<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------
FOR FISCAL YEAR ENDED OCTOBER 31, 1996 COMMISSION FILE NUMBER 1-5407
WHITTAKER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4033076
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1955 N. SURVEYOR AVENUE 93063
SIMI VALLEY, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 526-5700
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 $.01 per share New York Stock Exchange
Pacific Stock Exchange
Series A Participating Cumulative New York Stock Exchange
Preferred Stock Purchase Rights Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(TITLE OF CLASS)
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 ((S)229.405 of the Securities Exchange Act of 1934) 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. [_]
State the aggregate market value of the voting stock held by nonaffiliates
of the Registrant: $131,520,142 as of December 31, 1996.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: 11,149,473 shares of
Common Stock as of December 31, 1996.
================================================================================
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
WHERE
Document INCORPORATED
-------- ------------
<S> <C>
Definitive Proxy Statement for the Annual Meeting of Stockholders Part III
to be held April 4, 1997 to be filed pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (the "Proxy Statement")
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Whittaker Corporation ("Whittaker" or the "Company") was incorporated in
California in 1947 and became a Delaware corporation in 1986. Whittaker
maintains its principal executive and administrative offices at 1955 N.
Surveyor Avenue, Simi Valley, California 93063 (telephone number 805-526-5700).
The Company has been active during fiscal 1996 in the aerospace business,
including defense electronics, and in the data networking and communications
business. The Company's Aerospace Group develops, manufactures and markets
proprietary fluid (pneumatic, hydraulic, and fuel) control valves and control
systems and fire and overheat detection products and systems for aircraft, land-
based gas turbines, and other industrial applications, and defense electronic
products and systems. The Company's Communications division develops remote
access and other wide-area network ("WAN") and local-area network ("LAN")
products and systems for general business communications applications and
provides professional services for the integration of hospital data networks.
For the fiscal year ended October 31, 1996, the Company's total sales were
$221.9 million, of which 59% were generated by the Aerospace Group and 41% were
generated by the Communications division. Set forth below is a description of
these two business areas.
AEROSPACE GROUP
- ---------------
The business and operations which comprise the Aerospace group are conducted
by the Company's defense electronics and industrial products units.
PRODUCTS
Principal applications and representative products of the Company's Aerospace
group include:
Fluid and Pneumatic Controls. The Company designs and manufactures a broad
range of fluid control devices for both commercial and military aircraft. The
products are designed to control pneumatic, hydraulic and fuel flows in aircraft
systems. In commercial applications, they are used on virtually all Boeing,
McDonnell Douglas, and AirBus commercial aircraft, and virtually all other
aircraft and jet engines manufactured in the world, with the exception of those
manufactured in the former Communist countries. In addition, commercial and
industrial applications include ground fueling devices for airports and valving
systems, heat exchangers, and fuel skids for land-based gas turbines, off-shore
oil platforms, and petrochemical complexes. In military applications, the
products are used on military transports, bombers, helicopters, fighters and
landing craft. Both commercial and military applications include aircraft
turbine engines built by General Electric, Rolls Royce and Pratt & Whitney.
Sales of fluid control products were $73.9 million in fiscal 1996, $59.5 million
in fiscal 1995 and $52.9 million in fiscal 1994.
Fire and Overheat Detectors. The Company designs and manufactures continuous
length pneumatic fire and overheat detectors as well as optical flame and smoke
detectors and systems for commercial and military aircraft and gas turbine
engines. This equipment is widely used on a broad spectrum of aircraft
manufactured by Boeing, AirBus, McDonnell Douglas, Northrop Grumman and many
small manufacturers, as well as on small naval vessels, helicopters, and
railcars. The aircraft range from large commercial transports to small commuter
aircraft, private twin engine airplanes, helicopters, military fighters and
transport aircraft. The fire and overheat detectors are used on aircraft
engines manufactured by General Electric, Pratt & Whitney and Rolls Royce.
Industrial applications of such products include complete fire protection
systems for vehicles, gas turbine powered pumping and electric power generation
applications, as well as large scale systems to protect oil platforms and
refineries. Sales of fire and overheat detectors and systems were $21.8 million
in fiscal 1996, $21.8 million in fiscal 1995, and $10.5 million in fiscal 1994,
the year during which the Company acquired this business.
1
<PAGE>
Command, Control and Communications. The Company designs and manufactures
electronic systems for command, control and communications, including display
and analysis systems, digital data lines, signal data converters, tactical
simulation systems, and wide-band encrypted secure voice and data systems that
permit secure communications. The Company also has developed modular software
that is designed to be portable to any real-time operating system. A user-
friendly, window-based display and a unique table-driven architecture provide
easy interface between various equipment and facilitate the addition of new
equipment. Sales of command, control and communications systems were $7.7
million in fiscal 1996, $18.9 million in fiscal 1995, and $24.5 million in
fiscal 1994.
