ending with the month in which any such action
occurs, constitutes a Substantial Portion.
8.9. The Borrower or any of its Consolidated Subsidiaries shall fail
within 30 days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $5,000,000, which is not stayed on appeal.
8.10. The sum of (a) the Unfunded Liabilities of all Single Employer Plans
and (b) the unfunded liabilities with respect to all Foreign Pension Plans shall
exceed $30,000,000 in the aggregate or any Reportable Event shall occur in
connection with any Plan.
8.11. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
the Borrower or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds $1,000,000 or requires
payments exceeding $1,000,000 per annum.
<PAGE>
8.12. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of Title IV
of ERISA, if as a result of such reorganization or termination the aggregate
annual contributions of the Borrower and the other members of the Controlled
Group (taken as a whole) to all Multiemployer Plans which are then in
reorganization or being terminated have been or will be increased over the
amounts contributed to such Multiemployer Plans for the respective plan years of
each such Multiemployer Plan immediately preceding the plan year in which the
reorganization or termination occurs by an amount exceeding $1,000,000.
8.13. The Borrower or any of its Consolidated Subsidiaries shall (i) be
the subject of any proceeding or investigation pertaining to the release by the
Borrower, any of its Consolidated Subsidiaries or any other Person of any toxic
or hazardous waste or substance into the environment, or (ii) violate any
Environmental Law, which, in the case of an event described in clause (i) or
----------
clause (ii), could reasonably be expected to have a Material Adverse Effect.
- -----------
8.14. Any Change in Control shall occur.
8.15. The occurrence of any "default", as defined in any Loan Document
(other than this Agreement) or the breach of any of the terms or provisions of
any Loan Document (other than this Agreement), which default or breach continues
beyond any period of grace therein provided.
8.16. The Subsidiary Guaranty shall fail to remain in full force or effect
with respect to each Subsidiary Guarantor or any action shall be taken to
discontinue or to assert the invalidity or unenforceability of the Subsidiary
Guaranty, or any Subsidiary Guarantor shall fail to comply with any of the terms
or provisions of the Subsidiary Guaranty, or any Subsidiary Guarantor shall deny
that it has any further liability under the Subsidiary Guaranty, or shall give
notice to such effect.
8.17. Any of the following shall occur: (i) any Collateral Document shall
for any reason fail to create a valid and perfected first priority security
interest in any collateral purported to be covered thereby, except as permitted
by the terms of any Collateral Document, (ii) any Collateral Document shall fail
to remain in full force or effect, (iii) any action shall be taken to
discontinue or to assert the invalidity or unenforceability of any Collateral
Document, or (iv) the Borrower or any of its Subsidiaries shall fail to comply
with any of the terms or provisions of any Collateral Document, and, in the case
of clauses (i), (ii) and (iv), such occurrence shall continue for a period of 60
days after the earlier of the Borrower's knowledge thereof or the Borrower
received notice thereof from the Agent or any Lender.
8.18 An "Early Amortization Event," "Servicer Default" or event shall
occur resulting in the termination of purchases and/or funding under the
Receivables Purchase
<PAGE>
Agreement, or the Borrower shall cease to act as "Servicer" under the Amended
and Restated Pooling and Servicing Agreement dated as of April 18, 1996 executed
in connection with the Receivables Purchase Agreement, as the same may have been
or may hereafter be amended, modified , supplemented or restated.
ARTICLE IX: ACCELERATION, WAIVERS, AMENDMENTS AND
REMEDIES
9.1. Acceleration. (a) If any Default described in Section 8.6 or 8.7
------------ ----------- ---
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder, the obligation of the Swing Line Lender to make Swing Line
Loans and the obligation of the LC Issuers to issue Facility LCs shall
automatically terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Agent, the LC Issuers,
the Swing Lender or any Lender. If any other Default occurs, the Required
Lenders (or the Agent with the consent of the Required Lenders) may terminate or
suspend the obligations of the Lenders to make Loans hereunder, the Swing Line
Lender to make Swing Line Loans and the obligation of the LC Issuers to issue
Facility LCs, or declare the Obligations to be due and payable, or both,
whereupon the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which the Borrower
hereby expressly waives.
(b) In addition, the Borrower agrees that upon the occurrence and during
the continuance of any Default, it shall, if requested at any time by the Agent
upon instruction from the Required Lenders, pay (and, in the case of any of the
Defaults specified in Section 8.6 or 8.7 with respect to the Borrower,
----------- ---
forthwith, without any demand or the taking of any other action by the Agent or
any Lender, it shall pay) to the Agent an amount in immediately available funds
equal to the then aggregate amount of the LC Obligations to be held as security
therefor for the benefit of the Lenders and the LC Issuer.
(c) If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder, the obligation of the Swing Line Lender to make Swing Line Loans and
the obligation of the LC Issuers to issue Facility LCs as a result of any
Default (other than any Default as described in Section 8.6 or 8.7 with respect
----------- ---
to the Borrower) and before any judgment or decree for the payment of the
Obligations due shall have been obtained or entered, the Required Lenders (in
their sole discretion) shall so direct, the Agent shall, by notice to the
Borrower, rescind and annul such acceleration and/or termination.
9.2. Amendments. Subject to the provisions of this Article IX, the
---------- ----------
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided,
<PAGE>
however, that no such supplemental agreement shall, without the consent of all
of the Lenders:
(a) Reduce the principal of or rate of interest on any Loan, any
Reimbursement Obligation or any fees hereunder; or
(b) Postpone the date fixed for any payment of principal of or
interest on any Loan, any Reimbursement Obligation or any fees
hereunder; or
(c) Extend the Facility Termination Date, or otherwise extend the term
of the Commitment of any Lender; or
(d) Change the definition of Required Lenders or the percentage of the
Commitments, the Outstanding Credit Exposures or the Outstanding LC
Exposures or of the aggregate unpaid principal amount of the Notes, or
the number of Lenders, which shall be required for the Lenders or any
of them to take any action under this Section or any other provision
of the Loan Documents; or
(e) Permit the Borrower to assign any of its rights or obligations
under this Agreement;
(f) Other than in connection with any transactions which shall be
permitted by the terms hereof or of any other Loan Document or which
shall otherwise have been approved in writing by the Required Lenders
(or, if required by the other terms of Section 9.2, all of the
-----------
Lenders), release any Subsidiary from all or any portion of its
guaranty liability under the Subsidiary Guaranty; or
(g) Other than in connection with any transactions which shall be
permitted by the terms hereof or of any other Loan Document or which
shall otherwise have been approved in writing by the Required Lenders
(or, if required by the other terms of Section 9.2, all of the
-----------
Lenders), release any of the collateral pledged pursuant to the Pledge
Agreements; or
(h) Amend or waive any of the provisions of this Section 9.2.
-----------
No amendment of any provision of this Agreement relating to the Agent, the Swing
Line Lender or the LC Issuers shall be effective without the written consent of
the Agent, the Swing Line Lenders or the LC Issuers, as applicable. The Agent
may waive payment of the fee required under Section 13.3.2 without obtaining the
--------------
consent of any other party to this Agreement.
9.3. Preservation of Rights. No delay or omission of the Lenders, Swing
----------------------
Line Lenders, LC Issuers or the Agent to exercise any right under the Loan
Documents shall
<PAGE>
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Loan notwithstanding the existence of
a Default or the inability of the Borrower to satisfy the conditions precedent
to such Loan shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or further exercise
thereof or the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to Section 9.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Agent and the
Lenders until the Obligations have been paid in full.
ARTICLE X: GENERAL PROVISIONS
10.1. Survival of Representations. All representations and warranties of
---------------------------
the Borrower contained in this Agreement shall survive the making of the Credit
Extensions herein contemplated.
10.2. Governmental Regulation. Anything contained in this Agreement to
-----------------------
the contrary notwithstanding, no Lender, Swing Line Lender or LC Issuer shall be
obligated to extend credit to the Borrower in violation of any limitation or
prohibition provided by any applicable statute or regulation.
10.3. Headings. Section headings in the Loan Documents are for
--------
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
10.4. Entire Agreement. The Loan Documents embody the entire agreement
----------------
and understanding among the Borrower, the Agent, the Swing Line Lender, the LC
Issuers and the Lenders and supersede all prior agreements and understandings
among the Borrower, the Agent, the Swing Line Lender, the LC Issuers and the
Lenders relating to the subject matter thereof other than the fee letter
described in Section 11.13.
-------------
10.5. Several Obligations; Benefits of this Agreement. The respective
-----------------------------------------------
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns, provided, however, that the parties
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 10.6, 10.10 and 11.11 to the extent specifically set
------------- ----- -----
forth therein and shall have the right to enforce such provisions on its own
behalf and in its own name to the same extent as if it were a party to this
Agreement.
<PAGE>
10.6. Expenses; Indemnification. (i) The Borrower shall reimburse the
-------------------------
Agent and the Arranger for any reasonable costs, internal charges and out-of-
pocket expenses (including reasonable attorneys' fees and time charges of
attorneys for the Agent, which attorneys may be employees of the Agent) paid or
incurred by the Agent or the Arranger in connection with the preparation,
negotiation, execution, delivery, syndication, review, amendment, modification,
and administration of the Loan Documents. The Borrower also agrees to reimburse
the Agent, the Arranger, the Swing Line Lender, the LC Issuers and the Lenders
for any costs, internal charges and out-of-pocket expenses (including attorneys'
fees and time charges of attorneys for the Agent, the Arranger, the Swing Line
Lender, the LC Issuers and the Lenders, which attorneys may be employees of the
Agent, the Arranger, the Swing Line Lender, the LC Issuers or the Lenders) paid
or incurred by the Agent, the Arranger, the Swing Line Lender, the LC Issuer or
any Lender in connection with the collection and enforcement of the Loan
Documents. Expenses being reimbursed by the Borrower under this Section
include, without limitation, costs and expenses incurred in connection with the
Reports described in the following sentence. The Borrower acknowledges that
from time to time First Chicago may prepare and may distribute to the Lenders
(but shall have no obligation or duty to prepare or to distribute to the
Lenders) certain audit reports (the "REPORTS") pertaining to the Borrower's
assets or business for internal use by First Chicago from information furnished
to it by or on behalf of the Borrower, after First Chicago has exercised its
rights of inspection pursuant to this Agreement.
(ii) The Borrower hereby further agrees to indemnify the Agent, the
Arranger, the Swing Line Lender, each of the LC Issuers and each Lender, its
directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not the Agent, the
Arranger, the Swing Line Lender, any LC Issuer or any Lender is a party thereto)
which any of them may pay or incur arising out of or relating to this Agreement,
the other Loan Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan or
Facility LC hereunder except to the extent that they are determined in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
solely from the gross negligence or willful misconduct of the party seeking
indemnification. The obligations of the Borrower under this Section 10.6 shall
------------
survive the termination of this Agreement.
10.7. Numbers of Documents. All statements, notices, closing documents,
--------------------
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
10.8. Accounting. Except as provided to the contrary herein, all
----------
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP.
<PAGE>
10.9. Severability of Provisions. Any provision in any Loan Document that
--------------------------
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
10.10. Nonliability of Lenders. The relationship between the Borrower on
-----------------------
the one hand and the Lenders, the LC Issuers, the Swing Line Lender and the
Agent on the other hand shall be solely that of borrower and lender. Neither
the Agent, the Arranger, the LC Issuers, the Swing Line Lender nor any Lender
shall have any fiduciary responsibilities to the Borrower. Neither the Agent,
the Arranger, the LC Issuers, the Swing Line Lender nor any Lender undertakes
any responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the Borrower's business or operations.
The Borrower agrees that neither the Agent, the Arranger, the Swing Line Lender,
the LC Issuers nor any Lender shall have liability to the Borrower (whether
sounding in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Loan Documents, or any act,
omission or event occurring in connection therewith, unless it is determined in
a final non-appealable judgment by a court of competent jurisdiction that such
losses resulted from the gross negligence or willful misconduct of the party
from which recovery is sought. Neither the Agent, the Arranger, the Swing Line
Lender, the LC Issuers nor any Lender shall have any liability with respect to,
and the Borrower hereby waives, releases and agrees not to sue for, any special,
indirect or consequential damages suffered by the Borrower in connection with,
arising out of, or in any way related to the Loan Documents or the transactions
contemplated thereby.
10.11. Confidentiality. Each Lender, Swing Line Lender, LC Issuer and the
---------------
Agent agrees to hold any confidential information which it may receive from the
Borrower pursuant to this Agreement in confidence, except for disclosure (i) to
its Affiliates and to other Lenders, LC Issuers, the Swing Line Lender or the
Agent and their respective Affiliates, (ii) to legal counsel, accountants, and
other professional advisors to that Lender, Swing Line Lender, LC Issuer, the
Agent or to a Transferee, (iii) to regulatory officials, (iv) to any Person as
requested pursuant to or as required by law, regulation, or legal process, (v)
to any Person in connection with any legal proceeding to which that Lender,
Swing Line Lender, LC Issuer or the Agent is a party, and (vi) permitted by
Section 13.4.
- ------------
10.12. Nonreliance. Each Lender, LC Issuer and Swing Line Lender hereby
-----------
represents that it is not relying on or looking to any margin stock (as defined
in Regulation U of the Board of Governors of the Federal Reserve System) for the
repayment of the Loans provided for herein.
<PAGE>
ARTICLE XI: THE AGENT
11.1. Appointment; Nature of Relationship. The First National Bank of
-----------------------------------
Chicago is hereby appointed by each of the Lenders, LC Issuers and the Swing
Line Lender as its contractual representative (herein referred to as the
"AGENT") hereunder and under each other Loan Document, and each of the Lenders,
the Swing Line Lender and each of the LC Issuers irrevocably authorizes the
Agent to act as the contractual representative of such Lender, Swing Line Lender
and LC Issuer with the rights and duties expressly set forth herein and in the
other Loan Documents. The Agent agrees to act as such contractual
representative upon the express conditions contained in this Article XI.
----------
Notwithstanding the use of the defined term "Agent," it is expressly understood
and agreed that the Agent shall not have any fiduciary responsibilities to any
Lender, LC Issuer or Swing Line Lender by reason of this Agreement or any other
Loan Document and that the Agent is merely acting as the contractual
representative of the Lenders, the Swing Line Lender, and the LC Issuers with
only those duties as are expressly set forth in this Agreement and the other
Loan Documents. In its capacity as the Lenders', LC Issuers' and Swing Line
Lender's contractual representative, the Agent (i) does not hereby assume any
fiduciary duties to any of the Lenders, Swing Line Lenders or LC Issuers (ii) is
a "representative" of the Lenders, Swing Line Lender and LC Issuers within the
meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as
-------------
an independent contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement and the other Loan Documents. Each of the
Lenders, the Swing Line Lender and the LC Issuers hereby agrees to assert no
claim against the Agent on any agency theory or any other theory of liability
for breach of fiduciary duty, all of which claims each Lender, each LC Issuer
and the Swing Line Lender hereby waives.
11.2. Powers. The Agent shall have and may exercise such powers under the
------
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, the LC Issuers or the Swing
Line Lender or any obligation to the Lenders, LC Issuers or Swing Line Lender to
take any action thereunder except any action specifically provided by the Loan
Documents to be taken by the Agent.
11.3. General Immunity. Neither the Agent nor any of its directors,
----------------
officers, agents or employees shall be liable to the Borrower, any Lender, any
LC Issuer or the Swing Line Lender for any action taken or omitted to be taken
by it or them hereunder or under any other Loan Document or in connection
herewith or therewith except to the extent such action or inaction is determined
in a final non-appealable judgment by a court of competent jurisdiction to have
arisen solely from the gross negligence or willful misconduct of such Person.
11.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor
-------------------------------------------
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (a) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or
<PAGE>
observance of any of the covenants or agreements of any obligor under any Loan
Document, including, without limitation, any agreement by an obligor to furnish
information directly to each Lender, LC Issuer or Swing Line Lender; (c) the
satisfaction of any condition specified in Article V, except receipt of items
---------
required to be delivered solely -to the Agent; (d) the existence or
possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; (f) the
value, sufficiency, creation, perfection or priority of any Lien in any
collateral security; or (g) the financial condition of the Borrower or any
guarantor of any of the Obligations or of any of the Borrower's or any such
guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to
the Lenders, LC Issuers or the Swing Line Lender information that is not
required to be furnished by the Borrower to the Agent at such time, but is
voluntarily furnished by the Borrower to the Agent (either in its capacity as
Agent or in its individual capacity).
11.5. Action on Instructions of Lenders. The Agent shall in all cases be
---------------------------------
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders, the LC Issuers and the
Swing Line Lender. The Lenders, the Swing Line Lender and the LC Issuers hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or refusing
to take any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata against any and
all liability, cost and expense that it may incur by reason of taking or
continuing to take any such action.
11.6. Employment of Agents and Counsel. The Agent may execute any of its
--------------------------------
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, the Swing Line Lender or the LC Issuers, except as to money or
securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. The Agent shall be entitled to advice of counsel concerning
the contractual arrangement between the Agent and the Lenders, the LC Issuers
and the Swing Line Lender and all matters pertaining to the Agent's duties
hereunder and under any other Loan Document.
11.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely
------------------------------
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
<PAGE>
11.8. Agent's Reimbursement and Indemnification. The Lenders agree to
-----------------------------------------
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (i) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (ii) for any other expenses incurred by
the Agent on behalf of the Lenders, the Swing Line Lender or the LC Issuers in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents (including, without limitation, for any
expenses incurred by the Agent in connection with any dispute between the Agent
and any Lender, LC Issuer or the Swing Line Lender or between two or more of the
Lenders, LC Issuers and the Swing Line Lender) and (iii) for any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby (including, without
limitation, for any such amounts incurred by or asserted against the Agent in
connection with any dispute between the Agent and any Lender, LC Issuer or the
Swing Line Lender or between two or more of the Lenders, the LC Issuers and the
Swing Line Lender), or the enforcement of any of the terms of the Loan Documents
or of any such other documents, provided that no Lender shall be liable for any
of the foregoing to the extent any of the foregoing is found in a final non-
appealable judgment by a court of competent jurisdiction to have resulted solely
from the gross negligence or willful misconduct of the Agent. The obligations
of the Lenders under this Section 11.8 shall survive payment of the Obligations
------------
and termination of this Agreement.
11.9. Notice of Default. The Agent shall not be deemed to have knowledge
-----------------
or notice of the occurrence of any Default or Unmatured Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring to
this Agreement describing such Default or Unmatured Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders.
11.10. Rights as a Lender. In the event the Agent is a Lender, Swing Line
------------------
Lender or LC Issuer, the Agent shall have the same rights and powers hereunder
and under any other Loan Document with respect to its Commitment and its Loans
as any Lender, LC Issuer or the Swing Line Lender and may exercise the same as
though it were not the Agent, and the term "Lender" or "Lenders" , "LC Issuer"
or "LC Issuers" and "Swing Line Lender" shall, at any time when the Agent is a
Lender, LC Issuer or Swing Line Lender, unless the context otherwise indicates,
include the Agent in its individual capacity. The Agent and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of trust,
debt, equity or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of its
Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby
from engaging with any other Person.
<PAGE>
11.11. Lender Credit Decision. Each Lender, LC Issuer and Swing Line
----------------------
Lender acknowledges that it has, independently and without reliance upon the
Agent, the Arranger or any other Lender, LC Issuer or Swing Line Lender and
based on the financial statements prepared by the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each of the Lenders, LC Issuers and the Swing Line Lender also acknowledges that
it will, independently and without reliance upon the Agent, the Arranger or any
other Lender, the Swing Line Lender or LC Issuer, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
11.12. Successor Agent. The Agent may resign at any time by giving
---------------
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the resigning Agent gives notice of
its intention to resign. The Agent may be removed at any time with or without
cause by written notice received by the Agent from the Required Lenders, such
removal to be effective on the date specified by the Required Lenders. Upon any
such resignation or removal, the Required Lenders shall have the right to
appoint, on behalf of the Borrower and the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders within
thirty days after the resigning Agent's giving notice of its intention to
resign, then the resigning Agent may appoint, on behalf of the Borrower and the
Lenders, the Swing Line Lender and the LC Issuers, a successor Agent.
Notwithstanding the previous sentence, the Agent may at any time without the
consent of the Borrower or any Lender, Swing Line Lender or LC Issuer, appoint
any of its Affiliates which is a commercial bank as a successor Agent hereunder.
If the Agent has resigned or been removed and no successor Agent has been
appointed, the Lenders may perform all the duties of the Agent hereunder and the
Borrower shall make all payments in respect of the Obligations to the applicable
Lender, Swing Line Lender and LC Issuer and for all other purposes shall deal
directly with the Lenders, the Swing Line Lender and the LC Issuers. No
successor Agent shall be deemed to be appointed hereunder until such successor
Agent has accepted the appointment. Any such successor Agent shall be a
commercial bank having capital and retained earnings of at least $100,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning or removed Agent. Upon
the effectiveness of the resignation or removal of the Agent, the resigning or
removed Agent shall be discharged from its duties and obligations hereunder and
under the Loan Documents. After the effectiveness of the resignation or removal
of an Agent, the provisions of this Article XI shall continue in effect for the
----------
benefit of such Agent in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent hereunder and under the other Loan
Documents. In the event that there is a successor to the Agent by merger, or
the Agent assigns its duties and obligations to an Affiliate pursuant to this
Section 11.12, then the term "Corporate Base Rate" as used in
- -------------
<PAGE>
this Agreement shall mean the prime rate, base rate or other analogous rate
of the new Agent.
11.13. Agent's Fee. The Borrower agrees to pay to the Agent and the
-----------
Arranger the fees agreed to by the Borrower and the Agent pursuant to that
certain letter agreement dated November 14, 1997, or as otherwise agreed from
time to time.
11.14. Delegation to Affiliates. The Borrower, the Lenders, the Swing
------------------------
Line Lender and the LC Issuers agree that the Agent may delegate any of its
duties under this Agreement to any of its Affiliates. Any such Affiliate (and
such Affiliate's directors, officers, agents and employees) which performs
duties in connection with this Agreement shall be entitled to the same benefits
of the indemnification, waiver and other protective provisions to which the
Agent is entitled under Articles X and XI.
---------- --
11.15. Execution of Collateral Documents. The Lenders, the Swing Line
---------------------------------
Lender and the LC Issuers hereby empower and authorize the Agent to execute and
deliver to the Borrower on their behalf the Pledge Agreement(s) and all related
agreements, documents or instruments as shall be necessary or appropriate to
effect the purposes of the Pledge Agreement(s).
11.16. Collateral and Guaranty Releases. The Lenders, the Swing Line
--------------------------------
Lender and the LC Issuers hereby empower and authorize the Agent to execute and
deliver to the Borrower on their behalf any agreements, documents or instruments
as shall be necessary or appropriate to effect any releases of any entities'
liability with respect to the Subsidiary Guaranty or release of any collateral
pledged pursuant to any Pledge Agreement in connection with any transactions
which shall be permitted by the terms hereof or of any other Loan Document or
which shall otherwise have been approved in writing by the Required Lenders (or,
if required by the terms of Section 9.2, all of the Lenders), and the Agent
-----------
shall be obligated to execute and deliver to the Borrower such releases in
connection with any such permitted transactions.
ARTICLE XII: SETOFF; RATABLE PAYMENTS
12.1. Setoff. In addition to, and without limitation of, any rights of
------
the Lenders, the Swing Line Lender or the LC Issuers under applicable law, if
the Borrower becomes insolvent, however evidenced, or any Default occurs, any
and all deposits (including all account balances, whether provisional or final
and whether or not collected or available) and any other Indebtedness at any
time held or owing by any Lender, Swing Line Lender, LC Issuer or any Affiliate
of any Lender, Swing Line Lender or LC Issuer to or for the credit or account of
the Borrower may be offset and applied toward the payment of the Obligations
owing to such Lender, LC Issuer or Swing Line Lender whether or not the
Obligations, or any part hereof, shall then be due.
<PAGE>
12.2. Ratable Payments . If any Lender, whether by setoff or otherwise,
----------------
has payment made to it upon its Obligations (other than payments received
pursuant to Section 4.1, 4.2, 4.4 or 4.5) in a greater proportion than that
----------- --- --- ---
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans held by the other Lenders so that after such
purchase each Lender will hold its ratable proportion of Loans. If any Lender,
LC Issuer or the Swing Line Lender, whether in connection with setoff or amounts
which might be subject to setoff or otherwise, receives collateral or other
protection for its Obligations or such amounts which may be subject to setoff,
such Lender, LC Issuer or Swing Line Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders, LC Issuers and the Swing Line
Lender share in the benefits of such collateral ratably. In case any such
payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
ARTICLE XIII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
13.1. Successors and Assigns. The terms and provisions of the Loan
----------------------
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders, the Swing Line Lender, the LC Issuers, the Agent, the Arranger and the
Swing Line Lender and their respective successors and assigns, except that (i)
the Borrower shall not have the right to assign its rights or obligations under
the Loan Documents and (ii) any assignment by any Lender must be made in
compliance with Section 13.3. Notwithstanding clause (ii) of this Section, any
------------ -----------
Lender, Swing Line Lender or LC Issuer may at any time, without the consent of
the Borrower or the Agent, assign all or any portion of its rights under this
Agreement and any Note to a Federal Reserve Bank; provided, however, that no
such assignment to a Federal Reserve Bank shall release the transferor Lender,
LC Issuer or the Swing Line Lender from its obligations hereunder. The Agent
may treat the Person which made any Loan or which holds any Note as the owner
thereof for all purposes hereof unless and until such Person complies with
Section 13.3 in the case of an assignment thereof or, in the case of any other
- ------------
transfer, a written notice of the transfer is filed with the Agent. Any
assignee or transferee of the rights to any Loan or any Note agrees by
acceptance of such transfer or assignment to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Loan (whether or not a Note has been
issued in evidence thereof), shall be conclusive and binding on any subsequent
holder, transferee or assignee of the rights to such Loan.
<PAGE>
13.2. Participations.
--------------
13.2.1 Permitted Participants; Effect. Any Lender may, in the ordinary
------------------------------
course of its business and in accordance with applicable law, at any time
sell to one or more banks or other entities ("PARTICIPANTS") participating
interests in any Loan owing to such Lender, any Note held by such Lender,
any Commitment of such Lender, any LC Interest or any other interest of
such Lender under the Loan Documents. In the event of any such sale by a
Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the owner of its
Loans and the holder of any Note issued to it in evidence thereof for all
purposes under the Loan Documents, all amounts payable by the Borrower
under this Agreement shall be determined as if such Lender had not sold
such participating interests, and the Borrower and the Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
13.2.2. Voting Rights. Each Lender shall retain the sole right to
-------------
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees payable
with respect to any such Loan or Commitment, extends the Facility
Termination Date, postpones any date fixed for any regularly-scheduled
payment of principal of, or interest or fees on, any such Loan or
Commitment, releases any guarantor of any such Loan or releases all or
substantially all of the collateral, if any, securing any such Loan.
13.2.3. Benefit of Setoff. The Borrower agrees that each Participant
-----------------
shall be deemed to have the right of setoff provided in Section 12.1 in
------------
respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under the Loan Documents, provided
that each Lender shall retain the right of setoff provided in Section 12.1
------------
with respect to the amount of participating interests sold to each
Participant. The Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in Section 12.1,
------------
agrees to share with each Lender, any amount received pursuant to the
exercise of its right of setoff, such amounts to be shared in accordance
with Section 12.2 as if each Participant were a Lender.
------------
13.3. Assignments.
-----------
<PAGE>
13.3.1. Permitted Assignments. Any Lender may, in the ordinary course
---------------------
of its business and in accordance with applicable law, at any time assign
to one or more banks or other entities ("PURCHASERS") all or any part of
its rights and obligations under the Loan Documents. Such assignment shall
be substantially in the form of Exhibit E or in such other form as may be
---------
agreed to by the parties thereto. The consent of the Borrower and the Agent
shall be required prior to an assignment becoming effective with respect to
a Purchaser which is not a Lender or an Affiliate thereof; provided,
however, that if a Default has occurred and is continuing, the consent of
the Borrower shall not be required. Such consent shall not be unreasonably
withheld or delayed. Unless the Borrower and the Agent otherwise consents (
provided, however that if a Default has occurred and is continuing, the
consent of the Borrower shall not be required), each such assignment shall
be in an amount not less than the lesser of (i) $10,000,000 or (ii) the
remaining amount of the assigning Lender's Commitment (calculated as at the
date of such assignment).
13.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of a
----------------------
notice of assignment, substantially in the form attached as Exhibit 1 to
---------
Exhibit E (a "NOTICE OF ASSIGNMENT"), together with any consents required
---------
by Section 13.3.1, and (ii) payment of a $3,500 fee to the Agent for
--------------
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. The Notice of
Assignment shall contain a representation by the Purchaser to the effect
that none of the consideration used to make the purchase of the Commitment,
LC Interests and Loans under the applicable assignment agreement are "plan
assets" as defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be "plan assets" under
ERISA. On and after the effective date of such assignment, such Purchaser
shall for all purposes be a Lender party to this Agreement and any other
Loan Document executed by or on behalf of the Lenders and shall have all
the rights and obligations of a Lender under the Loan Documents, to the
same extent as if it were an original party hereto, and no further consent
or action by the Borrower, the Lenders, the Swing Line Lender or the LC
Issuers or the Agent shall be required to release the transferor Lender
with respect to the percentage of the Aggregate Commitment and Loans
assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 13.3.2, the transferor Lender, the Agent
--------------
and the Borrower shall, if the transferor Lender or the Purchaser desires
that its Loans be evidenced by Notes, make appropriate arrangements so that
new Notes or, as appropriate, replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting
their respective Commitments, as adjusted pursuant to such assignment.
13.4. Dissemination of Information. The Borrower authorizes each Lender
----------------------------
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any
prospective
<PAGE>
Transferee any and all information in such Lender's possession concerning the
creditworthiness of the Borrower and its Subsidiaries, including without
limitation any information contained in any Reports; provided that each
Transferee and prospective Transferee agrees to be bound by Section 10.11 of
-------------
this Agreement.
13.5. Tax Treatment. If any interest in any Loan Document is transferred
-------------
to any Transferee which is organized under the laws of any jurisdiction other
than the United States or any State thereof, the transferor Lender shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 4.5(iv).
---------------
ARTICLE XIV: NOTICES
14.1. Notices. Except as otherwise permitted by Section 2.15 with respect
------- ------------
to borrowing notices, all notices, requests and other communications to any
party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower and the Agent, at its address or facsimile number
set forth on the signature pages hereof, (y) in the case of any Lender, Swing
Line Lender or LC Issuer at its address or facsimile number set forth below its
signature hereto or (z) in the case of any party, at such other address or
facsimile number as such party may hereafter specify for the purpose by notice
to the Agent and the Borrower in accordance with the provisions of this Section
-------
14.1. Each such notice, request or other communication shall be effective (i)
- ----
if given by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received, (ii) if given
by mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, or (iii) if given by any other
means, when delivered (or, in the case of electronic transmission, received) at
the address specified in this Section; provided that notices to the Agent under
Article II shall not be effective until received.
- ----------
14.2. Change of Address. The Borrower, the Agent, the Swing Line Lender,
-----------------
any LC Issuer and any Lender may each change the address for service of notice
upon it by a notice in writing to the other parties hereto.
ARTICLE XV: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders
and each party has notified the Agent by facsimile transmission or telephone
that it has taken such action.
<PAGE>
ARTICLE XVI: CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER
OF
JURY TRIAL
16.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
-------------
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO APPLICABLE FEDERAL LAWS.
16.2. CONSENT TO JURISDICTION.
-----------------------
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF
---------------------- --------------
THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY
BY STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, BUT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF CHICAGO, ILLINOIS. EACH OF THE PARTIES HERETO WAIVES IN ALL
DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE
--------------
TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE AGENT, ANY LENDER,
-------------------
ANY LC ISSUER OR THE SWING LINE LENDER SHALL HAVE THE RIGHT TO PROCEED AGAINST
THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO
(1) OBTAIN PERSONAL JURISDICTION OVER THE BORROWER OR (2) REALIZE ON ANY
COLLATERAL FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF SUCH PERSON. THE BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE
ON ANY COLLATERAL FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF SUCH PERSON. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
--------------
16.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE LC ISSUERS, THE
--------------------
SWING LINE LENDER AND EACH LENDER HEREBY
<PAGE>
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders, the Swing Line Lender, the
LC Issuers and the Agent have executed this Agreement as of the date first above
written.
HOWMET CORPORATION
By:
---------------------------------
Title:
Notice Address: 475 Steamboat Road
Greenwich, CT 06836-1960
Attention: Treasurer
Telephone: (203) 625-8744
FAX: (203) 861-4746
With a copy to: Thiokol Corporation
2475 Washington Blvd.
Ogden, UT 84401-2398
Attention: Nicholas J. Iuanow
Telephone: (801) 629-2211
FAX: (801) 629-2222
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO.
Individually as a Lender, as Agent and as the LC Issuer
By:
------------------------
David G. Dixon
Title: Authorized Agent
---------------------
Notice Address: One First National Plaza
Chicago, Illinois 60670
Attention: Timothy J. King
Telephone: (312) 732-6456
FAX: (312) 732-3885
<PAGE>
MELLON BANK, N.A.
By:
-------------------------------
Lawrence C. Ivey
Title: Vice President
Notice Address: 400 South Hope St.
5th Floor
Los Angeles, CA 90071
Attention: Lawrence C. Ivey
Telephone: (213) 553-9543
FAX: (213) 629-0492
<PAGE>
WACHOVIA BANK, N.A.
By:
-------------------------------------
James McCreary
Title: Senior Vice President
Notice Address: 191 Peachtree Street NE
Atlanta, GA 30303
Attention: U.S. Corporate
Telephone: (404) 332-6210
FAX: (404) 332-6048
<PAGE>
BANK OF MONTREAL
By:
--------------------------------------
Joanna Bellocq
Title: Director
Notice Address: 115 South LaSalle Street
11th Floor
Chicago, IL 60603
Attention: Joanna Bellocq
Telephone: (212) 605-1647
FAX: (212) 605-1451
<PAGE>
ABN AMRO BANK, N.V.
By:___________________________________
Title: _______________________________
By:__________________________________
Title:_________________________________
Notice Address: 135 South LaSalle Street
Suite 2805
Chicago, IL 60603
Attention: Robert Decker
Telephone: (312) 904-2949
FAX: (312) 606-8428
<PAGE>
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION
By:
------------------------------------
Dianne P. Allen
Title: Vice President
Notice Address: 555 South Flower Street
11th Floor
Los Angeles, CA 90071
Attention: Dawn Esser
Telephone: (213) 228-2820
FAX: (213) 623-1959
<PAGE>
BANQUE NATIONALE DE PARIS
By:
----------------------------------
D. Guy Gibb
Title: Vice President
Notice Address: 180 Montgomery Street
3rd Floor
San Francisco, CA 94104
Attention: D. Guy Gibb
Telephone: (415) 956-0707
FAX: (415) 296-8954
<PAGE>
THE NORTHERN TRUST COMPANY
By:
-------------------------------------
John E. Burda
Title: Vice President
Notice Address: 50 South LaSalle Street
Chicago, IL 60675
Attention: John E. Burda
Telephone: (312) 444-4575
FAX: (312) 444-5055
<PAGE>
BANKERS TRUST COMPANY
By:
--------------------------------
Anthony LoGrippo
Title: Vice President
Notice Address: 130 Liberty Street
New York, NY 10006
Attention: Anthony LoGrippo
Telephone: (212) 250-4886
FAX: (212) 250-7218
<PAGE>
CREDIT SUISSE FIRST BOSTON
By:
------------------------------------
Mark A. Sampson
Title: Vice President
Notice Address: 11 Madison Avenue
20th Floor
New York, NY 10010-3629
Attention: Mark A. Sampson
Telephone: (212) 325-3641
FAX: (212) 325-8319
<PAGE>
FLEET NATIONAL BANK
By:
--------------------------------
Robert C. Rubino
Title: Senior Vice President
Notice Address: One Federal Street
MSN-MA-OF0308
Boston, MA 02211
Attention: Robert C. Rubino
Telephone: (617) 346-0574
FAX: (617) 346-0585
<PAGE>
PRICING SCHEDULE
<TABLE>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Applicable Level I Level II Level III Level IV Level V Level VI
Margin Status Status Status Status Status Status
Debt/ .5 >.5 and >1.0 and >1.5 and >2.0 and >2.5
EBITDA 1.0 1.5 2.0 2.5
- ----------------------------------------------------------------------------------------------------------
Facility Fee 10.0 11.0 12.5 15.0 17.5 20.0
- ----------------------------------------------------------------------------------------------------------
Eurodollar Rate 20.0 24.0 25.0 30.0 32.5 42.5
& Applicable
LC Fee
Percentage
- ----------------------------------------------------------------------------------------------------------
All-In Funded 30.0 35.0 37.5 45.0 50.0 62.5
==========================================================================================================
</TABLE>
For the purposes of this Schedule, the following terms have the following
meanings, subject to the final paragraph of this Schedule:
"FINANCIALS" means the annual or quarterly financial statements
of the Borrower delivered pursuant to Section 7.1(i) and (ii) of the
-------------- ----
Agreement.
"LEVEL I STATUS" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials,
the Leverage Ratio is less than or equal to .5 to 1.00.
"LEVEL II STATUS" exists at any date if, as of the last day of
the fiscal quarter of the Borrower referred to in the most recent
Financials, (i) the Borrower has not qualified for Level I Status and (ii)
the Leverage Ratio is less than or equal to 1.0 to 1.00.
"LEVEL III STATUS" exists at any date if, as of the last day of
the fiscal quarter of the Borrower referred to in the most recent
Financials, (i) the Borrower has not qualified for Level I Status or Level
II Status and (ii) the Leverage Ratio is less than or equal to 1.5 to 1.00.
"LEVEL IV STATUS" exists at any date if, as of the last day of
the fiscal quarter of the Borrower referred to in the most recent
Financials, (i) the Borrower has not qualified for Level I Status, Level II
Status or Level III Status and (ii) the Leverage Ratio is less than or
equal to 2.0 to 1.00.
<PAGE>
"LEVEL V STATUS" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials,
(i) the Borrower has not qualified for Level I Status, Level II Status,
Level III Status or Level IV Status and (ii) the Leverage Ratio is less
than or equal to 2.5 to 1.00.
"LEVEL VI STATUS" exists at any date if the Borrower has not
qualified for Level I Status, Level II Status, Level III Status, Level IV
Status or Level V Status.
For the period from the Closing Date until receipt of the Borrower's
audited financial statements for the period ending December 31, 1997, the
Applicable Margin and Applicable LC Fee Percentage and applicable Facility Fee
will be at Level III Status. Thereafter, the Applicable Margin and Applicable
LC Fee Percentage and applicable Facility Fee shall be determined in accordance
with the foregoing table based on the Borrower's Status as reflected in the then
most recent Financials. Adjustments, if any, to the Applicable Margin or
Applicable LC Fee Percentage and applicable Facility Fee shall be effective five
Business Days after the Agent has received the applicable Financials. If the
Borrower fails to deliver the Financials to the Agent at the time required
pursuant to the Credit Agreement, then the Applicable Margin and Applicable LC
Fee Percentage and applicable Facility Fee shall be the highest Applicable
Margin and Applicable LC Fee Percentage and applicable Facility Fee set forth in
the foregoing table until five days after such Financials are so delivered.
<PAGE>
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Lender Commitment
- ----------------------------------------------------------------------------------------------
<S> <C>
THE FIRST NATIONAL BANK OF CHICAGO $ 34,000,000
- ----------------------------------------------------------------------------------------------
ABN AMRO BANK, N.V. $ 33,000,000
- ----------------------------------------------------------------------------------------------
BANKERS TRUST COMPANY $ 33,000,000
- ----------------------------------------------------------------------------------------------
BANK OF AMERICA NATIONAL TRUST $ 27,000,000
& SAVINGS ASSOCIATION
- ----------------------------------------------------------------------------------------------
BANK OF MONTREAL $ 27,000,000
- ----------------------------------------------------------------------------------------------
CREDIT SUISSE FIRST BOSTON $ 27,000,000
- ----------------------------------------------------------------------------------------------
FLEET NATIONAL BANK $ 27,000,000
- ----------------------------------------------------------------------------------------------
BANQUE NATIONALE DE PARIS $ 23,000,000
- ----------------------------------------------------------------------------------------------
MELLON BANK, N.A. $ 23,000,000
- ----------------------------------------------------------------------------------------------
THE NORTHERN TRUST COMPANY $ 23,000,000
- ----------------------------------------------------------------------------------------------
WACHOVIA BANK, N.A. $ 23,000,000
- ----------------------------------------------------------------------------------------------
TOTAL $300,000,000
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
FORM OF NOTE
NOTE
[_____________________________], 1997
HOWMET CORPORATION, a Delaware corporation (the "Borrower"), promises
to pay to the order of [____________________________________] (the "Lender") the
aggregate unpaid principal amount of all Syndicated Loans made by the Lender to
the Borrower pursuant to Article II of the Credit Agreement hereinafter referred
----------
to (as the same may be amended or modified, the "Agreement"; capitalized terms
used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement), in immediately available funds on the
dates and at the offices of The First National Bank of Chicago, as Agent,
specified in the Agreement, together with interest on the unpaid principal
amount hereof at the rates and on the dates determined in accordance with the
Agreement. The Borrower shall pay the principal of and accrued and unpaid
interest on the Syndicated Loans in full on the Facility Termination Date and as
otherwise set forth in the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or otherwise record in accordance with its usual practice, the
date and amount of each Syndicated Loan and the date and amount of each
principal payment hereunder.
This Note is one of the Syndicated Notes issued pursuant to, and is
entitled to the benefits of, the Credit Agreement dated as of December 16,
1997, among the Borrower, The First National Bank of Chicago, as Agent, and the
lenders parties thereto, including the Lender, to which Agreement, as it may be
amended, modified, restated or supplemented from time to time, reference is
hereby made for a statement of the terms and conditions governing this Note,
including the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. The Agreement, among other things, provides for the
making of "Syndicated Loans" by the Lender to the Borrower from time to time in
an aggregate amount not to exceed at any time outstanding the Lender's
Commitment.
The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
<PAGE>
This Note shall be governed by, and construed in accordance with, the
internal laws of the State of Illinois but giving effect to applicable federal
laws.
HOWMET CORPORATION
By:
Title:
<PAGE>
Schedule of Syndicated Loans and Payments of Principal
to
Syndicated Note of Howmet Corporation
Principal Maturity
Amount of of Interest Principal Unpaid
Date Loan Period Amount Paid Balance
- -------------------------------------------------------------
<PAGE>
EXHIBIT B
FORM OF PLEDGE AGREEMENT
(Attached)
<PAGE>
EXECUTION COPY
EQUITABLE SHARE CHARGE
BETWEEN
HOWMET CORPORATION
AND
THE FIRST NATIONAL BANK OF CHICAGO
SIDLEY & AUSTIN
Royal Exchange
London EC3V 3LE
Ref: JM/HW/57072.7
Tel: 0171 360 3600
Fax: 0171 626 7937
<PAGE>
THIS DEED OF CHARGE is made the 30th day of January 1998 made by HOWMET
CORPORATION (the "Chargor"), to THE FIRST NATIONAL BANK OF CHICAGO, as agent
(the "Chargee"), for the benefit of the Secured Creditors (as defined below).
Except as otherwise defined herein, capitalized terms used herein and defined in
the Credit Agreement (as defined below) shall be used herein as therein defined.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Chargor, various lenders from time to time party thereto (the
"Lenders") and The First National Bank of Chicago, as agent for the Lenders
(together with any successor agent, the "Agent"), have entered into a Credit
Agreement, dated as of December 16, 1997, providing for the making of Loans and
the issuance of, and participation in, Facility LCs as contemplated therein (as
used herein, the term "Credit Agreement" means the Credit Agreement described
above in this paragraph, as the same may be amended, modified, extended,
renewed, replaced, restated or supplemented from time to time, and including any
agreement extending the maturity of, or restructuring the Indebtedness under
such agreement or any successor agreements) (the Lenders, the Agent and the
Chargee are herein called the "Bank Creditors");
WHEREAS, the Chargor may at any time and from time to time enter into one
or more Financial Contracts with one or more Lenders or any affiliate thereof
(each such Lender or affiliate, even if the respective Lender subsequently
ceases to be a Lender under the Credit Agreement for any reason, together with
such Lender's or affiliate's successors and assigns, if any, collectively, the
"Other Creditors," and together with the Bank Creditors, the "Secured
Creditors");
WHEREAS, it is a condition to the making of Loans and the issuance of
Facility LCs under the Credit Agreement that the Chargor shall have executed and
delivered this Deed; and
WHEREAS, the Chargor will derive direct or indirect benefits from the
incurrence of Loans and the issuance of Facility LCs under the Credit Agreement
and the entering into of Financial Contracts and, accordingly, the Chargor
desires to enter into this Deed in order to satisfy the conditions described in
the preceding paragraph,
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to the Chargor, the receipt and sufficiency of which are hereby
acknowledged, the Chargor hereby makes the following representations and
warranties to the Chargee for the benefit of the Secured Creditors and hereby
covenants and agrees with the Chargee for the benefit of the Secured Creditors
as follows:
<PAGE>
1. SECURITY FOR OBLIGATIONS. This Deed is made by the
Chargor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) of the Chargor to the Bank
Creditors, whether now existing or hereafter incurred under, arising out
of, or in connection with the Credit Agreement and the other Loan Documents
to which the Chargor is a party (including, without limitation, all such
obligations and indebtedness of the Chargor under the Credit Agreement) and
the due performance and compliance by the Chargor with all of the terms,
conditions and agreements contained in the Credit Agreement and such other
Loan Documents (all such obligations and liabilities under this clause (i),
except to the extent consisting of obligations or indebtedness with respect
to Financial Contracts, being herein collectively called the "Loan Document
Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) owing by the Chargor to
the Other Creditors under, or with respect to, any Financial Contracts,
whether such Financial Contract is now in existence or hereafter arising,
and the due performance and compliance by the Chargor with all of the
terms, conditions and agreements contained therein (all such obligations
and liabilities described in this clause (ii) being herein collectively
called the "Other Obligations");
(iii) any and all sums advanced by the Chargee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral (to the extent provided for in the Loan Documents);
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of the Chargor referred to
in clauses (i), (ii) and (iii) above, after any Default (as such term is
defined in the Credit Agreement) shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale, selling or
otherwise disposing of or realising on the Collateral, or of any exercise
by the Chargee of its rights hereunder, together with reasonable legal fees
and court costs; and
(v) all amounts paid by any Secured Creditor as to which such Secured
Creditor has the right to reimbursement under Section 11 of this Deed.
<PAGE>
All such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Deed or extended from time to time after the date of this
Deed.
2. DEFINITION OF SECURITIES, ETC. As used herein the term "Securities"
shall mean, all of the issued and outstanding share capital at any time
owned by the Chargor of any Material Foreign Subsidiary, provided that, the
Chargor shall not be required to charge hereunder, and nothing herein shall
be deemed to constitute a charge hereunder of, more than 65% of the total
combined voting power of all classes of issued share capital of any
Material Foreign Subsidiary. The Chargor represents and warrants that on
the date hereof (i) each Material Foreign Subsidiary of the Chargor, and
the direct ownership thereof, is listed in Schedule 1 hereto; (ii) the
Securities held by the Chargor consists of the number and type of shares of
the capital of the corporations as described in Schedule 1 hereto; (iii)
such Securities constitutes that percentage of the issued and outstanding
share capital of the corporation as is set forth in Schedule 1 hereto; and
(iv) the share certificates represent 65% of the issued and outstanding
share capital of each Material Foreign Subsidiary listed in Schedule 1.
3. CHARGE
(a) Charge. To secure the Obligations, the Chargor with full title
------
guarantee hereby charges in favour of the Chargee all of the Chargor's
interest in and to the Collateral (as defined below) with the intent that
such charge will take effect as a first equitable charge and shall rank
ahead of any other present or future security on the Collateral (as defined
below).
(b) Transfer of Shares. Forthwith upon execution of this Deed the Chargor
------------------
shall deliver to the Chargee all stock and share certificates and other
documents of title (including a certified true and correct copy of the
register of members of each Material Foreign Subsidiary listed in Schedule
1) relating to the Securities together with stock transfer forms executed
in blank and left undated (along with a Special Resolution of each Material
Foreign Subsidiary listed in Schedule 1, containing, inter alia, amendments
to its Articles of Association in the form specified in Schedule 2 hereto)
on the basis that the Chargee (or its nominee) shall be entitled to hold
such documents of title and stock transfer forms until the Obligations,
other than contingent indemnity obligations with respect to which no claim
has been made, has been irrevocably and unconditionally discharged in full
and shall be entitled, at any time if a Default shall have occurred and be
continuing, to complete (pursuant to its powers in Section 12(b) below) the
stock transfer forms on behalf of the Chargee in favour of itself or such
other person as it shall select.
<PAGE>
(c) Subsequently Acquired Securities. If the Chargor shall acquire (by
--------------------------------
purchase, stock dividend or otherwise) any additional Securities at any
time or from time to time after the date hereof, the Chargor will promptly
thereafter charge and deliver to the Chargee all stock and share
certificates and other documents of title relating to the Securities
together with stock transfer forms executed in blank and left undated and
will promptly thereafter deliver to the Chargee a certificate executed by a
principal executive officer of the Chargor describing such Securities and
certifying that the same has been duly charged to the Chargee hereunder in
the same manner and on the same basis as it has done so in relation to
Securities under Section 3(b) hereof; provided, however, the Chargor shall
not be required at any time to charge hereunder Securities which constitute
more than 65% of the total combined voting power of all issued share
capital of any Material Foreign Subsidiary entitled to vote.
(d) Uncertificated Securities. Notwithstanding anything to the contrary
-------------------------
contained in Sections 3(a), 3(b) and 3(c) hereof, if any Securities
(whether now owned or hereafter acquired) are uncertificated securities,
the Chargor shall promptly notify the Chargee thereof, and shall promptly
take all actions required to perfect the security interest of the Chargee
under applicable law. The Chargor further agrees to take such actions as
the Chargee deems reasonably necessary or desirable to effect the foregoing
and to permit the Chargee to exercise any of its rights and remedies
hereunder.
(e) Definitions of Charged Securities and Collateral. 65% of all
------------------------------------------------
Securities at any time charged or required to be charged hereunder and
represented by the share certificate number/s set out in Schedule 1 are
hereinafter called the "Charged Securities;" and the Charged Securities,
together with:
(i) all dividends, distributions and other income paid or payable on or
derived from the Charged Securities;
(ii) all shares or other property derived from the Charged Securities
(whether by way of bonus, option or otherwise); and
(iii) all accretions, rights, benefits and advantages of all kinds
accruing, offered or otherwise derived from the Charged Securities
(whether by way of conversion, redemption, bonus, preference,
option, offer or otherwise),
are hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS. ETC. The Chargee shall have the
right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Charged Securities, which may be held (in the
discretion of the Chargee) in the name of the Chargor, endorsed or assigned
in
<PAGE>
blank or in favour of the Chargee or any nominee or nominees of the
Chargee or a sub-agent appointed by the Chargee.
5. VOTING, ETC., WHILE NO DEFAULT. (a) Unless and until there shall have
occurred and be continuing a Default and the Chargee shall have given the
Chargor written notice that the Chargee has elected to exercise such
rights, the Chargor shall be entitled to exercise any and all voting and
other rights and powers attaching to the Charged Securities owned by it,
and to give consents, waivers or ratifications in respect thereof,
provided, that no vote shall be cast or any consent, waiver or ratification
--------
given or any action taken which would violate or be inconsistent with any
of the terms of this Deed, the Credit Agreement, any other Loan Document or
any Financial Contract (collectively, the "Secured Debt Agreements") and in
particular, without limiting the foregoing, the Chargor shall not exercise
any voting rights or powers if such exercise would result in the Charged
Securities representing less than 65 per cent in nominal value of the
entire issued share capital of each Material Foreign Subsidiary. All such
rights of the Chargor to vote and to give consents, waivers and
ratifications shall cease in case a Default has occurred and is continuing
and the Chargee shall have given the Chargor written notice that the
Chargee has elected to exercise such rights, and Section 7 hereof shall
become applicable.
(b) The rights and powers attaching to the Charged Securities shall, for
the purposes of Section 5(a) above, include, without limitation, all powers
given to trustees by Section 10(3) and 10(4) of the Trustee Act 1925 (in
respect of securities subject to a trust) and shall be exercisable without
any need for any further consent or authority of the Chargee.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have
occurred and be continuing a Default, all cash dividends and distributions
payable in respect of the Charged Securities shall be paid to the Chargor. The
Chargee shall be entitled to receive directly, and to retain as part of the
Collateral:
(i) all other or additional shares or other securities (other than
cash) paid or distributed by way of dividend or otherwise, as the case may
be, in respect of the Charged Securities;
(ii) all other or additional shares or other securities paid or
distributed in respect of the Charged Securities by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(iii) all other or additional shares or other securities or property
which may be paid in respect of the Collateral by reason of any
consolidation, merger, exchange of shares, conveyance of assets,
liquidation or similar corporate reorganisation.
<PAGE>
Nothing contained in this Section 6 shall limit or restrict in any way the
Chargee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Deed. All dividends, distributions or other payments
which are received by the Chargor contrary to the provisions of this Section 6
and Section 7 hereof shall be received in trust for the benefit of the Chargee,
shall be segregated from other property or funds of the Chargor and shall be
promptly paid over to the Chargee as Collateral in the same form as so received
(with any necessary endorsement).
7. ENFORCEMENT OF SECURITY.
(a) The restriction on the consolidation of mortgages imposed by Section 93 of
the Law of Property Act 1925 shall not apply to this Deed.
(b) Section 103 of the Law of Property Act 1925 shall not apply to the charges
created by this Deed which shall immediately become enforceable and the
power of sale and other powers conferred by Section 101 of such Act (as
varied or extended by this Deed) shall be immediately exercisable at any
time after notice demanding payment of any sum in respect of the
Obligations shall have been given by the Chargee to the Chargor following
the occurrence and during the continuance of Default.
(c) The powers conferred on mortgagees or receivers by sections 85 to 109 of
the Law of Property Act 1925 and sections 28 to 49 of the Insolvency Act
1986 shall apply to the security constructed by this Deed except insofar as
they are expressly or impliedly excluded and where there is ambiguity or
conflict between the powers contained in such Acts and those contained in
this Deed, those contained in this Deed shall prevail.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of
the Chargee provided for in this Deed or any other Secured Debt Agreement,
or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such
right, power or remedy.
The exercise or beginning of the exercise by the Chargee or any other Secured
Creditor of any one or more of the rights, powers or remedies provided for in
this Deed or any other Secured Debt Agreement or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by the Chargee of all such other rights, powers or remedies,
and no failure or delay on the part of the Chargee or any other Secured Creditor
to exercise any such right, power or remedy shall operate as a waiver thereof.
No notice to or demand on the Chargor in any case shall entitle it to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Chargee to any other or further action in any
circumstances without notice or demand.
<PAGE>
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Chargee upon
any sale or other disposition of the Collateral, together with all other
moneys received by the Chargor hereunder, shall be applied to the payment
-------
of the Obligations as follows:
(A) first, to pay amounts referred to in Section 1(iii) and (iv)
hereof;
(B) second, to pay interest on and then principal of any portion of
the Loans which the Agent may have advanced on behalf of any Lender
for which the Agent has not then been reimbursed by such Lender or the
Chargor;
(C) third, to pay interest on and then principal of any protective
advance made by the Agent for which the Agent has not then been paid by the
Chargor or reimbursed by the Lenders;
(D) fourth, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(E) fifth, to pay Obligations in respect of any fees, expenses,
reimbursements or indemnities then due to the Lenders and the Issuing
Banks;
(F) sixth, to pay interest due in respect of Swing Line Loans;
(G) seventh, to pay interest due in respect of Loans (other than Swing
Line Loans) and LC Obligations;
(H) eighth, to the ratable payment or prepayment of principal
outstanding on Swing Line Loans;
(I) ninth, to the ratable payment or prepayment of principal
outstanding on Loans (other than Swing Line Loans) and Reimbursement
Obligations in such order as the Agent may determine in its sole
discretion;
(J) tenth, to provide required cash collateral, if required pursuant
to;
(K) eleventh, to the ratable payment of all other Obligations with
respect to the Credit Agreement and the Loan Documents; and
(L) twelfth, to the ratable payment of all Obligations with respect
to Financial Contracts.
(b) It is understood and agreed that the Chargor shall remain liable to the
extent of any deficiency between the amount of the proceeds of the Collateral
hereunder and the aggregate amount of the Obligations.
<PAGE>
10. PURCHASERS OF COLLATERAL. (a) No purchaser from, or other person
dealing with, the Chargee shall be concerned to enquire whether any of the
powers which it has exercised or purported to exercise has arisen or become
exercisable, or whether any of the Obligations remains outstanding, or
whether any event has happened to authorise the Chargee to act or as to the
propriety or validity of the exercise or purported exercise of any such
power; and the title of such a purchaser and the position of such a person
shall not be impeachable by reference to any of those matters.
(b) Upon any sale of the Collateral by the Chargee hereunder the receipt of the
Chargee or the officer making the sale shall be a sufficient discharge to
the purchaser or purchasers of the Collateral so sold, and such purchaser
or purchasers shall not be obligated to see to the application of any part
of the purchase money paid over to the Chargee or such officer or be
answerable in any way for the misapplication or nonapplication thereof.
(c) In Sections 10(a) and 10(b), "purchaser" includes any person acquiring, for
money or money's worth, any Encumbrance (as defined below) over, or any
other interest or right whatsoever in relation to, any of the Charged
Property.
11. INDEMNITY. The Chargor agrees (i) to indemnify and hold harmless the
Chargee in such capacity and each other Secured Creditor and their
respective successors, assigns, employees, agents and servants
(individually an "Indemnitee," and collectively the "Indemnitees") from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature and (ii)
to reimburse each Indemnitee for all costs and expenses, including
reasonable legal fees, in each case growing out of or resulting from this
Deed or the exercise by any Indemnitee of any right or remedy granted to it
hereunder or under any other Secured Debt Agreement (but excluding any
claims, demands, losses, judgments and liabilities or expenses to the
extent incurred by reason of negligence or wilful misconduct of such
Indemnitee). In no event shall the Chargee be liable, in the absence of
negligence or wilful misconduct on its part, for any matter or thing in
connection with this Deed other than to account for monies actually
received by it in accordance with the terms hereof. If and to the extent
that the obligations of the Chargor under this Section 11 are unenforceable
for any reason, the Chargor hereby agrees to make the maximum contribution
to the payment and satisfaction of such obligations which is permissible
under applicable law.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) The Chargor undertakes,
from time to time and at all times, whether before or after the security
constituted hereunder shall have become enforceable, to execute and do at
its own expense all such deeds, assurances, agreements, instruments, acts
and things as the Chargee may reasonably require for perfecting and
protecting the security hereby
<PAGE>
constituted or facilitating the realisation thereof or for enforcing the
same or exercising any of the Chargee's rights hereunder and in particular,
but without limitation, the Chargor shall execute all transfers,
conveyances, assignments and assurances whatsoever and give all notices,
orders, instructions and directions whatsoever which the Chargee may deem
reasonably necessary or advisable in the exercise of its rights hereunder.
(b) The Chargor hereby irrevocably and by way of security appoints the
Chargee and any person nominated for the purpose by the Chargee in
writing under hand by an officer of the Chargee severally as its Attorney
and in its name and on its behalf and as its act and deed to execute as a
deed and deliver (using the company seal where appropriate) and otherwise
perfect and do any deed, assurance, agreement, instrument, act or thing
which may reasonably be required or deemed proper in the exercise of any
rights or powers hereunder or otherwise for any of the purposes of this
Deed and the Chargor hereby covenants with the Chargee to ratify and
confirm all reasonable acts or things made, done or executed by such
attorney as aforesaid.
13. THE CHARGEE AS AGENT. The Chargee will hold in accordance with this
Deed all items of the Collateral at any time received under this Deed on
the terms set forth herein and in Article XI of the Credit Agreement.
14. TRANSFER BY THE CHARGOR. The Chargor shall not (except as may be
permitted in accordance with the terms of the Credit Agreement):
(i) sell, create or permit to subsist any mortgage, charge, assignment,
pledge, lien, right of set-off, encumbrance or other security interest
(whether fixed or floating) whatsoever ("Encumbrance") on or over all
or any part of the Collateral or the right to receive or be paid the
same or agree to do so;
(ii) sell, transfer or otherwise dispose of the whole or any part of the
Collateral or the right to receive or be paid the same or agree to do
so; or
(iii) dispose of the equity of redemption in respect of any of the
Collateral.
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CHARGOR. The Chargor
represents, warrants and covenants that (i) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Charged
Securities charged by it hereunder, subject to no Encumbrance (except the
Encumbrance created by this Deed and other Encumbrances permitted by the
Credit Agreement); (ii) it has full corporate power, authority and legal
right to charge all the Collateral charged by it pursuant to this Deed;
(iii) this Deed has been duly authorised, executed and delivered by the
Chargor and constitutes a legal, valid and binding obligation of the
Chargor enforceable in accordance with its terms; (iv) no consent of any
other party (including, without limitation, any
<PAGE>
shareholder or creditor of the Chargor or any of its Subsidiaries) and
no consent, licence, permit, approval or authorisation of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required to be obtained by the Chargor in
connection with the execution, delivery or performance of this Deed, the
validity or enforceability of this Deed, the perfection or enforceability
of the Chargee's security interest in the Collateral or the exercise by the
Chargee of any of its rights or remedies provided herein; (v) the
execution, delivery and performance of this Deed by the Chargor will not
violate any provision of any applicable law or regulation or of any order,
judgment, writ, award or decree of any court, arbitrator or governmental
authority, domestic or foreign, applicable to the Chargor, or of the
certificate of incorporation or by-laws (or the equivalent organisational
documents) of the Chargor or of any securities issued by the Chargor or any
of its Subsidiaries, or of any mortgage, indenture, lease, deed of trust,
loan agreement, credit agreement or other material agreement, contract, or
instrument to which the Chargor or any of its Subsidiaries is a party or
which purports to be binding upon the Chargor or any of its Subsidiaries or
upon any of their respective assets and will not result in the creation or
imposition of (or the obligation to create or impose) any lien or
encumbrance on any of the assets of the Chargor or any of its Subsidiaries
except as contemplated by this Deed; (vi) all the shares which are part of
the Charged Securities have been duly and validly issued, are fully paid
and non-assessable and are subject to no options to purchase or similar
rights; and (vii) the charge, assignment and delivery to the Chargee of the
Securities (other than uncertificated securities) pursuant to this Deed
creates a valid and perfected first priority equitable charge over the
Collateral, subject to no other Encumbrance or to any Deed purporting to
grant to any third party an Encumbrance on the property or assets of the
Chargor which would include the Charged Securities. The Chargor covenants
and agrees that it will defend the Chargee's right, title and security
interest in and to the Collateral against the claims and demands of all
persons whomsoever in accordance with the Loan Documents; and the Chargor
covenants and agrees that it will have like title to and right to charge
any other property and any time hereafter charged to the Chargee as
Collateral hereunder and will likewise defend the right thereto and
security interest therein of the Chargee and Secured Creditors.
16. CHARGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the Chargor
under this Deed shall be in addition to and independent of every other
security which the Agent and the Lenders may at any time hold in respect of
any of the Chargor's obligations under the Loan Documents and shall be
absolute and unconditional and shall remain in full force and effect
without regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (i) any renewal, extension,
amendment or modification of or addition or supplement to or deletion from
any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver,
consent, extension, indulgence or other action or inaction under or in
respect of
<PAGE>
any such agreement or instrument including, without limitation, this Deed;
(iii) any furnishing of any additional security to the Chargee or its
assignee or any acceptance thereof or any release of any security by the
Chargee or its assignee; (iv) any limitation on any party's liability or
obligations under any such instrument or agreement or any invalidity or
unenforceability, in whole or in part, of any such instrument or agreement
or any term thereof; or (v) any winding-up, bankruptcy, insolvency,
administration, reorganisation, composition, adjustment, dissolution,
liquidation or other like proceeding relating to the Chargor or any
Subsidiary of the Chargor, (vi) any failure to realise or fully to realise
the value of, or any release, discharge, exchange or substitution of, any
such security or taken in respect of the Chargor's obligations under the
Loan Documents; or (vii) any other act, event or omission which, but for
this section, might operate to discharge, impair or otherwise affect any of
the obligations of the Chargor herein contained or any of the rights,
powers or remedies conferred upon the Agent by the Loan Documents or by law
or any action taken with respect to this Deed by any trustee or receiver or
by any court, in any such proceeding, whether or not the Chargor shall have
notice or knowledge of any of the foregoing.
17. RELEASE. (a) After the Termination Date (as defined below), the
Chargee, at the request and expense of the Chargor, will execute and
deliver to the Chargor such documents (or procure that its nominees execute
such documents) as the Chargor may reasonably request and which may be
required to release to the Chargor without recourse and without any
representation or warranty all the right, title and interest of the Chargee
in such of the Collateral as has not theretofore been sold or otherwise
applied or released pursuant to this Deed, together with any moneys at the
time held by the Chargee or any of its sub-agents hereunder. As used in
this Deed, "Termination Date" shall mean the date upon which the
Commitments and all Financial Contracts and the Loan Documents have been
terminated, no Note under the Credit Agreement is outstanding (and all
Loans and other Obligations have been unconditionally and irrevocably
discharged in full), all Facility LCs have been terminated, all Obligations
have been unconditionally and irrevocably discharged in full, other than
contingent indemnity obligations with respect to which no claim has been
made, and neither the Lenders nor the Chargee has any further contingent
obligations to lend or grant or create any commitment or liabilities under
or in connection with the Loan Documents or any instruments or documents or
issued pursuant thereto.
(b) In the event that any part of the Collateral is sold in connection
with a sale permitted by the Credit Agreement or otherwise released
pursuant to the Credit Agreement and the proceeds of such sale or sales or
from such release are applied in accordance with the provisions of the
Credit Agreement, to the extent required to be so applied, the Chargee, at
the request and expense of the Chargor, will duly assign, transfer and
deliver to the Chargor (without recourse and without any representation or
warranty) such of the Collateral (and releases therefor) as is then
<PAGE>
being (or has been) so sold or released and has not theretofore been
released pursuant to this Deed
(b) In the event that any part of the Collateral is sold in connection
with a sale permitted by the Credit Agreement or otherwise released
pursuant to the Credit Agreement and the proceeds of such sale or sales or
from such release are applied in accordance with the provisions of the
Credit Agreement, to the extent required to be so applied, the Chargee, at
the request and expense of the Chargor, will duly assign, transfer and
deliver to the Chargor (without recourse and without any representation or
warranty) such of the Collateral (and releases therefor) as is then being
(or has been) so sold or released and has not theretofore been released
pursuant to this Deed.
(c) At any time that the Chargor desires that the Chargee assign, transfer
and deliver Collateral (and releases therefor) as provided in Section
17(a) or (b) hereof, it shall deliver to the Chargee a certificate signed
by a principal executive officer of the Chargor stating that the release of
the respective Collateral is permitted pursuant to such Section 17(a) or
(b).
(d) The Chargee shall have no liability whatsoever to any other Secured
Creditor as the result of any release of Collateral by it in accordance
with this Section 17.
18. NOTICES, ETC. All notices, requests and other communications to either
party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party
at the notice address for it as specified in the Credit Agreement. Each
such notice, request or other communication shall be effective (i) if given
by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received, (ii) if
given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid, or (iii) if given
by any other means, when delivered (or, in the case of electronic
transmission, received) at the address specified in this Section; provided
that notices to the Chargee shall not be effective until received.
19. WAIVER; AMENDMENT. (a) None of the terms and conditions of this Deed
may be changed, waived, modified or varied in any manner whatsoever unless
in writing duly signed by the Chargor and the Chargee.
(b) No delay or omission of the Chargee in exercising any right, power or
privilege hereunder shall impair such right, power or privilege or be
construed as a waiver of such right, power or privilege nor shall any
single or partial exercise of any such right, power or privilege preclude
any further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies of the Chargee herein provided are
cumulative and not exclusive of any
<PAGE>
rights or remedies provided by law. A waiver given or consent granted by
the Chargee under this Deed will be effective only if given in writing and
then only in the instance and for the purpose for which it is given.
20. CURRENCY (a) All moneys received or held by the Chargee under this
Deed shall be converted into such other currency in which the obligations
and liabilities comprised in the Obligations were denominated at the rate
of exchange then prevailing for purchasing that other currency with the
existing currency in accordance with the Chargee's customary practice for
the exchange of currencies.
(b) No payment to the Chargee (whether under any judgment or court order
or otherwise) shall discharge the obligation or liability of the Chargor in
respect of which it was made unless and until the Chargee shall have
received payment in full in the currency in which the obligation or
liability was incurred (the "Original Currency"). In the event of any
payment made in a currency other than the Original Currency ("Other
Currency"), such obligation or liability shall be discharged only to the
extent that on the Business Day following receipt by the Chargee of such
payment in such Other Currency the Chargee may in accordance with normal
banking procedures purchase the Original Currency with such Other Currency:
if the amount of the Original Currency so purchased is less than the sum
originally due to the Chargee in the Original Currency, the Chargee shall
have a further separate course of action against the Chargor and shall be
entitled to enforce the security constituted by this Deed to recover the
amount of the shortfall.
21. CERTIFICATES. For all purposes, including any legal proceedings, a
certificate signed by one of the Chargee's officers as to the amount of the
Secured Obligations (or any part thereof) shall, in the absence of manifest
error, be prima facie evidence thereof against the Chargor.
22. DEED. The parties hereto intend this agreement to take effect as a
deed.
23. MISCELLANEOUS. This Deed shall be binding upon the parties hereto and
their respective successors and assigns and shall inure to the benefit of
and be enforceable by each of the parties hereto and its successors and
assigns. The headings in this Deed are for purposes of reference only and
shall not limit or define the meaning hereof. This Deed may be executed in
any number of counterparts, each of which shall be an original, but all of
which shall constitute one instrument. In the event that any provision of
this Deed shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Deed which
shall remain binding on all parties hereto.
24. RECOURSE. This Deed is made with full recourse to the Chargor and
pursuant to and upon all the representations, warranties, covenants and
agreements on the part of the Chargor contained herein and in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
<PAGE>
25. GOVERNING LAW. The Deed shall be governed by and construed in
accordance with English law.
26. JURISDICTION. (a) Exclusive Jurisdiction. Except as otherwise provided
in subsection (b) each of the parties hereto agrees that all disputes among
them arising out of, connected with, related to or incidental to the
relationship established between them in connection with this Deed or any
other Loan Documents shall be resolved exclusively by the Courts of
England. Each of the parties hereto waives in all disputes brought pursuant
to this subsection (a) any objection that it may have to the location of
the court considering the dispute.
(b) Other Jurisdictions. The Chargor agrees that the Chargee shall
--------------------
have the right to proceed against the Chargor or its property in a court in
any location to enable the Chargee to (i) obtain personal jurisdiction over
the Chargor or (ii) realise on any Collateral for the Obligations or to
enforce a judgment or other court order entered in favour of the Chargee.
The Chargor waives any objection that it may have to the location of the
court in which the Chargee has commenced a proceeding brought in compliance
with this subsection (b).
27. PROCESS AGENT. Each of the Chargor and the Chargee irrevocably agrees
that any writ, notice, or other document issued in connection with or for
the purpose of any proceeding, suit or action arising out of or in
connection with this Deed in the English Courts shall be duly served upon
it if delivered or sent by registered post to the following person, namely:
In respect of the Chargor:
Name: Mr Clive E. Cotton
Position: Secretary, Howmet Limited
Address: Kestrel Way, Exeter, Devon EX2 7LL England
In respect of the Chargee:
Name:
Position:
Address:
<PAGE>
IN WITNESS WHEREOF, the Chargor and the Chargee have caused this Deed to
be executed as of the date first above written.
EXECUTED as a DEED by HOWMET CORPORATION )
acting by its duly authorised officer )
...........................
Vice President
<PAGE>
EXECUTED as a DEED by THE FIRST NATIONAL BANK OF )
CHICAGO as Chargee acting by its duly authorised officer(s) )
....................... ............................
Officer Officer
<PAGE>
SCHEDULE 1
MATERIAL FOREIGN SUBSIDIARIES OF THE CHARGOR
Material Foreign Subsidiary Chargor's Direct Ownership and Share
- --------------------------- ------------------------------------
Certificate Numbers
-------------------
Howmet Limited 1,000,001 fully paid ordinary shares
representing 99.9% of the issued
share capital of Howmet Limited
Share certificate number 4 represents
65% of the issued share capital of
Howmet Limited
<PAGE>
SCHEDULE 2
WRITTEN RESOLUTION OF HOWMET LIMITED
------------------------------------
("THE COMPANY")
---------------
We, the undersigned, being the sole members for the time being of the above
named Company entitled to receive notice of and to attend and vote at General
Meetings of the Company HEREBY PASS the following written resolution and agree
that the said resolution shall, pursuant to Article 53 of Table A, for all
purposes be as valid and effective as if the same had been passed by a Special
Resolution at a General Meeting of the Company duly convened and held.
It is hereby resolved that:-
28. The Articles of Association be amended by inserting the words "Subject to
this Article" at the beginning of Article 3 and then adding the following
sentence to the end of Article 3: The lien referred to in clause 8 of Table
A shall not apply to any share registered in the name of Howmet
Corporation.
29. The Articles of Association of the Company be amended by inserting the
words "Subject to this Article" at the beginning of Article 14 and then
adding the following sentence to the end of Article 14:
"Notwithstanding anything contained in clause 24 and 26 and these
Articles, the directors shall not decline to register any transfer of
shares, nor may they suspend registration thereof where such a
transfer is executed by any bank or institution to whom such shares
have been charged by way of security, or by any nominee of such a bank
or institution, pursuant to the power of sale under such security, and
a certificate by any official of such bank or institution that the
shares were so charged and the transfer was so executed shall be
conclusive evidence of such facts."
Dated this day of January, 1998
For and on behalf of For and on behalf of
Howmet Corporation Roger Hambleton
............................. ..........................
<PAGE>
MADE ON 30 JANUARY, 1998
_______________________________________________________________________________
SHARES ACCOUNTS PLEDGE AGREEMENT
(NANTISSEMENT DE COMPTES D'INSTRUMENTS FINANCIERS)
________________________________________________________________________________
BETWEEN
HOWMET CORPORATION
AS PLEDGOR
AND
THE FIRST NATIONAL BANK OF CHICAGO
AS COLLATERAL AGENT
AND
THE LENDERS
AND
HOWMET S.A.
AS ACCOUNT HOLDER
_______________________________________________________________________________
[LOGO]
GIDE LOYRETTE NOUEL
26, COURS ALBERT 1ER
75008 PARIS
<PAGE>
CONTENTS
Page
THE UNDERSIGNED........................................ 3
WHEREAS................................................ 3
1. DEFINITIONS.................................. 4
2. PLEDGE (NANTISSEMENT)........................ 5
3. REPRESENTATIONS AND WARRANTIES............... 6
4. COVENANTS.................................... 7
5. FURTHER ASSURANCES........................... 8
6. TERM - COVENANT TO RELEASE................... 8
7. ENFORCEMENT.................................. 8
8. NOTICES...................................... 8
9. MISCELLANEOUS................................ 9
10. SUCCESSORS AND ASSIGNS....................... 9
11. GOVERNING LAW AND JURISDICTION............... 10
Annex 1 List of the Lenders
Annex 2 Addresses for notices
Annex 3 Form of Statement of Pledge
Annex 4 Form of Confirmation of Pledge
<PAGE>
BETWEEN THE UNDERSIGNED :
- -----------------------
1. The First National Bank of Chicago a company governed by the laws of the
State of Illinois, whose registered office is at One First National
Plaza, Chicago, Illinois 60670, U.S.A., represented by Mr. David G.
Dixon, duly authorized for the purposes hereof, acting in its own name
and as Collateral Agent in the name and on behalf of a bank syndicate
(hereafter referred to as the "Lenders") parties to the Credit Agreement
mentioned below, hereafter referred as to the "Collateral Agent",
2. The Lenders (individually a "Lender" and collectively the "Lenders"),
listed on Annex 1 hereto, represented by the First National Bank of
Chicago as Collateral Agent for the purposes hereof, hereafter referred
to as the "Lenders".
AND
- ---
3. Howmet Corporation, a Delaware corporation, whose registered office is
at P.O. Box 1960, 475 Steamboat Road, Greenwich, Connecticut
06836-1960, represented by Mr Mark .F Lasker, duly authorized for the
purposes hereof, hereafter referred to as the "Pledgor",
AND
- ---
4. Howmet S.A., a French company, with a share capital of FRF
290,328,100.00 whose registered office is at 68-78, rue du Moulin de
Gage, 92230 Gennevilliers, France, duly incorporated in the Nanterre
Trade and Companies Register under n(degree) B 562 109 801, represented
by Mr. Michel Desvernois duly authorized for the purposes hereof,
hereafter referred to as the "Account Holder".
WHEREAS :
- -------
(A) The Pledgor, the Collateral Agent and the Lenders have entered into a
credit agreement dated as of December 16, 1997 providing for the making
of Loans and the issuance of, and participation in, Facility Lcs as
contemplated therein (such credit agreement as it may be amended,
restated or otherwise modified, extended, renewed, replaced, restated
or supplemented from time to time, and including any agreement
extending the maturity of, or restructuring the Indebtedness under such
agreement or any successors agreement, being hereafter referred to as
the "Credit Agreement").
(B) The Pledgor is the owner of 1,887,132 shares in the share capital of
the Company (as defined below).
(C) Pursuant to the Credit Agreement, the Pledgor is required to grant to
the Pledgee certain security interest to secure its liabilities under
the Credit Agreement including in particular the pledge of 65% of the
sharecapital of the Company upon the following terms and conditions of
this Agreement (as defined below).
<PAGE>
IT HAS BEEN AGREED AS FOLLOWS :
- -----------------------------
1. DEFINITIONS
-----------
1.1 In this Agreement, terms defined in the Credit Agreement have the same
meaning when used in this Agreement and the following terms and
expressions used in this Agreement shall, unless the context requires
otherwise, have the following meaning :
"Agreement" means this agreement for the pledge of the Shares Account
together with the annexes hereto, as it or they may be amended, restated
or supplemented in the future.
"Business Day" means a day (other than a Saturday or a Sunday) on which
banks are open for business in Paris and Chicago.
"Company" means Howmet S.A., a "societe anonyme" organised under the
laws of France, with a registered capital of FRF 290,328,100.00, whose
registered office is at 68-78, rue du Moulin de Gage, 92230
Gennevilliers, France, duly incorporated in the Nanterre Trade and
Companies Register under n(degree) B 562 109 801.
"Event of Default" means any event described in Article VIII of the
Credit Agreement.
"Pledge" means the pledge (nantissement) created over the Shares Account
("compte d'instruments financiers").
"Shares Account" means the shares account ("compte d'instruments
financiers") within the meaning of Article 29 of law n(degree) 83-1 of
3rd January, 1983, as amended by law n(degree) 96-597 of 2nd July, 1996
and as opened in the books of the Account Holder in the name of the
Pledgor and numbered 1424, to which the Shareholder Interest have been
credited in accordance with the terms of the Agreement, such shares
account being pledged thereunder.
"Shareholder Interest" means, in respect of the Pledgor and at any time
until this Agreement shall be terminated in accordance with its terms,
the 1,887,132 shares held in full ownership by the Pledgor in the issued
share capital of the Company, representing 65% of the share capital of
the Company, together with all shares or other securities ("valeurs
mobilieres"), whether present or future, actual or contingent, from time
to time credited to the Shares Account in accordance with the terms
hereof.
"Secured Liabilities" means all obligations and liabilities by the
Pledgor to the Collateral Agent and the Lenders (i) under, or with
respect to, the Credit Agreement and the other Loan Documents (as
defined in the Credit Agreement) (including, without limitation, all
such obligations and indebtedness of the Pledgor under the Credit
Agreement) to which the Pledgor is a party and the due performance by
the Pledgor with all of terms, conditions and agreements contained in
the Credit Agreement and such other Loan Documents, (ii) under or with
respect to any Financial Contracts (as defined in the Credit Agreement),
and the due performance by the Pledgor with all of the terms, conditions
and agreements contained therein, together with (iii) all costs, charges
and expenses incurred by the Collateral Agent
<PAGE>
in connection with the preservation or enforcement of their rights under
this Agreement and the Credit Agreement including the Loans Documents,
the Financial Contracts or any other documents evidencing or securing
any such liabilities.
1.2 On and after the date hereof, each reference in this Agreement to :
(a) "Agreement", "hereunder", "hereof", "herein", or words of like
import referring to this Agreement shall mean and be a
reference to this Agreement ;
(b) articles and annexes shall mean and be a reference to the
articles and annexes of this Agreement.
2. PLEDGE (NANTISSEMENT)
---------------------
2.1 Pledged Shares Account
(a) Pursuant to Article 29 of law n(degree) 83-1 of 3rd January,
1983, as amended by law n(degree) 96-597 of 2nd July, 1996, the
Pledgor hereby irrevocably pledges to the Collateral Agent its
Shares Account, including its Shareholder Interest, as security
for the Secured Liabilities.
(b) The Pledgor hereby undertakes to execute immediately upon
signature of this Agreement a statement of pledge relating to
its Shares Account (a "Statement of Pledge") in the form of
Annex 3 and to cause the Account Holder to issue on the same
day a certificate of confirmation of pledge relating to its
Shares Account (a "Confirmation of Pledge") in the form of
Annex 4.
(c) Immediately following the execution of this Agreement, an
executed copy of this Agreement and of the Statement of Pledge
relating to its Shares Account shall for this purpose be
transmitted by the Pledgor to the Account Holder.
2.2 Pledged Shareholder Interest
(a) The Pledgor undertakes to credit to its Shares Account, any
and all dividends, interest and distributions received or to
be received by it and any all of its rights to receive
distributions in respect of its Shareholders Interest. As
long as no Event of Default has occurred, the Pledgor shall
be entitled to receive payment of any dividends paid in cash
("dividendes en numeraires") or other interest, distributions
or rights to distributions in cash only, in respect of the
Shareholder Interest. Upon the occurrence of an Event of
Default, the Pledgor shall not be entitled to receive
dividends or other sums in cash referred to hereabove.
(b) In addition to the provisions of paragraph 2.2 (a) above :
(i) Any proceeds as well as any other shares or
shareholder rights or interest resulting from the
Shareholder Interest and any securities or rights
which
<PAGE>
may be substituted for, or added to, the Shareholder
Interest, by way of exchange, consolidation, division,
free distribution or otherwise, and any new shares or
other securities issued by the Company relating to the
Shareholder Interest and attributed to the Pledgor as
a result of a reduction of the Company's capital due
to losses; and
(ii) more generally, any shares or other shareholder
interest attributed to, and any additional shares or
other shareholder interest acquired by the Pledgor and
constituting ownership interests in the Company or any
legal entity resulting from the transformation or
merger of the Company or any similar operation,
shall automatically be deemed the Shareholder Interest of the
Pledgor for the purposes of this Agreement and shall be
promptly credited to the Shares Account, without any such
operation constituting in any manner a novation of the rights
and security granted to the Collateral Agent hereunder and the
Pledgor shall sign all documents and take all action necessary
to confirm the same in favor of the Collateral Agent as further
provided in article 5 provided, however, the Pledgor shall not
be required at any time to pledge hereunder Shares or other
Shareholder Interests constituting ownership interest in the
Company which constitute more than 65% of the Share capital of
the Company.
(c) The Pledgor shall not be entitled to replace or substitute the whole
or part of its Shareholder Interest without the prior written consent
of the Collateral Agent in each instance.
3. REPRESENTATIONS AND WARRANTIES
------------------------------
On the date hereof, the Pledgor represents and warrants to the
Collateral Agent (and such representations and warranties shall be
deemed true and accurate for the term of this Agreement) that :
(a) the execution and performance of this Agreement and all its
obligations hereunder have been duly authorized and any
necessary corporate actions have been taken in connection
therewith ;
(b) its obligations under this Agreement constitute and will
constitute legal, valid and binding obligations, enforceable
against it in accordance with its terms ;
(c) no consent, licence, approval and authorizations of and
registrations with or declarations to any governmental authority
are required in connection with the execution of this
Agreement ;
(d) it has valid title to its Shares Account and to the Shareholder
Interest credited to its Shares Account ;
<PAGE>
(e) its Shareholder Interest are not subject to any security
interest, purchase option or similar restrictions which may
affect the rights of the Collateral Agent under this Agreement
or the value of the Pledge created over the Shares Account by
virtue of this Agreement ;
(f) the Pledge herein created over its Shares Account, once
perfected in accordance with the terms hereof, will constitute a
valid first ranking security interest in its Shares Account in
favor of the Collateral Agent.
4. COVENANTS
---------
4.1 Except as permitted or required under the Credit Agreement, the Pledgor
covenants not to allow any security interest to be created or remain on
its Shares Account or Shareholder Interest other than that created
pursuant to this Agreement.
4.2 Subject to the limitations specified in article 2.2(b) the Pledgor
undertakes to cause the Account Holder to credit to the Shares Account
any Shareholder Interest attributed to, and acquired by it, and
constituting ownership interest in the Company or any legal entity
resulting from the transformation or merger of the Company or any
similar operation as specified in article 2.2 (b), and the Pledgor shall
sign all documents and take all action necessary to this effect as
further provided in article 5.
4.3 The Pledgor undertakes not to exercise the voting rights attached to its
Shareholder Interest in a way that could reasonably be expected to void
the Plegde created hereunder.
4.4 Except as permitted hereunder, the Pledgor undertakes that it will not
locate or permit to locate any Shareholder Interest received by it from
any person for whatever reason in an account other than in its Shares
Account.
4.5 Subject to the provisions of Article 2.2 (c) above, the Pledgor (i)
shall refrain from debiting the Shares Account from any Shareholder
Interest credited on the Shares Account from time to time and (ii)
undertakes to cause the Account Holder to credit his Share Account any
additional shares in the Company required pursuant to and within the
limits of, article 2.2 (b).
5. FURTHER ASSURANCES
------------------
5.1 The Pledgor shall at any time and from time to time, at its expense,
and within the limits and in compliance with the terms of the Credit
Agreement promptly execute any such further instruments and documents,
and take such further action, as may be necessary or appropriate or as
the Collateral Agent may reasonably request, in order to perfect,
protect or replace any security interest granted or purported to be
granted with respect to its Shares Account and to enable the Collateral
Agent to exercise and enforce their rights and remedies under this
Agreement.
<PAGE>
5.2 The Pledgor hereby undertakes to cause each successor Account Holder to
agree to be bound as Account Holder by all the terms and conditions of
this Agreement as if it were the Account Holder from the date hereof,
as a condition precedent to any transfer of any of its rights and
obligations by the Account Holder hereunder.
6. TERM - COVENANT TO RELEASE
--------------------------
6.1 This Agreement shall remain in full force until all of the Secured
Liabilities have been fully performed.
6.2 The Collateral Agent shall release the Pledge herein created, at the
Pledgor's expense, provided that and as soon as all amounts due in
respect of the Secured Liabilities shall have been repaid in full.
7. ENFORCEMENT
-----------
Following the occurrence of an Event, the Collateral Agent shall be
entitled to (i) exercise all rights, actions and privileges on the
Shares Account and/or the Shareholder Interest of the Pledgor as granted
by law to a secured creditor in order to recover the Secured
Liabilities, and in particular, (ii) request direct payment of moneys or
cash proceeds credited to the Shares Account, subject to the Collateral
Agent making request of the same by at least eight (8) days notice sent
to the Account Holder and to the Pledgor by registered letter in
acordance with any legal requirements including the Decree of May 21,
1997.
8. NOTICES
-------
8.1 Giving of notices
All notices or other communications under or in connection with this
Agreement shall be given in writing and, unless otherwise stated, may be
made by letter, telex or facsimile. Any such notice will be deemed to be
given as follows :
(a) if by letter, when delivered personally or on actual receipt ;
(b) if by telex, when dispatched, but only if, at the time of
transmission, the correct answerback appears at the start and at
the end of the sender's copy of the notice; and
(c) if by facsimile, when received in legible form.
However, a notice given in accordance with the above but received on a
non-Business Day or after business hours in the place of receipt will
only be deemed to be given on the next Business Day in that place.
<PAGE>
8.2 Addresses for notices
The addresses, telex and facsimile number of the Pledgor and the
Colateral Agent are as set out in Annex 2 or any other notified by the
Pledgor and the Collateral Agent for this purpose by not less than five
(5) Business Days' notice.
9. MISCELLANEOUS
-------------
9.1 The rights and remedies of the Collateral Agent in this Agreement may be
exercised as often as necessary and are cumulative and not exclusive of
any rights or remedies provided by law or any other document.
9.2 No failure to exercise and no delay in exercising any right, power or
privilege under this Agreement by the Collateral Agent shall operate as
a waiver of the same, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise of
the same, or the exercise of any other right, power or privilege. No
waiver by the Collateral Agent shall be effective unless it is in
writing.
9.3 If any provision of this Agreement is prohibited or unenforceable in any
jurisdiction, such prohibition or unenforceability shall not invalidate
the remaining provisions of this Agreement or affect the validity or
enforceability of such provision in any other jurisdiction.
9.4 Neither the Collateral Agent nor any of its officers or employees shall
be liable for any action taken or omitted under or in connection with
this Agreement unless caused by its or their gross negligence or
willfull misconduct.
For purposes of clause 9.4 "Gross Negligence" means recklessness, the
absence of the slightest care or the complete disregard of
consequences.For avoidance of doubts "Gross Negligence" does not include
the mere absence of ordinary care or diligence, or an inadvertent act or
inadvertent failure to act.
10. SUCCESSORS AND ASSIGNS
----------------------
10.1 All the rights, privileges and options of the Collateral Agent hereunder
will benefit its respective successors and assigns and all terms,
conditions, representations and warranties and covenants of the Pledgor
hereunder shall oblige its respective successors and assigns in the same
manner, it being agreed and understood that :
(a) the Pledgor shall not assign, transfer, novate or dispose of any
of, or any interest in its rights and/or obligations hereunder,
except with the prior written consent of the Collateral Agent ;
and
<PAGE>
(b) the Collateral Agent shall be entitled to assign, transfer,
novate or dispose of any of, or any interest in their rights
and/or obligations hereunder to any third party in accordance
with the relevant provisions of the Credit Agreement.
10.2 In the event of any assignment, transfer, novation or disposal of a part
or the whole of their rights and obligations by the Collateral Agent,
the above transferor expressly maintains, which the Pledgor accepts, all
its rights and privileges hereunder for the benefit of its assignees or
transferees, as the case may be, in accordance with the provisions of
Article 1278 of the French Civil Code.
11. GOVERNING LAW AND JURISDICTION
------------------------------
11.1 This Agreement shall be governed by, and interpreted in accordance with,
the laws of France.
11.2 The parties hereby irrevocably consent to the exclusive jurisdiction of
the Commercial Court of Nanterre (Tribunal de Commerce de Nanterre) in
connection with any action or proceeding arising out of or relating to
this Agreement or any documents or instruments delivered pursuant to
this Agreement.
Made in Asnieres
On January 30, 1998
In three (3) original copies
THE FIRST NATIONAL BANK OF CHICAGO HOWMET CORPORATION
as Collateral Agent for the Lenders as Pledgor
listed in Annex 1
By : /s/ Gregory J. Sjulle By : /s/ Marklin Lasker
- --------------------------- -----------------------------
Name : Gregory J. Sjulle Name : Marklin Lasker
HOWMET S.A
as Account Holder
By : /s/ Michel Devernois
- ---------------------------
Name : Michel Devernois
<PAGE>
<TABLE>
<CAPTION>
ANNEXE 1
Liste des Preteurs au Contrat de Pret
- ------------------------------------------------------------------------------------------------------------------------------------
Banks Address Participation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza, Chicago, $34,000,000
Illinois 60670, U.S.A., Attn :
Timothy J. King
Ph. : (312) 732-6456
Fax : (312) 732-3885
- ------------------------------------------------------------------------------------------------------------------------------------
MELLON BANK, N.A. 400 South Hope St. $23,000,000
5th Floor
Los Angeles, CA 90071
Attention : Lawrence C. Ivey
Ph. : (213) 553-9543
Fax : (213) 629-0492
- ------------------------------------------------------------------------------------------------------------------------------------
WACHOVIA BANK, N.A. 191 Peachtree Street NE $23,000,000
Atlanta, GA 30303
Attention : U.S Corporate
Ph : (404) 332-6210
Fax : (404) 332-6048
- ------------------------------------------------------------------------------------------------------------------------------------
BANK OF MONTREAL 115 South LaSalle Street $27,000,000
11th Floor
Chicago, IL 60603
Attention : Joanna Bellocq
Ph : (212) 605-1647
Fax : (212) 605-1451
- ------------------------------------------------------------------------------------------------------------------------------------
ABN AMRO BANK, N.V. 135 South LaSalle Street $33,000,000
Suite 2805
Chicago, IL 60603
Attention : Robert Decker
Ph : (312) 904-2949
Fax : (312) 606-8428
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Banks Address Participation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK OF AMERICA NATIONAL 555 South Flower Street $27,000,000
TRUST & SAVINGS 11th Floor
ASSOCIATION Los Angeles, CA 90071
Attention : Dawn Esser
Ph. : (213) 228-2820
Fax : (213) 623-1959
- ------------------------------------------------------------------------------------------------------------------------------------
BANQUE NATIONALE DE PARIS 180 Montgomery Street $23,000,000
3rd Floor
San Francisco, CA 94104
Attention : D. Guy Gibb
Ph : (415) 956-0707
Fax : (415) 296-8954
- ------------------------------------------------------------------------------------------------------------------------------------
THE NOTHERN TRUST COMPANY
50 South LaSalle Street $23,000,000
Chicago, IL 60675
Attention : John E. Burda
Ph : (312) 444-4575
Fax : (312) 444-5055
- ------------------------------------------------------------------------------------------------------------------------------------
BANKERS 130 Liberty Street $33,000,000
TRUST COMPANY New York, NY 10006
Attention : Anthony LoGrippo
Ph : (212) 250-4886
Fax : (212) 250-7218
- ------------------------------------------------------------------------------------------------------------------------------------
$27,000,000
CREDIT SUISSE FIRST BOSTON 11 Madison Avenue
20th Floor
New York, NY 10010-3629
Attention : Mark A. Sampson
Ph : (212) 325-3641
Fax : (212) 325-8319
- ------------------------------------------------------------------------------------------------------------------------------------
FLEET NATIONAL BANK One Federal Street $27,000,000
MSN-MA-OF0308
Boston, MA 02211
Attention : Robert C. Rubino
Ph : (617) 346-0574
Fax : (617) 346-0585
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX 2
-------
Addresses for notices
Agent:
-----
The First National Bank of Chicago,
One First National Plaza,
Chicago, Illinois 60670, U.S.A.
Attention: Mr. Timothy J. King
Telephone n(degree): (312) 732-6456
Facsimile n(degree): (312) 732-3885
Account Holder:
--------------
Howmet S.A.,
68-78, rue du Moulin de Cage,
92230 Gennevilliers, France,
Attention : Mr. Michel Desvernois
Telephone n(degree) : 01 40 80 25 03
Facsimile n(degree) : 01 40 80 25 99
Pledgor :
-------
Howmet Corporation
P.O. Box 1960,
475 Steamboat Road,
Greenwich, Connecticut 06836-1960,
Attention : Treasurer
Telephone n(degree) : (203) 625-8744
Facsimile n(degree) : (203) 861-4746
<PAGE>
ANNEX 3
-------
Form of Statement of Pledge
(Article 29 of law n(degree) 83-1 of 3rd January,
1983 as amended by law n(degree) 96-597
of 2nd July, 1996)
DECLARATION DE GAGE DE COMPTE
D'INSTRUMENTS FINANCIERS
(soumises aux dispositions de l'article 29
de la loi n(degree) 83-1 du 3 janvier 1983, modifiee par la loi
n(degree) 96-597 du 2 juillet 1996)
LE SOUSSIGNE:
- ------------
Howmet Corporation, une societe de l'Etat du Delaware (U.S.A.), dont le siege
social se trouve a P.O. Box 1960, 475 Steamboat Road, Greenwich, Connecticut
06836-1960, U.S.A. representee par MonsieurMark.F Lasker, dument habilite aux
fins des presentes,
ci-apres designe "le Constituant"
conformement a un acte de nantissement de compte d'instruments financiers en
date de ce jour et intitule "Shares Accounts Pledge Agreement" (Nantissement de
Comptes d'Instruments Financiers) (le "Contrat de Nantissement"),
DONNE INSTRUCTION A:
Howmet S.A., societe anonyme au capital de FRF 290.328.100.00, situee au 68-78,
rue du Moulin de Cage, 92230 Gennevilliers, France, immatriculee au Registre du
Commerce et des Societes de Nanterre, sous le numero B 562 109 801,
ci-apres designe le "Teneur de Compte"
D'OUVRIR A SON NOM DANS SES LIVRES UN COMPTE SPECIAL D'ACTIONNAIRE N(degree)
1424 (CI-APRES LE "COMPTE GAGE")
<PAGE>
ET D'Y TRANSFERER LES INSTRUMENTS FINANCIERS CI-APRES:
1.887.132 actions (soit 65 % a la date des presentes) de la societe Howmet S.A.,
societe anonyme au capital de FRF 290.328.100,00 ayant son siege social au
68-78, rue du Moulin de Cage, 92230 Gennevilliers, France, immatriculee au
Registre du Commerce et des Societes de Nanterre, sous le numero B 562 109 801,
d'une valeur nominale de 100 Francs chacune,
ci-apres designes les "Instruments Financiers"
ET CONSTITUE EN GAGE LE COMPTE GAGE
AU BENEFICE DE:
Les Preteurs dont la liste figure a l'Annexe 1 aux presentes, parties a un
contrat de pret (ci-apres le "Contrat de Pret ") en date du 16 decembre 1997 et
intitule "Credit Agreement" ainsi que leurs cessionnaires et successeurs
successifs qui deviendront parties au Contrat de Pret conformement a l'article
XIII du Contrat de Pret, representes par The First National Bank of Chicago, une
societe de droit de l'Etat de l'Illinois, dont le siege social se trouve a One
First National Plaza, Chicago, Illinois 60670, U.S.A., (sous reserve de la
designation d'un nouvel Agent conformement a l'article 11.12 du Contrat de
Pret), representee par Monsieur David G. Dixon, dument habilite a l'effet des
presentes,
ci-apres designe "le Beneficiaire"
EN GARANTIE DU PAIEMENT DES SOMMES DUES AU TITRE DE L'OBLIGATION CI-APRES
DEFINIE :
Nature :
- ------
Toutes les obligations du Constitutant a l'egard de l'Agent des Suretes et des
Preteurs (i) au titre du Contrat de Pret ("Credit Agreement") et des autres
documents de pret ("Loan Documents") (tels que definis dans le Contrat de Pret,
incluant, sans limitation, tous autres obligations et endettement du Constituant
en vertu du Contrat de Pret) auxquels le Constituant est partie, et l'execution
par le Constituant de tous les termes, conditions et accords contenus dans le
Contrat de Pret et autres documents de pret ("Loan Documents"), (ii) en vertu ou
au titre de tout contrat financier ("Financial Contract" tel que defini dans le
Contrat de Pret), et l'execution par le Constituant de tous les termes,
conditions et accords qui y sont contenus, ainsi que (iii) tous les couts,
charges et depenses encourus par l'Agent des Suretes en relation avec la
preservation ou la mise en oeuvre de ses droits en vertu du Contrat de
Nantissement et du Contrat de Pret incluant les documents de pret ("Loan
Documents"), les contrats financiers ("Financial Contracts") ou tout autre
document etablissant ou garantissant de telles obligations.
Montant Maximum :
- ---------------
Le Montant maximum des sommes dues au titre du Contrat de Pret soit trois cent
millions ($300,000,000) de Dollars en principal, augmente des interets, interets
de retard, penalites,
<PAGE>
indemnites, commissions, frais et accessoires et autres paiements y afferents
stipules au Contrat de Pret incluant les montants qui pourraient etre dues par
le Constituant en vertu des documents de pret ("Loan Documents") et les contrats
financiers ("Financial Contracts").
ci-apres designee la "Creance Garantie"
DANS LES CONDITIONS SUIVANTES :
Conformement aux dispositions de l'article 29 de la loi n(degree) 83-1 du 3
janvier 1983, modifiee par la loi n(degree) 96-597 du 2 juillet 1996, le
Constituant affecte en nantissement au benefice du Beneficiaire, le Compte Gage
en garantie du paiement de l'integralite des sommes dues, en principal,
interets, frais et accessoires, au titre de la Creance Garantie jusqu'a son
complet remboursement.
Le Constituant declare que les Instruments Financiers ne font l'objet d'aucune
indisponibilite a quelque titre que ce soit, autre qu'au titre de la presente
declaration. Les Instruments Financiers, ceux qui leur sont substitues ou les
completent, de quelque maniere que ce soit, sont compris dans l'assiette du
gage.
Le Constituant ne pourra pas disposer des Instruments Financiers conformement
aux termes du Contrat de Nantissement, dont le Teneur de Compte declare avoir eu
connaissance.
Si la Creance Garantie est declaree exigible conformement au contrat constatant
la Creance Garantie, pour quelque cause que ce soit, le Beneficiaire pourra
proceder a la realisation du gage conformement aux textes en vigueur. Les frais
resultant de la realisation du gage demeureront a la charge du Constituant et
seront imputes sur le produit de cette realisation.
Le Teneur de Compte procedera a cette realisation sur demande ecrite du
Beneficiaire.
Les frais relatifs aux presentes seront a la charge du Constituant.
La presente declaration de gage est soumise au droit francais. Toute
contestation relative a la validite, l'interpretation ou l'execution des
presentes sera de la competence du tribunal de commerce de Nanterre.
Fait a Asnieres
le 30 Janvier 1998
en trois (3) exemplaires
Pour constitution du nantissement :
- -------------------------------------
Par : Howmet Corporation
- -------------------------------------
Titre : Mr.Mark .F Lasker
<PAGE>
Translation for information purposes only
STATEMENT OF PLEDGE OVER SHARES ACCOUNT
(subject to provisions of Article 29 of law n(degree) 83-1 of 3rd January,
1983 as amended by law n(degree) 96-597 of 2nd July, 1996)
THE UNDERSIGNED:
- ---------------
Howmet Corporation., a Delaware corporation, whose registered office is P.O. Box
1960, 475 Steamboat Road, Greenwich, Connecticut 06836-1960, U.S.A., represented
by MrMark.F Lasker, duly authorized for the purposes hereof,
hereafter referred to as the "Pledgor"
pursuant to a Shares Account Pledge Agreement executed on the date hereof (the
"Pledge Agreement")
HEREBY INSTRUCTS
Howmet S.A., a "societe anonyme" organised under the laws of France, with a
registered capital of FRF 290,328,100.00, whose registered office is at 68-78,
rue du Moulin de Cage, 92230 Gennevilliers, France, duly incorporated in the
Nanterre Trade and Companies Register under n(degree) B 562 109 801,
hereafter the "Account Holder"
TO OPEN IN ITS NAME IN ITS BOOKS A SPECIAL ACCOUNT N(degree)1424 (THE "PLEDGED
ACCOUNT")
AND
TO TRANSFER ON SUCH ACCOUNT THE FOLLOWING SHAREHOLDER INTEREST:
1,887,132 shares representing 65% of the sharecapital of Howmet S.A., a "societe
anonyme" organised under the laws of France, with a registered capital of FRF
290,328,100.00, whose registered office is at 68-78, rue du Moulin de Cage,
92230 Gennevilliers, France, duly incorporated in the Nanterre Trade and
Companies Register under n(degree) B 562 109 801,
hereinafter referred to as the
"Shareholder Interest"
<PAGE>
AND HEREBY PLEDGES THE PLEDGED ACCOUNT
TO THE BENEFIT OF:
The Lenders listed in the Annex 1 hereto, parties to a credit agreement
(hereafter the "Credit Agreement") dated 16 December, 1997 and entitled the
"Credit Agreement" and their respective successors and assigns which will become
parties to the Credit Agreement according to Article XIII thereof, represented
by The First National Bank of Chicago, a company governed by the laws of the
State of Illinois, whose registered office is at One First National Plaza,
Chicago, Illinois 60670, U.S.A., (subject to the designation of a new Collateral
Agent as provided for under Article 11.12 of the Credit Agreement) itself
represented by Mr. David G. Dixon, duly authorized for the purpose hereof,
hereafter the "Beneficiary"
AS SECURITY FOR PAYMENT OF THE FOLLOWING LIABILITIES:
Nature :
- ------
All obligations and liabilities by the Pledgor to the Collateral Agent and the
Lenders (i) under, the Credit Agreement and the other Loans Documents (as
defined in the Credit Agreement) (including, without limitation, all such
obligations and indebtedness of the Pledgor under the Credit Agreement) to which
the Pledgor is a party and the due performance by the Pledgor with all of terms,
conditions and agreements contained in the Credit Agreement and such other Loan
Documents, (ii) under or with respect to any Financial Contracts (as defined in
the Credit Agreement) and the due performance by the Pledgor with all of the
terms, conditions and agreements contained therein, together with (iii) all
costs, charges and expenses incurred by the Collateral Agent in connection with
the protection, preservation or enforcement of their rights under the Pledge
Agreement and the Credit Agreement including the Loans Documents, the Financial
Contracts or any other documents evidencing or securing any such liabilities.
Maximum Amount :
- --------------
The maximum amount due under the Credit Agreement being three hundred million US
Dollars($300,000,000) plus interest, late interest, penalties, indemnities,
commissions, fees, accessories and related payments provided by the Credit
Agreement including the amounts which could be due by the Pledgor under the Loan
Documents and the Financial Contracts.
hereafter the "Secured Liabilities"
<PAGE>
UNDER THE FOLLOWING TERMS AND CONDITIONS:
Pursuant to Article 29 of law n(degree) 83-1 of 3rd January 1983 as amended by
law n(degree) 96-597 of 2nd July 1996, the Pledgor pledges to the Beneficiary
the Pledged Account as security of payment of any and all sums due, including
principal, interests, costs and accessories, as Secured Liabilities until such
sums have been paid in full.
The Pledgor represents that the transfer of the Shareholder Interest is not
subject to any restriction other than this statement.
The Shareholder Interest, any other rights which may be substituted for or added
to the Shareholder Interest in any way, shall be subject to the Pledge.
The Pledgor shall not assign the Shareholder Interest, in accordance with terms
of the Pledge Agreement. The Account Holder acknowledges that it has full
knowledge of the terms of the same.
Should the Secured Liabilities declared due in accordance with the agreement
creating the Secured Liabilities, the Beneficiary shall be entitled to enforce
the Pledge in compliance with applicable regulations. The Beneficiary shall not
be responsible for the value retained for the enforcement of the Pledge.
Expenses incurred by the enforcement of the Pledge shall be borne by the Pledgor
and charged on the proceeds remaining from the enforcement.
The Account Holder shall proceed to the enforcement of the pledge upon written
request from the Beneficiary.
The costs hereof shall be borne by the Pledgor.
This statement of pledge is governed by the laws of France. Any dispute relating
to the validity, interpretation and realization of this statement shall be in
the jurisdiction of the Nanterre Commercial Court ("Tribunal de Commerce de
Nanterre").
Signed in Asnieres on 30 january, 1998
in three (3) original copies
For the purpose of constituting the pledge:
- ------------------------------------------
By : Howmet Corporation
- -----------------------------
Name : Mr. Mark .F Lasker
<PAGE>
ANNEX 4
Form of Confirmation of Pledge
Over Shares Accounts
(Article 29 of Law n(degree) 83-1 of January 3, 1983, as amended by Law
n(degree) 96-597 of July 2, 1996)
ATTESTATION DE NANTISSEMENT
DE COMPTE D'INSTRUMENTS FINANCIERS
(article 29 de la loi n(degree) 83-1 du 3 janvier 1983, modifiee par la loi du
n(degree) 96-597 du 2 juillet 1996)
Connaissance prise de la Declaration de Gage de Compte d'Instruments Financiers
. en date du :
. signee par : Howmet Corporation., une societe de l'Etat du Delaware
(U.S.A.), dont le siege social se trouve P.O.Box 1960, 475 Steamboat
Road, Greenwich, Connecticut 06836-1960, U.S.A., representee par
MonsieurMark F. Lasker, dument habilite aux fins des presentes,
(le "Constituant"),
. au benefice des Preteurs dont la liste figure en Annexe 1 des
presentes, parties a un contrat de pret (ci-apres le "Contrat de
Pret") en date du 16 decembre 1997 et intitule "Credit Agreement"
ainsi que leurs cessionnaires et successeurs successifs qui
deviendront parties au Contrat de Pret conformement a l'article XIII
du Contrat de Pret, representes par The First National Bank of
Chicago, une societe de droit de l'Etat de l'Illinois, dont le siege
social se trouve a One First National Plaza, Chicago, Illinois 60670,
U.S.A., (sous reserve de la designation d'un nouvel Agent
conformement aux dispositions de l'article 11.12 du Contrat de Pret),
elle-meme representee par Monsieur David G. Dixon, dument habilite a
l'effet des presentes,
(le "Beneficiaire"),
Ci-apres la "Declaration de Gage",
Nous soussignee, Howmet S.A., societe anonyme au capital de FRF 290.328.100,00,
situee au 68-78, rue du Moulin de Cage, 92230 Gennevilliers, France,
immatriculee au Registre du Commerce et des Societes de Nanterre, sous le numero
B 562 109 801,
agissant en qualite de Teneur du Compte Gage,
1/ attestons par la presente l'ouverture et le nantissement du compte
d'instruments financiers:
<PAGE>
dont les references sont les suivantes :
Compte d'Instruments Financiers N(degree)1424 ouvert au nom de la
Societe Howmet Corporation ainsi qu'il est indique dans la
Declaration de Gage,
2/ donnons inventaire des instruments financiers ci-apres :
1.887.132 actions representant 65% de la participation detenue par le
Constituant dans le capital de la societe Howmet S.A. ;
3/ prenons acte de :
l'interdiction faite au Constituant de disposer des instruments
financiers inscrits dans le Compte Gage, conformement aux termes du
Contrat de Nantissement en date de ce jour vise dans la Declaration
de Gage,
4/ acceptons d'exercer la mission de controle en resultant.
Fait a Gennevilliers
le 1998
Howmet S.A en qualite de
Teneur de Compte
Par:
Titre:
<PAGE>
Translation for information purposes only
Confirmation of Pledge
Over Shares Accounts
(Article 29 of Law n(degree) 83-1 of January 3, 1983, as amended by
Law n(degree) 96-597 of July 2, 1996)
Having knowledge of the Statement of Pledge over Shares Account,
. dated:
. signed by : Howmet Corporation, a Delaware corporation, whose
registered office is P.O. Box 1960, 475 Steamboat Road, Greenwich,
Connecticut 06836-1960, U.S.A., represented by MrMark.F Lasker, duly
authorized for the purposes hereof,
(the "Pledgor"),
. to the benefit of : the Lenders listed in Annex 1, parties to a
credit agreement (hereafter the "Credit Agreement") dated 16 December, 1997 and
entitled the "Credit Agreement" and their respective successors and assigns
which will become parties to the Credit Agreement according to Article XIII
thereof, represented by The First National Bank of Chicago, a company governed
by the laws of the State of Illinois (subject to the susbstitution of the Agent
as provided for by Article 11.12 of the Credit Agreement), whose registered
office is at One First National Plaza, Chicago, Illinois 60670, U.S.A., itself
represented by Mr. David G. Dixon, duly authorized for the purpose hereof,
(the "Beneficiary"),
hereafter the "Statement of Pledge",
We the undersigned, Howmet S.A., a "societe anonyme" organised under the laws of
France, with a registered capital of FRF 290,328,100.00, whose registered office
is 68-78, rue du Moulin de Cage, 92230 Gennevilliers France, duly incorporated
in the Nanterre Trade and Companies Register under n(degree) B 562 109 801,
acting in our capacity as Account Holder,
1/ hereby confirm the opening and constitution of a pledge over shares
accounts:
the references of which are the following :
Shares Account N(degree)1424 open in the name of Howmet Corporation
as provided in the Statement of Pledge
2/ present the inventory of shareholder interest as follows:
1,887,132 shares representing 65% of the interest held by the Pledgor
in the share capital of Howmet S.A. ;
<PAGE>
3/ acknowledge that:
the Pledgor is not allowed to assign part or all of the shareholder
interest in accordance with the terms of the Pledge Agreement of the
dated hereof referred to in the Statement of Pledge,
4/ agree to exercise a control over the pledged account.
In Gennevilliers
on 1998
Howmet S.A. as
Account Holder
By:
Title:
<PAGE>
DECLARATION DE GAGE DE COMPTE
D'INSTRUMENTS FINANCIERS
(soumises aux dispositions de l'article 29 de la loi n(degree) 83-1 du 3
janvier 1983, modifiee par la loi n(degree) 96-597 du 2 juillet 1996)
LE SOUSSIGNE :
- ------------
Howmet Corporation, une societe de l'Etat du Delaware (U.S.A.), dont le siege
social se trouve a P.O. Box 1960, 475 Steamboat Road, Greenwich, Connecticut
06836-1960, U.S.A. representee par MonsieurMark.F Lasker, dument habilite aux
fins des presentes,
ci-apres designe "le Constituant"
conformement a un acte de nantissement de compte d'instruments financiers en
date de ce jour et intitule "Shares Accounts Pledge Agreement" (Nantissement de
Comptes d'Instruments Financiers) (le "Contrat de Nantissement"),
DONNE INSTRUCTION A:
Howmet S.A., societe anonyme au capital de FRF 290.328.100.00, situee au 68-78,
rue du Moulin de Cage, 92230 Gennevilliers, France, immatriculee au Registre du
Commerce et des Societes de Nanterre, sous le numero B 562 109 801,
ci-apres designe le "Teneur de Compte"
D'OUVRIR A SON NOM DANS SES LIVRES UN COMPTE SPECIAL D'ACTIONNAIRE N(degree)
1424 (CI-APRES LE "COMPTE GAGE")
ET D'Y TRANSFERER LES INSTRUMENTS FINANCIERS CI-APRES :
1.887.132 actions (soit 65 % a la date des presentes) de la societe Howmet S.A.,
societe anonyme au capital de FRF 290.328.100,00 ayant son siege social au
68-78, rue du Moulin de
<PAGE>
Cage, 92230 Gennevilliers, France, immatriculee au Registre du Commerce et des
Societes de Nanterre, sous le numero B 562 109 801, d'une valeur nominale de 100
Francs chacune,
ci-apres designes les "Instruments Financiers"
ET CONSTITUE EN GAGE LE COMPTE GAGE
AU BENEFICE DE :
Les Preteurs dont la liste figure en Annexe 1 des presentes, parties a un
contrat de pret (ci-apres le "Contrat de Pret ") en date du 16 decembre 1997 et
intitule "Credit Agreement" ainsi que leurs cessionnaires et successeurs
successifs qui deviendront parties au Contrat de Pret conformement a l'article
XIII du Contrat de Pret, representes par The First National Bank of Chicago, une
societe de droit de l'Etat de l'Illinois, dont le siege social se trouve a One
First National Plaza, Chicago, Illinois 60670, U.S.A., (sous reserve de la
designation d'un nouvel Agent conformement a l'article 11.12 du Contrat de
Pret), representee par Monsieur David G. Dixon, dument habilite a l'effet des
presentes,
ci-apres designe "le Beneficiaire"
EN GARANTIE DU PAIEMENT DES SOMMES DUES AU TITRE DE L'OBLIGATION CI-APRES
DEFINIE :
Nature :
- ------
Toutes les obligations du Constitutant a l'egard de l'Agent des Suretes et des
Preteurs (i) au titre du Contrat de Pret ("Credit Agreement") et des autres
documents de pret ("Loan Documents") (tels que definis dans le Contrat de Pret,
incluant, sans limitation, tous autres obligations et endettement du Constituant
en vertu du Contrat de Pret) auxquels le Constituant est partie, et l'execution
par le Constituant de tous les termes, conditions et accords contenus dans le
Contrat de Pret et autres documents de pret ("Loan Documents"), (ii) en vertu ou
au titre de tout contrat financier ("Financial Contract" tel que defini dans le
Contrat de Pret), et l'execution par le Constituant de tous les termes,
conditions et accords qui y sont contenus, ainsi que (iii) tous les couts,
charges et depenses encourus par l'Agent des Suretes en relation avec la
preservation ou la mise en oeuvre de ses droits en vertu du Contrat de
Nantissement et du Contrat de Pret incluant les documents de pret ("Loan
Documents"), les contrats financiers ("Financial Contracts") ou tout autre
document etablissant ou garantissant de telles obligations.
<PAGE>
Montant Maximum :
- ---------------
Le montant maximum des sommes dues au titre du Contrat de Pret soit trois cent
millions de Dollars ($300,000,000) en principal, augmente des interets, interets
de retard, penalites, indemnites, commissions, frais et accessoires et autres
paiements y afferents stipules au Contrat de Pret incluant les montants qui
pourraient etre dues par le Constituant en vertu des documents de pret ("Loan
Documents") et les contrats financiers ("Financial Contracts").
ci-apres designee la "Creance Garantie"
DANS LES CONDITIONS SUIVANTES :
Conformement aux dispositions de l'article 29 de la loi n(degree) 83-1 du 3
janvier 1983, modifiee par la loi n(degree) 96-597 du 2 juillet 1996, le
Constituant affecte en nantissement au benefice du Beneficiaire, le Compte Gage
en garantie du paiement de l'integralite des sommes dues, en principal,
interets, frais et accessoires, au titre de la Creance Garantie jusqu'a son
complet remboursement.
Le Constituant declare que les Instruments Financiers ne font l'objet d'aucune
indisponibilite a quelque titre que ce soit, autre qu'au titre de la presente
declaration. Les Instruments Financiers, ceux qui leur sont substitues ou les
completent, de quelque maniere que ce soit, sont compris dans l'assiette du
gage.
Le Constituant ne pourra pas disposer des Instruments Financiers conformement
aux termes du Contrat de Nantissement, dont le Teneur de Compte declare avoir eu
connaissance.
Si la Creance Garantie est declaree exigible conformement au contrat constatant
la Creance Garantie, pour quelque cause que ce soit, le Beneficiaire pourra
proceder a la realisation du gage conformement aux textes en vigueur. Les frais
resultant de la realisation du gage demeureront a la charge du Constituant et
seront imputes sur le produit de cette realisation.
Le Teneur de Compte procedera a cette realisation sur demande ecrite du
Beneficiaire.
Les frais relatifs aux presentes seront a la charge du Constituant.
La presente declaration de gage est soumise au droit francais. Toute
contestation relative a la validite, l'interpretation ou l'execution des
presentes sera de la competence du tribunal de commerce de Nanterre.
Fait a Asnieres
le 30 janvier 1998
en trois (3) exemplaires
Pour constitution du nantissement :
- ---------------------------------
<PAGE>
Par : Howmet Corporation
- -------------------------------------
Titre : Mr. Mark.F Lasker
<PAGE>
<TABLE>
<CAPTION>
ANNEXE 1
--------
Liste des Preteurs au Contrat de Pret
- ------------------------------------------------------------------------------------------------------------------------------------
Banks Address Participation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza, Chicago, $34,000,000
Illinois 60670, U.S.A., Attn : Timothy J. King
Ph. : (312) 732-6456
Fax : (312) 732-3885
- ------------------------------------------------------------------------------------------------------------------------------------
MELLON BANK, N.A. 400 South Hope St. $23,000,000
5th Floor
Los Angeles, CA 90071
Attention : Lawrence C. Ivey
Ph. : (213) 553-9543
Fax : (213) 629-0492
- ------------------------------------------------------------------------------------------------------------------------------------
WACHOVIA BANK, N.A. 191 Peachtree Street NE $23,000,000
Atlanta, GA 30303
Attention : U.S Corporate
Ph : (404) 332-6210
Fax : (404) 332-6048
- ------------------------------------------------------------------------------------------------------------------------------------
BANK OF MONTREAL 115 South LaSalle Street $27,000,000
11th Floor
Chicago, IL 60603
Attention : Joanna Bellocq
Ph : (212) 605-1647
Fax : (212) 605-1451
- ------------------------------------------------------------------------------------------------------------------------------------
ABN AMRO BANK, N.V. 135 South LaSalle Street $33,000,000
Suite 2805
Chicago, IL 60603
Attention : Robert Decker
Ph : (312) 904-2949
Fax : (312) 606-8428
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Banks Address Participation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK OF AMERICA NATIONAL 555 South Flower Street $27,000,000
TRUST & SAVINGS ASSOCIATION 11th Floor
Los Angeles, CA 90071
Attention : Dawn Esser
Ph. : (213) 228-2820
Fax : (213) 623-1959
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BANQUE NATIONALE DE PARIS 180 Montgomery Street $23,000,000
3rd Floor
San Francisco, CA 94104
Attention : D. Guy Gibb
Ph : (415) 956-0707
Fax : (415) 296-8954
- ------------------------------------------------------------------------------------------------------------------------------------
THE NOTHERN TRUST COMPANY
50 South LaSalle Street $23,000,000
Chicago, IL 60675
Attention : John E. Burda
Ph : (312) 444-4575
Fax : (312) 444-5055
- ------------------------------------------------------------------------------------------------------------------------------------
BANKERS 130 Liberty Street $33,000,000
TRUST COMPANY New York, NY 10006
Attention : Anthony LoGrippo
Ph : (212) 250-4886
Fax : (212) 250-7218
- ------------------------------------------------------------------------------------------------------------------------------------
$27,000,000
CREDIT SUISSE FIRST BOSTON 11 Madison Avenue
20th Floor
New York, NY 10010-3629
Attention : Mark A. Sampson
Ph : (212) 325-3641
Fax : (212) 325-8319
- ------------------------------------------------------------------------------------------------------------------------------------
FLEET NATIONAL BANK One Federal Street $27,000,000
MSN-MA-OF0308
Boston, MA 02211
Attention : Robert C. Rubino
Ph : (617) 346-0574
Fax : (617) 346-0585
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ATTESTATION DE NANTISSEMENT
DE COMPTE D'INSTRUMENTS FINANCIERS
(article 29 de la loi n(degree) 83-1 du 3 janvier 1983,
modifiee par la loi du n(degree) 96-597 du 2 juillet 1996)
Connaissance prise de la Declaration de Gage de Compte d'Instruments Financiers
. en date du 30 janvier 1998
. signee par : Howmet Corporation., une societe de l'Etat du Delaware
(U.S.A.), dont le siege social se trouve P.O.Box 1960, 475 Steamboat
Road, Greenwich, Connecticut 06836-1960, U.S.A., representee par
Monsieur Mark.F Lasker, dument habilite aux fins des presentes,
(le "Constituant"),
. au benefice des Preteurs parties a un contrat de pret (ci-apres le
"Contrat de Pret") en date du 16 decembre 1997 et intitule "Credit
Agreement" ainsi que leurs cessionnaires et successeurs successifs qui
deviendront parties au Contrat de Pret conformement a l'article XIII du
Contrat de Pret, representes par The First National Bank of Chicago,
une societe de droit de l'Etat de l'Illinois, dont le siege social se
trouve a One First National Plaza, Chicago, Illinois 60670, U.S.A.,
(sous reserve de la designation d'un nouvel Agent conformement aux
dispositions de l'article 11.12 du Contrat de Pret), elle-meme
representee par Monsieur David G. Dixon, dument habilite a l'effet des
presentes,
(le "Beneficiaire"),
Ci-apres la "Declaration de Gage",
Nous soussignee, Howmet S.A., societe anonyme au capital de FRF 290.328.100,00,
situee au 68-78, rue du Moulin de Cage, 92230 Gennevilliers, France,
immatriculee au Registre du Commerce et des Societes de Nanterre, sous le numero
B 562 109 801,
agissant en qualite de Teneur du Compte Gage,
1/ attestons par la presente l'ouverture et le nantissement du compte
d'instruments financiers:
<PAGE>
dont les references sont les suivantes :
Compte d'Instruments Financiers N(degree)1424 ouvert au nom de la
Societe Howmet Corporation ainsi qu'il est indique dans la
Declaration de Gage,
2/ donnons inventaire des instruments financiers ci-apres :
1.887.132 actions representant 65% de la participation detenue par le
Constituant dans le capital de la societe Howmet S.A. ;
3/ prenons acte de :
l'interdiction faite au Constituant de disposer des instruments
financiers inscrits dans le Compte Gage, conformement aux termes du
Contrat de Nantissement en date de ce jour vise dans la Declaration
de Gage,
4/ acceptons d'exercer la mission de controle en resultant.
Fait aGennevilliers
le 1998
Howmet S.A en qualite de
Teneur de Compte
Par:
Titre:
<PAGE>
EXHIBIT C
FORM OF SUBSIDIARY GUARANTY
(Attached)
<PAGE>
GUARANTY
THIS GUARANTY (this "Guaranty") is made as of the 16th day of December,
1997, by Blade Receivables Corporation, a Nevada corporation, Howmet Cercast
(U.S.A.), Inc., a Delaware corporation, Howmet Management Services, Inc., a
Delaware corporation, Howmet Refurbishment, Inc., a Delaware corporation,
Turbine Components Corporation, a Connecticut corporation, Howmet Research
Corporation, a Delaware corporation, Warner Commerce Corporation, a Delaware
corporation, Howmet Sales and Services, Inc., a Delaware corporation, Howmet-
Tempcraft, Inc., an Ohio corporation, Howmet Thermatech Canada, Inc., a Delaware
corporation, Howmet Transport Services, Inc., a Delaware corporation, Sprayform
Technologies International, L.L.C., a Delaware limited liability company
(collectively, the "Initial Guarantors" and along with any New Subsidiaries
which become parties to this Agreement by executing an Addendum hereto in the
form attached as Annex I, the "Guarantors") in favor of the Agent, for the
ratable benefit of the Lenders, under (and as defined in) the Credit Agreement
referred to below;
WITNESSETH:
WHEREAS, Howmet Corporation, a Delaware corporation (the "Borrower"), The
First National Bank of Chicago, as contractual representative (the "Agent"), and
certain Lenders have entered into a certain Credit Agreement dated as of
December 26, 1997 (as same may be amended, modified, supplemented and/or
restated, and as in effect from time to time, the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for extensions of credit
to be made by the Lenders to the Borrower;
WHEREAS, it is a condition precedent to the initial extensions of credit by
the Lenders under the Credit Agreement that each of the Guarantors (constituting
all the domestic Subsidiaries of the Borrower) execute and deliver this
Guaranty, whereby each of the Guarantors shall guarantee the payment when due,
subject to Section 8 hereof, of all principal, interest, letter of credit
---------
reimbursement obligations and other amounts that shall be at any time payable by
the Borrower under the Credit Agreement, the Notes and the other Loan Documents;
and
WHEREAS, in consideration of the financial and other support that the
Borrower has provided, and such financial and other support as the Borrower may
in the future provide, to the Guarantors, and in order to induce the Lenders and
the Agent to enter into the Credit Agreement, each of the Guarantors is willing
to guarantee the obligations of the Borrower under the Credit Agreement, the
Notes, and the other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION l. Definitions. Terms defined in the Credit Agreement and not
-----------
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
SECTION 2. Representations, Warranties and Covenants. Each of the
-----------------------------------------
Guarantors represents and warrants (which representations and warranties shall
be deemed to have been renewed at the time of the making of any Loan or issuance
of any Facility LC) that:
(a) It is a corporation, limited liability company, partnership or
other commercial entity duly incorporated or formed, validly existing and in
good standing under the laws of its jurisdiction of incorporation or formation
and has all requisite authority to conduct its business as a foreign Person in
each jurisdiction in which its business is conducted, except where the failure
to have such requisite authority would not have a Material Adverse Effect.
(b) It has the power and authority and legal right to execute and
deliver this Guaranty and to perform its obligations hereunder. The execution
and delivery by it of this Guaranty and the performance by it of its obligations
hereunder have been duly authorized by proper proceedings, and this Guaranty
constitutes a legal, valid and binding obligation of such Guarantor enforceable
against such Guarantor in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
(c) Neither the execution and delivery by it of this Guaranty, nor the
consummation by it of the transactions herein contemplated, nor compliance by it
with the terms and provisions hereof, will violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on it or its
certificate or articles of incorporation or by-laws, limited liability company
or partnership agreement or the provisions of any indenture, instrument or
material agreement to which it is a party or is subject, or by which it, or its
property, is bound, or conflict with or constitute a default thereunder, or
result in the creation or imposition of any Lien in, of or on its property
pursuant to the terms of any such indenture, instrument or material agreement.
No order, consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, any Governmental
Authority, is required to authorize, or is required in connection with the
execution, delivery and performance by it of, or the legality, validity, binding
effect or enforceability against the it of, this Guaranty.
In addition to the foregoing, each of the Guarantors covenants that,
so long as any Lender has any Commitment outstanding under the Credit Agreement
or any amount payable under the Credit Agreement, or any Note or any other
Obligations shall remain unpaid, it will, and, if necessary, will enable the
Borrower to, fully comply with those covenants and agreements of the Borrower
applicable to such Guarantor set forth in the Credit Agreement.
<PAGE>
SECTION 3. The Guaranty. Subject to Section 8 hereof, each of the
------------ ---------
Guarantors hereby unconditionally guarantees, jointly with the other Guarantors
and severally, the full and punctual payment when due (whether at stated
maturity, upon acceleration or otherwise) of the Obligations, including, without
limitation, (i) the principal of and interest on each Loan made to and each Note
issued by the Borrower pursuant to the Credit Agreement, (ii) any Reimbursement
Obligations of the Borrower, (iii) all other amounts payable by the Borrower
under the Credit Agreement and the other Loan Documents (all of the foregoing,
subject to the provisions of Section 8 hereof, being referred to collectively as
---------
the "Guaranteed Obligations"). Upon failure by the Borrower to pay punctually
any such amount, each of the Guarantors agrees that it shall forthwith on demand
pay such amount at the place and in the manner specified in the Credit
Agreement, any Note or the relevant Loan Document, as the case may be. Each of
the Guarantors hereby agrees that this Guaranty is an absolute, irrevocable and
unconditional guaranty of payment and is not a guaranty of collection.
SECTION 4. Guaranty Unconditional. Subject to Section 8 hereof, the
---------------------- ---------
obligations of each of the Guarantors hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, indulgence, compromise, waiver
or release of or with respect to the Guaranteed Obligations or any part
thereof or any agreement relating thereto, or with respect to any
obligation of any other guarantor of any of the Guaranteed Obligations,
whether (in any such case) by operation of law or otherwise, or any failure
or omission to enforce any right, power or remedy with respect to the
Guaranteed Obligations or any part thereof or any agreement relating
thereto, or with respect to any obligation of any other guarantor of any of
the Guaranteed Obligations;
(ii) any modification or amendment of or supplement to the Credit
Agreement, any Note, or any other Loan Document, including, without
limitation, any such amendment which may increase the amount of the
Obligations guaranteed hereby;
(iii) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, of any
collateral securing the Guaranteed Obligations or any part thereof, any
other guaranties with respect to the Guaranteed Obligations or any part
thereof, or any other obligation of any person or entity with respect to
the Guaranteed Obligations or any part thereof, or any nonperfection or
invalidity of any direct or indirect security for the Guaranteed
Obligations;
(iv) any change in the corporate, partnership or other existence,
structure or ownership of the Borrower or any other guarantor of any of the
Guaranteed Obligations, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Borrower or any other guarantor of
the Guaranteed
<PAGE>
Obligations, or any of their respective assets or any resulting release or
discharge of any obligation of the Borrower or any other guarantor of any
of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights which the
Guarantors may have at any time against the Borrower, any other guarantor
of any of the Guaranteed Obligations, the Agent, any Lender or any other
Person, whether in connection herewith or in connection with any unrelated
transactions, provided that nothing herein shall prevent the assertion of
--------
any such claim by separate suit or compulsory counterclaim;
(vi) the enforceability or validity of the Guaranteed Obligations or any
part thereof or the genuineness, enforceability or validity of any
agreement relating thereto or with respect to any collateral securing the
Guaranteed Obligations or any part thereof, or any other invalidity or
unenforceability relating to or against the Borrower or any other guarantor
of any of the Guaranteed Obligations, for any reason related to the Credit
Agreement, any other Loan Document, or any provision of applicable law or
regulation purporting to prohibit the payment by the Borrower or any other
guarantor of the Guaranteed Obligations, of any of the Guaranteed
Obligations;
(vii) the failure of the Agent to take any steps to perfect and maintain
any security interest in, or to preserve any rights to, any security or
collateral for the Guaranteed Obligations, if any;
(viii) the election by, or on behalf of, any one or more of the Lenders,
in any proceeding instituted under Chapter 11 of Title 11 of the United
States Code (11 U.S.C. 101 et seq.) (the "Bankruptcy Code"), of the
application of Section 1111(b)(2) of the Bankruptcy Code;
(ix) any borrowing or grant of a security interest by the Borrower, as
debtor-in-possession, under Section 364 of the Bankruptcy Code;
(x) the disallowance, under Section 502 of the Bankruptcy Code, of all
or any portion of the claims of any of the Lenders or the Agent for
repayment of all or any part of the Guaranteed Obligations;
(xi) the failure of any other Guarantor to sign or become party to this
Guaranty or any amendment, change, or reaffirmation hereof; or
(xii) any other act or omission to act or delay of any kind by the
Borrower, any other guarantor of the Guaranteed Obligations, the Agent, any
Lender or any other Person or any other circumstance whatsoever which
might, but for the provisions of this Section 4, constitute a legal or
---------
equitable discharge of any Guarantor's obligations hereunder.
<PAGE>
SECTION 5. Discharge Only Upon Payment In Full: Reinstatement In Certain
-------------------------------------------------------------
Circumstances. Each of the Guarantors' obligations hereunder shall remain in
- -------------
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Commitments and all Facility LCs issued under the Credit Agreement
shall have terminated or expired. If at any time any payment of the principal
of or interest on any Loan, any Reimbursement Obligation or any other amount
payable by the Borrower or any other party under the Credit Agreement or any
other Loan Document is rescinded or must be otherwise restored or returned upon
the insolvency, bankruptcy or reorganization of the Borrower or otherwise, each
of the Guarantors' obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
SECTION 6. General Waivers. Each of the Guarantors irrevocably waives
---------------
acceptance hereof, presentment, demand or action on delinquency, protest, the
benefit of any statutes of limitations and, to the fullest extent permitted by
law, any notice not provided for herein, as well as any requirement that at any
time any action be taken by any Person against the Borrower, any other guarantor
of the Guaranteed Obligations, or any other Person.
SECTION 7. Subordination of Subrogation. Until the Obligations have been
----------------------------
indefeasibly paid in full in cash, the Guarantors (i) shall have no right of
subrogation with respect to such Obligations and (ii) waive any right to enforce
any remedy which the Lenders, LC Issuers or the Agent now have or may hereafter
have against the Borrower, any endorser or any guarantor of all or any part of
the Obligations or any other Person, and the Guarantors waive any benefit of,
and any right to participate in, any security or collateral given to the
Lenders, the LC Issuers and the Agent to secure the payment or performance of
all or any part of the Obligations or any other liability of the Borrower to the
Lenders or LC Issuers. Should any Guarantor have the right, notwithstanding the
foregoing, to exercise its subrogation rights, each Guarantor hereby expressly
and irrevocably (a) subordinates any and all rights at law or in equity to
subrogation, reimbursement, exoneration, contribution, indemnification or set
off that the Guarantor may have to the indefeasible payment in full in cash of
the Obligations and (b) waives any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Obligations are indefeasibly
paid in full in cash. Each Guarantor acknowledges and agrees that this
subordination is intended to benefit the Agent and the Lenders and shall not
limit or otherwise affect such Guarantor's liability hereunder or the
enforceability of this Guaranty, and that the Agent, the Lenders and their
respective successors and assigns are intended third party beneficiaries of the
waivers and agreements set forth in this Section 7.
---------
SECTION 8. Limitation. Notwithstanding any provision herein
----------
contained to the contrary, each Guarantor's liability under this Guaranty (which
liability is in any event in addition to amounts for which such entity may be
primarily liable) shall be limited to an amount not to exceed as of any date of
determination the greater of:
<PAGE>
(a) the net amount of all Loans advanced to the Borrower under this
Agreement and then re-loaned or otherwise transferred to, or for the
benefit of, such Guarantor; and
(b) the amount which could be claimed by the Agent and the Lenders
from such Guarantor under this Guaranty without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law after taking
into account, among other things, such Guarantor's right of contribution
and indemnification from each other Guarantor under Section 9.
---------
SECTION 9. Contribution with Respect to Guaranty Obligations.
-------------------------------------------------
(a) To the extent that any Guarantor shall make a payment under this
Guaranty (a "Guarantor Payment") which, taking into account all other Guarantor
Payments then previously or concurrently made by any other Guarantor, exceeds
the amount which such Guarantor would otherwise have paid if each Guarantor had
paid the aggregate Obligations satisfied by such Guarantor Payment in the same
proportion that such Guarantor's "Allocable Amount" (as defined below) (as
determined immediately prior to such Guarantor Payment) bore to the aggregate
Allocable Amounts of each of the Guarantors as determined immediately prior to
the making of such Guarantor Payment, then, following indefeasible payment in
----
full in cash of the Obligations and termination of the Commitments, such
Guarantor shall be entitled to receive contribution and indemnification payments
from, and be reimbursed by, each other Guarantor for the amount of such excess,
pro rata based upon their respective Allocable Amounts in effect immediately
- --- ----
prior to such Guarantor Payment.
(b) As of any date of determination, the "Allocable Amount" of any
Guarantor shall be equal to the maximum amount of the claim which could then be
recovered from such Guarantor under this Guaranty without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.
(c) This Section 9 is intended only to define the relative rights of
---------
the Guarantors and nothing set forth in this Section 9 is intended to or shall
---------
impair the obligations of the Guarantors, jointly and severally, to pay any
amounts as and when the same shall become due and payable in accordance with the
terms of this Agreement.
(d) The parties hereto acknowledge that the rights of contribution
and indemnification hereunder shall constitute assets of the Guarantor to which
such contribution and indemnification is owing.
<PAGE>
(e) The rights of the indemnifying Guarantors against other
Guarantors under this Section 9 shall be exercisable upon the full and
---------
indefeasible payment of the Obligations and the termination of the Commitments.
SECTION 10. Stay of Acceleration. If acceleration of the time for payment
--------------------
of any amount payable by the Borrower under the Credit Agreement, any Note or
any other Loan Document is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Note or any other Loan
Document shall nonetheless be payable by each of the Guarantors hereunder
forthwith on demand by the Agent.
SECTION 11. Notices. All notices, requests and other communications to
-------
any party hereunder shall be given in the manner prescribed in Article XIV of
the Credit Agreement with respect to the Agent at its notice address therein and
with respect to any Guarantor at the address set forth in the Credit Agreement
for notices to the Borrower or such other address or telecopy number as such
party may hereafter specify for such purpose by notice to the Agent in
accordance with the provisions of such Article XIV.
SECTION 12. No Waivers. No failure or delay by the Agent or any Lender in
----------
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided in this Guaranty, the Credit Agreement, the
Notes, and the other Loan Documents shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 13. Successors and Assigns. This Guaranty is for the benefit of
----------------------
the Agent and the Lenders and their respective successors and permitted assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, the Notes, or the other Loan Documents in accordance with the
respective terms thereof, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Guaranty shall be binding upon each of the Guarantors and their respective
successors and assigns.
SECTION 14. Changes in Writing. Neither this Guaranty nor any provision
------------------
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the Guarantors and the Agent with the consent of the
Required Lenders (or all of the Lenders if required pursuant to the terms of
Section 8.3 of the Credit Agreement).
- -----------
SECTION 15. CHOICE OF LAW. THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE
-------------
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS,
BUT GIVING EFFECT TO APPLICABLE FEDERAL LAWS.
<PAGE>
SECTION 16. CONSENT TO JURISDICTION.
-----------------------
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF
---------------------- --------------
THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY
BY STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, BUT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF CHICAGO, ILLINOIS. EACH OF THE PARTIES HERETO WAIVES IN ALL
DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE
--------------
TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. EACH OF THE GUARANTORS AGREES THAT THE AGENT,
-------------------
ANY LENDER, ANY LC ISSUER OR THE SWING LINE LENDER SHALL HAVE THE RIGHT TO
PROCEED AGAINST SUCH GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER SUCH GUARANTOR OR
(2) REALIZE ON ANY COLLATERAL FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. EACH GUARANTOR AGREES THAT
IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY
SUCH PERSON TO REALIZE ON ANY COLLATERAL FOR THE OBLIGATIONS OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. EACH OF THE GUARANTORS
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH
PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
--------------
SECTION 17. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVE
--------------------
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
SECTION 18. No Strict Construction. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Guaranty. In the event an
ambiguity or question of intent or interpretation arises, this Guaranty shall be
construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Guaranty.
<PAGE>
SECTION 19. Taxes, Expenses of Enforcement, etc. All payments required to
-----------------------------------
be made by any of the Guarantors hereunder shall be made without setoff or
counterclaim and free and clear of and without deduction or withholding for or
on account of, any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any political or
taxing authority thereof, provided, however, that if any of the Guarantors is
required by law to make such deduction or withholding, such Guarantor shall
forthwith pay to the Agent or any Lender, as applicable, such additional amount
as results in the net amount received by the Agent or any Lender, as applicable,
equaling the full amount which would have been received by the Agent or any
Lender, as applicable, had no such deduction or withholding been made. The
Guarantors also agree to reimburse the Agent and the Lenders for any reasonable
costs, internal charges and out-of-pocket expenses (including reasonable
attorneys' fees and time charges of attorneys for the Agent and the Lenders,
which attorneys may be employees of the Agent or the Lenders) paid or incurred
by the Agent or any Lender in connection with the collection and enforcement of
amounts due under the Loan Documents, including without limitation this
Guaranty.
SECTION 20. Setoff. At any time after all or any part of the Guaranteed
------
Obligations have become due and payable (by acceleration or otherwise), each
Lender and the Agent may, without notice to any Guarantor and regardless of the
acceptance of any security or collateral for the payment hereof, appropriate and
apply toward the payment of all or any part of the Guaranteed Obligations (i)
any indebtedness due or to become due from such Lender or the Agent to any
Guarantor, and (ii) any moneys, credits or other property belonging to any
Guarantor, at any time held by or coming into the possession of such Lender or
the Agent or any of their respective affiliates.
SECTION 21. Financial Information. Each Guarantor hereby assumes
---------------------
responsibility for keeping itself informed of the financial condition of the
Borrower and any and all endorsers and/or other Guarantors of all or any part of
the Guaranteed Obligations, and of all other circumstances bearing upon the risk
of nonpayment of the Guaranteed Obligations, or any part thereof, that diligent
inquiry would reveal, and each Guarantor hereby agrees that none of the Lenders
or the Agent shall have any duty to advise such Guarantor of information known
to any of them regarding such condition or any such circumstances. In the event
any Lender or the Agent, in its sole discretion, undertakes at any time or from
time to time to provide any such information to a Guarantor, such Lender or the
Agent shall be under no obligation (i) to undertake any investigation not a part
of its regular business routine, (ii) to disclose any information which such
Lender or the Agent, pursuant to accepted or reasonable commercial finance or
banking practices, wishes to maintain confidential or (iii) to make any other or
future disclosures of such information or any other information to such
Guarantor.
SECTION 22. Severability. Wherever possible, each provision of this
------------
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such
<PAGE>
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions
of this Guaranty.
SECTION 23. Merger. This Guaranty represents the final agreement of each
------
of the Guarantors with respect to the matters contained herein and may not be
contradicted by evidence of prior or contemporaneous agreements, or subsequent
oral agreements, between the Guarantor and any Lender or the Agent.
SECTION 24. Release of Guarantor. In the event that all of the capital
--------------------
stock of one or more of the Guarantors is sold or otherwise disposed of (except
to [the Borrower or] any of the Borrower's Subsidiaries) in connection with a
sale permitted by the Credit Agreement and the proceeds of such sale or sales or
from such release are applied in accordance with the provisions of the Credit
Agreement, to the extent required to be so applied, such Guarantor shall be
released from this Guaranty and this Guaranty shall, as to each such Guarantor
or Guarantors, terminate, and have no further force or effect (it being
understood and agreed that a sale of one or more Persons that own directly or
indirectly all of the capital stock or partnership interests of any Guarantor
shall be deemed to be a sale of such Guarantor for the purposes of this Section
-------
24.)
- --
SECTION 25. Conflict of Agreements. To the extent the terms of this
----------------------
Guaranty conflict with the terms of the Credit Agreement, the terms of the
Credit Agreement shall control.
SECTION 26. Headings. Section headings in this Guaranty are for
--------
convenience of reference only and shall not govern the interpretation of any
provision of this Guaranty.
<PAGE>
IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be
duly executed by its authorized officer as of the day and year first above
written.
BLADE RECEIVABLES CORPORATION
HOWMET CERCAST (U.S.A.), INC.
HOWMET MANAGEMENT SERVICES, INC.
HOWMET REFURBISHMENT, INC.
TURBINE COMPONENTS CORPORATION
HOWMET RESEARCH CORPORATION
WARNER COMMERCE CORPORATION
HOWMET SALES AND SERVICES, INC.
HOWMET-TEMPCRAFT, INC.
HOWMET THERMATECH CANADA, INC.
HOWMET TRANSPORT SERVICES, INC.
In each case:
By: _______________________________
Its: _______________________________
and
SPRAYFORM TECHNOLOGIES INTERNATIONAL, L.L.C.
By: HOWMET CORPORATION, a member
By:___________________________________
Its:___________________________________
S-1
<PAGE>
ANNEX I TO GUARANTY
-------------------
Reference is hereby made to the Guaranty (the "Guaranty") made as of the
[____] day of December, 1997, by Blade Receivables Corporation, a Nevada
corporation, Howmet Cercast (U.S.A.), Inc., a Delaware corporation, Howmet
Management Services, Inc., a Delaware corporation, Howmet Refurbishment, Inc., a
Delaware corporation, Turbine Components Corporation, a Connecticut corporation,
Howmet Research Corporation, a Delaware corporation, Warner Commerce
Corporation, a Delaware corporation, Howmet Sales and Services, Inc., a Delaware
corporation, Howmet-Tempcraft, Inc., an Ohio corporation, Howmet Thermatech
Canada, Inc., a Delaware corporation, Howmet Transport Services, Inc., a
Delaware corporation, Sprayform Technologies International, L.L.C., a Delaware
limited liability company (collectively, the "Initial Guarantors" and along with
any other Subsidiaries which have become parties thereto and together with the
undersigned, the"Guarantors") in favor of the Agent, for the ratable benefit of
the Lenders, under the Credit Agreement. Capitalized terms used herein and not
defined herein shall have the meanings given to them in the Guaranty. By its
execution below, the undersigned [NAME OF NEW GUARANTOR], a _________________,
agrees to become, and does hereby become, a Guarantor under the Guaranty and
agrees to be bound by such Guaranty as if originally a party thereto. By its
execution below, the undersigned represents and warrants as to itself that all
of the representations and warranties contained in Section 2 of the Guaranty are
---------
true and correct in all respects as of the date hereof.
IN WITNESS WHEREOF, [NAME OF NEW GUARANTOR], a ______________ has executed
and delivered this Annex I counterpart to the Guaranty as of this __________ day
of _________, ____.
[NAME OF NEW GUARANTOR]
By:___________________________________________
Title:_________________________________________
::ODMA\PCDOCS\CHICAGO4\518699\4
S-2
<PAGE>
<PAGE>
EXHIBIT D
FORM OF SWING LINE NOTE
Attached
<PAGE>
SWING LINE NOTE
December 16, 1997
HOWMET CORPORATION, a Delaware corporation (the "Borrower"), promises to
pay to the order of THE FIRST NATIONAL BANK OF CHICAGO (the "Swing Line
Lender") the aggregate unpaid principal amount of the Swing Line Loans made by
the Swing Line Lender to the Borrower pursuant to Article II of the Credit
----------
Agreement hereinafter referred to (as the same may be amended, modified,
supplemented or restated the "Agreement"; capitalized terms used herein and not
otherwise defined herein are used with the meanings attributed to them in the
Agreement), in immediately available funds on the dates and at the offices of
the Swing Line Lender, specified in the Agreement, together with interest on the
unpaid principal amount hereof at the rates and on the dates determined in
accordance with the Agreement. The Borrower shall pay the principal of and
accrued and unpaid interest on each Swing Line Loan in the amounts and at the
times set forth in the Agreement.
The Swing Line Lender shall, and is hereby authorized to, record on the
schedule attached hereto, or otherwise record in accordance with its usual
practice, the date and amount and other pertinent terms of, and the interest
rate and interest payment dates applicable to, each Swing Line Loan, and the
date and amount of each principal payment hereunder.
This Swing Line Note is issued pursuant to, and is entitled to the benefits
of, the Credit Agreement dated as of December 16, 1997 among the Borrower, The
First National Bank of Chicago, as Agent, and the lenders parties thereto,
including the Swing Line Lender, to which Credit Agreement, as it may be
amended, modified, restated or supplemented from time to time, reference is
hereby made for a statement of the terms and conditions governing this Swing
Line Note, including the terms and conditions under which this Swing Line Note
may be prepaid or its maturity date accelerated.
The Borrower hereby waives presentment, demand, protest and notice of any
kind. No failure to exercise, and no delay in exercising, any rights hereunder
on the part of the holder hereof shall operate as a waiver of such rights.
This Note shall be governed by, and construed in accordance with, the
internal laws of the State of Illinois but giving effect to applicable federal
laws.
HOWMET CORPORATION
By:
Title:
<PAGE>
Schedule of Swing Line Loans and Payments of Principal
to
Swing Line Loan Note of Howmet Corporation
Dated December 16, 1997
<TABLE>
<CAPTION>
Applicable Interest Rate and Interest Other
Currency Principal Amount Basis for Payment Pertinent Principal Amount
Date of Loan of Loan Calculation Dates Terms Paid
- ---- ------------------ ---------------- ----------------- ------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT E
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
(the "Assignor") and __________________ (the "Assignee") is dated as of
, 19__. The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
---------------------
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached
hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
-------------------------
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
--------------
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Exhibit "1" attached hereto
-----------
has been delivered to the Agent. Such Notice of Assignment must include any
consents required to be delivered to the Agent by Section 13.3.1 of the Credit
--------------
Agreement. In no event will the Effective Date occur if the payments required
to be made by the Assignee to the Assignor on the Effective Date under Sections
--------
4 and 5 hereof are not made on the proposed Effective Date. The Assignor will
- - -
notify the Assignee of the proposed Effective Date no later than the Business
Day prior to the proposed Effective Date. As of the Effective Date, (i) the
Assignee shall have the rights and obligations of a Lender under the Loan
Documents with respect to the rights and obligations assigned to the Assignee
hereunder and (ii) the Assignor shall relinquish its rights and be released from
its corresponding obligations under the Loan Documents with respect to the
rights and obligations assigned to the Assignee hereunder.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the Assignee
-------------------
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. [In consideration for the sale
<PAGE>
and assignment of Loans hereunder, (i) the Assignee shall pay the Assignor, on
the Effective Date, an amount equal to the principal amount of the portion of
all Floating Rate Loans assigned to the Assignee hereunder and (ii) with respect
to each Fixed Rate Loan made by the Assignor and assigned to the Assignee
hereunder which is outstanding on the Effective Date, (a) on the last day of the
Interest Period therefor or (b) on such earlier date agreed to by the Assignor
and the Assignee or (c) on the date on which any such Fixed Rate Loan becomes
due (by acceleration or otherwise)(the date as described in the foregoing
clauses (a), (b) or (c) being hereinafter referred to as the "Payment Date"),
- ----------- --- ---
the Assignee shall pay the Assignor an amount equal to the principal amount of
the portion of such Fixed Rate Loan assigned to the Assignee which is
outstanding on the Payment Date. If the Assignor and the Assignee agree that the
Payment Date for such Fixed Rate Loan shall be the Effective Date, they shall
agree to the interest rate applicable to the portion of such Loan assigned
hereunder for the period from the Effective Date to the end of the existing
Interest Period applicable to such Fixed Rate Loan (the "Agreed Interest Rate")
and any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period from the
Effective Date to but not including the Payment Date is not paid by the Borrower
with respect to any Fixed Rate Loan sold by the Assignor to the Assignee
hereunder, the Assignee shall pay to the Assignor interest for such period on
the portion of such Fixed Rate Loan sold by the Assignor to the Assignee
hereunder at the applicable rate provided by the Credit Agreement. In the event
a prepayment of any Fixed Rate Loan which is existing on the Payment Date and
assigned by the Assignor to the Assignee hereunder occurs after the Payment Date
but before the end of the Interest Period applicable to such Fixed Rate Loan,
the Assignee shall remit to the Assignor the excess of the prepayment penalty
paid with respect to the portion of such Fixed Rate Loan assigned to the
Assignee hereunder over the amount which would have been paid if such prepayment
penalty was calculated based on the Agreed Interest Rate. The Assignee will also
promptly remit to the Assignor (i) any principal payments received from the
Agent with respect to Fixed Rate Loans prior to the Payment Date and (ii) any
amounts of interest on Loans and fees received from the Agent which relate to
the portion of the Loans assigned to the Assignee hereunder for periods prior to
the Effective Date, in the case of Floating Rate Loans or fees, or the Payment
Date, in the case of Fixed Rate Loans, and not previously paid by the Assignee
to the Assignor.] In the event that either party hereto receives any payment to
which the other party hereto is entitled under this Assignment Agreement, then
the party receiving such amount shall promptly remit it to the other party
hereto./1/
5. FEES PAYABLE BY THE ASSIGNEE. The [Assignee shall pay to the Assignor
----------------------------
a fee on each day on which a payment of interest facility fees is made under the
Credit Agreement with respect to the amounts assigned to the Assignee hereunder
(other than a payment of interest or facility fees for the period prior to the
Effective Date or, in the case of Fixed Rate Loans, the Payment Date, which the
Assignee is obligated to deliver to the Assignor pursuant to Section 4 hereof).
---------
The amount of such fee shall be the
- ---------------------------------------
/1/Each Assignor may insert its standard payment provisions in lieu of the
payment terms included in this Exhibit.
<PAGE>
difference between (i) the interest or fee, as applicable, paid with respect to
the amounts assigned to the Assignee hereunder and (ii) the interest or fee, as
applicable, which would have been paid with respect to the amounts assigned to
the Assignee hereunder if each interest rate was ___ of 1% less than the
interest rate paid by the Borrower or if the facility fee was ___ of 1% less
than the facility fee paid by the Borrower, as applicable. In addition, the]
Assignee agrees to pay ___% of the recordation fee required to be paid to the
Agent in connection with this Assignment Agreement./2/
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
--------------------------------------------------------------
LIABILITY. The Assignor represents and warrants that it is the legal and
- ---------
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has
-------------------------------
received a copy of the Credit Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information at it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, (iii) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Loan Documents as
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (v) agrees that
its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA
- --------------------------------------
/2/ Bracketed language may be modified by Assignor and Assignee.
<PAGE>
and that its rights, benefits and interests in and under the Loan Documents will
not be "plan assets" under ERISA, and (vii) if applicable, attaches the forms
prescribed by the Internal Revenue Service of the United States certifying that
the Assignee is entitled to receive payments under the Loan Documents without
deduction or withholding of any United States federal income taxes.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
---------
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
----------------------
have the right pursuant to Section 13.3.1 of the Credit Agreement to assign the
--------------
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under Sections 4, 5 and 8 hereof.
---------- - -
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate
----------------------------------
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
----------------
of Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
-------------
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
-------
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:_______________________________________________
Title:
[NAME OF ASSIGNEE]
By:_______________________________________________
Title:
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
CREDIT AGREEMENT DATED AS OF DECEMBER 16, 1977 BY AND AMONG HOWMET
CORPORATION, A DELAWARE CORPORATION, THE FINANCIAL INSTITUTIONS FROM TIME
TO TIME PARTY THERETO AS THE "LENDERS" AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CONTRACTUAL REPRESENTATIVE FOR THE LENDERS.
2. Date of Assignment Agreement: _____________, 19__
3. Amounts (As of Date of Item 2 above):
a. Total of Commitments under
Credit Agreement $_____________
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement ____________% /3/
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $______________
4. Assignee's Aggregate
Commitment Amount
Purchased Hereunder: $
5. Proposed Effective Date: ________________________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: __________________________ By:_____________________________
Title: ________________________ Title: ___________________________
- ----------------------------------------
/3/ Percentage taken to 10 decimal places
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
ADMINISTRATIVE INFORMATION SHEET
--------------------------------
Attach Assignor's Administrative Information Sheet, which must
include notice addresses for the Assignor and the Assignee
(Sample form attached)
<PAGE>
ASSIGNOR INFORMATION
--------------------
Contact:
- -------
Name: Telephone No.:
Fax No.: Telex No.:
Answerback:
------------------------------
PAYMENT INFORMATION:
- --------------------
Name & ABA # of Destination Bank:
Account Name & Number for Wire Transfer:
Other Instructions:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDRESS FOR NOTICES FOR ASSIGNOR:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ASSIGNEE INFORMATION
--------------------
Credit Contact:
- --------------
Name: Telephone No.:
Fax No.: Telex No.:
Answerback:
------------------------------
KEY OPERATIONS CONTACTS:
- -----------------------
Booking Installation: Booking Installation:
Name: Name:
Telephone No.: Telephone No.:
Fax No.: Fax No.:
Telex No.: Telex No.:
Answerback: Answerback:
------------------------------
PAYMENT INFORMATION:
- --------------------
Name & ABA # of Destination Bank:
Account Name & Number for Wire Transfer:
Other Instructions:
-------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDRESS FOR NOTICES FOR ASSIGNEE:
- --------------------------------- ----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FNBC INFORMATION
----------------
Assignee will be called promptly upon receipt of the signed agreement.
INITIAL FUNDING CONTACT: SUBSEQUENT OPERATIONS CONTACT:
- ----------------------- -----------------------------
Name:
_______________ _________________________________
Telephone No.: _________________________________ Telephone No.: (312)
----------
Fax No.: _______________________________________ Fax No.: (312)
----------
FNBC Telex No.: 190201 (Answerback: FNBC UT)
------------------------------
FNBC WIRE INSTRUCTIONS: The First National Bank of Chicago, ABA # 071000013
- ----------------------
<PAGE>
ADDRESS FOR NOTICES FOR FNBC: One First National Plaza, Chicago, IL 60670
- ----------------------------
Attn: Agency/Compliance Division, Suite 0353
Fax No. (312) 732-2038 or (312) 732-4339
<PAGE>
EXHIBIT "1"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
-------------
- ----------------------------------------------------, 19__
To: The First National Bank of Chicago, as Agent
One First National Plaza
Chicago, IL 60670
[Howmet Corporation
475 Steamboat Road
Greenwich, CT 06836-1960]/4/
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered
to [the Borrower and]** the Agent pursuant to Section 13.3.2 of the Credit
--------------
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of ___________, 19__ (the "Assignment"), pursuant to which,
among other things, the Assignor has sold, assigned, delegated and transferred
to the Assignee, and the Assignee has purchased, accepted and assumed from the
Assignor the percentage interest specified in Item 3 of Schedule 1 of all
outstandings, rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3 of Schedule 1. The Effective Date of the Assignment
shall be the later of the date specified in Item 5 of Schedule 1 or two Business
Days (or such shorter period as agreed to by the Agent) after this Notice of
Assignment and any consents and fees required by Sections 13.3.1 and 13.3.2 of
--------------- ------
the Credit Agreement have been delivered to the Agent, provided that the
Effective Date shall not occur if any condition precedent agreed to by the
Assignor and the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the assignment and delegation referred to herein. The Assignor
will confer with the Agent
- -------------------------------------------
/4/ Include reference to Borrower if required.
<PAGE>
before the date specified in Item 5 of Schedule 1 to determine if the Assignment
Agreement will become effective on such date pursuant to Section 3 hereof, and
---------
will confer with the Agent to determine the Effective Date pursuant to Section 3
---------
hereof if it occurs thereafter. The Assignor shall notify the Agent if the
Assignment Agreement does not become effective on any proposed Effective Date as
a result of the failure to satisfy the conditions precedent agreed to by the
Assignor and the Assignee. At the request of the Agent, the Assignor will give
the Agent written confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before
the Effective Date the processing fee of $3,500 required by Section 13.3.2 of
--------------
the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacement notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Borrower
upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that its
rights, benefits, and interests in and under the Loan Documents will not be
"plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the
Loan Documents in accordance with the terms thereof. The Assignee acknowledges
that the Agent has no duty to supply information with respect to the Borrower or
the Loan Documents to the Assignee until the Assignee becomes a party to the
Credit Agreement. /5/
NAME OF ASSIGNOR NAME OF ASSIGNEE
By:_____________________________ By:_______________________________________
Title:__________________________ Title:____________________________________
- ---------------------------------
/5/ May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
<PAGE>
ACKNOWLEDGED AND CONSENTED TO [ACKNOWLEDGED AND CONSENTED TO
BY THE FIRST NATIONAL BANK BY HOWMET CORPORATION]
OF CHICAGO, as Agent
By:________________________________ By:____________
Title:_______________________________ Title:_________
<PAGE>
EXHIBIT F
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To: The First National Bank of Chicago,
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Credit Agreement, dated as of December 16, 1997 (as the same may be
amended, modified, supplemented or restated, the "Credit Agreement"), among
Howmet Corporation (the "Borrower"), the Lenders named therein and the
Agent. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the
following standing money transfer instructions with respect to the proceeds of
Advances or other extensions of credit from time to time until receipt by the
Agent of a specific written revocation of such instructions by the Borrower,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the Borrower in accordance with Section 14.1 of the
------------
Credit Agreement or based on any telephonic notice made in accordance with
Section 2.14 of the Credit Agreement.
- ------------
Facility Identification Number(s)_______________________________________
Customer/Account Name_____________________________________________
Transfer Funds To__________________________________________________
For Account No.___________________________________________________
Reference/Attention To _____________________________________________
AUTHORIZED OFFICER (CUSTOMER REPRESENTATIVE) Date:__________________________
___________________________
(Please Print)
- ------------------------------------
BANK OFFICER NAME Date:___________________________
___________________________
(Please Print)
- ------------------------------------
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
<PAGE>
EXHIBIT G
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of December 16, 1997 (as amended, modified, restated,
renewed or extended from time to time, the "Agreement") among the Howmet
Corporation, a Delaware corporation (the "Borrower"), the lenders party thereto
and The First National Bank of Chicago, as Agent for the Lenders. Unless
otherwise defined herein, capitalized terms used in this Compliance Certificate
have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below;
4. Schedule I attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct;
and
5. Schedule II hereto sets forth the determination of the Applicable
Facility Fee Rate, Applicable LC Fee Percentage and Applicable Margins
commencing on the fifth Business Day following the delivery hereof.
<PAGE>
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
The foregoing certifications, together with the computations set forth
in Schedule I and Schedule II hereto and the financial statements delivered with
this Certificate in support hereof, are made and delivered this ____ day of
______________, _______.
By:
Name:
Title:
<PAGE>
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, ____
<TABLE>
<S> <C>
A. MINIMUM INTEREST COVERAGE RATIO (Section 7.20.1)
--------------
1. Consolidated Net Income (as defined) $
a. + Consolidated Interest Expense (as defined) to
the extent deducted from revenues in determining
Consolidated Net Income $
b. + Expense for income taxes paid $
c. + Receivables Facility Financing Costs (as defined
and to the extent not otherwise included) $
d. = Sum of Lines 1., 1.a., 1.b. and 1.c.
(Consolidated EBIT) $
2. Consolidated Interest Expense (as defined) $
3. Interest Coverage Ratio
(Ratio of lines 1.d. / 2 above) ____ to 1.00
4. Minimum Interest Coverage Ratio 2.25 to 1.00
B. MAXIMUM LEVERAGE RATIO (Section 7.20.2)
--------------
1. Indebtedness (as defined) of Borrower and its Consolidated
Subsidiaries shown shown on balance sheet $
a. + all Receivables Facility Attributed Indebtedness
(as defined) of the Borrower and its
Consolidated Subsidiaries $
b. + all Off Balance Sheet Liabilities (as defined)
of the Borrower and its Consolidated
Subsidiaries $
c. = Consolidated Total Debt
(Sum of Lines 1, 1.a. and 1.b.) $
</TABLE>
<PAGE>
2. Consolidated EBITDA
a. Consolidated EBIT (Line A.l.d. above) $___________
b. + Depreciation $___________
c. + Amortization $___________
d. = Consolidated EBITDA $___________
3. Leverage Ratio
(Ratio of lines 1.c. / 2.d. above) _____to 1.00
4. Maximum Leverage Ratio 3.25 to 1.00
C. MINIMUM CONSOLIDATED NET WORTH (Section 7.20.3)
--------------
1. Consolidated Net Worth (as defined) $
2. Minimum Consolidated Tangible Net Worth
($525,000,000 + 50% of Consolidated Net Income
earned since December 31, 1997) $
<PAGE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
Borrower's Applicable Margin, Applicable Facility Fee Rate and
Applicable LC Fee Percentage Calculation
Based on determination of the Leverage Ratio as set forth on Schedule I to
Compliance Certificate, Line B.3., determine the applicable Level Status from
the Pricing Schedule.
Leverage Ratio ________ to 1.00
Level that applies pursuant to Pricing Schedule: Level ___ Status
Applicable Facility Fee Rate applicable to Level ___ Status _____%
Applicable Margin and Applicable LC Fee
Percentage applicable to Level ___ Status _____%
All-In Funded rate applicable to Level ___ Status _____%
<PAGE>
SCHEDULE 1
TO HOWMET CORPORATION
CREDIT AGREEMENT
Existing LCs
------------
(Definitions; Section 3.2)
Attached
<PAGE>
<TABLE>
<CAPTION>
EFFECTIVE EXPIRATION CURRENT
Number DATE BANK DATE DATE BENEFICIARY AMOUNT STATUS
- ----------- --------- ----------------------- --------- ---------- ------------------------------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
0002 6-Dec-95 First Chicago 11-Dec-96 11-Dec-97 State of Connecticut -- Dept. of 250,000 250,000
Economic Development
0003 6-Dec-95 First Chicago 11-Dec-96 11-Dec-97 Morristown Utility Commission 25,000 25,000
0004 6-Dec-95 First Chicago 11-Dec-96 11-Dec-97 Travelers Indemnity Company of 3,400,000 5,300,000
Illinois
004A 24-Jul-96 11-Dec-96 11-Dec-97 Travelers Indemnity Company of 5,300,000
Illinois
0005 6-Dec-95 First Chicago 11-Dec-96 11-Dec-97 Connecticut Indemnity Co. 50,000 50,000
0007 15-Aug-96 ABN-AMRO Bank 15-Aug-96 15-Aug-97 New Jersey Department of 2,000,000 2,000,000
(Replaces Chase) Environmental Protection
0008 Bank of Montreal Canadian Customs 42,254 42,254
</TABLE>
<PAGE>
SCHEDULE 2
TO HOWMET CORPORATION
CREDIT AGREEMENT
Litigation and Contingent Obligations
-------------------------------------
(Section 6.7)
Attached
<PAGE>
1. AAR Engine Group Inc. v. James Stoecker and Howmet Refurbishment, Inc.,
----------------------------------------------------------------------
Case No. 94 L 16039, Circuit Court, Cook County, Illinois
In a lawsuit commenced in 1996 against Borrower's subsidiary Howmet
Refurbishment, Inc., AAR Aviation Trading, Inc. claimed that one of its
former employees, for his own benefit, interfered with AAR's opportunity to
obtain a consignment agreement with American Airlines and instead assisted
HRI in obtaining the contract.
All of the claims against HRI have been dismissed except for a single
claim of civil conspiracy. In addition, the court has made a ruling on one
issue of law related to this remaining claim which will severely limit
AAR's ability to establish its claim. The court made a second ruling which
was favorable to AAR's claim but has been asked to reconsider the matter
and has indicated some willingness to change that ruling. These various
decisions have severely limited AAR's ability to establish its claim. The
commissions at stake could range from $200,000 to $500,000. Borrower
continues to believe that AAR's claim is without merit and is defending the
claim vigorously. Borrower has agreed with the purchaser of its
refurbishment business, United Technologies Corporation, to pay all
liability and expense related to this case.
2. Siemens Claim
-------------
Siemens, A.G., one of Borrower's IGT customers, has asserted a claim
against Borrower relating to a cracking problem discovered in the internal
cored passages on a number of turbine blades provided to this customer on
two different engine models. Borrower is working with the customer to
investigate the situation more fully, and has offered to replace the
components at no charge to Siemens (at an estimated cost to Borrower of $2-
3 million). Siemens, however, has asked for additional reimbursement to
cover its incurred costs in the amount of $10 million. Accordingly,
Borrower will record a fourth quarter 1997 charge with respect to this
matter preliminarily estimated in the $3-4.2 million range after taxes.
The Corporation's general and umbrella insurance carriers have also been
put on notice of this claim.
3. Environmental Matters
---------------------
Borrower has received recent test results indicating levels of
polychlorinated biphenyls ("PCBs") at its Dover, New Jersey facility which
will require remediation. These levels have been reported to the New
Jersey Department of Environmental Protection ("NJDEP"). Borrower is
preparing a work plan to define the risk and to test possible clean-up
options. The statement of work must be approved by the NJDEP pursuant to
an Administrative Consent Order entered into between Borrower and NJDEP on
May 20, 1991 regarding
<PAGE>
clean-up of the site. Various remedies are possible and could involve
expenditures ranging from $2 million to $22 million or more. Borrower has
recorded a $2 million long-term liability as of September 28, 1997 for this
matter. Given the uncertainties, it is possible that the estimated range of
this cost and the amount accrued will change in the near future. The
indemnification discussed below applies to the costs associated with this
matter.
Borrower is currently investigating possible and known contamination
(including soil and groundwater contamination) at the following other North
American facilities currently or previously owned and operated by Borrower:
Whitehall, Michigan; Dover, New Jersey, Branford, Connecticut; Farmington,
Connecticut; and Hillsboro, Texas. Borrower currently estimates that the
total investigation and remediation costs at these facilities will be $1.2
million. Borrower is remediating environmental contamination at five
European facilities. Borrower has conducted an assessment and estimates
actual expenditures at these properties to be $100,000 to $1.3 million.
As a result of off-site waste disposal prior to the December 1995
acquisition of Borrower from Pechiney International (the "Acquisition"),
Borrower is subject to liability for, and is currently involved in certain
matters relating to the investigation and/or remediation of environmental
contamination at properties not owned or operated by Borrower. Borrower has
been or may be named a PRP at the following sites: Barkhampstead Landfill,
Connecticut; Combe Fill South Landfill, New Jersey; PJP Landfill, New
Jersey; Solvent Recovery Service, Connecticut; PCB Treatment Inc. Site,
Missouri; Omega Chemical Corporation Site, California; and SCA Independent
Landfill, Michigan. Borrower currently estimates that its total liability
at these sites will be approximately $2.4 million. Borrower has also
recently been named as a Potentially Responsible Party with respect to the
shipment of liquid and shell waste material in the early 1980s from its
Wichita Falls Casting facility to the Materials Recovery Enterprises
disposal site in Texas. The Corporation believes the volume of shell
material imputed to Borrower in this matter is grossly overstated, but
presently estimates potential liability to be between $100,000 and $1.3
million.
In connection with the Acquisition, Pechiney International and
Pechiney S.A. are required to indemnify Blade for environmental liabilities
and obligations stemming from events occurring or conditions existing prior
to the closing of the Acquisition to the extent such liabilities exceed
$6.0 million. Blade assigned its rights to Borrower with respect to any
such indemnification upon consummation of the Acquisition. Borrower has
recorded a long-term receivable of $2 million related to this
indemnification. There can be no assurance, however, that Pechiney
International and Pechiney S.A. will indemnify Borrower for all such
environmental matters set forth above when demanded by Borrower. If
Pechiney International and Pechiney S.A. do not honor their indemnification
obligations, Borrower likely would be responsible for such matters.
<PAGE>
Borrower's parent company, Howmet International Inc., has contingent
liability exposure for environmental contamination and related costs
associated with certain discontinued mining operations owned and/or
operated by a predecessor in interest until the early 1960s. These
liabilities include approximately $21.3 million in remediation and natural
resource damage liabilities at the Blackbird Mine Site in Idaho and at
least $8.0 million in investigation and remediation costs at the Holden
Mine Site in Washington. Pechiney International and Pechiney, S.A. have
agreed to indemnify Howmet International, Inc. for such environmental when
demanded by Howmet International, Inc. Howmet International, Inc. assigned
its rights to Howmet Holdings and Borrower with respect to any such
indemnification to the extent that either Holdings or Borrower incurs
liability with respect to such matters. If Pechiney International and
Pechiney S.A. do not honor their indemnification obligations, the Company
likely would be responsible for such matters.
4. Stock Appreciation Rights
-------------------------
In the fourth quarter of 1997, the Company will incur a charge related
to its Amended SAR Program (as defined herein) which will be based on the
lower of the initial public offering price per share or the Company's stock
price at December 31, 1997. Based upon the initial public offering price of
$15 per share, the maximum after-tax charge would be $6.2 million or $.06
per share.
5. Costs Associated with this Agreement, Tender Offer for Senior Subordinated
--------------------------------------------------------------------------
Notes, and Retirement of Junior Subordinated Notes
--------------------------------------------------
On November 21, 1997, the Company announced that Howmet intends to
make a tender offer to repurchase all of the Senior Subordinated Notes. The
tender offer is conditioned upon completion of this Agreement. If fully
subscribed, will be funded with approximately $140 million of borrowings
under this Agreement. Completion of this Agreement and of the tender offer
is expected to result in after tax interest expense savings (exclusive of
amortization of debt issuance costs) of approximately $3.0 million
annually. The tender offer is expected to be completed by December 31,
1997, and will result in a one-time extraordinary after tax charge to
earnings preliminarily estimated to be $12 million to $13 million (assuming
the tender offer is fully subscribed) in the fourth quarter, including
write-off of unamortized debt issuance costs. Subject to market conditions,
the Company will also consider using a portion of the New Credit Facility
to refinance or retire some or all of its outstanding 10% junior
subordinated notes.
<PAGE>
SCHEDULE 3
TO HOWMET CORPORATION
CREDIT AGREEMENT
Subsidiaries
------------
(Section 6.8)
Attached
<PAGE>
SCHEDULE 3
LIST OF SUBSIDIARIES, CONSOLIDATED SUBSIDIARIES,
JURISDICTIONS OF INCORPORATION,
SHAREHOLDINGS, AND PERCENTAGE OF
ASSETS OF FOREIGN SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C>
Blade Receivables Corporation Nevada 1000 Shares (100%) held by Howmet Corporation
Howmet Cercast (Canada), Inc. Canada 1000 Shares (100%) held by Howmet Corporation
Howmet Cercast (U.S.A.), Inc. Delaware 10 Shares (100%) held by Howmet Corporation
Howmet Foreign Sales Corporation U.S. Virgin Islands 10 Shares (100%) held by Howmet Corporation
Howmet Limited (5.5%)* United Kingdom 1,000,001 Shares (99.99%) held by Howmet
Corporation
1 Share held by Roger Hambleton (for the benefit
of Howmet Corporation)
Howmet Management Services, Inc. Delaware 10 Shares (100%) held by Howmet Corporation
Howmet Refurbishment, Inc. Delaware 10 Shares (100%) held by Howmet Corporation
Turbine Components Corporation Connecticut 1,572 Shares Class A Common Stock (100%) held by
Howmet Corporation
7,388 Shares Class B Limited Voting Stock held by
Howmet Corporation
Howmet Research Corporation Delaware 10 Shares (100%) held by Howmet Corporation
Warner Commerce Corporation Delaware 10 Shares (100%) held by Howmet Research
Corporation
Howmet S.A. (6.0%)* France 2,903,211 shares (99.99%) held by Howmet
Corporation
10 shares (.00%) each held by Roland Paul
Michel Devernois
Gilles Deconinck
Mark Lasker
Jack Lambert
John Chluski
Financiere D'Ocquier S.A. France 962,794 Shares (99.99%) held by Howmet S.a.
1 Share (.00%) each held by David Squier
Henri Fine
Roland Paul
Phillipe Vallade
Michel Devernois
Mark Lasker
CIRAL s.n.c. France 78,319 Shares (99.99%) held by Financiere
D'Ocquier S.A.
1 Share (.00%) held by Howmet S.A.
CIRAL IT. s.r.l. Italy 20,790 Shares (99%) held by CIRAL S.A.
210 Shares (1%) held by Financiere D'Ocquier S.A.
Howmet Sales and Services, Inc. Delaware 10 Shares (100%) held by Howmet Corporation
Howmet-Tempcraft, Inc. Ohio 83 Shares (100%) held by Howmet Corporation
Howmet Thermatech Canada, Inc. Delaware 10 Shares (100%) held by Howmet Corporation
Howmet Transport Services, Inc. Delaware 10 Shares (100%) held by Howmet Corporation
Sprayform Technologies International, L.L.C.+ Delaware 51% owned by Howmet Corporation
49% owned by United Technologies Corporation,
Pratt & Whitney Division
</TABLE>
* Indicates, as of the quarter ended September 28, 1997, such Subsidiary's total
assets as a percentage of the consolidated total assets of the Borrower and
its consolidated Subsidiaries.
+ All Subsidiaries are Consolidated Subsidiaries except Sprayform Technologies
International, L.L.C.
<PAGE>
SCHEDULE 4
TO HOWMET CORPORATION
CREDIT AGREEMENT
Indebtedness and Liens
----------------------
(Sections 6.14, 7.10 and 7.14)
Attached
<PAGE>
Schedule 4
Liens (ss6.14), Exceptions to Title (ss7.14(v)), and Indebtedness (ss7.10(ii))
I. LIENS
<TABLE>
<CAPTION>
ST FILE NO. DATE TYPE SECURED PARTY LOCATION SUBJECT
<S> <C> <C> <C> <C> <C> <C>
CT 1663703 12-18-95 UCC-1 First National Bank of Chicago Greenwich, CT Security Agreement
CT 1663710 12-18-95 UCC-1 First National Bank of Chicago Winchester, CT Real Estate
CT 1663711 12-18-95 UCC-1 First National Bank of Chicago Winchester, CT Real Estate
CT 1662708 12-13-95 UCC-1 Manufacturers and Traders Trust Greenwich, CT Receivables Financing
CT 1689935 04-18-96 UCC-1 Manufacturers and Traders Trust Greenwich, CT Receivables Financing
CT 1801092 09-12-97 REL First National Bank of Chicago Branford, CT TCC Release
IN 2023770 12-19-95 UCC-1 First National Bank of Chicago LaPorte, IN Real Estate
IN 2023772 12-19-95 UCC-1 First National Bank of Chicago Greenwich, CT Security Agreement
IN 2147052 09-17-97 REL First National Bank of Chicago Indianapolis, IN HRI Release
MI 64850B 12/19/95 UCC-1 First National Bank of Chicago Whitehall, MI Real Estate
MI 64852B 12/19/95 UCC-1 First National Bank of Chicago Whitehall, MI Security Agreement
MI D182782 1/10/97 UCC-1 First National Bank of Chicago Whitehall, MI Security Agreement
MI D252109 7/1/97 UCC-1 Elkem Metals Company LP Whitehall, MI Electrolytic Chromium
MI 89326B 9/23/97 UCC-1 Magid Glove and Safety Manufacturing Whitehall, MI Work gloves, safety clothing,
Co. L.L.C. safety products
MI 89384B 9/25/97 UCC-1 Magid Glove and Safety Manufacturing Whitehall, MI Work gloves, safety clothing,
Co. L.L.C. safety products
NV 9518384 12-20-95 UCC-1 First National Bank of Chicago Greenwich, CT Security Agreement
NJ 1628441 4/6/95 UCC-1 Shieldalloy Metallurgical Corp. Dover, NJ Consigned alloy inventory
NJ 1672461 12/18/95 UCC-1 First National Bank of Chicago Dover, NJ Security Agreement
NJ 1672462 12/18/95 UCC-1 First National Bank of Chicago Dover, NJ Security Agreement
TN 962-000143 3/1/96 UCC-1 First National Bank of Chicago Morristown, TN Security Agreement
TN 962-000144 3/1/96 UCC-1 First National Bank of Chicago Morristown, TN Security Agreement
TN 971-511869 4/29/97 UCC-1 First National Bank of Chicago Morristown, TN Security Agreement
TX 242234 12-19-95 UCC-1 First National Bank of Chicago Greenwich, CT Security Agreement
TX 713790 09-17-97 UCC-3 First National Bank of Chicago Greenwich, CT Partial Release
VA 197156 12-19-95 UCC-1 First National Bank of Chicago Greenwich, CT Security Agreement
</TABLE>
<PAGE>
Schedule 4
Liens (ss6.14), Exceptions to Title (ss7.14(v)), and Indebtedness (ss7.10(ii))
II. EXCEPTIONS TO TITLE
(SEE ATTACHED SCHEDULE BS TO TITLE POLICIES, LISTING EXCEPTIONS)
A. BRANFORD, CT
B. WINCHESTER, CT
C. LAPORTE, IN
D. WHITEHALL, MI
E. ROCKAWAY (DOVER), NJ
F. CLEVELAND, OH (TEMPCRAFT)
G. MORRISTOWN, TN
H. WICHITA FALLS, TX
I. HAMPTON, VA
<PAGE>
Schedule 4
Liens (ss6.14), Exceptions to Title (ss7.14(v)), and Indebtedness (ss7.10(ii))
III. INDEBTEDNESS
. Amended and Restated Credit Agreement between Howmet International, Howmet
Holdings and Howmet Corporation, various banks, and First National Bank of
Chicago, as Administrative Agent
Debt Value: $29,500,000
. Receivables Financing Facility with Falcon Asset Securitization Corporation
Debt Value: $55,000,000
. Senior Subordinated Notes, Marine Midland Bank, Trustee
Debt Value: 125,000,000
. Guaranty of Howmet Corporation of 50% of the indebtedness of Komatsu-Howmet
Ltd. Debt Value: (Yen)1,135,977,000 (~U.S.$13,109,000)*
. $100,000 American Express Financial Services credit line to support Howmet
Corporation's travel advance program, June 7, 1993
Debt Value: $30,000
. $5,000,000 Visa Procurement Card Credit Agreement with First Bank for
Howmet Corporation, November 29, 1993
Debt Value: $551,426 as of November 23, 1997
. $1,000,000 Visa Procurement Card Credit Agreement with First Bank for
Howmet Refurbishment, Inc., November 29, 1993
Debt Value: $14,793 as of November 23, 1997
. $1,000,000 Visa Procurement Card Credit Agreement with First Bank for
Howmet Research Corporation
Debt Value: $155,824 as of November 23, 1997
. Capital Lease Agreement between CIRAL, S.N.C. and Le District du Pays d'
Evron, dated March 23, 1992
Debt Value: Fr1,194,000 (~U.S.$192,000)
. Fr37,400,000 (original amount) 12.4% capital lease agreement between Howmet
S.A. and C.C. Bail, Societe de Credit Bail Immoblier, dated December 29,
1989,re: Dives sur Mer Factory**
Debt Value: Fr8,898,000 (~U.S.$1,491,000)
____________________
* The Borrower will be indemnified for 50% of any liabilities arising from
these guarantees.
** Le Magnesium Industriel has been merged in Microfusion S.A., now Howmet
S.A. C.C. Bail has assigned the lease to Sofia Mur.
<PAGE>
Schedule 4
Liens (ss6.14), Exceptions to Title (ss7.14(v)), and Indebtedness (ss7.10(ii))
SCHEDULE 5
TO HOWMET CORPORATION
CREDIT AGREEMENT
Investments
-----------
(Section 7.13)
<PAGE>
Schedule 4
Liens (ss6.14), Exceptions to Title (ss7.14(v)), and Indebtedness (ss7.10(ii))
SCHEDULE 5
EXISTING INVESTMENTS IN SUBSIDIARIES AND OTHER INVESTMENTS ((S)7.13(II))
Name of Subsidiary/Investment INVESTMENT VALUE
----------------------------- ----------------
Komatsu Howmet Ltd. (50% Owned) 10,000
Sprayform Technologies LLC (51% Owned) 1,672,000
Howmet Refurbishment Inc. 39,201,000
Howmet Cercast USA, Inc. 15,368,000
Howmet Cercast Canada, Inc. 20,474,000
Howmet Management Services, Inc. 230,000
Howmet Sales and Services, Inc. 2,377,000
Howmet Foreign Sales and Services, Inc. 4,385,000
Howmet Transport Services, Inc. 177,000
Howmet Research Corporation 40,005,000
Warner Commerce Corporation 24,000,000
Howmet Tempcraft, Inc. 14,275,000
Blade Receivable Corporation 60,267,000
Howmet S.A. 64,321,000
Howmet UK 56,945,000
Ciral 17,454,000
Turbine Components Corporation 14,045,000
<PAGE>
Schedule 4
Liens (ss6.14), Exceptions to Title (ss7.14(v)), and Indebtedness (ss7.10(ii))
SCHEDULE 6
TO HOWMET CORPORATION
CREDIT AGREEMENT
Transactions with Affiliates
----------------------------
(Section 7.15)
Agreements of Howmet International Inc. with Parent Affiliates
- --------------------------------------------------------------
1. Management Agreement between Howmet International, Inc. and TCG Holdings,
L.L.C. to be executed as disclosed in the Prospectus of Howmet
International dated November 25, 1997.
2. Services Agreement between Howmet International, Inc. and Thiokol
Corporation to be executed as disclosed in the Prospectus of Howmet
International dated November 25, 1997.
3. Shareholders Agreement among Howmet International, Inc., The Carlyle Group
or an Affiliate thereof and Thiokol Corporation or an Affiliate thereof to
be executed as disclosed in the Prospectus of Howmet International dated
November 25, 1997.
4. Corporate Agreement between Howmet International, Inc. and Thiokol
Corporation to be executed as disclosed in the Prospectus of Howmet
International dated November 25, 1997.
5. Registration Rights Agreement between Howmet International, Inc. and
Carlyle Group or an Affiliate thereof to be executed as disclosed in the
Prospectus of Howmet International dated November 25, 1997.
Agreements with Borrower's Subsidiary Affiliates
- ------------------------------------------------
1. License Agreement between Howmet Limited and Howmet Research Corporation
regarding use of Howmet technology, dated January 1, 1996.
2. License Agreement between Howmet S.A. and Howmet Research Corporation
regarding use of Howmet technology, dated January 1, 1996.
3. Amended and Restated Pooling and Servicing Agreement among Blade
Receivables Corporation as Transferor, Howmet Corporation as Servicer, and
Manufacturers and Traders Trust Coompany as Trustee, dated April 18, 1996.
4. Representation Agreement between Howmet Corporation (Howmet Turbine
Components Corporation) and Howmet Sales and Services, Inc. (HTC Sales,
Inc.), dated January 1, 1986.
5. Export Services Agency Agreement between Howmet Corporation (Howmet Turbine
Components Corporation) and Howmet Foreign Sales Corporation, dated January
1, 1985.
6. Export Commission Agency Agreement between Howmet Corporation (Howmet
Turbine Components Corporation) and Howmet Foreign Sales Corporation, dated
January 1, 1985.
<PAGE>
Schedule 4
Liens (ss6.14), Exceptions to Title (ss7.14(v)), and Indebtedness (ss7.10(ii))
7. Lease of Operhall Research Center,Whitehall, MI by Howmet Research
Corporation, tenant, from Howmet Corporation, Landlord, dated January 1,
1997.
8. Lease of Premises in Whitehall, MI by Sprayform Technologies International,
LLC, tenant from Howmet Corporation, dated April 2, 1997.
9. License Agreement and Technology Transfer Agreement Between Howmet
Corporation and Sprayform Technologies International, LLC, dated April 2,
1997.
10. Howmet Support and Services Agreement Between Howmet Corporation and
Sprayform Technologies International, LLC, dated April 2, 1997.
<PAGE>
EXHIBIT 10.14
AMENDED AND RESTATED TCG MANAGEMENT AGREEMENT
---------------------------------------------
This Amended and Restated Management Agreement ("Agreement"), dated as
of December 2, 1997 is entered into by and between Howmet Corporation, a
Delaware corporation (the "Company"), and TCG Holdings, L.L.C., a Delaware
limited liability company ("TCG").
WHEREAS, the Company and TCG entered into a Management Agreement dated
as of December 13, 1995 (the "Original TCG Management Agreement");
WHEREAS, pursuant to the terms of the IPO Agreement, dated as of
October 8, 1997, by and among Howmet International Inc., a Delaware corporation
and the indirect parent of the Company ("HHI"), Carlyle-Blade Acquisition
Partners, L.P., a Delaware limited partnership and an affiliate of TCG
("Carlyle"), Thiokol Corporation, a Delaware corporation ("Thiokol"), and
Thiokol Holding Company, a Delaware corporation and a wholly-owned subsidiary
of Thiokol, the parties thereto have agreed to amend and restate the Original
TCG Management Agreement as set forth herein.
AGREEMENT
---------
NOW THEREFORE, in consideration of the premises and mutual agreements
set forth in this Agreement, and subject to the terms and conditions set forth
herein, the parties hereby agree as follows:
Section 1. Definitions
--------- -----------
<PAGE>
Capitalized terms used herein, unless otherwise defined herein, shall
have the meanings ascribed to them in the IPO Agreement.
Section 2. Services
--------- --------
A. TCG shall advise and assist the Board of Directors and the Chief
Executive Officer of the Company regarding the formulation and implementation of
the business strategies for the Company and its subsidiaries. TCG shall use its
reasonable best efforts to identify and assist the Company in evaluating
corporate opportunities, including marketing opportunities, and financial
strategies and to assist the Company and its Subsidiaries with respect to
lender, securityholder and public and government relations matters. The precise
nature of the services to be performed hereunder by TCG shall be determined by
the mutual agreement of TCG and the Board of Directors of the Company, and TCG
shall devote such time and resources as are reasonably necessary to provide such
services. In connection with rendering services hereunder, TCG shall designate
certain of its principals and employees to serve on the Board of Directors of
HHI in accordance with the terms of the IPO Agreement. The Company and TCG shall
use their reasonable best efforts to ensure that the services provided by TCG
are performed and documented so as to maximize their allowability under
government contracting rules.
Section 3. Consideration
--------- -------------
In consideration for the management services to be provided by TCG,
the Company shall pay to TCG, and TCG shall be entitled to receive an annual
management fee of $500,000 (the "Annual Management Fee"), accruing quarterly at
the rate of $125,000 (pro rated in the case of any partial quarter), and payable
on the last business day of each calendar quarter and continuing thereafter each
succeeding quarter until termination of this Agreement pursuant to Section 4
below. All such payments shall be subject to compliance with the terms and
conditions
-2-
<PAGE>
of the Amended and Restated Credit Agreement among HHI (formerly
Blade Acquisition Corp.), Howmet Holdings Corporation (formerly Pechinney
Corporation), the Company, various banks, Bankers Trust Company, Citicorp USA,
Inc. and The First National Bank of Chicago, as Managing Agents, Bankers Trust
Company, as Syndication Agent, Citicorp USA, Inc., as Documentation Agent and
The First National Bank of Chicago, as Administrative Agent, dated as of
December 13, 1995 as amended and restated on December 6, 1996. The Annual
Management Fee shall constitute full compensation for the services provided
hereunder by TCG, and shall cover, among other things, compensation for
principals or employees of TCG who serve on the Board of Directors of HHI and
their subsidiaries (provided that, in addition to the annual Management Fee, TCG
shall also, in connection with services rendered hereunder, be reimbursed for
out-of-pocket expenses incurred by TCG, its affiliates and their employees).
Section 4. Term
--------- ----
This Agreement shall take effect as of the date first above written
and shall continue until the earlier of the second anniversary of this Agreement
or such time as Carlyle no longer Beneficially Owns at least 5% of the
outstanding shares of Common Stock.
Section 5. Reimbursement; Indemnification
--------- ------------------------------
A. The Company agrees to reimburse TCG, its affiliates and their respective
directors, officers, employees, agents and controlling persons (each an
"Indemnified Party") promptly upon demand for expenses (including fees and
expenses of legal counsel) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened claim,
or any litigation, proceeding or other action in respect of the engagement of
-3-
<PAGE>
TCG under this Agreement, or any actions taken or omitted or services performed
under, by or in connection with this Agreement. The Company also agrees (in
connection with the foregoing) to indemnify and hold harmless each Indemnified
Party from and against any and all losses, claims, damages and liabilities,
joint or several, to which any Indemnified Party may become subject, including
any amount paid in settlement of any litigation or other action (commenced or
threatened), to which the Company shall have consented in writing (such consent
not to be unreasonably withheld), whether or not any Indemnified Party is a
party and whether or not liability resulted; provided, however, that the Company
shall not be liable pursuant to this Section 5 in respect of any loss, claim,
damage or liability to the extent that a court having competent jurisdiction
shall have determined by final judgment (not subject to further appeal) that
such loss, claim, damage or liability resulted primarily and directly from the
willful misfeasance or gross negligence of such Indemnified Party. The
provisions of this Section 5 shall not apply to claims by any partners of
Carlyle or limited partners of such partners against any one or more of Carlyle,
its partners, their respective general partners, members, managers, principals,
partners, directors, officers, employees or the beneficial owners of such
general partners. The provisions of this Section 5 shall survive any
termination of this Agreement.
Section 6. Miscellaneous
--------- -------------
A. Assignment. This Agreement may not be assigned or transferred by
----------
TCG or the Company without the express written consent of the other party.
B. Amendment. This Agreement may not be amended except by a written
---------
instrument executed by all of the parties.
C. Choice of Law. This Agreement is made under and shall be construed
-------------
in accordance with the laws of the State of New York.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
TCG HOLDINGS, L.L.C., a Delaware
limited liability company
By:__________________________________________
Name:________________________________________
Title:_______________________________________
HOWMET CORPORATION, a Delaware
corporation
By: /s/ Roland A. Paul
________________________________________
Name:________________________________________
Title:_______________________________________
-5-
<PAGE>
Exhibit 10.25
INTERCOMPANY SERVICES AGREEMENT
This Intercompany Services Agreement (this "Agreement") is made and
entered into as of this 2nd day of December, 1997, by and between Howmet
International Inc., a Delaware corporation with headquarters in Greenwich,
Connecticut ("Howmet"), and Thiokol Corporation, a Delaware corporation with
headquarters in Ogden, Utah ("Thiokol").
1. COMMENCEMENT AND TERM OF AGREEMENT
----------------------------------
a. Beginning on the date hereof (the "Effective Date"), Thiokol
shall begin to provide to Howmet the services set forth in Section 2a of this
Agreement ("Corporate Services").
b. Unless terminated earlier by agreement of the parties hereto or
in accordance with its terms, this Agreement shall have a term of three (3)
years from its Effective Date.
2. SERVICES, INSURANCE COVERAGE AND EMPLOYEE BENEFITS
--------------------------------------------------
a. The Corporate Services provided under this Agreement include,
but are not limited to the following:
(1) Tax planning advice and return preparation
(2) Corporate control and Internal audit
(3) Risk management and Insurance (see Section 4 hereof)
(4) Health, safety and environmental
(5) Human resources and employee relations
<PAGE>
(6) Legal services (other than outside counsel services)
(7) Employee benefit plan administration (see Section 5 hereof)
(8) Treasury and cash management
(9) Investor Relations and Public Affairs
(10) Executive Department services
b. To the extent provided in this Agreement, Thiokol may include
Howmet in its insurance coverages ("Insurance"). The foregoing notwithstanding,
the parties hereto recognize that Thiokol is neither an insurance broker nor an
insurance carrier. At no time will Thiokol be required by this Agreement or
otherwise by Howmet to act as an insurance broker or carrier.
c. In addition to the above services and coverages, Thiokol may
provide Howmet employees with benefit plans and programs and the corresponding
administrative services ("Benefit Plans").
3. COSTS AND FEES FOR CORPORATE SERVICES
-------------------------------------
a. In return for Corporate Services provided for herein, Howmet
shall pay Thiokol the costs of the services plus a fee, both amounts determined
by Thiokol from time to time on a basis consistent with its past practices,
recognizing, to the extent practicable, Thiokol's increased ownership of
Howmet's stock and Howmet's requirements for the Corporate Services. Howmet
shall pay these costs and fees in arrears on the last business day of the period
to which the costs and fees relate.
b. In some cases, the services provided to Howmet by Thiokol will
include some services provided by third parties (e.g. insurance brokers and
carriers; actuaries; financial printers). Generally, such third party services
shall
<PAGE>
be billed directly to Howmet with no "mark up" by Thiokol. However, the cost of
Thiokol's arranging for third parties' services shall be billed to Howmet along
with a fee, as described herein.
4. Insurance.
---------
a. If Thiokol arranges for an insurance policy covering only
Howmet risks or interests, the costs of such a policy shall be handled in
accordance with Section 3b, above.
b. If Thiokol arranges for an insurance policy that covers risks
or interests of both Howmet and Thiokol, then the following terms and conditions
shall apply:
(1) Howmet shall, within 30 days of its receipt of a reasonably
detailed invoice from Thiokol, pay the portion of the premiums and other charges
for the Insurance attributable to the coverage provided to Howmet.
Notwithstanding the foregoing, if Thiokol provides Howmet with at least five
days' advance written notice, Howmet agrees to make funds available, as and when
to be paid by Thiokol, to Thiokol so that Thiokol may pay the premiums and other
charges for the Insurance attributable to the coverage provided to Howmet. The
portion of such premiums and other charges payable by Howmet shall be allocated
in good faith by Thiokol in a manner to reflect the cost to Thiokol of the
insurance premiums and other charges that are properly attributable to Howmet
(but without any allocation of Thiokol overhead costs). The Insurance provided
shall be subject to such policies of insurance or self-insurance, and such
guidelines or procedures in respect of insurance or self-insurance, as Thiokol
shall determine. In the event the terms of the Insurance change from those
terms in effect immediately prior to the date hereof, Thiokol agrees (i) to the
extent Thiokol is aware of a material change prior to the effective date of the
<PAGE>
change, to provide notice to Howmet of the change prior to its effective date,
or (ii) otherwise to provide notice to Howmet upon becoming aware of the change.
It is expressly agreed by Howmet and Thiokol that any self-insurance, retention
or deductible shall be for the account of and be an obligation of Howmet, and
that Howmet's obligations in respect of such self-insurance, retention or
deductible shall survive the termination of this Agreement.
(2) Termination of Insurance. Either Howmet or Thiokol may
------------------------
terminate all or any portion of the Insurance at any time on 90 days' prior
written notice to the other party hereto. Notwithstanding the foregoing, so long
as Thiokol beneficially owns shares of capital stock of Howmet possessing 50% or
more of the voting power of all then-outstanding shares of capital stock, Howmet
may not, without the prior written consent of Thiokol, terminate all or any
portion of the Insurance without providing evidence satisfactory to Thiokol in
its sole discretion that Howmet has obtained, or upon termination of such
Insurance will obtain, comparable insurance coverage. In the event all or any
portion of the Insurance is terminated, if appropriate, the charges therefor
shall be adjusted equitably to reflect such termination.
5. EMPLOYEE BENEFIT PLANS
----------------------
a. Plans and Services. Prior to the Effective Date, employees of
------------------
Howmet participated in the employee benefit plans sponsored by Howmet and
administered by Howmet. On and after the Effective Date, employees of Howmet
shall be eligible to participate in Thiokol plans subject to the terms of the
governing plan documents as interpreted by the appropriate plan fiduciaries and
subject to Thiokol's decision whether the inclusion of Howmet employees in a
particular plan is economically justified. On and after the Effective Date,
subject to regulatory requirements, the Thiokol Corporate Benefits Department
will continue to administer those Thiokol plans in which employees of Howmet
<PAGE>
participate in substantially the same manner as it administered the plans prior
to the Effective Date.
b. Direct Cost Reimbursement. Howmet shall reimburse Thiokol for
-------------------------
the direct costs associated with the plans in which Howmet employees
participate. For this purpose, direct costs associated with the plans shall
include those items charged to participating employers as direct costs prior to
the Effective Date which included the cost of the benefits (premiums and
contributions) and administration and management fees of third party providers
and internal personnel. As appropriate, Howmet's allocable share of the direct
costs will be determined consistent with the methodology used prior to the
Effective Date. Thiokol will provide an estimate of the direct costs allocable
to Howmet at the same time such information is provided to other business units
of Thiokol that are participating employers in the plans. Thiokol will invoice
Howmet on a monthly basis and Howmet shall make payment to Thiokol within 30
days of receipt of an invoice. Notwithstanding the foregoing, if Thiokol
provides Howmet with at least five days' advance written notice, Howmet agrees
to make funds available, as and when to be paid by Thiokol, to Thiokol so that
Thiokol may make contributions or payments to, for the account of, or in respect
of current or former employees or their spouses of other beneficiaries (i) under
tax-qualified benefit plans or (ii) that are generally made on a predetermined
periodic basis. Experience rated insurance contracts will be actualized as soon
as practicable after the end of each year; Howmet shall promptly reimburse
Thiokol the amount of any increased cost and Thiokol will promptly refund to
Howmet any overcharges.
c. Termination. Howmet or Thiokol may terminate participation by
-----------
Howmet in any plan sponsored by Thiokol by giving 180 days' written notice to
the other party, except that the date of termination may be extended by either
party if the termination of Howmet's participation would adversely affect the
tax qualification of the plan or its compliance with applicable regulatory
<PAGE>
requirements. The termination date may also be extended to the earlier of an
additional 180 days or the expiration date of any contract pursuant to which
benefits are provided if termination within 180 days would adversely affect
rates or rights of other employees or if more time is necessary to effect an
orderly termination of Howmet's employees participation. If the termination
date is extended, Thiokol and Howmet will cooperate reasonably in establishing a
mutually agreeable termination date. Notice of less than 180 days may be given
by mutual written consent of Howmet and Thiokol. Unless Thiokol otherwise
agrees, termination shall be effective with respect to the entire plan. Thiokol
will promptly submit an invoice for, and Howmet shall promptly pay to Thiokol,
all costs incurred prior to the date of termination, including costs resulting
from the termination. All services offered by the Thiokol Corporate Benefits
Department with respect to such terminated benefit shall cease. Thiokol
thereafter will not be responsible for providing benefits of a like type to
Howmet employees.
d. Changes: Additional Services. Howmet may request changes in
-----------------------------
plan terms or services; approval of such changes shall be in the sole discretion
of Thiokol, which will not be exercised unreasonably. Howmet may request
additional services that, if agreeable to Thiokol, will be provided on a direct
cost basis to Howmet. From time to time, Thiokol may, as plan sponsor, make
changes in the benefit plans or in the administration of any of the plans.
e. Howmet Plans. Except for the executive compensation plans
------------
referenced in Exhibit A, on or after the Effective Date, no employee of Howmet
who is covered by a benefit plan sponsored by any entity other than Thiokol
shall be entitled to simultaneous coverage under any plan sponsored by Thiokol
that provides a benefit of similar type, regardless of whether the other plan
provides more or less coverage than the Thiokol-sponsored plan. Howmet shall be
solely responsible for benefits delivery and administration of plans covering
its employees that are not sponsored by Thiokol. A list of plans not
<PAGE>
sponsored by Thiokol that covered Howmet employees prior to the Effective Date
is attached as Exhibit B.
f. Regulatory Compliance. In the event Howmet provides benefit
---------------------
plans to its employees, other than those sponsored by Thiokol, Howmet will have
sole responsibility to comply with all regulatory requirements with respect to
Howmet plans. Notwithstanding the foregoing, Thiokol and Howmet agree to
cooperate fully with each other in the administration and coordination of
regulatory and administrative requirements that apply jointly to Howmet and
Thiokol. Such coordination, upon request, will include (but is not limited to)
the following: Sharing payroll data for determination of highly compensated
employees, providing census information (including accrued benefits) for
purposes of running discrimination tests, providing actuarial reports for
purposes of determining the funded status of any plan, review and coordination
of insurance and other third party contracts, and providing for review all
summary plan descriptions, requests for determination letters, insurance
contracts, forms 5500, financial statement disclosures, and plan documents.
g. Executive Compensation. Certain executives also participate in
----------------------
executive compensation and benefit programs offered by Thiokol. These plans are
listed in Exhibit A and are administered by the Executive Vice President, Human
Resources and Administration of Thiokol.
h. Certain Notices. In the event there is an "ERISA Event,"
---------------
Thiokol shall advise Howmet as soon as reasonably practicable after Thiokol
determines the ERISA Event has occurred. For purposes of this Section 4(h), an
"ERISA Event" means (i) the termination of a Thiokol plan or the filing of a
Notice of Intent to Terminate such a plan, in either case, under Section 4041(c)
of the Employee Retirement Income Security Act of 1974, as amended from time to
time ("ERISA"); (ii) the institution of proceedings by the Pension Benefit
Guaranty
<PAGE>
Corporation (or any successor thereof) to terminate a Thiokol plan or to appoint
a trustee to administer such a plan or the receipt of notice by Thiokol that
such an action has been taken with respect to such a plan; (iii) any substantial
accumulated funding deficiency within the meaning of Section 412 of the Internal
Revenue Code of 1986, as amended (the "Code") or Section 302 of ERISA is
incurred with respect to any plan sponsored by Thiokol and no waiver of that
deficiency has been obtained from the Internal Revenue Service; (iv) the
Internal Revenue Service determines that a Thiokol plan that is intended to be
qualified under Section 401 of the Code fails to meet the applicable
requirements of the Code and disqualifies the plan; or (v) an amendment to a
plan sponsored by Thiokol that results in a significant underfunding described
in Section 401(a)(29) of the Code or Section 307 of ERISA.
i. No Third Party Beneficiary. Nothing in this Agreement is
--------------------------
intended to entitle any employee or individual to any benefit or compensation
from Howmet or Thiokol or to otherwise establish or create any rights on the
part of any third party. Nothing in this agreement is intended to restrict or
limit Thiokol in the exercise of its rights or the fulfillment of its duties as
plan sponsor.
6. COOPERATION. Thiokol and Howmet shall cooperate with each other
-----------
with respect to all provisions of this Agreement and the Corporate Services,
Insurance (if any) and Benefit Plans (if any) provided hereunder.
7. LIMITATION OF LIABILITY. Except as may be provided in Section 8
-----------------------
below, Thiokol, its subsidiaries, affiliates, directors, officers, employees,
agents and permitted assigns (each, a "Thiokol Party") shall not be liable to
Howmet, any subsidiary or any affiliate, director, officer, employee, agent or
permitted assign of Howmet or any of its subsidiaries, (each, a "Howmet Party")
for any liabilities, claims, damages, losses or expenses, including, but not
limited to, any special, indirect, incidental or consequential damages, of a
Howmet Party arising
<PAGE>
in connection with this Agreement, the Corporate Services, the Insurance or the
Benefit Plans.
8. THIOKOL INDEMNIFICATION. Thiokol shall indemnify, defend and hold
-----------------------
harmless each of the Howmet Parties from and against all liabilities, claims,
damages, losses and expenses (including, but not limited to, court costs and
reasonable attorneys' fees) (collectively referred to as "Damages") of any kind
or nature, of third parties unrelated to any Howmet Party caused by or arising
in connection with the gross negligence or willful misconduct of any employee of
Thiokol in connection with the performance of the Corporate Services or the
administration of the Benefit Plans, or provision of the Insurance, except to
the extent that Damages were caused directly or indirectly by acts or omissions
of any Howmet Party; provided however, that in the case of a Benefit Plan,
Howmet's right of indemnification also shall extend to claims of Howmet's
employees but shall not extend to any Damages that otherwise would have been
owed in the absence of such gross negligence or willful misconduct.
Notwithstanding the foregoing, Thiokol shall not be liable for any special,
indirect, incidental, or consequential damages relating to such third party
claims. In the event that Howmet knows of a claim that may be the subject of
indemnification under this Section, it shall promptly notify Thiokol of such
claim and Thiokol, in its sole discretion, may defend, settle, or otherwise
litigate such claim.
9. HOWMET INDEMNIFICATION. Howmet shall indemnify, defend and hold
----------------------
harmless each of the Thiokol Parties, from and against all Damages of any kind
or nature, caused by or arising in connection with Howmet's failure to fulfill
Howmet's obligations hereunder, except to the extent that such failure is
caused, directly or indirectly, by acts or omissions of any Thiokol Party.
Notwithstanding the foregoing, Howmet shall not be liable for any special,
indirect, incidental or consequential damages relating to such claims.
<PAGE>
10. INFORMATION. Subject to applicable law, each party hereto covenants
-----------
and agrees to provide the other party with all information regarding itself and
transactions under this Agreement as are required by such other party to comply
with all applicable federal, state, county and local laws, ordinances,
regulations and codes, including, but not limited to, securities laws and
regulations.
11. CONFIDENTIAL INFORMATION. Howmet and Thiokol hereby covenant and
------------------------
agree to hold in trust and maintain confidential, except as otherwise required
by law, all Confidential Information relating to the other party or any of its
subsidiaries. Confidential Information shall mean all information disclosed by
either party to the other in connection with this Agreement whether orally,
visually, in writing or in any other tangible form, and includes, but is not
limited to, technical, economic and business data, know-how, flow sheets,
drawings, business plans, computer information data bases, and the like.
Without prejudice to the rights and remedies of any party to this Agreement, a
party disclosing any Confidential Information to the other party in accordance
with the provisions of this Agreement shall be entitled to equitable relief by
way of an injunction if the other party hereto breaches or threatens to breach
any provision of this Section 11.
12. ASSIGNMENT. Except as otherwise provided herein, neither party may
----------
assign or transfer any of its rights or duties under this Agreement to any
person or entity without the prior written consent of the other party.
13. NOTICES. Any notice, instruction, direction or demand under the
-------
terms of this Agreement required to be in writing will be duly given upon
delivery, if delivered by hand, facsimile transmission or intercompany mail, or
five (5) days after posting if sent by certified mail, return receipt requested
to the following addresses:
<PAGE>
Thiokol:
Thiokol Corporation
2475 Washington Blvd.
Ogden, Utah 84401-2398
Attention: Daniel S. Hapke, Jr.
Senior Vice President and General Counsel
Telecopy No.: (801) 629-2279
and
Howmet:
Howmet International Inc.
475 Steamboat Road
Greenwich, CT 06836-1960
Attention: Roland A. Paul
Vice President, General Counsel and Secretary
Telecopy No.: (203) 625-8771
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 13.
14. GOVERNING LAW. This Agreement shall be construed in accordance with
-------------
and governed by the laws of the State of Utah except its choice of law rules and
except to the extent preempted by federal law.
<PAGE>
15. SUSPENSION. The obligations of any party to perform any acts
----------
hereunder may be suspended if such performance is prevented by fires, strikes,
embargoes, riot, invasion, governmental interference, inability to secure goods
or materials, or other circumstances outside the control of the parties.
16. SEVERABILITY. If any provision of this Agreement shall be invalid
------------
or unenforceable, such invalidity or unenforceability shall not render the
entire Agreement invalid. Rather, the Agreement shall be construed as if not
containing the particular invalid or unenforceable provision, and the rights and
obligations of each party shall be construed and enforced accordingly.
17. RIGHTS UPON ORDERLY TERMINATION; SURVIVAL. Upon termination or
-----------------------------------------
expiration of this Agreement or any of the Services, Insurance or Plans
described herein, each party shall, upon request, forthwith return to the other
party all reports, paper, materials and other information required to be
provided to the other party by this Agreement. In addition, each party shall
assist the other in the orderly termination of this Agreement or any of the
Services, Insurance or Plans described herein. Notwithstanding any termination
of this Agreement, the obligations of the parties hereto to make payments
hereunder and the provisions of Sections 7, 8, 9 and 11 shall survive.
18. AMENDMENT. This Agreement may only be amended by a written
---------
agreement executed by all of the parties hereto.
19. ENTIRE AGREEMENT. This Agreement, including the exhibits hereto,
----------------
constitutes the entire agreement between the parties, and supersedes all prior
agreements, representations, negotiations, statements or proposals related to
the subject matter hereof.
<PAGE>
20. COUNTERPARTS. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed an original and all of which, when
taken together, shall constitute one agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives.
THIOKOL CORPORATION
By: /s/ Richard L. Corbin
----------------------
Name: Richard L. Corbin
---------------------
Title: Senior Vice President
---------------------
HOWMET INTERNATIONAL INC.
By: /s/ Roland A. Paul
---------------------
Name:
---------------------
Title:
---------------------
<PAGE>
EXHIBIT A
EXECUTIVE COMPENSATION PLANS
(TBD)
<PAGE>
EXHIBIT B
PLANS NOT SPONSORED BY THIOKOL THAT COVERED
HOWMET EMPLOYEES PRIOR TO THE EFFECTIVE DATE
(TBD)
<PAGE>
EXHIBIT 10.26
AGREEMENT AND
AMENDMENT TO STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT AND AMENDMENT (this "Amendment"), dated as of November
__, 1997, is made by and between Howmet Corporation, a Delaware corporation (the
"Company"), and David L. Squier (the "Executive") and amends that certain Stock
Appreciation Right Agreement by and between the Company and the Executive (the
"Agreement"). Defined terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Agreement.
WHEREAS, the Company has previously granted to the Executive the Stock
Appreciation Rights provided for in the Agreement; and
WHEREAS, the Company desires to limit the potential value of the Stock
Appreciation Rights in exchange for certain options to purchase common stock of
Howmet International Inc. (formerly known as Blade Acquisition Corp.) to be
granted to the Executive in connection herewith;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
---------
1. The provisions of Paragraph 2 of this Article I and Article II of this
Amendment shall become effective only upon the later to occur of (a) the first
date on which persons holding at least 80% of the Stock Appreciation Rights
granted by the Company prior to the date hereof have executed an agreement and
amendment in the same form as this Agreement and Amendment, and (b) the closing
of the IPO; provided that, in the event the events set forth in clauses (a) and
--------
(b) above shall not have occurred on or prior to January 31, 1998, this
Amendment shall be terminated, its provisions shall become null and void, and
the Agreement, as currently in effect, shall continue in effect in accordance
with its terms.
2. The Company agrees to grant to the Executive, on the closing date of
the IPO, options ("Options") to purchase a number of shares of Blade Common
Stock (as defined in the Agreement) equal to 50 times the number of Stock
Appreciation Rights granted to the Executive pursuant to the Agreement (or 80%
thereof, in the event the Executive elects to receive a 1998 Payout (as defined
below)), at an exercise price per share equal to the IPO Price (as defined
below). The Options shall vest and become exercisable in 25% increments on
January 1 each year beginning 1999 until fully vested. The Options shall expire
on the eighth anniversary date of their granting. The Options shall be subject
to additional terms and conditions to be set forth in a stock option plan to be
adopted by the Company or its corporate parent and/or a stock option grant
agreement to be entered into between the Executive and the Company or its
corporate parent, including, without limitation, terms and provisions that (a)
accelerate the vesting and/or exercisability of Options upon the occurrence of
certain events, and (b) freeze the vesting or
<PAGE>
require forfeiture of Options in the event of termination of the Executive's
employment with the Company.
3. By executing this Amendment, the Executive hereby acknowledges the
foregoing paragraphs and agrees to accept and be bound by the terms of any plan
or agreement containing terms and provisions relating to the Options not
inconsistent with the foregoing paragraph.
ARTICLE II
----------
1. Section 1.1 of the Agreement is hereby amended by deleting clauses (v)
and (vi) thereof and renumbering clause (vii) thereof to be clause (v).
2. Section 1.3 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of the" and inserting thereat the words "fifty (50)
times the".
3. Section 1.5 of the Agreement is hereby amended in its entirety as
follows:
" `Blade' shall mean Howmet International Inc., a Delaware
corporation."
4. Section 1.7 of the Agreement is hereby amended in its entirety as
follows:
" `Board' shall mean the Board of Directors of Blade, or any committee
thereof to which such Board of Directors shall have delegated all or any
portion of its authority hereunder."
5. Section 1.13 of the Agreement is hereby amended in its entirety as
follows:
" `Fair Market Value' for purposes of this Agreement shall mean, as of
any given date, the lesser of (a) the mean between the highest and lowest
reported on such date (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) sales prices
of Blade Common Stock on the New York Stock Exchange Composite Tape or, if
not listed on such exchange, on any other national securities exchange on
which the Blade Common Stock is listed or on NASDAQ (provided that if there
--------
is no regular public trading market for such stock, the Fair Market Value
of Blade Common Stock shall be determined by the Board of Directors in good
faith) and (b) the IPO Price."
6. Section 1.20 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
7. Section 1.24 of the Agreement is hereby deleted.
8. Section 1.28 of the Agreement is hereby amended by adding at the end
thereof the following:
", less, in the event the Executive elects to receive a 1998 Payout, 20%."
-2-
<PAGE>
9. A new Section 1.30 and a new Section 1.31 shall be added to Article I
of the Agreement, and shall read in their respective entireties as follows:
"Section 1.30 IPO
------------ ---
" `IPO' shall mean the initial offering of Blade Common Stock, whether
by Blade or by any stockholder of Blade, to the public pursuant to an
effective registration statement on Form S-1 under the Securities Act of
1933, as amended.
"Section 1.31 IPO Price
------------ ---------
" `IPO Price' shall mean the per share price to public at which shares
of Blade Common Stock are sold in the IPO."
10. Section 2.1 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
11. Section 2.3 of the Agreement is hereby amended by adding to the end
thereof the following:
"(d)(i) Any other provision of this Section 2.3 notwithstanding, the
Executive may irrevocably elect to receive the Appreciated Value of 20% of
the Stock Appreciation Rights granted hereby (the "1997 Vested
Percentage"), in a lump sum, in cash (a "1998 Payout"), on a date selected
by the Board in its discretion that is within 30 days of the closing of the
IPO, but not earlier than January 1, 1998.
"(ii) An election to receive a 1998 Payout shall be made in writing
and delivered to the Company. If the Executive does not make an election,
the Executive shall be deemed to have elected not to receive a 1998
Payout."
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first written above.
HOWMET CORPORATION
By: /s/ David L. Squier
--------------------
Name: David L. Squier
Title: President and CEO
Sign: /s/ David L. Squier
---------------------
Print Name Here: David L. Squier
-----------------
____________________________________
Address
____________________________________
City State Zip
____________________________________
Taxpayer Identification Number
1998 PAYOUT ELECTION
--------------------
By signing my name in the space provided below, I hereby elect, pursuant to
Section 2.3(d) of the Stock Appreciation Right Agreement, as amended, between
myself and the Company, to receive a 1998 Payout, as such term is defined in
such agreement. My election is irrevocable by me.
(Please sign only if you wish to receive a 1998 Payout. If you wish to decline
the 1998 Payout, please leave blank)
_____________________________
Signature
-4-
<PAGE>
EXHIBIT 10.27
AGREEMENT AND
AMENDMENT TO STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT AND AMENDMENT (this "Amendment"), dated as of November
10, 1997, is made by and between Howmet Corporation, a Delaware corporation (the
"Company"), and Mark Lasker (the "Executive") and amends that certain Stock
Appreciation Right Agreement by and between the Company and the Executive (the
"Agreement"). Defined terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Agreement.
WHEREAS, the Company has previously granted to the Executive the Stock
Appreciation Rights provided for in the Agreement; and
WHEREAS, the Company desires to limit the potential value of the Stock
Appreciation Rights in exchange for certain options to purchase common stock of
Howmet International Inc. (formerly known as Blade Acquisition Corp.) to be
granted to the Executive in connection herewith;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
---------
1. The provisions of Paragraph 2 of this Article I and Article II of this
Amendment shall become effective only upon the later to occur of (a) the first
date on which persons holding at least 80% of the Stock Appreciation Rights
granted by the Company prior to the date hereof have executed an agreement and
amendment in the same form as this Agreement and Amendment, and (b) the closing
of the IPO; provided that, in the event the events set forth in clauses (a) and
--------
(b) above shall not have occurred on or prior to January 31, 1998, this
Amendment shall be terminated, its provisions shall become null and void, and
the Agreement, as currently in effect, shall continue in effect in accordance
with its terms.
2. The Company agrees to grant to the Executive, on the closing date of
the IPO, options ("Options") to purchase a number of shares of Blade Common
Stock (as defined in the Agreement) equal to 50 times the number of Stock
Appreciation Rights granted to the Executive pursuant to the Agreement (or 80%
thereof, in the event the Executive elects to receive a 1998 Payout (as defined
below)), at an exercise price per share equal to the IPO Price (as defined
below). The Options shall vest and become exercisable in 25% increments on
January 1 each year beginning 1999 until fully vested. The Options shall expire
on the eighth anniversary date of their granting. The Options shall be subject
to additional terms and conditions to be set forth in a stock option plan to be
adopted by the Company or its corporate parent and/or a stock option grant
agreement to be entered into between the Executive and the Company or its
corporate parent, including, without limitation, terms and provisions that (a)
accelerate the vesting and/or exercisability of Options upon the occurrence of
certain events, and (b) freeze the vesting or
<PAGE>
require forfeiture of Options in the event of termination of the Executive's
employment with the Company.
3. By executing this Amendment, the Executive hereby acknowledges the
foregoing paragraphs and agrees to accept and be bound by the terms of any plan
or agreement containing terms and provisions relating to the Options not
inconsistent with the foregoing paragraph.
ARTICLE II
----------
1. Section 1.1 of the Agreement is hereby amended by deleting clauses (v)
and (vi) thereof and renumbering clause (vii) thereof to be clause (v).
2. Section 1.3 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of the" and inserting thereat the words "fifty (50)
times the".
3. Section 1.5 of the Agreement is hereby amended in its entirety as
follows:
" `Blade' shall mean Howmet International Inc., a Delaware
corporation."
4. Section 1.7 of the Agreement is hereby amended in its entirety as
follows:
" `Board' shall mean the Board of Directors of Blade, or any committee
thereof to which such Board of Directors shall have delegated all or any
portion of its authority hereunder."
5. Section 1.13 of the Agreement is hereby amended in its entirety as
follows:
" `Fair Market Value' for purposes of this Agreement shall mean, as of
any given date, the lesser of (a) the mean between the highest and lowest
reported on such date (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) sales prices
of Blade Common Stock on the New York Stock Exchange Composite Tape or, if
not listed on such exchange, on any other national securities exchange on
which the Blade Common Stock is listed or on NASDAQ (provided that if there
--------
is no regular public trading market for such stock, the Fair Market Value
of Blade Common Stock shall be determined by the Board of Directors in good
faith) and (b) the IPO Price."
6. Section 1.20 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
7. Section 1.24 of the Agreement is hereby deleted.
8. Section 1.28 of the Agreement is hereby amended by adding at the end
thereof the following:
", less, in the event the Executive elects to receive a 1998 Payout, 20%."
-2-
<PAGE>
9. A new Section 1.30 and a new Section 1.31 shall be added to Article I
of the Agreement, and shall read in their respective entireties as follows:
"Section 1.30 IPO
------------ ---
" `IPO' shall mean the initial offering of Blade Common Stock, whether
by Blade or by any stockholder of Blade, to the public pursuant to an
effective registration statement on Form S-1 under the Securities Act of
1933, as amended.
"Section 1.31 IPO Price
------------ ---------
" `IPO Price' shall mean the per share price to public at which shares
of Blade Common Stock are sold in the IPO."
10. Section 2.1 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
11. Section 2.3 of the Agreement is hereby amended by adding to the end
thereof the following:
"(d)(i) Any other provision of this Section 2.3 notwithstanding, the
Executive may irrevocably elect to receive the Appreciated Value of 20% of
the Stock Appreciation Rights granted hereby (the "1997 Vested
Percentage"), in a lump sum, in cash (a "1998 Payout"), on a date selected
by the Board in its discretion that is within 30 days of the closing of the
IPO, but not earlier than January 1, 1998.
"(ii) An election to receive a 1998 Payout shall be made in writing
and delivered to the Company. If the Executive does not make an election,
the Executive shall be deemed to have elected not to receive a 1998
Payout."
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first written above.
HOWMET CORPORATION
By: /s/ David L. Squier
--------------------
Name: David L. Squier
Title: President and CEO
Sign: /s/ Mark Lasker
---------------
Print Name Here: Mark Lasker
-----------
_____________________________________
Address
____________________________________
City State Zip
____________________________________
Taxpayer Identification Number
1998 PAYOUT ELECTION
--------------------
By signing my name in the space provided below, I hereby elect, pursuant to
Section 2.3(d) of the Stock Appreciation Right Agreement, as amended, between
myself and the Company, to receive a 1998 Payout, as such term is defined in
such agreement. My election is irrevocable by me.
(Please sign only if you wish to receive a 1998 Payout. If you wish to decline
the 1998 Payout, please leave blank)
/s/ Mark Lasker
- ----------------
Signature
-4-
<PAGE>
EXHIBIT 10.28
AGREEMENT AND
AMENDMENT TO STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT AND AMENDMENT (this "Amendment"), dated as of November
10, 1997, is made by and between Howmet Corporation, a Delaware corporation (the
"Company"), and James Stanley (the "Executive") and amends that certain Stock
Appreciation Right Agreement by and between the Company and the Executive (the
"Agreement"). Defined terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Agreement.
WHEREAS, the Company has previously granted to the Executive the Stock
Appreciation Rights provided for in the Agreement; and
WHEREAS, the Company desires to limit the potential value of the Stock
Appreciation Rights in exchange for certain options to purchase common stock of
Howmet International Inc. (formerly known as Blade Acquisition Corp.) to be
granted to the Executive in connection herewith;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
---------
1. The provisions of Paragraph 2 of this Article I and Article II of this
Amendment shall become effective only upon the later to occur of (a) the first
date on which persons holding at least 80% of the Stock Appreciation Rights
granted by the Company prior to the date hereof have executed an agreement and
amendment in the same form as this Agreement and Amendment, and (b) the closing
of the IPO; provided that, in the event the events set forth in clauses (a) and
--------
(b) above shall not have occurred on or prior to January 31, 1998, this
Amendment shall be terminated, its provisions shall become null and void, and
the Agreement, as currently in effect, shall continue in effect in accordance
with its terms.
2. The Company agrees to grant to the Executive, on the closing date of
the IPO, options ("Options") to purchase a number of shares of Blade Common
Stock (as defined in the Agreement) equal to 50 times the number of Stock
Appreciation Rights granted to the Executive pursuant to the Agreement (or 80%
thereof, in the event the Executive elects to receive a 1998 Payout (as defined
below)), at an exercise price per share equal to the IPO Price (as defined
below). The Options shall vest and become exercisable in 25% increments on
January 1 each year beginning 1999 until fully vested. The Options shall expire
on the eighth anniversary date of their granting. The Options shall be subject
to additional terms and conditions to be set forth in a stock option plan to be
adopted by the Company or its corporate parent and/or a stock option grant
agreement to be entered into between the Executive and the Company or its
corporate parent, including, without limitation, terms and provisions that (a)
accelerate the vesting and/or exercisability of Options upon the occurrence of
certain events, and (b) freeze the vesting or
<PAGE>
require forfeiture of Options in the event of termination of the Executive's
employment with the Company.
3. By executing this Amendment, the Executive hereby acknowledges the
foregoing paragraphs and agrees to accept and be bound by the terms of any plan
or agreement containing terms and provisions relating to the Options not
inconsistent with the foregoing paragraph.
ARTICLE II
----------
1. Section 1.1 of the Agreement is hereby amended by deleting clauses (v)
and (vi) thereof and renumbering clause (vii) thereof to be clause (v).
2. Section 1.3 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of the" and inserting thereat the words "fifty (50)
times the".
3. Section 1.5 of the Agreement is hereby amended in its entirety as
follows:
" `Blade' shall mean Howmet International Inc., a Delaware
corporation."
4. Section 1.7 of the Agreement is hereby amended in its entirety as
follows:
" `Board' shall mean the Board of Directors of Blade, or any committee
thereof to which such Board of Directors shall have delegated all or any
portion of its authority hereunder."
5. Section 1.13 of the Agreement is hereby amended in its entirety as
follows:
" `Fair Market Value' for purposes of this Agreement shall mean, as of
any given date, the lesser of (a) the mean between the highest and lowest
reported on such date (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) sales prices
of Blade Common Stock on the New York Stock Exchange Composite Tape or, if
not listed on such exchange, on any other national securities exchange on
which the Blade Common Stock is listed or on NASDAQ (provided that if there
--------
is no regular public trading market for such stock, the Fair Market Value
of Blade Common Stock shall be determined by the Board of Directors in good
faith) and (b) the IPO Price."
6. Section 1.20 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
7. Section 1.24 of the Agreement is hereby deleted.
8. Section 1.28 of the Agreement is hereby amended by adding at the end
thereof the following:
", less, in the event the Executive elects to receive a 1998 Payout, 20%."
-2-
<PAGE>
9. A new Section 1.30 and a new Section 1.31 shall be added to Article I
of the Agreement, and shall read in their respective entireties as follows:
"Section 1.30 IPO
------------ ---
" `IPO' shall mean the initial offering of Blade Common Stock, whether
by Blade or by any stockholder of Blade, to the public pursuant to an
effective registration statement on Form S-1 under the Securities Act of
1933, as amended.
"Section 1.31 IPO Price
------------ ---------
" `IPO Price' shall mean the per share price to public at which shares
of Blade Common Stock are sold in the IPO."
10. Section 2.1 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
11. Section 2.3 of the Agreement is hereby amended by adding to the end
thereof the following:
"(d)(i) Any other provision of this Section 2.3 notwithstanding, the
Executive may irrevocably elect to receive the Appreciated Value of 20% of
the Stock Appreciation Rights granted hereby (the "1997 Vested
Percentage"), in a lump sum, in cash (a "1998 Payout"), on a date selected
by the Board in its discretion that is within 30 days of the closing of the
IPO, but not earlier than January 1, 1998.
"(ii) An election to receive a 1998 Payout shall be made in writing
and delivered to the Company. If the Executive does not make an election,
the Executive shall be deemed to have elected not to receive a 1998
Payout."
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first written above.
HOWMET CORPORATION
By:___________________________________
Name: David L. Squier
Title: President and CEO
Sign: /s/ James R. Stanley
--------------------
Print Name Here: James R. Stanley
-----------------
____________________________________
Address
____________________________________
City State Zip
____________________________________
Taxpayer Identification Number
1998 PAYOUT ELECTION
--------------------
By signing my name in the space provided below, I hereby elect, pursuant to
Section 2.3(d) of the Stock Appreciation Right Agreement, as amended, between
myself and the Company, to receive a 1998 Payout, as such term is defined in
such agreement. My election is irrevocable by me.
(Please sign only if you wish to receive a 1998 Payout. If you wish to decline
the 1998 Payout, please leave blank)
_____________________________
Signature
-4-
<PAGE>
EXHIBIT 10.29
AGREEMENT AND
AMENDMENT TO STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT AND AMENDMENT (this "Amendment"), dated as of November
__, 1997, is made by and between Howmet Corporation, a Delaware corporation (the
"Company"), and John C. Ritter (the "Executive") and amends that certain Stock
Appreciation Right Agreement by and between the Company and the Executive (the
"Agreement"). Defined terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Agreement.
WHEREAS, the Company has previously granted to the Executive the Stock
Appreciation Rights provided for in the Agreement; and
WHEREAS, the Company desires to limit the potential value of the Stock
Appreciation Rights in exchange for certain options to purchase common stock of
Howmet International Inc. (formerly known as Blade Acquisition Corp.) to be
granted to the Executive in connection herewith;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
---------
1. The provisions of Paragraph 2 of this Article I and Article II of this
Amendment shall become effective only upon the later to occur of (a) the first
date on which persons holding at least 80% of the Stock Appreciation Rights
granted by the Company prior to the date hereof have executed an agreement and
amendment in the same form as this Agreement and Amendment, and (b) the closing
of the IPO; provided that, in the event the events set forth in clauses (a) and
--------
(b) above shall not have occurred on or prior to January 31, 1998, this
Amendment shall be terminated, its provisions shall become null and void, and
the Agreement, as currently in effect, shall continue in effect in accordance
with its terms.
2. The Company agrees to grant to the Executive, on the closing date of
the IPO, options ("Options") to purchase a number of shares of Blade Common
Stock (as defined in the Agreement) equal to 50 times the number of Stock
Appreciation Rights granted to the Executive pursuant to the Agreement (or 80%
thereof, in the event the Executive elects to receive a 1998 Payout (as defined
below)), at an exercise price per share equal to the IPO Price (as defined
below). The Options shall vest and become exercisable in 25% increments on
January 1 each year beginning 1999 until fully vested. The Options shall expire
on the eighth anniversary date of their granting. The Options shall be subject
to additional terms and conditions to be set forth in a stock option plan to be
adopted by the Company or its corporate parent and/or a stock option grant
agreement to be entered into between the Executive and the Company or its
corporate parent, including, without limitation, terms and provisions that (a)
accelerate the vesting and/or exercisability of Options upon the occurrence of
certain events, and (b) freeze the vesting or
<PAGE>
require forfeiture of Options in the event of termination of the Executive's
employment with the Company.
3. By executing this Amendment, the Executive hereby acknowledges the
foregoing paragraphs and agrees to accept and be bound by the terms of any plan
or agreement containing terms and provisions relating to the Options not
inconsistent with the foregoing paragraph.
ARTICLE II
----------
1. Section 1.1 of the Agreement is hereby amended by deleting clauses (v)
and (vi) thereof and renumbering clause (vii) thereof to be clause (v).
2. Section 1.3 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of the" and inserting thereat the words "fifty (50)
times the".
3. Section 1.5 of the Agreement is hereby amended in its entirety as
follows:
" `Blade' shall mean Howmet International Inc., a Delaware
corporation."
4. Section 1.7 of the Agreement is hereby amended in its entirety as
follows:
" `Board' shall mean the Board of Directors of Blade, or any committee
thereof to which such Board of Directors shall have delegated all or any
portion of its authority hereunder."
5. Section 1.13 of the Agreement is hereby amended in its entirety as
follows:
" `Fair Market Value' for purposes of this Agreement shall mean, as of
any given date, the lesser of (a) the mean between the highest and lowest
reported on such date (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) sales prices
of Blade Common Stock on the New York Stock Exchange Composite Tape or, if
not listed on such exchange, on any other national securities exchange on
which the Blade Common Stock is listed or on NASDAQ (provided that if there
--------
is no regular public trading market for such stock, the Fair Market Value
of Blade Common Stock shall be determined by the Board of Directors in good
faith) and (b) the IPO Price."
6. Section 1.20 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
7. Section 1.24 of the Agreement is hereby deleted.
8. Section 1.28 of the Agreement is hereby amended by adding at the end
thereof the following:
", less, in the event the Executive elects to receive a 1998 Payout, 20%."
-2-
<PAGE>
9. A new Section 1.30 and a new Section 1.31 shall be added to Article I
of the Agreement, and shall read in their respective entireties as follows:
"Section 1.30 IPO
------------ ---
" `IPO' shall mean the initial offering of Blade Common Stock, whether
by Blade or by any stockholder of Blade, to the public pursuant to an
effective registration statement on Form S-1 under the Securities Act of
1933, as amended.
"Section 1.31 IPO Price
------------ ---------
" `IPO Price' shall mean the per share price to public at which shares
of Blade Common Stock are sold in the IPO."
10. Section 2.1 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
11. Section 2.3 of the Agreement is hereby amended by adding to the end
thereof the following:
"(d)(i) Any other provision of this Section 2.3 notwithstanding, the
Executive may irrevocably elect to receive the Appreciated Value of 20% of
the Stock Appreciation Rights granted hereby (the "1997 Vested
Percentage"), in a lump sum, in cash (a "1998 Payout"), on a date selected
by the Board in its discretion that is within 30 days of the closing of the
IPO, but not earlier than January 1, 1998.
"(ii) An election to receive a 1998 Payout shall be made in writing
and delivered to the Company. If the Executive does not make an election,
the Executive shall be deemed to have elected not to receive a 1998
Payout."
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first written above.
HOWMET CORPORATION
By:
-----------------------------------
Name: David L. Squier
Title: President and CEO
Sign: /s/ John C. Ritter
-----------------------------------
Print Name Here: John C. Ritter
------------------------
- -----------------------------------------
Address
- -----------------------------------------
City State Zip
- -----------------------------------------
Taxpayer Identification Number
1998 PAYOUT ELECTION
--------------------
By signing my name in the space provided below, I hereby elect, pursuant to
Section 2.3(d) of the Stock Appreciation Right Agreement, as amended, between
myself and the Company, to receive a 1998 Payout, as such term is defined in
such agreement. My election is irrevocable by me.
(Please sign only if you wish to receive a 1998 Payout. If you wish to decline
the 1998 Payout, please leave blank)
- -----------------------------
Signature
-4-
<PAGE>
EXHIBIT 10.30
AGREEMENT AND
AMENDMENT TO STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT AND AMENDMENT (this "Amendment"), dated as of November
8, 1997, is made by and between Howmet Corporation, a Delaware corporation (the
"Company"), and B. D. Albrechtsen (the "Executive") and amends that certain
Stock Appreciation Right Agreement by and between the Company and the Executive
(the "Agreement"). Defined terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Agreement.
WHEREAS, the Company has previously granted to the Executive the Stock
Appreciation Rights provided for in the Agreement; and
WHEREAS, the Company desires to limit the potential value of the Stock
Appreciation Rights in exchange for certain options to purchase common stock of
Howmet International Inc. (formerly known as Blade Acquisition Corp.) to be
granted to the Executive in connection herewith;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
---------
1. The provisions of Paragraph 2 of this Article I and Article II of this
Amendment shall become effective only upon the later to occur of (a) the first
date on which persons holding at least 80% of the Stock Appreciation Rights
granted by the Company prior to the date hereof have executed an agreement and
amendment in the same form as this Agreement and Amendment, and (b) the closing
of the IPO; provided that, in the event the events set forth in clauses (a) and
--------
(b) above shall not have occurred on or prior to January 31, 1998, this
Amendment shall be terminated, its provisions shall become null and void, and
the Agreement, as currently in effect, shall continue in effect in accordance
with its terms.
2. The Company agrees to grant to the Executive, on the closing date of
the IPO, options ("Options") to purchase a number of shares of Blade Common
Stock (as defined in the Agreement) equal to 50 times the number of Stock
Appreciation Rights granted to the Executive pursuant to the Agreement (or 80%
thereof, in the event the Executive elects to receive a 1998 Payout (as defined
below)), at an exercise price per share equal to the IPO Price (as defined
below). The Options shall vest and become exercisable in 25% increments on
January 1 each year beginning 1999 until fully vested. The Options shall expire
on the eighth anniversary date of their granting. The Options shall be subject
to additional terms and conditions to be set forth in a stock option plan to be
adopted by the Company or its corporate parent and/or a stock option grant
agreement to be entered into between the Executive and the Company or its
corporate parent, including, without limitation, terms and provisions that (a)
accelerate the vesting and/or exercisability of Options upon the occurrence of
certain events, and (b) freeze the vesting or
<PAGE>
require forfeiture of Options in the event of termination of the Executive's
employment with the Company.
3. By executing this Amendment, the Executive hereby acknowledges the
foregoing paragraphs and agrees to accept and be bound by the terms of any plan
or agreement containing terms and provisions relating to the Options not
inconsistent with the foregoing paragraph.
ARTICLE II
----------
1. Section 1.1 of the Agreement is hereby amended by deleting clauses (v)
and (vi) thereof and renumbering clause (vii) thereof to be clause (v).
2. Section 1.3 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of the" and inserting thereat the words "fifty (50)
times the".
3. Section 1.5 of the Agreement is hereby amended in its entirety as
follows:
" `Blade' shall mean Howmet International Inc., a Delaware
corporation."
4. Section 1.7 of the Agreement is hereby amended in its entirety as
follows:
" `Board' shall mean the Board of Directors of Blade, or any committee
thereof to which such Board of Directors shall have delegated all or any
portion of its authority hereunder."
5. Section 1.13 of the Agreement is hereby amended in its entirety as
follows:
" `Fair Market Value' for purposes of this Agreement shall mean, as of
any given date, the lesser of (a) the mean between the highest and lowest
reported on such date (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) sales prices
of Blade Common Stock on the New York Stock Exchange Composite Tape or, if
not listed on such exchange, on any other national securities exchange on
which the Blade Common Stock is listed or on NASDAQ (provided that if there
--------
is no regular public trading market for such stock, the Fair Market Value
of Blade Common Stock shall be determined by the Board of Directors in good
faith) and (b) the IPO Price."
6. Section 1.20 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
7. Section 1.24 of the Agreement is hereby deleted.
8. Section 1.28 of the Agreement is hereby amended by adding at the end
thereof the following:
", less, in the event the Executive elects to receive a 1998 Payout, 20%."
-2-
<PAGE>
9. A new Section 1.30 and a new Section 1.31 shall be added to Article I
of the Agreement, and shall read in their respective entireties as follows:
"Section 1.30 IPO
------------ ---
" `IPO' shall mean the initial offering of Blade Common Stock, whether
by Blade or by any stockholder of Blade, to the public pursuant to an
effective registration statement on Form S-1 under the Securities Act of
1933, as amended.
"Section 1.31 IPO Price
------------ ---------
" `IPO Price' shall mean the per share price to public at which shares
of Blade Common Stock are sold in the IPO."
10. Section 2.1 of the Agreement is hereby amended by deleting the words
"one two-hundredth (1/200) of a share" and inserting thereat the words "fifty
(50) shares".
11. Section 2.3 of the Agreement is hereby amended by adding to the end
thereof the following:
"(d)(i) Any other provision of this Section 2.3 notwithstanding, the
Executive may irrevocably elect to receive the Appreciated Value of 20% of
the Stock Appreciation Rights granted hereby (the "1997 Vested
Percentage"), in a lump sum, in cash (a "1998 Payout"), on a date selected
by the Board in its discretion that is within 30 days of the closing of the
IPO, but not earlier than January 1, 1998.
"(ii) An election to receive a 1998 Payout shall be made in writing
and delivered to the Company. If the Executive does not make an election,
the Executive shall be deemed to have elected not to receive a 1998
Payout."
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first written above.
HOWMET CORPORATION
By:___________________________________
Name: David L. Squier
Title: President and CEO
Sign: /s/ Bjarne Dennis Albrechtsen
-----------------------------
Print Name Here: Bjarne Dennis Albrechtsen
--------------------------
____________________________________
Address
____________________________________
City State Zip
____________________________________
Taxpayer Identification Number
1998 PAYOUT ELECTION
--------------------
By signing my name in the space provided below, I hereby elect, pursuant to
Section 2.3(d) of the Stock Appreciation Right Agreement, as amended, between
myself and the Company, to receive a 1998 Payout, as such term is defined in
such agreement. My election is irrevocable by me.
(Please sign only if you wish to receive a 1998 Payout. If you wish to decline
the 1998 Payout, please leave blank)
_____________________________
Signature
-4-
<PAGE>
======================================
Financial Data
Statements of Income 17
Consolidated Balance Sheets 18
Statements of Cash Flows 19
Statements of Common Stockholders'
Equity and Redeemable
Preferred Stock 20
Notes to Financial Statements 21
Management's Report on
Financial Statements 39
Report of Independent Auditors 40
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 41
Selected Financial Data 47
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Statements of Income
<TABLE>
<CAPTION>
Howmet International Inc. Howmet Predecessor
Consolidated Company Combined
--------------------------------------------------------------
Period from Period from
December 14, 1995 January 1, 1995
Year ended December 31, to to
(Dollars in millions, except per share amounts) 1997 1996 December 31, 1995 December 13, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 1,258.2 $ 1,106.8 $ 51.4 $ 894.1
Operating expenses:
Cost of sales 874.2 803.6 38.0 681.4
Selling, general and administrative expense 145.4 117.3 4.6 105.0
Depreciation and amortization expense 59.5 59.7 2.8 32.6
Research and development expense 24.6 24.2 1.4 25.0
Restructuring credit -- -- -- (1.6)
- ------------------------------------------------------------------------------------------------------------------
1,103.7 1,004.8 46.8 842.4
- ------------------------------------------------------------------------------------------------------------------
Income from operations 154.5 102.0 4.6 51.7
Interest income (expense) from Restricted Trust
and Pechiney Notes, net (Note 8) -- -- -- --
Interest income 1.2 1.7 -- 1.3
Interest expense (31.0) (41.9) (3.1) (3.7)
Interest income, net of expense, affiliates -- -- -- 6.5
Other, net (6.4) (5.9) (1.0) (5.8)
- ------------------------------------------------------------------------------------------------------------------
Income before income taxes 118.3 55.9 .5 50.0
Income taxes 46.3 30.3 .5 23.7
- ------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 72.0 25.6 -- 26.3
Extraordinary item - loss on early retirement
of debt, net of income taxes of $7.9 (12.3) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Net income 59.7 25.6 -- 26.3
Dividends on redeemable preferred stock (5.1) (4.6) (.2) --
- ------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 54.6 $ 21.0 $ (.2) $ 26.3
==================================================================================================================
Per common share amounts, basic and diluted:
Income before extraordinary item $ .67 $ .21 $ -- $ .26
Extraordinary item (.12) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Net income $ .55 $ .21 $ -- $ .26
==================================================================================================================
</TABLE>
See notes to the financial statements.
PAGE 17
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
(Dollars in millions, except share amounts) 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 45.4 $ 23.4
Accounts receivable (less allowance of $4.4 and $5.6) 78.7 76.9
Inventories 155.5 149.4
Retained receivables 20.2 46.1
Deferred income taxes 16.3 21.0
Other current assets 3.9 3.0
- -------------------------------------------------------------------------------------------------------------
Total current assets 320.0 319.8
Property, plant and equipment, net 275.5 291.1
Goodwill, net 226.5 249.0
Patents and technology and other intangible assets, net 118.4 130.1
Other noncurrent assets 53.8 62.4
Restricted Trust(a) 716.4 716.4
- -------------------------------------------------------------------------------------------------------------
Total assets $ 1,710.6 $ 1,768.8
=============================================================================================================
Liabilities, redeemable preferred stock and stockholders' equity
Current liabilities:
Accounts payable $ 84.2 $ 76.5
Accrued liabilities 145.1 157.4
Income taxes payable 28.2 18.6
Long-term debt due within one year -- 56.1
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 257.5 308.6
Accrued retiree benefits other than pensions 93.1 88.5
Other noncurrent liabilities 106.1 70.1
Deferred income taxes 3.4 16.9
Long-term debt, excluding the Pechiney Notes 208.4 294.6
Pechiney Notes(a) 716.4 716.4
Commitments and contingencies (Notes 9 and 18)
Redeemable preferred stock, 9% payment-in-kind dividends, $.01 par value;
liquidation value $10,000 per share; authorized - 15,000 shares; issued and
outstanding: 1997 - 6,001 shares; 1996 - 5,490 shares 60.0 54.9
Stockholders' equity:
Preferred stock, authorized - 9,985,000 shares; issued and outstanding - 0 shares -- --
Common stock, $.01 par value; authorized - 400,000,000 shares;
issued and outstanding - 100,000,000 shares 1.0 1.0
Capital surplus 195.0 195.0
Retained earnings 75.3 20.7
Cumulative translation adjustment (5.6) 2.1
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 265.7 218.8
- -------------------------------------------------------------------------------------------------------------
Total liabilities, redeemable preferred stock and stockholders' equity $ 1,710.6 $ 1,768.8
=============================================================================================================
</TABLE>
(a) The Restricted Trust holds a note receivable from Pechiney, S.A. and
related letters of credit that secure Pechiney, S.A.'s agreement to repay
the Pechiney Notes. Management believes that it is extremely remote that
the Company will use any assets other than those in the Restricted Trust
to satisfy any payments related to the Pechiney Notes. See Note 8.
See notes to the financial statements.
PAGE 18
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Statements of Cash Flows
<TABLE>
<CAPTION>
Howmet International Inc. Howmet Predecessor
Consolidated Company Combined
--------------------------------------------------------------
Period from Period from
December 14, 1995 January 1, 1995
Year ended December 31, to to
(Dollars in millions) 1997 1996 December 31, 1995 December 13, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities
Net income $ 59.7 $ 25.6 $ -- $ 26.3
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 66.9 63.3 3.0 32.6
Equity in (income) loss of
unconsolidated affiliates (1.5) 1.4 .2 4.3
Extraordinary item 12.3 -- -- --
Changes in assets and liabilities:
Receivables 8.4 29.9 (19.8) (11.4)
Inventories (17.9) 17.2 12.4 (1.6)
Accounts payable and accrued liabilities 12.1 39.1 (8.2) (5.9)
Deferred income taxes (.3) (3.2) .2 (2.7)
Income taxes payable 16.9 6.1 (.6) (18.7)
Long-term SARs accrual 31.4 6.6 -- --
Other - net 4.6 (1.5) .1 12.3
- ------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 192.6 184.5 (12.7) 35.2
Investing activities
Proceeds from disposal of fixed assets .2 .3 -- 3.2
Purchases of property, plant and equipment (56.9) (33.7) (1.6) (41.2)
Increase in advances to Pechiney -- -- -- 237.4
Payments made for investments and other assets (2.0) -- (1.1) (5.8)
Proceeds from sale of refurbishment business, net 44.9 -- -- --
Acquisition of business, net of cash acquired -- 3.6 (737.5) --
- ------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities (13.8) (29.8) (740.2) 193.6
Financing activities
Issuance of long-term debt 326.2 147.2 50.8 37.0
Repayment of long-term debt (467.6) (288.1) (40.0) (56.9)
Premiums paid on early retirement of debt (13.7) -- -- --
Dividends paid -- -- -- (200.0)
Proceeds from acquisition financing:
Sale of accounts receivable -- -- 51.4 --
Issuance of debt -- -- 450.2 --
Issuance of equity -- -- 250.0 --
Foreign currency rate changes (1.7) -- .1 .2
- ------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (156.8) (140.9) 762.5 (219.7)
- ------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 22.0 13.8 9.6 9.1
Cash and cash equivalents at beginning of period 23.4 9.6 -- 5.0
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 45.4 $ 23.4 $ 9.6 $ 14.1
==================================================================================================================
</TABLE>
See notes to the financial statements.
PAGE 19
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Statements of Common Stockholders' Equity and
Redeemable Preferred Stock
<TABLE>
<CAPTION>
Total
Retained Cumulative Common Redeemable
(Dollars in millions, Common Stock Capital Earnings Translation Stockholders' Preferred Stock
except share amounts) Shares Amount Surplus (Deficit) Adjustment Equity Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Howmet Predecessor
Company Combined:
January 1, 1995 10 $ -- $ 85.6 $297.9 $ 1.3 $384.8 $ --
Net income 26.3 26.3
Dividends - common stock (200.0) (200.0)
Foreign exchange adjustment 8.1 8.1
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 13, 1995 10 $ -- $ 85.6 $124.2 $ 9.4 $219.2 $ --
====================================================================================================================================
Howmet International Inc.
Consolidated:
December 14, 1995,
initial investment (Note 1) 100,000,000 $1.0 $199.0 $ -- $ -- $200.0 5,000 $ 0.0
Net income -- --
Dividends - redeemable
preferred stock (.2) (.2) 24 .2
Return of investment (4.0) (4.0)
Foreign exchange adjustment 1.1 1.1
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 100,000,000 1.0 195.0 (.2) 1.1 196.9 5,024 50.2
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 25.6 25.6
Dividends - redeemable
preferred stock (4.7) (4.7) 466 4.7
Foreign exchange adjustment 1.0 1.0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 100,000,000 1.0 195.0 20.7 2.1 218.8 5,490 54.9
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 59.7 59.7
Dividends - redeemable
preferred stock (5.1) (5.1) 511 5.1
Foreign exchange adjustment (7.7) (7.7)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 100,000,000 $1.0 $195.0 $ 75.3 $(5.6) $265.7 6,001 $60.0
====================================================================================================================================
</TABLE>
See notes to the financial statements.
PAGE 20
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Notes to Financial Statements
1. BASIS OF PRESENTATION
Howmet International Inc. ("HII") was formed on October 11, 1995 to acquire the
group of companies which subsequently comprised Howmet Corporation and its
parent. See "The 1995 Acquisition" below. The acquisition occurred on December
13, 1995. Prior to December 14, 1995 HII had no operations. Consequently, HII's
results of operations and cash flows for the period from December 14, 1995 to
December 31, 1995 were the same as HII's results for the period from October 11,
1995 to December 31, 1995.
These financial statements include the consolidated statements of income,
cash flows, and common stockholders' equity and redeemable preferred stock of
HII for the years ended December 31, 1997 and 1996 and for the period from
December 14, 1995 to December 31, 1995. For the period prior to December 14,
1995 (prior to the Acquisition when HII began operations), these financial
statements include the combined statements of income, cash flows, and common
stockholders' equity and redeemable preferred stock for the Howmet Predecessor
Company. The entities which comprise the Howmet Predecessor Company are those
which generated all HII sales and pre-interest, pre-tax earnings for the years
ended December 31, 1997 and 1996 and for the period from December 14, 1995 to
December 31, 1995. See "Howmet Predecessor Company" below.
The 1995 Acquisition
HII was formed to acquire Pechiney Corporation from Pechiney International, S.A.
and the Cercast group of companies from Howmet Cercast S.A., a subsidiary of
Pechiney International, S.A. (the "Acquisition"). Pechiney International, S.A.
was subsequently merged into Pechiney, S.A. (together "Pechiney, S.A.").
Carlyle-Blade Acquisition Partners, L.P., an affiliate of The Carlyle Group
("Carlyle") and Thiokol Holding Company, a wholly-owned subsidiary of Thiokol
Corporation ("Thiokol"), owned 51% and 49%, respectively, of HII's common stock
from December 13, 1995 until the 1997 ownership change (see "The 1997 Ownership
Change" below). Thiokol owns 100% of HII's 9% Series A Cumulative
payment-in-kind preferred stock.
The Acquisition was effected through a series of transactions, mergers and
name changes resulting in HII owning Howmet Holdings Corporation ("Holdings,"
formerly named Pechiney Corporation). Holdings owns Howmet Corporation. Howmet
Corporation and its subsidiaries, including the Cercast group of companies, is
the only operating subsidiary of Holdings and HII. The Stock Purchase Agreement
provides HII with indemnities from Pechiney, S.A. for certain pre-closing tax,
environmental and product liability matters and the Pechiney Notes (Note 8).
The Acquisition was completed on December 13, 1995 for a total purchase
price, including transaction fees and expenses, of approximately $771.6 million
(after agreed upon 1996 post-closing adjustments). Financing for the Acquisition
included (i) a $250 million cash equity investment from the proceeds of the
issuance of $200 million of HII common stock and $50 million of HII payment-in-
kind preferred stock, (ii) $51.4 million of proceeds from a special purpose
receivables facility, (iii) a $25 million payment-in-kind ("PIK") junior
subordinated purchaser note issued to Pechiney, S.A. and (iv) Company
borrowings.
The Acquisition was accounted for in accordance with the purchase method
of accounting, and accordingly, the consolidated financial statements reflect
the allocation of the purchase price and related acquisition costs to the assets
acquired and liabilities assumed based on their fair values on the date of
acquisition. The 1995 results, on a pro forma basis, after giving effect to the
Acquisition as if it had occurred at the beginning of the year are: net sales
$945.5 million, net loss $19.3 million, and net loss per common share $0.19. The
pro forma information does not necessarily represent what the actual
consolidated results would have been for 1995 and is not intended to be
indicative of future results.
PAGE 21
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Howmet Predecessor Company
The combined statements of operations and retained earnings and cash flows have
been prepared to present the combined operations of Howmet Corporation and
Howmet Cercast Group ("Cercast") (collectively, the "Howmet Predecessor
Company") on a historical cost basis prior to their acquisition by HII. All
transactions between Howmet Corporation and Cercast have been eliminated.
The entities which comprise the Howmet Predecessor Company are those which
generated all HII sales and pre-interest, pre-tax earnings for the years ended
December 31, 1997 and 1996 and for the period from December 14, 1995 to December
31, 1995. These entities were affiliated with common ownership and management.
The Howmet Predecessor Company had significant transactions with Pechiney,
S.A.
The 1997 Ownership Change
In November 1997, Carlyle sold 15 million of its HII common shares to the
public. In December 1997, Carlyle sold 13 million of its HII common shares to
Thiokol. In January 1998, an additional 350,000 common shares were sold to the
public. After these sales, Thiokol, Carlyle and the public hold 62%, 22.65% and
15.35%, respectively, of outstanding HII common shares. Thiokol also owns all of
the outstanding non-voting 9% Series A Cumulative payment-in-kind preferred
stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
References to the "Company" relate to both HII and Howmet Predecessor Company.
Principles of Consolidation
The accompanying financial statements include all subsidiary companies and
reflect the use of the equity method of accounting for 50% owned joint ventures.
All significant intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the carrying amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the respective period. Amounts affected include, but are not limited to,
allowances for doubtful accounts, reserves for contract losses and other
accruals. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue from the sale of its products upon shipment.
Provision for estimated losses on sales commitments are recorded when
identified.
Earnings Per Share
Basic earnings per share is calculated by dividing net income applicable to
common shareholders by the weighted average number of common shares outstanding
(100,000,000). Diluted earnings per share is calculated by dividing net income
applicable to common shareholders by the weighted average number of common
shares outstanding plus the common stock equivalent shares of employee stock
options, calculated using the treasury stock method (8,832 in 1997).
All share and per share data have been retroactively restated to reflect
the October 1997 10,000-to-1 stock split.
PAGE 22
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Cash and Cash Equivalents
The Company considers all investment instruments with a maturity of three months
or less when acquired to be cash equivalents.
Inventories
Inventories are stated at cost, which approximates or is less than replacement
value. The Company values a substantial portion of its inventories on the
last-in, first-out ("LIFO") method and the remainder on the first-in, first-out
method.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is computed
principally on the straight-line method over the estimated useful lives of the
respective assets, ranging from 4 to 8 years for machinery and equipment and
from 19 to 30 years for buildings.
Goodwill
Goodwill is the excess of the purchase price over the fair value of tangible and
identifiable intangible net assets acquired. It is amortized on a straight-line
basis over 40 years.
Impairment of Long-Lived Assets
The Company records impairment losses on goodwill and on long-lived assets used
in operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than net book value.
Acquisition Intangibles
Other acquisition intangible assets consist of the fair value, at the
Acquisition date (Note 1), of patents, technology and a non-compete agreement.
They are being amortized on a straight-line basis over 10 to 15 years.
Translation of Foreign Currencies
All assets and liabilities of the Company's subsidiaries outside of the U.S.,
except for Canada, are translated into U.S. dollars at year-end exchange rates.
Revenues and expenses are translated into U.S. dollars at average rates of
exchange prevailing during the period. Unrealized currency translation
adjustments are deferred in the balance sheets, whereas transaction gains and
losses are recognized currently in the statements of income.
The Canadian operations functional currency is the U.S. dollar. Therefore,
Canadian monetary assets and liabilities are translated at period end exchange
rates, and inventories and other nonmonetary assets and liabilities are
translated at historical rates. Adjustments resulting from translation of
Canadian monetary assets and liabilities at year-end exchange rates are included
in the statements of income.
Derivative Financial Instruments
Derivative financial instruments are utilized by the Company to reduce interest
rate and foreign currency risks. The Company does not hold or issue derivative
financial instruments for trading purposes.
The Company enters into interest rate swap agreements to reduce the risk
on its floating rate debt. The differentials to be received or paid under such
contracts are recognized as an increase or decrease to interest expense. In the
event of an early termination of an interest rate swap, the resulting gain or
loss is deferred and amortized as an adjustment to interest expense over the
remaining life of the debt.
The Company enters into forward foreign exchange contracts to hedge
transactions, primarily firm commitments relating to firm sales backlog and
inventory purchases denominated in foreign currencies. A forward foreign
PAGE 23
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
exchange contract obligates the Company to exchange predetermined amounts of
specified foreign currencies at specified exchange rates on specified dates or
to make an equivalent U.S. dollar payment equal to the value of such exchange.
The gains and losses on foreign currency transaction hedges are recognized in
income and offset the foreign exchange gains and losses on the underlying
transactions. Gains and losses of foreign currency firm commitment hedges are
deferred and included in the basis of the transaction underlying the
commitments.
Income Taxes
Provisions for federal, state, local and foreign income taxes are calculated
based on current tax laws. The provision for income taxes includes, in the
current period, the cumulative effect of any changes in tax rates from those
used previously in determining deferred tax assets and liabilities. Deferred
taxes are provided to recognize the income tax effects of amounts which are
included in different reporting periods for financial statement and tax
purposes.
New Accounting Standards
In January 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities." The standard establishes accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities, including the sale of receivables. In February
1997, SFAS No. 128, "Earnings Per Share" was issued. This statement changes the
methodology of calculating earnings per share. Adoption of both standards did
not have a material effect on the Company's financial statements.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information" were
issued. Adoption of SFAS No. 131 in 1998 is not expected to have a significant
impact on the Company's financial statements. Adoption of SFAS No. 130 in 1998
will not have an effect on the Company's cash flows, financial position or net
income. However, adoption of SFAS No. 130 will require the Company to report
comprehensive income, which will include net income and the change in the
cumulative translation adjustment reported in stockholders' equity.
Reclassification of Prior Period Financial Statements
Certain 1996 and 1995 amounts have been reclassified to be consistent with the
1997 presentation.
3. INVENTORIES
Inventories are summarized as follows (in millions):
December 31,
1997 1996
- --------------------------------------------------------------------------------
Raw materials and supplies $ 62.0 $ 56.1
Work in progress 61.5 53.4
Finished goods 35.4 41.6
- --------------------------------------------------------------------------------
FIFO inventory 158.9 151.1
LIFO valuation adjustment (3.4) (1.7)
- --------------------------------------------------------------------------------
$155.5 $149.4
================================================================================
At December 31, 1997 and 1996, inventories include $122.7 million and
$101.2 million, respectively, that are valued using LIFO. This valuation
adjustment approximates the difference between the LIFO carrying value and
current replacement cost.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes the following
(in millions):
December 31,
1997 1996
- --------------------------------------------------------------------------------
Land $ 12.8 $ 14.6
Buildings 60.2 70.7
Machinery and equipment 267.7 246.8
- --------------------------------------------------------------------------------
340.7 332.1
Accumulated depreciation (65.2) (41.0)
- --------------------------------------------------------------------------------
$275.5 $291.1
================================================================================
Depreciation expense was $41.2 million in 1997, $39.6 million in 1996,
$1.8 million in the period from December 14 to December 31, 1995, and $31.9
million in the period from January 1 to December 13, 1995.
PAGE 24
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
5. GOODWILL
Goodwill relates to the Acquisition (Note 1). Accumulated amortization was $14.6
million and $8.1 million at December 31, 1997 and 1996. The $22.5 million 1997
reduction in goodwill was due to (i) $6.5 million of amortization, (ii) the
recognition of $6.1 million of preacquisition U.S. alternative minimum tax
credits (Note 10) that were not estimable at the acquisition date, (iii) $9.4
million of goodwill associated with the Company's refurbishment business which
was sold in 1997 (Note 19), and (iv) the effects of foreign exchange
translation. The $55.6 million goodwill reduction in 1996 was due to (i) $7.7
million of amortization, (ii) the recognition of $30.5 million of preacquisition
U.S. net operating loss carryforward benefits and alternative minimum tax
credits that were not estimable at the acquisition date, (iii) the reversal of
$22.3 million of restructuring accruals (Note 20), (iv) the 1996 $3.6 million
settlement reduction of the acquisition price, and (v) finalization of the
Acquisition purchase price allocation to the carrying value of certain other
assets and liabilities.
6. PATENTS AND TECHNOLOGY AND OTHER INTANGIBLE
ASSETS, NET AND OTHER NONCURRENT ASSETS
Patents and technology and other intangible assets, net includes the following
(in millions):
December 31,
1997 1996
- --------------------------------------------------------------------------------
Patents and technology, net of
accumulated amortization of
$13.8 and $7.1 $ 53.6 $ 60.3
Non-compete agreement, net of
accumulated amortization of
$10.2 and $5.2 64.8 69.8
- --------------------------------------------------------------------------------
$118.4 $130.1
================================================================================
Other noncurrent assets in the consolidated balance sheet at December 31,
1997 and 1996 includes net deferred financing costs of $.8 million and $13.8
million, respectively. The deferred financing costs are being amortized over the
life of the financings. In 1997, substantially all of the deferred financing
amounts were expensed because the related financings were repaid and/or
terminated (Note 7). Other noncurrent assets at December 31, 1997 and 1996 also
includes $7.2 million and $8.2 million, respectively, of indemnification
receivables from Pechiney, S.A. related to insurance claims. Equal amounts are
included in the amounts captioned "Other noncurrent liabilities" on the
consolidated balance sheets. The December 31, 1997 and 1996 "Other noncurrent
assets" amount also includes indemnification receivables of $32.4 million and
$26.7 million, respectively, related to environmental matters (Note 18).
7. FINANCING ARRANGEMENTS
In the fourth quarter of 1997, the Company terminated its senior credit
facilities and repaid all outstanding borrowings thereunder, and the Company
tendered for and repaid all but $3 million of its $125 million senior
subordinated notes. As a result of these transactions, the Company recorded an
extraordinary loss from the early retirement of debt of $12.3 million, after
tax. The loss includes the write-offs of unamortized debt issuance costs, a
tender premium for the senior subordinated notes and transaction costs. The debt
repayments were funded with borrowings under a new $300 million bank revolving
credit facility, which was entered into in the fourth quarter. Also in the
fourth quarter, the Company elected to repay all but $6 million of its
payment-in-kind junior subordinated notes. This payment was also funded with
borrowings under the new $300 million bank revolving credit facility.
PAGE 25
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Long-term debt, excluding Pechiney Notes (Note 8), is summarized as
follows (in millions):
December 31,
1997 1996
- --------------------------------------------------------------------------------
Revolving credit facility $198.0 $ --
Retired debt issues -- 309.0
Payment-in-kind junior
subordinated notes 6.0 27.7
Other 4.4 14.0
- --------------------------------------------------------------------------------
208.4 350.7
Less current portion -- 56.1
- --------------------------------------------------------------------------------
$208.4 $294.6
================================================================================
Principal maturities for the succeeding five years ended December 31 are
as follows: $0 in 1998-2001 and $198 million in 2002. At December 31, 1997, $7.6
million of letters of credit were outstanding and $94.4 million of borrowing
capacity was available under the Revolving Credit Facility.
In December 1997, the Company (through its wholly-owned and only
operating subsidiary, Howmet Corporation) entered into a $300 million bank
revolving credit facility ("Revolving Credit Facility"). The facility expires on
December 16, 2002 and provides for an unsecured revolving credit line and
letters of credit of up to $300 million in the aggregate. Interest is based on
(i) the higher of a bank's corporate base rate or the Federal funds rate plus
1/2% ("Floating Rate") for swing line loans which can be made daily or (ii) at
the Company's option the Floating Rate or the Eurodollar rate plus 1/4% (6.22%
at December 31, 1997) for advance loans which require three days notice.
Terms of the Revolving Credit Facility require Howmet Corporation to meet
certain interest coverage and leverage ratios and maintain certain minimum net
worth amounts. In addition, there are restrictions customarily found in such
agreements, such as limits on indebtedness and payments for acquisitions or
investments. The agreement contains events of default including a change of
control (as defined) of the Company and its subsidiaries, and cross defaults
with respect to other debt and the receivables facility.
The Company is a holding company, which conducts its only operations
through Howmet Corporation and its subsidiaries and, accordingly, is dependent
on the receipt of cash from these subsidiaries to meet its expenses and other
obligations. Terms of the Revolving Credit Facility which limit transfers of
cash to the Company from Howmet Corporation, affect the Company's ability to
obtain funds for any purposes, including dividends, stock redemption, debt
service and normal business activities. Based on current and anticipated
activities, this limitation is not expected to have an effect on the Company's
ability to conduct its normal activities.
The 10% payment-in-kind junior subordinated purchaser note is due December
13, 2006. Interest accumulates through the issuance of PIK notes through
December 13, 2003 and is payable in cash semi-annually thereafter. The notes may
be prepaid at any time without penalty or notice.
The Company has an agreement to sell, on a revolving basis, an undivided
interest in a defined pool of accounts receivable. At December 31, 1997 the
defined pool of outstanding accounts receivable amounted to $75.2 million. The
Company received $55 million from the sale of such eligible receivables to a
master trust and has deducted this amount from accounts receivable in the
December 31, 1997 and 1996 consolidated balance sheets. Losses on the sale of
receivables for the years ended December 31, 1997 and 1996 and for the period
from December 14, 1995 to December 31, 1995 were $3.8 million, $4.5 million and
$.7 million, respectively. These losses are included in the line captioned
"Other, net" in the statements of income. At December 31, 1997 and 1996 the
$20.2 million and $46.1 million differences, between the total eligible pool and
the $55 million sold, represent retainage on the sale in the event the
receivables are not fully collected. The Company has retained the responsibility
for servicing and collecting the accounts receivable sold or held in the master
trust. Any incremental additional costs related to such servicing and collection
efforts are not significant.
PAGE 26
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
In 1997, 1996, the period from December 14 to December 31, 1995 and the
period from January 1 to December 13, 1995, the Company paid interest of $20.1
million, $36.2 million, $0 million and $5.3 million, respectively.
8. RESTRICTED TRUST AND RELATED PECHINEY NOTES PAYABLE
In 1988, Pechiney Corporation, which as a wholly-owned subsidiary of Pechiney,
S.A., issued indebtedness maturing in 1999 (the "Pechiney Notes") to third
parties in connection with the purchase of American National Can Company. As a
result of the Acquisition, Pechiney Corporation (now named Howmet Holdings
Corporation, "Holdings") became a wholly-owned subsidiary of the Company. The
Pechiney Notes remained at Holdings, but Pechiney, S.A., which retained American
National Can Company, agreed with the Company to be responsible for all payments
due on or in connection with the Pechiney Notes. Accordingly, Pechiney, S.A.
issued its own note to Holdings in an amount sufficient to satisfy all
obligations under the Pechiney Notes. The Pechiney, S.A. note was deposited in a
trust for the benefit of Holdings (the "Restricted Trust"). If Pechiney, S.A.
fails to make any payments required by its note, the trustee under the
Restricted Trust (the "Trustee") has irrevocable letters of credit in the
aggregate amount of $772 million issued to the Restricted Trust by Banque
Nationale de Paris ("BNP"), a French bank which has an A+ credit rating from
Standard & Poors Ratings Group ("S&P"), to draw upon to make such payments. In
the event that there is an impediment to a draw under the BNP letters of credit
held by the Trustee, the Trustee has substantially identical "back-up" letters
of credit in the aggregate amount of $772 million issued to the Restricted Trust
by Caisse des Depots et Consignations, a French bank which has an AAA credit
rating from S&P. In addition, the holders of the Pechiney Notes have a third set
of letters of credit (also issued by BNP), which can be drawn upon by such
holders in the event that principal and/or interest payments on the Pechiney
Notes are not made. Pechiney, S.A. is solely responsible as reimbursement party
for draws under the various letters of credit referenced above, and by agreement
with the banks neither Holdings nor the Company has any responsibility therefor.
However, Holdings remains liable as the original issuer of the Pechiney Notes in
the event that Pechiney, S.A. and both banks fail to meet their obligations
under their respective letters of credit. Management believes that it is
extremely remote that the Company will be required to use any of its assets
other than those in the Restricted Trust to satisfy any payments due on or in
connection with the Pechiney Notes. Upon repayment of the Pechiney Notes, the
Restricted Trust terminates and any assets of the Restricted Trust are to be
returned to Pechiney, S.A.
The Pechiney Notes are due on January 2, 1999 and may not be prepaid prior
to that date. Interest is at three-month LIBOR plus 25 basis points (5.98% for
the quarter ended December 31, 1997). Interest is paid on the last business day
of each calendar quarter. Interest expense on these notes was $42.8 million and
$42.1 million for the year ended December 31, 1997 and 1996 and $2.2 million for
the period from December 14, 1995 to December 31, 1995. Interest income from the
Restricted Trust for the aforementioned periods was equal to the interest
expense and is netted in these financial statements.
9. COMMITMENTS
The Company and its subsidiaries have noncancellable operating leases relating
principally to manufacturing and office facilities and certain equipment. Future
minimum payments under noncancellable leases as of December 31, 1997 are as
follows: 1998 - $5.2 million, 1999 - $4.3 million, 2000 - $3.3 million, 2001 -
$1.6 million, 2002 - $.8 million and thereafter $2.8 million.
Total rental expense for all operating leases was $7.3 million in 1997, $8
million in 1996, $.4 million in the period from December 14 to December 31, 1995
and $6.7 million in the period from January 1 to December 13, 1995.
As of December 31, 1997, the Company is committed to spend $20.1 million
for 1998 capital expenditures.
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
10. INCOME TAXES
Income taxes were provided in the following amounts (in millions):
<TABLE>
<CAPTION>
Howmet International Inc. Howmet Predecessor
Consolidated Company Combined
----------------------------------------------------------------
Period from Period from
December 14, 1995 January 1, 1995
Year ended December 31, to to
1997 1996 December 31, 1995 December 13, 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current income taxes:
U.S. Federal $23.0 $15.5 $ .2 $22.9
State 7.8 11.7 -- 4.0
Foreign 7.9 6.3 .3 2.8
- ----------------------------------------------------------------------------------------------------------------------
38.7 33.5 .5 29.7
Deferred income taxes (.3) (3.2) -- (6.0)
- ----------------------------------------------------------------------------------------------------------------------
$38.4 $30.3 $ .5 $23.7
======================================================================================================================
</TABLE>
In 1997 tax expense includes $46.3 million of expense related to income
before the extraordinary loss, and a $7.9 million benefit related to the
extraordinary loss from early retirement of debt.
A reconciliation of the United States statutory rate to the effective
income tax rate follows:
<TABLE>
<CAPTION>
Howmet International Inc. Howmet Predecessor
Consolidated Company Combined
----------------------------------------------------------------
Period from Period from
December 14, 1995 January 1, 1995
Year ended December 31, to to
1997 1996 December 31, 1995 December 13, 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0% 35.0%
Effect of:
State income taxes, net of federal benefit 3.1 10.1 10.1 4.0
Foreign tax differential .1 .3 17.1 5.0
Goodwill amortization 2.3 4.8 46.1 1.2
Research & development credits (3.3) (.4) -- --
Adjustment to prior years' provision -- -- -- 2.3
Other 1.9 4.4 (14.7) (.1)
- ----------------------------------------------------------------------------------------------------------------------
Effective rate 39.1% 54.2% 93.6% 47.4%
======================================================================================================================
</TABLE>
Domestic and foreign components of pre-tax income, including the 1997
$20.2 million extraordinary loss from early retirement of debt, are as follows
(in millions):
<TABLE>
<CAPTION>
Howmet International Inc. Howmet Predecessor
Consolidated Company Combined
----------------------------------------------------------------
Period from Period from
December 14, 1995 January 1, 1995
Year ended December 31, to to
1997 1996 December 31, 1995 December 13, 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States $71.8 $37.0 $(2.0) $37.9
Foreign 26.3 18.9 2.5 12.1
- ----------------------------------------------------------------------------------------------------------------------
$98.1 $55.9 $ .5 $50.0
======================================================================================================================
</TABLE>
PAGE 28
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
The components of the net deferred income tax asset (liability) are as
follows (in millions):
December 31,
1997 1996
- --------------------------------------------------------------------------------
State and foreign net operating losses $ 24.7 $ 29.9
U.S. alternative minimum tax credits 7.9 18.3
Accrued retiree benefits
other than pensions 39.8 38.0
Vacation and deferred
compensation accruals 24.2 9.9
Pension liability 6.6 6.7
Other accruals 23.1 25.2
- --------------------------------------------------------------------------------
Gross deferred tax asset 126.3 128.0
Valuation allowance (18.0) (22.2)
- --------------------------------------------------------------------------------
Total deferred tax asset 108.3 105.8
- --------------------------------------------------------------------------------
Inventory (27.0) (27.3)
Property, plant and equipment (46.9) (50.1)
Patents and technology (21.5) (24.3)
- --------------------------------------------------------------------------------
Total deferred tax liability (95.4) (101.7)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 12.9 $ 4.1
================================================================================
Balance sheet classification:
Current assets $ 16.3 $ 21.0
Noncurrent liabilities (3.4) (16.9)
- --------------------------------------------------------------------------------
$ 12.9 $ 4.1
================================================================================
The change in net deferred tax asset includes a $.3 million and $3.2
million deferred tax benefit which is included in the net 1997 and 1996 income
tax expense, respectively. Also, in 1997 and 1996 net deferred tax assets were
increased by $6.1 million and $30.1 million, respectively, and goodwill was
reduced by the respective amounts. The principal reason for these reductions was
the recognition of $36.6 million of preacquisition U.S. net operating loss
carryforward benefits and alternative minimum tax credits, which were acquired
as part of the December 13, 1995 acquisition and were not estimable at the
acquisition date. All the U.S. net operating loss carryforwards have been used
to offset U.S. Federal taxes that would have otherwise been payable in 1996. A
majority of the alternative minimum tax credits were used to offset U.S. Federal
taxes that would have otherwise been payable in 1997. The alternative minimum
tax credits have no expiration date. The 1997 deferred tax assets increased an
additional $2.4 million primarily due to the cumulative foreign exchange
adjustment.
At December 31, 1997 and 1996, the Company had available $131 million and
$151.8 million, respectively, of state net operating loss carryforwards. Of the
1997 amount, $101 million expires in 1998 and $30 million expires in 1999. At
December 31, 1997 and 1996, the Company had available approximately $10.5
million and $15.8 million, respectively, of foreign net operating loss
carryforwards which can only be used to offset foreign taxable income. A
majority of these carryforwards have no expiration date. At December 31, 1997
and 1996, the Company also had foreign tax benefits of $6.8 million and $7.8
million, respectively, which will be realized over the next three years.
At December 31, 1997 and 1996, the Company carried a valuation allowance
equal to the deferred tax asset associated with all state and foreign net
operating loss carryforwards. The Company has no other valuation allowance
because management believes it is more likely than not that future operations
will generate sufficient taxable income to realize the other deferred tax
assets. A continuation of the 1997 level of earnings will provide ample taxable
income for such realizations.
In 1997 the deferred tax valuation allowance related to state net
operating losses decreased by $2.6 million as some losses were used to offset
1997 income and others expired. In 1997 the deferred tax valuation allowance
related to foreign net operating losses was reduced by $1.6 million because some
losses were used to offset 1997 income and because of the reducing effect of
foreign exchange translation. During 1996 the Company's deferred tax valuation
allowance decreased by $2.2 million, principally due to a change in estimated
foreign net operating losses.
In 1997, 1996, the period from December 14 to December 31, 1995 and the
period from January 1 to December 13, 1995, the Company paid income taxes, net
of refunds, of $45.6 million, $28.4 million, $.9 million, and $42.6 million,
respectively.
PAGE 29
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
11. PENSIONS
The Company has noncontributory defined benefit retirement plans covering
substantially all of its employees in the U.S. and Canada. In accordance with
the Stock Purchase Agreement for the Acquisition, Pechiney, S.A. is responsible
for the benefits of the nonunion hourly employees who were retired at the
Acquisition date. Pechiney, S.A. is also responsible for all salaried employee
benefits earned prior to the Acquisition date. The Company is responsible for
all other covered nonunion hourly employees and for all salaried employee
benefits earned subsequent to the Acquisition date. Effective January 1, 1997,
Howmet Corporation has amended the salaried plan to change the formula from
"final pay" to "cash balance." This change resulted in a 1997 unrecognized prior
service cost reduction of $37.9 million, and 1997 expense of $2.6 million less
than it would have been using the prior plan formula. The Company intends to
make annual contributions to the retirement plans in amounts up to the maximum
allowable for tax deduction purposes.
The following items are the components of the net periodic pension cost
for the U.S. and Canadian plans (in millions):
<TABLE>
<CAPTION>
Howmet International Inc. Howmet Predecessor
Consolidated Company Combined
----------------------------------------------------------------
Period from Period from
December 14, 1995 January 1, 1995
Year ended December 31, to to
1997 1996 December 31, 1995 December 13, 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost - benefits earned during the period $10.1 $ 8.6 $ .4 $ 7.8
Interest cost on the projected benefit obligation 8.2 9.7 .4 8.0
Actual return on plan assets (18.1) (10.9) (.4) (12.8)
Net amortization and deferral 5.0 1.0 -- 4.7
- ----------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 5.2 $ 8.4 $ .4 $ 7.7
======================================================================================================================
</TABLE>
The following table sets forth the U.S. and Canadian plans' funded status
and amounts recognized in the balance sheets (in millions):
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
Actuarial benefit obligation Actuarial benefit obligation
-------------------------------------------------------------
Exceed Less than Exceed Less than
plan assets plan assets plan assets plan assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(16.1) $(86.5) $ (8.9) $(80.3)
Nonvested benefit obligation (1.3) (4.8) (2.5) (3.4)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (17.4) (91.3) (11.4) (83.7)
Additional benefits based on estimated future salary increases (5.2) (1.1) (41.2) (1.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (22.6) (92.4) (52.6) (84.8)
Fair value of plan assets 14.3 125.4 2.4 112.2
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (in excess of) less than plan assets (8.3) 33.0 (50.2) 27.4
Prior service cost (reduction) not yet recognized in net periodic cost (37.9) .6 -- --
Unrecognized net loss (gain) 4.9 (7.3) 2.0 (1.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued pension liability $(41.3) $ 26.3 $(48.2) $ 25.9
====================================================================================================================================
</TABLE>
PAGE 30
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
The discount rate used to determine the actuarial present value of the
projected benefit obligation was 7.5% at December 31, 1997 and 1996. The
expected rate of return was 9% at December 31, 1997 and 1996 and 9.5% at
December 31, 1995 for U.S. plan assets and 8% for Canadian plan assets at
December 31, 1997, 1996 and 1995. The expected increase in future salaries for
those plans using future compensation assumptions was 5% at December 31, 1997
and 1996 for the U.S. plans and 6% for the Canadian plans at December 31, 1997
and 1996. The unrecognized net asset and the unrecognized prior service cost are
being amortized based on the projected future service lives of employees, which
range from 15-25 years. Plan assets are primarily invested in equity securities,
debt securities and temporary cash investments. Accrued pension cost is included
in the amounts captioned "Accrued liabilities" and "Other noncurrent
liabilities" in the consolidated balance sheets.
The net pension expense for the Company's United Kingdom operations was
$1.2 million in 1997 and $1.1 million in both 1996 and 1995.
The Company sponsors matching 401(k) savings plans for eligible employees.
The Company matches up to 5% of salaried employee contributions and up to 6% of
the contribution of all full time nonunion hourly employees. Company
contributions to the matching savings plans were approximately $6.8 million in
1997 and $4 million in both 1996 and 1995.
12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides postretirement health care and life insurance benefits to
its eligible active and retired employees, including certain union, nonunion and
salaried employees. Components of the net periodic postretirement benefit cost
were as follows (in millions):
<TABLE>
<CAPTION>
Howmet International Inc. Howmet Predecessor
Consolidated Company Combined
-------------------------------------------------------------
Period from Period from
December 14, 1995 January 1, 1995
Year ended December 31, to to
1997 1996 December 31, 1995 December 13, 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost - benefits attributable to service during the period $ 3.4 $ 2.9 $ .1 $ 2.4
Interest cost on accumulated postretirement benefit obligation 7.5 6.6 .4 6.3
Net amortization and deferral .4 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $11.3 $ 9.5 $ .5 $ 8.7
=================================================================================================================================
</TABLE>
The amounts recognized as a liability in the Company's consolidated
balance sheets are as follows (in millions):
December 31,
1997 1996
- --------------------------------------------------------------------------------
Retirees $(53.4) $(49.8)
Fully eligible active plan participants (19.9) (14.0)
Other plan participants (37.0) (32.1)
Unrecognized prior service cost 4.5 --
Unrealized net loss 6.7 1.4
- --------------------------------------------------------------------------------
Total (99.1) (94.5)
Less current portion 6.0 6.0
- --------------------------------------------------------------------------------
$(93.1) $(88.5)
================================================================================
The 1997 unrecognized prior service cost is primarily due to lowering
eligibility requirements for union hourly employees. The accumulated
postretirement benefit obligation was determined using weighted average discount
rates of 7.5% for 1997 and 1996. The health care cost trend rate assumption for
below age 65 benefits was 10% in 1997 and 11% in 1996 and is assumed to decline
1% annually to 6% in the year 2001 and remain constant thereafter. The health
care cost trend rate for above age 65 benefits was 8.2% in 1997 and 9% in 1996
and is assumed to decline gradually to 5% in the year 2001 and remain constant
thereafter. A 1% increase in the health care cost trend rate would have
increased the accumulated postretirement benefit obligation by $1.3 million and
$6.1 million at December 31, 1997 and 1996, respectively, and the net periodic
cost by $.5 million in 1997 and $.7 million in 1996.
PAGE 31
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
13. COMMON AND PREFERRED STOCK
On October 8, 1997, the Board of Directors approved a 10,000-to-1 stock split in
the form of a stock dividend, which increased outstanding common stock from
10,000 to 100,000,000 shares. All share and per share data in the accompanying
financial statements have been retroactively adjusted to reflect the
aforementioned changes.
An amendment to the Company's Restated Certificate of Incorporation was
approved by the Board of Directors and the stockholders of the Company on
October 8, 1997. The amendment increased authorized common stock to 400,000,000
shares and authorized 10,000,000 shares of preferred stock, $.01 par value per
share. The Board of Directors is authorized to determine the terms of any new
series of preferred stock. Of the 10,000,000 shares of authorized preferred
stock, 15,000 shares are designated as 9% Series A Senior Cumulative Preferred
Stock. Dividends on this preferred stock are at 9% and are payable-in-kind. The
Company is obligated to redeem these shares in 2005 or immediately prior to a
merger or consolidation of the Company with, or the sale or transfer of
substantially all assets to, any entity other than a wholly-owned subsidiary.
Upon liquidation or dissolution of the Company, holders of this preferred stock
would be entitled to be paid from the assets of the Company before any payment
could be made to the common stockholders. All outstanding shares of this
preferred stock are owned by Thiokol.
14. SARs AND STOCK OPTION PLANS
Stock Appreciation Rights ("SARs")
In early 1996, the Company adopted a SARs plan. Under the plan, SARs
representing up to 5% of the Company's equity value were authorized to be issued
to executive officers of the Company. The SARs are similar to phantom stock
options and are valued based on appreciation of the value of the Company's
common stock above the base per share of the SARs. In November 1997, the Company
amended its SARs plan (the "Amended SARs Program"). Pursuant to the Amended SARs
Program, the maximum per share value of the outstanding SARs is limited to the
difference between $15 and the base price per share of the SARs (generally $2).
In exchange for accepting such limitation, each holder of SARs was granted a
non-qualified stock option (a "Howmet Option") to purchase, at the $15 per share
initial public offering price, a number of shares of common stock equal to the
number of shares with respect to which such employee had SARs (approximately 4.4
million Howmet Options in total).
The SARs vest over a five-year period ending in 2001 based upon passage of
time, the operating performance of the Company, and tenure of the executives.
Vesting accelerates if there is a sale of substantially all assets, liquidation,
or a change in control of the Company.
At December 31, 1997 there were approximately 4.4 million SARs
outstanding. Compensation costs of $31.4 million and $6.6 million were charged
against income for the SARs plan in 1997 and 1996, respectively. At December 31,
1997 and 1996, $38 million and $6.6 million, respectively, was included in the
amount captioned "Other noncurrent liabilities" in the consolidated balance
sheet.
PAGE 32
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Howmet Options
In November 1997, the Company adopted its 1997 Stock Awards Plan (the "Plan")
which provides for grants of stock options, shares of restricted stock and SARs
to key Company employees. The Plan provides for grants involving up to an
aggregate 5 million shares of Howmet International Inc. common stock. In
December 1997, 4,377,500 options were granted as a result of the aforementioned
Amended SARs Program. All such options have a $15 per share exercise price and
are outstanding at December 31, 1997. Such options will vest and become
exercisable in 25% increments on January 1 of each year beginning in 1999. The
options expire eight years after the date of grant. The Company has reserved 5
million common shares for issue pursuant to the 1997 Stock Awards Plan.
On January 1, 1997, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation." In accordance with the provisions of SFAS No. 123,
the Company chose to continue to account for stock-based compensation using the
intrinsic value method under APB Opinion No. 25 and, accordingly, does not
recognize compensation cost for options issued at the market price at date of
grant. If the Company recognized compensation cost based on the fair value of
the options granted at grant date as prescribed by SFAS No. 123, net income
applicable to common stock and earnings per common share, on a pro forma basis
would have been reduced by approximately 1.2% and 1.8%, respectively, in 1997.
The fair value of the Howmet options was estimated using the Black-Scholes
option pricing model with the following weighted-average assumptions: risk-free
interest rate of 5.71%; volatility of the expected market price of the Company's
common stock of .288 and a weighted-average option life of 6 years.
Thiokol Options
Certain key executives of the Company hold 195,000 contingent stock options for
Thiokol common stock. The exercise price of the options is the market price of
Thiokol common stock on the date of the grant ($35.50-$40.94). The options will
vest only if Thiokol acquires 100% of the Company prior to December 13, 2001.
The options vest, and are exercisable, 50% on the date of such acquisition and
25% each year thereafter. They expire not later than ten years after the date of
the grant.
Thiokol has informed holders of the Thiokol Options of Thiokol's intention
to adopt a plan that would allow the holders to benefit from such options even
if Thiokol does not acquire 100% of the Company prior to December 13, 2001. At
December 13, 2001 each participant will become vested in the difference as of
December 13, 2001 between the aggregate market value of all of the shares of
Thiokol common stock represented by the participant's Thiokol Options and the
aggregate exercise price of all such options. Holders of Thiokol Options who
retire before December 13, 2001 would receive a pro rata portion of the benefits
described above based on the portion of time employed by the Company during the
period from December 13, 1995 to December 13, 2001.
Whether the executives vest in the Thiokol Options or vest in the
alternative plan, the Company will record compensation expense for one but not
both plans. Because vesting is assured under the alternative plan, the Company
is recording compensation expense related to that plan over the six year vesting
period ending December 13, 2001. In 1997 $2.9 million of compensation expense
was charged against income. There was no comparable expense recorded prior to
1997.
PAGE 33
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
15. GEOGRAPHIC INFORMATION
The Company operates in a single industry as a manufacturer of investment cast
components primarily for sale to the defense and commercial aircraft and
industrial gas turbine engine industries. The Company is a multinational entity
with operating subsidiaries in two geographic regions, North America (including
the United States and Canada) and Europe (including France and the United
Kingdom). Intercompany transfers between geographic areas are not significant.
In computing earnings from operations for subsidiaries outside of the United
States, no allocations of general corporate expenses have been made. Allocated
identifiable assets exclude the $716.4 million Restricted Trust (Note 8).
(in millions) North America Europe Total
- --------------------------------------------------------------------------------
Howmet International Inc.
Consolidated:
1997
Sales to unaffiliated
customers $1,026.9 $ 231.3 $1,258.2
Income from
operations 135.7 18.8 154.5
Identifiable assets 779.3 214.9 994.2
1996
Sales to unaffiliated
customers 876.9 229.9 1,106.8
Income from
operations 88.2 13.8 102.0
Identifiable assets 829.2 223.2 1,052.4
Period from
December 14, 1995 to
December 31, 1995
Sales to unaffiliated
customers 34.9 16.5 51.4
Income from
operations 2.1 2.5 4.6
Howmet Predecessor
Company Combined:
Period from
January 1, 1995 to
December 13, 1995
Sales to unaffiliated
customers 703.6 190.5 894.1
Income from
operations 45.0 6.7 51.7
- --------------------------------------------------------------------------------
Sales to unaffiliated customers include export sales of $331.9 million in
1997, $330.1 million in 1996, $19.3 million in the period from December 14 to
December 31, 1995, and $278.1 million in the period from January 1 to December
13, 1995. Export sales of domestic operations, included in total export sales,
were $254.1 million in 1997, $235 million in 1996, $10.1 million in the period
from December 14 to December 31, 1995, and $160.4 million in the period from
January 1 to December 13, 1995. In 1997, 1996 and 1995, approximately 50% to 61%
of export sales of domestic operations were to Western Europe, approximately 25%
to 41% were to Canada and approximately 8% to 16% were to the Far East.
The Company's sales to its two largest customers were $253.4 million and
$185.1 million in 1997, $206 million and $159.5 million in 1996, $10.5 million
and $7.9 million in the period from December 14 to December 31, 1995, and $184
million and $138.1 million in the period from January 1, 1995 to December 13,
1995. Receivables from these customers were $12.4 million and $17 million at
December 31, 1997 and $16.5 million and $12.7 million at December 31, 1996.
16. TRANSACTIONS WITH AFFILIATES
Prior to the 1997 ownership change (Note 1), the Company had management
agreements with Carlyle and with Thiokol for certain management and financial
advisory services. Each agreement provided for the payment of an annual
management fee of $1 million. In addition, in 1995 Carlyle and Thiokol each
received $2 million for services provided in connection with the acquisition of
the Company. This transaction was reflected as a reduction of capital surplus in
the consolidated balance sheet. In November 1997, the agreement with Carlyle was
amended to reduce the annual fee to $.5 million and the agreement with Thiokol
was terminated. The Company and Thiokol have entered into a new service
agreement whereby Thiokol will provide a wide range of administrative services
for which the Company will generally pay Thiokol's cost plus a fee.
PAGE 34
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
In connection with the 1997 ownership change, Thiokol and Carlyle amended
and restated their December 1995 shareholders agreement and entered into an
agreement with the Company. Pursuant to such agreements, (1) Carlyle has one
position on the Company's Board of Directors as long as it owns not less than 5%
of the outstanding common stock; (2) Carlyle will not dispose of any of its
shares of common stock prior to the earlier of December 1999 or a change of
control of Thiokol; (3) during the two-year period starting December 1999,
Thiokol will have an option to acquire Carlyle's shares of common stock (all, or
in increments of 25%) and a right of first refusal to acquire any shares Carlyle
proposes to sell, in each case at market price; (4) generally, if Thiokol
disposes of any of its shares of common stock to an unaffiliated third party
prior to December 2001, Carlyle will have the right to participate in such sale
with respect to a proportionate number of its shares on the same terms; (5)
Carlyle has certain registration rights (exercisable between December 1999 and
December 2002) for its remaining shares of common stock; and (6) Thiokol has
certain preemptive rights. In addition, Thiokol has agreed that, without prior
consent of the Carlyle director and a majority (but not less than two) of the
non-employee directors of the Company who are not directors or employees of
Thiokol or Carlyle, neither Thiokol nor any of its affiliates may acquire any
Publicly Held Shares if, after such acquisition, the number of Publicly Held
Shares then outstanding would be less than 14% of the total number of shares
outstanding, other than (x) pursuant to a tender offer to acquire all of the
outstanding shares of common stock not then beneficially owned by Thiokol, or
(y) pursuant to a merger or other business combination in which all holders of
Publicly Held Shares are treated equally. "Publicly Held Shares" means the
outstanding shares of common stock other than shares held by Thiokol, Carlyle or
their respective affiliates.
In December 1995, certain executives of the Howmet Predecessor Company
invested $4.7 million in Carlyle. Upon the 1997 sale of Carlyle's interest in
the Company, the executives received a cash distribution from Carlyle, pro rata
to their investment in Carlyle.
The Howmet Predecessor Company had financing and other transactions with
Pechiney Corporation. Interest income earned from advances to Pechiney
Corporation was based on short-term borrowing rates obtained by Pechiney
Corporation. The average advance balance was $148.7 million for the period from
January 1 to December 13, 1995.
17. FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to credit risk
consist principally of trade receivables. The Company does not require
collateral and maintains reserves for potential credit losses related to trade
accounts receivable. The Company's accounts receivable are principally due from
companies in the aerospace and industrial gas turbine engine industries. See
Note 15 for receivables from the Company's two largest customers.
The fair values of the Company's trade receivables and payables
approximate their carrying amounts. Because the Revolving Credit Facility
borrowings are at variable interest rates, their carrying value approximates
their fair value at December 31, 1997.
The Company enters into forward exchange contracts as a hedge against
currency fluctuations of certain foreign currency transactions. At December 31,
1997, the Company had contracts to purchase 7.6 million Canadian dollars with
maturity dates from January to September 1998 for $5.5 million. At December 31,
1997, the fair value of these contracts was $5.3 million. The fair value of
foreign currency contracts was estimated by obtaining quotes from brokers. The
market value gains or losses arising from foreign exchange contracts offset
foreign exchange gains or losses on the underlying hedged assets or liabilities.
The Company's exposure to currency risk is limited to currency rate movement and
is considered to be negligible.
PAGE 35
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
The counterparties to the foreign exchange transactions are major
financial institutions. The Company does not anticipate nonperformance by the
counterparties.
18. CONTINGENCIES
The Company has received test results indicating levels of polychlorinated
biphenyls ("PCBs") at its Dover, New Jersey facility which will require
remediation. These levels have been reported to the New Jersey Department of
Environmental Protection ("NJDEP"), and the Company is preparing a work plan to
define the risk and to test possible clean-up options. The statement of work
must be approved by the NJDEP pursuant to an Administrative Consent Order
entered into between the Company and NJDEP on May 20, 1991 regarding clean-up of
the site. Various remedies are possible and could involve expenditures ranging
from $2 million to $22 million or more. The Company has recorded a $2 million
long-term liability as of December 31, 1997 and 1996 for this matter. Given the
uncertainties, it is possible that the estimated range of this cost and the
amount accrued will change within a one year period. The indemnification
discussed below applies to the costs associated with this matter.
In addition to the above, liabilities arising for clean-up costs
associated with hazardous types of materials in several waste disposal
facilities exist. In particular, the Company has been or may be named a
potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act or similar state laws at eleven on-site and
off-site locations. At December 31, 1997 and 1996, $4.4 million of accrued
environmental liabilities are included in the consolidated balance sheet for
such matters.
In connection with the Acquisition, Pechiney, S.A. indemnified the Company
for environmental liabilities relating to Howmet Corporation and stemming from
events occurring or conditions existing on or prior to the Acquisition, to the
extent that such liabilities exceed a cumulative $6 million. This
indemnification applies to all of the aforementioned environmental matters. It
is highly probable that changes in any of the aforementioned accrued liabilities
will result in an equal change in the amount receivable from Pechiney, S.A.
pursuant to this indemnification.
In addition to the above environmental matters, and unrelated to Howmet
Corporation, Holdings and Pechiney, S.A. are jointly and severally liable for
environmental contamination and related costs associated with certain
discontinued mining operations owned and/or operated by a predecessor-in-
interest until the early 1960s. These liabilities include approximately $21.3
million in remediation and natural resource damage liabilities at the Blackbird
Mine site in Idaho and a minimum of $8 million in investigation and remediation
costs at the Holden Mine site in Washington. Pechiney, S.A. has agreed to
indemnify the Company for such liabilities. In connection with these
environmental matters, the Company recorded a $29.3 million liability and an
equal $29.3 million receivable from Pechiney, S.A. as of December 31, 1997 and
$24.7 million for both the liability and receivable as of December 31, 1996.
Estimated environmental costs are not expected to materially impact the
financial position or the results of the Company's operations in future periods.
However, environmental clean-up periods are protracted in length and
environmental costs in future periods are subject to changes in environmental
remediation regulations. Any losses which are not covered by the Pechiney, S.A.
indemnifications and which are in excess of amounts currently accrued will be
charged to operations in the periods in which they occur.
The Company, in its ordinary course of business, is involved in other
litigation, administrative proceedings and investigations of various types in
several jurisdictions. The Company believes these are routine in nature and
incidental to its operations, and that the outcome of any proceedings to which
the Company currently is a party will not have a material adverse effect upon
its operations or financial condition.
PAGE 36
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
At December 31, 1997, the Company guaranteed certain indebtedness
aggregating $5.9 million of a 50% owned entity.
19. SALE OF REFURBISHMENT BUSINESS
In September 1997, the Company sold its aircraft engine component refurbishment
business (other than its coating operations). The Company received net cash
proceeds of approximately $44.9 million after tax and related expenses. The
sales transaction had an immaterial effect on net income. Net sales of such
business were approximately $53 million in 1997 for the period prior to the
September sale and approximately $69 million for the full year 1996. Income
from operations of this business were immaterial in all periods.
20. RESTRUCTURING
1992 and 1994 Restructuring
In 1992 the Company recorded a restructuring provision for reengineering
programs and capacity rationalization. In 1994 the Company recorded an
additional restructuring provision for costs to close a wax facility, for
closure of an administrative office, and for costs to exit the airmelt alloy
business. The decision to exit the airmelt alloy business was reversed in 1995,
and the related restructuring accrual was credited to income in 1995.
The following table sets forth the 1995, 1996 and 1997 activity for these
restructuring accruals (in millions):
1992 1994
Restructuring Restructuring
- --------------------------------------------------------------------------------
December 31, 1994 balance $12.4 $ 4.0
Cash disbursements (9.3) (1.9)
Changes in estimates -- (1.6)
- --------------------------------------------------------------------------------
December 31, 1995 balance 3.1 .5
Cash disbursements -- (.1)
Changes in estimates (2.8) (.4)
- --------------------------------------------------------------------------------
December 31, 1996 balance .3 --
Cash disbursements (.3) --
- --------------------------------------------------------------------------------
December 31, 1997 balance $ -- $ --
================================================================================
The 1996 accrual reductions resulted in a reduction of goodwill.
1995/1996 Restructuring Provision
In connection with the Acquisition, management determined that certain
manufacturing capabilities would be eliminated and the related facilities would
be utilized for purposes other than for manufacturing. Accordingly, a reserve of
$21 million, principally for severance costs, was recorded. The extent of the
restructuring was less than initially anticipated; consequently, in 1996 $19.1
million of the accrual was reversed and goodwill was reduced by an equal amount.
Expenditures in 1996 for this restructuring effort were $1 million, principally
for termination costs for 45 permanent and temporary employees. The $.9 million
December 31, 1996 accrual balance is included in amounts captioned "Accrued
liabilities" in the consolidated balance sheet. This amount was spent in 1997,
principally for termination costs related to 15 employees.
21. OTHER INFORMATION
Other, net in the income statements includes equity in income (loss) of
unconsolidated affiliates of $1.5 million, $(1.4) million, $(.2) million and
$(4.3) million for the years ended December 31, 1997, 1996, the period from
December 14 to December 31, 1995 and the period from January 1 to December 13,
1995, respectively. It also includes losses on sales of receivables (Note 7) and
$2.6 million of 1997 costs associated with the 1997 public offering of common
stock.
The 1996 reduction of receivables reported in the statement of cash flows
includes $21.1 million for collection of long-term customer receivables.
PAGE 37
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
22. QUARTERLY FINANCIAL HIGHLIGHTS (UNAUDITED)
The table below presents the Company's quarterly financial highlights for 1997
and 1996. The Company's business is generally not seasonal. However, the timing
of customer inventory needs in relation to engine production and delivery
schedules can cause quarterly fluctuations in the Company's operating
performance that are not necessarily related to underlying business conditions.
<TABLE>
<CAPTION>
(in millions, except per share amounts) 1997 Quarter Ended 1996 Quarter Ended
- --------------------------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 28 June 29 Mar. 30 Dec. 31 Sept. 29 June 30 Mar. 31
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (a) $ 306.2 $ 309.0 $ 330.4 $ 312.6 $ 283.5 $ 278.5 $ 283.4 $ 261.4
Gross profit 93.5 94.3 103.6 92.6 80.5 76.7 74.6 71.4
Income before extraordinary item(b)(c)(d) 12.7 21.2 22.6 15.5 9.8 9.2 5.0 1.6
Extraordinary item - loss on
early retirement of debt (12.3) -- -- -- -- -- -- --
Net income .4 21.2 22.6 15.5 9.8 9.2 5.0 1.6
Income per common share before
extraordinary item (basic and diluted) .11 .20 .21 .14 .09 .08 .04 .01
==========================================================================================================================
</TABLE>
(a) Includes $3.4 million and $6.3 million of additional revenue (with no
associated costs) in the first and second quarters of 1997, respectively,
from a pricing adjustment with a customer that is not expected to recur in
future periods.
(b) Includes expense related to the Company's SARs plan of $7.9 million, $8
million, $5.1 million and $10.4 million in the first, second, third and
fourth quarters of 1997, respectively, and $.9 million, $.9 million and
$4.8 million in the second, third and fourth quarters of 1996,
respectively.
(c) Includes expense of $1.3 million and $2.8 million in the second and third
quarters of 1997, respectively, for the accelerated write-off of debt
issuance costs associated with debt that was repaid ahead of schedule.
(d) Includes $.6 million and $2 million in the third and fourth quarters of
1997, for costs associated with the Company's November 1997 public
offering of common stock.
PAGE 38
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Management's Report on Financial Statements
Management has prepared, and is responsible for, the consolidated financial
statements and all related financial information contained in the Annual Report.
The consolidated financial statements, which include amounts based on estimates
and judgments, were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances and applied on a consistent basis.
Other financial information in this report is consistent with that in the
consolidated financial statements.
Management maintains an accounting system and related internal controls
which it believes provide reasonable assurance, at appropriate cost, that
transactions are properly executed and recorded, that assets are safe-guarded,
and that accountability for assets is maintained. An environment that provides
an appropriate level of control is maintained and monitored and includes
examinations by an internal audit staff.
Management recognizes its responsibilities for conducting the Company's
affairs in an ethical and socially responsible manner. The Company has written
standards of business conduct, including its business code of ethics which
emphasize the importance of personal and corporate conduct, that demands
compliance with federal and state laws governing the Company. The importance of
ethical behavior is communicated to all employees.
The Audit Committee of the Board of Directors is composed of two outside
directors. This Committee meets periodically and also meets separately with
representatives of the independent auditors, Company officers, and the internal
auditors to review their activities.
The consolidated financial statements have been examined by Ernst & Young
LLP, independent auditors, whose report follows.
/s/ John C. Ritter
John C. Ritter
Senior Vice President and
Chief Financial Officer
PAGE 39
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Report of Independent Auditors
The Board of Directors and Stockholders
Howmet International Inc.
We have audited the accompanying consolidated balance sheets of Howmet
International Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of income, common stockholders' equity and redeemable
preferred stock, and cash flows for the years ended December 31, 1997 and 1996,
and for the period from December 14, 1995 to December 31, 1995, and the related
combined statements of income, common stockholders' equity and redeemable
preferred stock, and cash flows for the period from January 1, 1995 to December
13, 1995 (Howmet Predecessor Company). 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 did not audit the
1995 financial statements of Howmet SA, CIRAL SNC and Howmet Limited (UK),
wholly-owned subsidiaries, which statements reflect total revenues of $221
million for the year ended December 31, 1995. Those statements were audited by
other auditors whose reports have been furnished to us, and our opinion, insofar
as it relates to data included for Howmet SA, CIRAL SNC and Howmet Limited (UK),
is based solely on the reports of other auditors.
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 (including the allocation of the results of operations of Howmet SA,
CIRAL SNC and Howmet Limited (UK) for the period from December 14, 1995 to
December 31, 1995) 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 and the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and, for 1995, the reports of other
auditors, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Howmet International
Inc. as of December 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for the years ended December 31, 1997 and 1996,
and for the period from December 14, 1995 to December 31, 1995 and the combined
results of its operations and its cash flows for the period from January 1, 1995
to December 13, 1995 (Howmet Predecessor Company) in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 28, 1998
PAGE 40
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
The Company is a manufacturer of investment cast components for the aerospace
and industrial gas turbine industries through operating companies located in the
United States, France, the United Kingdom and Canada. See Note 15 of Notes to
Financial Statements.
The Company's operating performance is affected by general economic trends and
by the following key factors.
Industry Trends. The Company manufactures superalloy, titanium and aluminum
castings for turbine engines and airframes applications for customers worldwide
in the commercial and military aviation and the industrial gas turbine ("IGT")
markets.
Demand for the Company's products is affected by trends in the commercial
aviation market, which are currently favorable. Worldwide output of large
commercial aviation engines, for which the Company makes the majority share of
airfoils, increased significantly from 1996 to 1997. Scheduled aircraft
deliveries give some indication of engine and component requirements, although
the deliveries of engine components precede actual aircraft deliveries by
approximately nine months. Approximately 495 large aircraft (over 50 passengers)
were delivered in 1996, and an estimated 684 units were delivered in 1997. Spare
part sales for engines in service, which contribute approximately one-half of
the Company's sales to the commercial aviation market, are also increasing as a
result of the higher number of aircraft in service and increased flight hours,
among other factors.
Military and defense contractor sales comprised approximately 14% of the
Company's total 1997 sales. Such sales are principally in North America and are
affected by a portion of United States defense spending which has been declining
since the 1980s. In the near term, the Company expects its military and defense
contractor sales to remain stable.
Growth in demand for efficient, lower cost electrical generation
facilities with shorter construction lead times has resulted in IGT engines now
accounting for approximately 25% of new electric utility generating capacity
ordered worldwide. Management believes that continued growth in global electric
power demand provides continued opportunity for the Company's IGT castings
through demand for new engines and for replacement spare parts. Sales of spare
parts currently represent approximately 38% of total IGT revenues, but are
expected to increase as the installed base of IGT engines grows and ages.
Pricing. The Company has experienced pressure from all of its major customers
for price reductions. This pressure is the result of the competitive environment
which the Company's OEM customers are facing in the selling of their products in
the worldwide market. The Company's strategy to provide added value and service
to its customers has been successful in offsetting much of the pricing
pressures.
Cost Reduction and Productivity Programs. Since 1992 the Company has
significantly reduced costs and improved productivity, delivery and cycle times.
On-time deliveries (measured in terms of 100% on-time deliveries of complete
orders, not simply by individual pieces) have increased from 68% in 1992 to 87%
in 1997 and cycle times (measured by work-in-process inventory days) have fallen
from 44 days in 1992 to 18 days in 1997, in each case despite the fact that the
complexity and volume of the Company's products have increased significantly
during the same period. As a result of these improvements, the Company has
significantly enhanced its financial performance, and management believes
further improvements can be achieved. The Company employs specific programs
designed to achieve these improvements. These programs include synchronous
manufacturing, kaizen events (in which solutions to specific operational
problems are achieved by teams of workers in concentrated time periods), quick
shop intelligence (daily meetings of plant staff in which product-specific
PAGE 41
<PAGE>
HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
manufacturing issues are reviewed and solved), and standardization of
manufacturing and business processes throughout the Company's facilities
worldwide, specialization by plants in the production of certain families of
castings and inter-facility manufacturing and technical support, including the
sharing of best practices, under a "One Howmet" concept.
Sale of Refurbishment Business. In September 1997, the Company sold its aircraft
engine component refurbishment business (other than its coating operations). The
Company received net cash proceeds of approximately $44.9 million after tax
payments and related expenses. The sale had an immaterial effect on net income.
Net sales of this business were approximately $53 million in 1997 for the period
prior to the September sale and approximately $69 million for the full year
1996. Earnings from operations of this business were immaterial in all periods.
Backlog. The Company's backlog of orders as of December 31, 1997 and 1996 were
$793 million and $648 million, respectively. Because of the short lead and
delivery times often involved and because the Company's orders are often
affected by deferrals and cancellations, backlog may not be a significant
indicator of future performance of the Company.
RESULTS OF OPERATIONS
See Note 1 of Notes to Financial Statements for a discussion of the October 11,
1995 formation of the Company and its December 13, 1995 acquisition of all of
the Company's current operating entities (the "Acquisition"). The Company had no
operations prior to December 14, 1995. For the period prior to December 14,
1995, results of Howmet Predecessor Company are used for comparison purposes
below. This is appropriate because the entities which comprise Howmet
Predecessor Company are those which generated all of the Company's sales and
pre-interest, pre-tax earnings since December 13, 1995.
For the purpose of comparing the Company's results of operations for the
year ended December 31, 1995, the results of the Company for the period from
December 14, 1995 to December 31, 1995 and the results of Howmet Predecessor
Company for the period from January 1, 1995 to December 13, 1995 have been
combined.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Summary financial information for the years ended December 31 follows (in
millions, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 Better/(Worse) Percent
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 1,258.2 $ 1,106.8 $ 151.4 14
- -----------------------------------------------------------------------------------------------------------------
Gross profit $ 384.0 $ 303.2 $ 80.8 27
Selling, general and administrative expense 145.4 117.3 (28.1) (24)
Depreciation and amortization expense 59.5 59.7 0.2 --
Research and development expense 24.6 24.2 (0.4) (2)
- -----------------------------------------------------------------------------------------------------------------
Income from operations 154.5 102.0 52.5 51
Net interest expense (29.8) (40.2) 10.4 26
Other, net (6.4) (5.9) (0.5) (8)
Income taxes (46.3) (30.3) (16.0) (53)
- -----------------------------------------------------------------------------------------------------------------
Income before extraordinary item 72.0 25.6 46.4 181
Extraordinary item (12.3) -- (12.3) --
- -----------------------------------------------------------------------------------------------------------------
Net income $ 59.7 $ 25.6 $ 34.1 133
=================================================================================================================
Income per share before extraordinary item (basic and diluted) $ .67 $ .21 $ .46 219
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Net sales increased significantly in 1997 due primarily to volume
increases, principally in the aerospace market. The favorable effects of higher
volume were partially offset by lower prices. Such price reductions are a
function of competitive factors and sharing cost reductions with customers. In
1997 the Company received $9.7 million of additional revenue from a pricing
adjustment with a customer that is not expected to recur in future periods.
Gross profit increased by 27% in 1997 primarily from leveraging the higher
sales volume and improved operating performance. Cost reductions and
productivity improvements were partially offset by the aforementioned price
reductions. A $6.5 million warranty expense charge in 1997 and the $9.7 million
additional revenue (which had no associated costs) also affect comparability.
All of these factors resulted in a 1997 gross margin percentage of 30.5%
compared to 27.4% in 1996.
Selling, general and administrative expense increased by $28.1 million in
1997. The increase was primarily due to $24.8 million of higher 1997 expense
recorded in connection with the Company's stock appreciation rights plan.
Net interest expense decreased $10.4 million in 1997. Interest expense was
reduced by $14.5 million due to lower debt levels and, to a lesser extent, lower
rates resulting from achievements of financial targets. Partially offsetting
this reduction is a $4.1 million accelerated write-off of debt issuance costs
associated with debt that was repaid ahead of schedule in the second and third
quarters.
The effective tax rate for 1997 was 39.1% compared to 54.2% for 1996. The
lower effective rate for 1997 is attributable primarily to the diminished impact
of nondeductible goodwill amortization in relation to higher 1997 income,
higher 1997 research and development credits, and a lower state tax rate.
Income before extraordinary item increased by 181%, and the resulting per
share amount increased by 219%, due to the factors outlined above, including the
favorable impact of the lower effective tax rate. Per share amounts are
calculated assuming 100 million common shares were outstanding for all years.
In 1997 the Company recorded a $12.3 million extraordinary loss from early
debt retirement. (See "Liquidity and Capital Resources" below.)
The impact of inflation on net sales and earnings from operations was not
significant.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Summary financial information for the years ended December 31 follows (in
millions, except per share amounts):
<TABLE>
<CAPTION>
1996 1995 Better/(Worse) Percent
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 1,106.8 $ 945.5 $ 161.3 17
- -------------------------------------------------------------------------------------------------
Gross profit $ 303.2 $ 226.1 $ 77.1 34
Selling, general and administrative expense 117.3 109.6 (7.7) (7)
Depreciation and amortization expense 59.7 35.4 (24.3) (69)
Research and development expense 24.2 26.4 2.2 8
Restructuring credit -- (1.6) (1.6) --
- -------------------------------------------------------------------------------------------------
Income from operations 102.0 56.3 45.7 81
Net interest (expense) income (40.2) 1.0 (41.2) --
Other, net (5.9) (6.8) 0.9 13
Income taxes (30.3) (24.2) (6.1) (25)
- -------------------------------------------------------------------------------------------------
Net income $ 25.6 $ 26.3 $ (0.7) (3)
=================================================================================================
Net income per share (basic and diluted) $ .21 $ .26 $ (.05) (19)
- -------------------------------------------------------------------------------------------------
</TABLE>
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Net sales increased by 17% in 1996 primarily due to volume increases. The
increases reflect strength in all markets served, with the largest improvement
in IGT.
Gross profit increased by 34% in 1996 primarily from leveraging higher
sales volume and improved operating performance. Cost reductions and
productivity improvements were partially offset by price reductions. Other
contributing factors included a $2.6 million lower LIFO charge in 1996 and a
$5.4 million workers' compensation charge in 1995 with no comparable amount in
1996. All of these factors resulted in a 1996 gross margin percentage of 27.4%
compared to 23.9% in 1995.
Selling, general and administrative expense increased by $7.7 million in
1996. The increase was due primarily to performance-based incentive compensation
costs.
Depreciation and amortization expense increased by $24.3 million in 1996.
Most of the increase relates to the December 13, 1995 Acquisition asset
additions and revaluations including goodwill, patents, non-compete agreements,
and step-ups of property, plant and equipment.
Net interest expense was $40.2 million in 1996, and net interest income
was $1 million for 1995. The expense in 1996 resulted principally from the
December 13, 1995 Acquisition financing-related debt. In 1995 the Company
recorded net interest income on loans to/from its former owner, which are no
longer outstanding.
The effective tax rate for 1996 was 54.2% compared to an effective tax
rate of 47.9% for 1995. The higher rate in 1996 reflects certain losses and
expenses for which there were no associated tax benefits, principally goodwill
amortization.
Net income was 3% lower in 1996 due to the factors outlined above,
including the adverse effects of the December 13, 1995 Acquisition on interest
expense and depreciation and amortization. Net income per share declined 19% for
the aforementioned reasons and because of dividends on redeemable preferred
stock which was part of the December 13, 1995 Acquisition financing.
In connection with the Acquisition in December 1995, management determined
that certain manufacturing operations would be eliminated. Accordingly, a
reserve of $21 million, principally for severance costs, was established. In
1996, as a result of increased customer orders for parts produced by such
operations, operational improvements and a general improvement of the prospects
of such operations, management re-evaluated its decision and concluded that such
operations should be retained. As a result of the decision to retain these
operations, in 1996 $19.1 million of the original accrual (principally relating
to severance costs) was reversed and goodwill was reduced by an equal amount.
See Note 20 of Notes to Financial Statements.
The impact of inflation on net sales and earnings from operations was not
significant.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash flow from operations and
borrowings under its revolving credit facility. The Company's principal
requirements for cash are to provide working capital, service debt, finance
capital expenditures and fund research and development. Based upon the current
level of operations, management believes that cash from the aforementioned
sources will be adequate to meet the Company's anticipated requirements for
working capital, interest payments and scheduled debt principal payments,
capital expenditures and research and development for the next year. To date,
cash available after satisfaction of these requirements has been used to
voluntarily repay debt prior to mandatory due dates.
In the fourth quarter of 1997, the Company completed a comprehensive
refinancing to take advantage of favorable interest rates. The Company
terminated its senior credit facilities and repaid all outstanding borrowing
thereunder, and the Company tendered for and repaid all but $3 million of its
$125 million senior subordinated notes. As a result of these transactions, the
Company recorded a $12.3 million, after tax, extraordinary loss from early
PAGE 44
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
retirement of debt. The loss included write-offs of unamortized debt issuance
costs, a tender premium for the senior subordinated notes and transactions
costs. The debt repayments were funded with borrowings under a new $300 million
bank revolving credit facility which was entered into in the fourth quarter.
Also in the fourth quarter, the Company elected to repay in cash all amounts
owed under its payment-in-kind junior subordinated note except for $6 million.
This payment was also funded with borrowings under the new $300 million
revolving credit facility. As a result of these refinancings, the Company
reduced interest expense on the $146.4 million of debt from a fixed rate of 10%
to a variable rate, currently at 6.22%.
At December 31, 1997, there were $7.6 million standby letters of credit
and $198 million outstanding borrowings under the $300 million bank revolving
credit facility. Total debt at December 31, 1997 was $208.4 million, and total
minimum payments over the next five years under non-cancelable operating leases
are $15.2 million. In 1997 net debt repayments were $141.4 million. The source
of $44.9 million of the cash used for the debt repayments was the sale of the
aircraft engine component refurbishment business, discussed above.
Capital expenditures for 1997 of $56.9 million were for replacement of
existing equipment, for capacity expansion and for several projects to support
new products and enhanced process capabilities. In 1998 capital expenditures are
expected to be approximately $80 million. The 1998 increase is attributable to
the completion of capacity expansions needed to serve the core business, as well
as, additional expenditures to support new products and process enhancement
activities.
Debt plus redeemable preferred stock as a percentage of total
capitalization (debt plus redeemable preferred stock plus common shareholders'
equity) has been reduced to 50% at December 31, 1997 from 65% at December 31,
1996. The current ratios (excluding long-term debt due within one year) at
December 31, 1997 and 1996 were 1.2 and 1.3, respectively. Working capital
(excluding long-term debt due within one year) was $62.5 million and $67.3
million at December 31, 1997 and 1996, respectively.
At December 31, 1997, the Company's balance sheet includes $716.4 million
of Pechiney Notes and a $716.4 million Restricted Trust asset. See Note 8 of
Notes to Financial Statements.
Since December 31, 1996, the cumulative translation adjustment, which is
included in stockholders' equity, changed by $7.7 million, resulting in a $5.6
million negative balance at December 31, 1997. The change is primarily due to
the strengthening of the U.S. dollar relative to the French Franc.
ENVIRONMENTAL AND OTHER LEGAL MATTERS
In view of the indemnification from the Company's previous owners granted in
connection with the acquisition described in Note 1 of Notes to Financial
Statements, the Company does not expect resolution of environmental matters to
have a material effect on its liquidity or results of operations. See Note 18 of
Notes to Financial Statements.
The Company, in its ordinary course of business, is involved in other
litigation, administrative proceedings and investigations of various types in
several jurisdictions. The Company believes these are routine in nature and
incidental to its operations, and that the outcome of any proceedings to which
the Company currently is a party will not have a material adverse effect upon
its operations or financial condition.
YEAR 2000 COMPLIANCE
The Company does not anticipate a disruption in operations as a result of
computer software issues associated with the Year 2000. A dedicated team of both
Company and contract programmers are actively addressing the Company's Year 2000
compliance issues. All data logic problems on the Company's central mainframe
and distributed server applications have been identified, and remedial action to
correct or
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
replace problematic code is currently underway. Project work on this phase of
the effort started in late 1996 and is scheduled to be completed by June 30,
1999.
The Year 2000 compliance team is concurrently working with the various
remote plant facilities to identify and begin implementing any needed changes to
both local business applications and shop floor control systems. The inventory
and assessment phase of this effort will be completed in the second quarter of
1998. To date no material risk of non-compliance has been identified.
The Company has also initiated formal communications with all of its
significant suppliers, including raw materials, services, and computer
hardware/software suppliers, and large customers to determine the extent to
which Howmet's manufacturing processes and interface systems are vulnerable to
those third parties' failure to resolve their own Year 2000 issues. There can be
no guarantee that the systems of other companies on which Howmet's systems rely
will be timely converted and would not have an adverse effect on the Howmet
systems. However, at this point, the Company has not been made aware of any
material problems.
The Company has incurred and expects to incur incremental costs for its
Year 2000 efforts of $1 million, $2.5 million, $2.5 million and $.5 million,
respectively, for the full years 1997, 1998, 1999 and 2000. The Company has also
diverted internal resources with an additional annual cost of approximately $.6
million for each of 1997, 1998 and 1999.
RISK FACTORS
Except for the historical information contained herein, certain statements in
this annual report are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995, which involve risks and uncertainties
that include changing economic and political conditions in the United States and
in other countries, including those in Asia, where economic disruption could
delay their receipt of aero or industrial gas turbine engines. The impact of
such delay in receipt of new engines would be offset in part by higher spare
parts sales to these consumers. Risks and uncertainties also include but are not
limited to changes in governmental laws and regulations, the outcome of
environmental matters, the availability and cost of raw materials, and the
effects of: (i) aerospace and IGT industry economic conditions, (ii) aerospace
industry cyclicality, (iii) a concentrated customer base, (iv) competition and
(v) pricing pressures. All forecasts and projections in this report are
"forward-looking statements", and are based on management's current expectations
of the Company's results, based on current information available pertaining to
the Company and its products including the aforementioned risk factors. Actual
future results and trends may differ materially from projections made herein.
NEW ACCOUNTING STANDARDS
In June 1997, Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" were issued. Adoption of SFAS No. 131
in 1998 is not expected to have a significant impact on the Company's financial
statements. Adoption of SFAS No. 130 in 1998 will not have an effect on the
Company's cash flows, financial position or net income. However, adoption of
SFAS No. 130 will require the Company to report comprehensive income, which will
include net income and the change in the cumulative translation adjustment
reported in stockholders' equity.
RECENT MARKET PRICES AND DIVIDENDS
The market price of the Company's common stock since it began public trading in
November 1997 through December 31, 1997, ranged from a low of $14.69 to a high
of $16.00 per share.
The Company did not pay dividends in either 1997 or 1996.
PAGE 46
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HOWMET 1997 ANNUAL REPORT
=======================================-----------------------------------------
Selected Financial Data
<TABLE>
<CAPTION>
Howmet International Inc. Howmet Predecessor
Consolidated (a) Company Combined (a)
------------------------------------------------------------------------------
Period from Period from
December 14, January 1,
1995 to 1995 to
Year Ended December 31 December 31, December 13, Year Ended December 31
(Dollars in millions, except per share amounts) 1997 1996 1995 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data(a)
Net sales $ 1,258.2 $ 1,106.8 $ 51.4 $ 894.1 $ 858.3 $ 832.7
Operating expenses:
Cost of sales 874.2 803.6 38.0 681.4 647.3 603.4
Selling, general and administrative(b) 145.4 117.3 4.6 105.0 90.9 104.5
Depreciation and amortization 59.5 59.7 2.8 32.6 33.1 31.0
Research and development 24.6 24.2 1.4 25.0 19.2 23.3
Restructuring charges (credit) -- -- -- (1.6) 2.5 --
Goodwill write-off -- -- -- -- 47.4 --
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations 154.5 102.0 4.6 51.7 17.9 70.5
Interest (expense) income, net (29.8) (40.2) (3.1) 4.1 5.2 0.4
Other, net (6.4) (5.9) (1.0) (5.8) (0.1) (0.1)
Income taxes 46.3 30.3 .5 23.7 46.0 27.8
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary
item and cumulative effect of
change in accounting(c) $ 72.0 $ 25.6 $ -- $ 26.3 $ (23.0) $ 43.0
====================================================================================================================================
Net income (loss)(c) $ 59.7 $ 25.6 $ -- $ 26.3 $ (23.0) $ (6.3)
Dividends on redeemable preferred stock (5.1) (4.6) (.2) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 54.6 $ 21.0 $ (.2) $ 26.3 $ (23.0) $ (6.3)
====================================================================================================================================
Per common share amounts(d):
Income (loss) before extraordinary
item and cumulative effect of
change in accounting $ .67 $ .21 $ -- $ .26 $ (.23) $ (.06)
====================================================================================================================================
Net income (loss) $ .55 $ .21 $ -- $ .26 $ (.23) $ (.06)
====================================================================================================================================
Other Data (end of period, where applicable):(a)(e)
Total assets, excluding Restricted Trust $ 994.2 $ 1,052.4 $ 1,127.8 $ -- $ 509.9 $ 579.6
Restricted Trust(f) 716.4 716.4 716.4 -- -- --
Long-term debt, including current
maturities, excluding Pechiney Notes 208.4 350.7 488.6 -- 42.1 44.5
Pechiney Notes(f) 716.4 716.4 716.4 -- -- --
Redeemable preferred stock 60.0 54.9 50.2 -- -- --
Stockholders' equity 265.7 218.8 196.9 -- 166.3 239.1
Net cash provided (used) by operating activities 192.6 184.5 (12.7) 35.2 91.4 95.4
Capital expenditures 56.9 33.7 1.6 41.2 38.0 33.1
Number of employees 10,352 10,035 9,577 -- 8,702 8,990
====================================================================================================================================
</TABLE>
(a) In 1995 Howmet International Inc. was formed to acquire its only
operations, which are those of the entities that comprise Howmet
Predecessor Company Combined. Data for periods after December 13, 1995
reflect the allocation of the acquisition purchase price to assets and
liabilities of the Company, the financing of the Acquisition, and the
subsequent amortization, depreciation, interest expense and other effects
related thereto.
(b) Includes charges related to the Company's stock appreciation rights plan
of $31.4 million in 1997 and $6.6 million in 1996.
(c) In 1997 the Company recorded a $12.3 million after-tax extraordinary loss
on early retirement of debt. In 1993 a $49.3 million after-tax charge was
recorded as the cumulative effect of adopting Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions."
(d) All per common share amounts are both basic and diluted and were
calculated assuming that the 100 million common shares outstanding at
December 31, 1997 were outstanding for all periods.
(e) Excludes related party advances to Pechiney Corporation (1994-$238.7
million, 1993-$203.7 million) and excludes related party dividends and
notes payable (1994-$20 million, 1993-$20.5 million).
(f) The Restricted Trust holds a note receivable from Pechiney, S.A. and
related letters of credit that secures Pechiney, S.A.'s agreement to repay
the Pechiney Notes. Management believes that it is extremely remote that
the Company will use any assets other than those in the Restricted Trust
to satisfy any payments related to the Pechiney Notes. See Note 8 of Notes
to Financial Statements.
<PAGE>
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES
State or Country
of Incorporation
----------------
Howmet Corporation Delaware
Howmet Holdings Corporation Delaware
Howmet Cercast (Canada), Inc. Canada
Howmet Cercast (U.S.A.), Inc. Delaware
Howmet Ltd. United Kingdom
Howmet Refurbishment Inc. Delaware
Howmet S.A. France
Howmet Tempcraft, Inc. Ohio
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EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report on Form 10-K
of Howmet International Inc. of our report dated January 28, 1998, included in
the 1997 Annual Report to Stockholders of Howmet International Inc.
Our audits also included the financial statement schedules of Howmet
International Inc. listed in Item 14(a). These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME OF HOWMET
INTERNATIONAL INC. INCLUDED AS EXHIBIT 13 OF FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH EXHIBIT 13 OF FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 45,439
<SECURITIES> 0
<RECEIVABLES> 103,302
<ALLOWANCES> 4,409
<INVENTORY> 155,534
<CURRENT-ASSETS> 320,020
<PP&E> 340,695
<DEPRECIATION> 65,205
<TOTAL-ASSETS> 1,710,556
<CURRENT-LIABILITIES> 257,533
<BONDS> 924,805
60,010
0
<COMMON> 1,000
<OTHER-SE> 264,660
<TOTAL-LIABILITY-AND-EQUITY> 1,710,556
<SALES> 1,258,189
<TOTAL-REVENUES> 1,258,189
<CGS> 874,214
<TOTAL-COSTS> 874,214
<OTHER-EXPENSES> 84,122
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,988
<INCOME-PRETAX> 118,220
<INCOME-TAX> 46,267
<INCOME-CONTINUING> 71,953
<DISCONTINUED> 0
<EXTRAORDINARY> 12,255
<CHANGES> 0
<NET-INCOME> 59,698
<EPS-PRIMARY> .55<F1>
<EPS-DILUTED> .55
<FN>
<F1> Earnings per share - Basic
</FN>
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<PAGE>
EXHIBIT 99.1
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
The Company wishes to inform its investors of the following important factors
that in some cases have affected, and in the future could affect, the Company's
results of operations and that could cause such future results of operations to
differ materially from those expressed in any forward looking statements made by
or on behalf of the Company. Disclosure of these factors is intended to permit
the Company to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Many of these factors have been
discussed in prior SEC filings by the Company or by Howmet Corporation.
Although the Company has attempted to list comprehensively these important
cautionary factors, the Company wishes to caution investors that other factors
may in the future prove to be important in affecting the Company's results of
operations. The Company undertakes no obligation to publicly update or revise
any forward looking statements, whether as a result of new information, future
events or otherwise.
EFFECTS OF INDUSTRY ECONOMIC CONDITIONS AND CYCLICALITY
The Company derives approximately 69% of its revenues from the commercial
aerospace industry. The commercial aerospace industry is a cyclical business,
and the demand by commercial airlines for new aircraft historically has been
highly related to the stability and health of the United States and world
economies. Aircraft delivery trends vary in direct relation to the general
economic cycle, with an approximate two year lag. The United States airline
industry as a whole has reported a return to profitability in 1995 through 1997
after several years of operating losses in the early 1990s. There can be no
assurance, however, that the improved operating performance of the commercial
airlines will continue or that deliveries of engines for large commercial
aircraft will not decline in the future. Any developments in the commercial
aerospace market resulting in a reduction in the rate of aircraft engine
deliveries in the future, including future cancellations and deferrals of
scheduled deliveries, could materially adversely affect the Company's financial
condition and results of operations. The Company's revenues from its industrial
gas turbine ("IGT") castings are subject to changes in global electric power
demand and other market factors. Changing economic and political conditions in
the United States and in other countries, including those in Asia, where
economic disruption could delay receipt of aerospace or industrial gas engines,
could have a material effect on the Company's operations.
CONCENTRATED CUSTOMER BASE
A substantial portion of the Company's business is conducted with a small
number of large aerospace and industrial gas turbine customers, including The
General Electric Company through its Aircraft Engine and Power Systems Groups
and United Technologies Corporation's Pratt & Whitney Division. The Company's
top ten customers in the aggregate accounted for approximately 62% of 1997 net
sales. Approximately half of the Company's business is derived from multi-year
contracts with its customers, which typically last three years and generally
give the Company the right and obligation to fill a specified percentage of the
customer's requirements but generally do not provide the Company with any
minimum order commitments. The Company typically renegotiates these contracts
during the last year of the contract period, and, during the renegotiation
process, customers frequently solicit bids from the Company's competitors. Some
of the contracts require specified price reductions over the term of the
contract based on lower production costs as programs mature, shared benefits
from other cost reductions resulting from joint production decisions, and
negotiated reductions.
Military and defense contractor sales comprised approximately 14% of the
Company's 1997 sales. United States defense spending in markets served by the
Company has been declining since the 1980s, and continued reductions in defense
budgets or military aircraft procurement could adversely affect the Company's
results of operations.
The Company's financial condition and results of operations could be
materially adversely affected if one or more of the Company's key customers
shifted a material amount of its work from the Company. In addition, the
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Company could also be materially adversely affected by any substantial work
stoppage or interruption of production at any of its major customers or at any
of the major aircraft manufacturers, and could be materially adversely affected
if one or more key customers reduce or cease conducting operations.
COMPETITION
The Company competes against Precision Castparts Corp. ("PCC"), its principal
competitor, and other investment cast manufacturers. Competition in investment
casting is based primarily on technological sophistication, quality, price,
service and delivery for orders from large, well-capitalized customers with
significant market power. Management believes that the Company and PCC account
for most of the total aerospace turbine engine and IGT casting production,
except for the captive foundries owned by two European customers. Because
competition is based to a significant extent on technological capabilities and
innovations, there can be no assurance that PCC or any other of the Company's
competitors will not develop products and/or processes that would give them a
competitive advantage in the Company's markets.
PRICING PRESSURES
The Company has experienced pressure from all of its major customers for price
reductions. This pressure is the result of the competitive environment which the
Company's original equipment manufacturing ("OEM") customers are facing in the
selling of their products in the worldwide market. Because winning an initial
order by an OEM generally provides it with a long-term profitable market for
sales of spare parts, fierce competition exists and has resulted in reduced
prices which OEMs receive in the market. Pressure for reduced prices is then
exerted by OEMs on their suppliers. The future profitability of the Company will
depend upon, among other things, its ability to continue to reduce its per unit
costs and maintain a cost structure that will enable it to remain cost-
competitive.
AVAILABILITY AND COST OF RAW MATERIALS
Raw materials used by the Company include a number of metals and minerals,
including titanium, hafnium, aluminum, nickel, cobalt, molybdenum and chromium,
among others. Prices of these materials can be volatile, and the Company engages
in forward purchases of some of these materials under certain market conditions,
and passes certain price fluctuations through to customers pursuant to its long-
term agreements. The Company ordinarily does not otherwise attempt to hedge the
price risk of its raw materials. For some of the supplies and raw materials it
purchases, including certain metals, the Company has no fixed price contracts or
arrangements. Commercial deposits of certain metals, such as cobalt, nickel,
titanium, and molybdenum, that are required for the alloys used in the Company's
precision castings, are found in only a few parts of the world, and for certain
materials only single sources are readily available. The availability and prices
of these metals and other materials may be influenced by private or governmental
cartels, changes in world politics, unstable governments in exporting nations,
production interruptions, inflation and other factors. Although the Company has
not experienced significant shortages of its supplies and raw materials in the
past twenty years, there can be no assurance that such shortages will not occur
in the future. Any such shortages or price fluctuations could have a material
adverse effect on the Company.
CONTROL BY AND RELATIONSHIP WITH THIOKOL
Thiokol Corporation ("Thiokol") beneficially owns 62% of the outstanding
Common Stock and owns all of the outstanding non-voting 9.0% Series A Senior
Cumulative Preferred Stock of the Company. Accordingly, subject to the right of
Carlyle-Blade Acquisition Partners ("Carlyle-Blade Partners") under the
Shareholders Agreement between it and Thiokol to designate one director, Thiokol
will be able to control the election of the Company's Board of Directors and
exercise a controlling influence over the business and affairs of the Company
(including any determinations with respect to mergers or other business
combinations involving the Company, the acquisition or disposition of assets by
the Company, the incurrence of indebtedness by the Company, the issuance of any
additional Common Stock or other equity securities of the Company, the
repurchase or redemption of Common Stock or preferred stock of the Company and
the payment of dividends with respect to the Common Stock), and will be able to
do so as long as it continues to own more than 50% of the voting power of the
Company's capital stock. Similarly, Thiokol will have the power to determine
matters submitted to a vote of the Company's stockholders without the consent of
the Company's other stockholders, will have the power to prevent or cause a
change in control of the Company and
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could take other actions that might be favorable to Thiokol. For further
details in this regard, see "Arrangements Among the Company, Carlyle and
Thiokol" on pages 13-15 of the Company's definitive Proxy Statement dated
March 24, 1998.
POTENTIAL CONFLICTS OF INTEREST ARISING FROM THIOKOL RELATIONSHIPS
As a result of Thiokol's ownership of Common Stock of the Company and its
intercompany agreements with the Company or otherwise, various conflicts of
interest between the Company and Thiokol could arise. Ownership interests of
directors or officers of the Company in Common Stock of Thiokol, if any, or
service as a director or officer of both the Company and Thiokol could create or
appear to create potential conflicts of interest when directors and officers are
faced with decisions that could have different implications for the Company and
Thiokol. The Restated Certificate of Incorporation of the Company includes
certain provisions relating to the allocation of business opportunities that may
be suitable for both the Company and Thiokol. In addition, under Delaware
corporate law, officers, directors and controlling stockholders of the Company
have certain fiduciary duties to the Company's stockholders.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS
Certain of the Company's products are manufactured and sold under U.S.
government contracts or subcontracts. Consequently, the Company is directly and
indirectly subject to various federal rules, regulations and orders applicable
to government contractors. Violation of applicable government rules and
regulations could result in civil liability, in cancellation or suspension of
existing contracts or in ineligibility for future contracts or subcontracts
funded in whole or in part with federal funds. Similarly, changes in the
regulations or other requirements relating to parts manufactured by the Company
could adversely affect the competitiveness of any Company part affected by such
changes.
The Company is subject to comprehensive and changing federal, state, local and
international laws, regulations and ordinances (together, "Environmental Laws")
that (i) govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and disposal
practices for solid and hazardous wastes, and (ii) impose liability for the
costs of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous substances and materials, including
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA," the federal "Superfund" statute), and similar
state statutes for the investigation and remediation of environmental
contamination at properties owned and/or operated by the Company and at off-site
locations where it has arranged for the disposal of hazardous substances. The
Company is involved from time to time in legal proceedings involving remediation
of environmental contamination from past or present operations, as well as
compliance with environmental requirements applicable to ongoing operations.
There can be no assurance that material costs or liabilities will not be
incurred in connection with any such proceedings, claims or compliance
requirements or in connection with currently unknown environmental liabilities.
If it is determined that the Company is not in compliance with current
Environmental Laws, the Company could be subject to penalties. The amount of any
such penalties could be material. In addition, the Company uses solvents, waxes,
metals, caustics, acids, oils and other hazardous substances, and as is the case
with manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties or from an off-site disposal facility, the Company
may be held liable and may be required to pay the cost of remedying the
condition. The amount of any such liability could be material.
The Company's facilities have made, and will continue to make, expenditures to
comply with current and future Environmental Laws. The Company anticipates that
it could incur additional capital and operating costs in the future to comply
with existing Environmental Laws and new requirements arising from new or
amended statutes and regulations. In addition, because the applicable regulatory
agencies have not yet promulgated final standards for some existing
environmental programs, the Company cannot at this time reasonably estimate the
cost for compliance with these additional requirements. The amount of any such
compliance costs could be material.
Certain potential sources of liability under the Environmental Laws, as well
as other information relating to
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environmental matters, including rights of the Company to indemnification for
substantial portions of these potential liabilities, are described in the Report
to which this exhibit is attached under "Business--Environmental Matters.
FAILURE OF PECHINEY TO REPAY THE PECHINEY NOTES
In 1988, Pechiney Corporation (now the Company's subsidiary Howmet Holdings
Corporation ("HHC")) issued notes maturing in 1999 to third parties in
connection with the purchase of an unrelated business. The aggregate
outstanding principal amount of those notes as of December 31, 1997 was $716.4
million. Payments required to be made under or in connection with those notes
(the "Pechiney Notes") are expected to be made (i) by Pechiney, S.A., a French
company (which had 1997 net sales of approximately 69.7 billion French francs
and total assets as of December 31, 1997 of 59.5 billion French francs),
pursuant to its agreements with HHC and its note deposited in a restricted trust
(the "Restricted Trust"), or (ii) if Pechiney, S.A. fails to make such payments,
by draws under letters of credit issued to the Restricted Trust in the aggregate
amount of $772 million by Banque Nationale de Paris ("BNP"), a French bank which
has an A+ credit rating from Standard & Poor's Ratings Group ("S&P"), or (iii)
if there is an impediment to a draw under such BNP letters of credit, by draws
under substantially identical "back-up" letters of credit issued to the
Restricted Trust in the aggregate amount of $772 million by Caisse des Depots et
Consignations ("CDC"), a French bank which has an AAA credit rating from S&P. In
addition, if for any reason required payments are not made with respect to the
Pechiney Notes, the holders could draw on a third set of letters of credit (also
issued by BNP). Pechiney is solely responsible as reimbursement party for draws
under the various letters of credit referenced above, and, by agreement with the
banks, neither HHC nor the Company has any responsibility therefor. However, HHC
remains liable as the original issuer of the Pechiney Notes in the event that
Pechiney defaults and both banks fail to meet their obligations under their
respective letters of credit. Such event would have a material adverse effect on
the Company's financial condition. For further details in this regard, see
Note 8 of Notes to Financial Statements on page 27 of the Company's 1997 Annual
Report to Stockholders attached as Exhibit 13 to the Report to which this
Exhibit is attached.
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