Radio Frequency/Survivability Systems. The Company designs radar
countermeasure systems and electronic combat systems that provide radar and
proximity fuse jamming using an internally developed radio frequency memory
unit. Experience in technique development was used by the Company to invent a
proprietary monopulse radar countermeasures generator that is applicable to most
modern jamming systems. Based on this technology, the Company is under contract
with the United States Army to develop enhancements to a Company-designed and
produced electronic protection system, the Shortstop Electronic Protection
System ("SEPS"), that prematurely detonates incoming artillery, mortar and other
proximity-fused weapons, significantly enhancing the survivability of personnel
and high value assets. Other radar surveillance and tracking systems of the
Company, including replicas of enemy radar systems, are used in tactical
training, including the production of airborne pods that provide real time
simulations for air combat crew training.
Other Electronics Products. The Company designs and manufactures high
reliability silicon dioxide insulated coaxial and multiple conductor cable
systems which permit broad-band data transmission and control function operation
in extreme environments. Atmospheric monitoring systems are produced for timely
warning of emergency conditions. Applications for these technologies include
signal transmission and control functions inside nuclear power plants and
reactors, power and control monitoring and electronic valve control at oil
refineries, extreme environmental condition cable applications near jet engines,
and critical connections in airborne electronic countermeasure systems.
PRODUCT DEVELOPMENT
In 1996, the Company completed development of several products for the
industrial market. The Company developed and produced its first gas turbine
fuel skid. This device employs a number of valves, instruments and associated
plumbing which connect a gas turbine to its fuel supply and regulates the fuel
flow in response to an electronic fuel controller to control the speed and
output of the engine. The Company also completed the development of a liquefied
natural gas fuel nozzle under a contract with DARPA, which will be used to
refuel automobiles and other vehicles which are powered by low polluting
liquefied natural gas.
The Company also developed new products for the aircraft market. The Company
completed the qualification and initial deliveries of the fire detection system
for the third generation Boeing 737. The system utilizes a newly designed,
customer friendly electronic controller, lighter weight product, and uses an
improved detection system. The Company also completed the development and
initial deliveries of the cargo compartment ventilation and heating valves for
the Boeing 777. This was a rapid development resulting from a system
requirement change that surfaced during the initial operation of the aircraft in
service.
The Aerospace group spent $2.5 million, $3.4 million and $2.7 million on
research and development activities in fiscal 1996, 1995 and 1994, respectively.
MARKETS AND CUSTOMERS
Sales to commercial customers, including foreign customers, were the major
contributor to Aerospace sales and profit in 1996. In past years, the principal
contributor to sales and profit for the Aerospace group had been the United
States Government and its prime contractors. Sales directly or indirectly to
the United States Government, primarily under military procurement contracts,
continued to decrease as a percentage of Aerospace sales, dropping to 35% of
sales in 1996 compared to 41% of sales in 1995 and 49% in 1994. Export sales to
customers outside the United States continued to increase, representing 25% of
Aerospace sales for 1996, compared to 23% in 1995 and 20% in 1994.
2
<PAGE>
The Company has been able to achieve increased sales of its aircraft fluid
and pneumatic control devices over the past three years despite relatively low
new aircraft build rates in 1994 and 1995. Increased emphasis has been placed
on expanding sales from overhaul repairs, retrofits, upgrades and spare
components to end-users such as airlines, cargo carriers, maintenance stations,
military bases and government agencies. New aircraft production is now rising,
which may continue to contribute to an improved business climate for these
Company products. The Company has also positioned itself for continued growth
in the Aerospace segment by expanding its product offerings through acquisitions
and growth in related markets, including fire and overheat detection equipment
and industrial markets. During fiscal 1996, the Company continued to market its
products to manufacturers of industrial, land-based gas turbines, resulting in
increased sales to industrial customers in 1996 compared to 1995.
In certain geographic areas and for certain products, sales are often made
indirectly through independent representatives or distributors.
Companies engaged in supplying military equipment to the United States
Government are subject to competition, changes in the continuing availability of
Congressional appropriations, changes in contract timing and scheduling,
complexity of designs and the potential for obsolescence, and other changes
which may result from world events. Contracts with the United States Government
are subject to termination for the convenience of the Government if deemed in
its best interests. Contracts which are terminated for convenience generally
provide for payments to a contractor for its costs and for fees or profits
related to work accomplished through the date of termination.
BACKLOG
At October 31, 1996, Aerospace Group backlog totaled $60.6 million (compared
to $66.9 million at October 31, 1995), of which $6.3 million is not expected to
be filled within fiscal 1997. Aerospace backlog includes no unfunded amounts
relating to government contracts.
COMPETITION
The military and commercial industries in which the Aerospace Group operates
are generally highly competitive, with competition centering on price, technical
innovation, product performance and product support. Competitors of the Company
in such markets may have substantially greater financial resources, research and
design capabilities, and manufacturing capacity.
COMMUNICATIONS DIVISION
- -----------------------
The business and operations of the Communications division are conducted by
Xyplex Networks, the combined organization of Whittaker Communications, Inc. and
of Xyplex, Inc., which was acquired in April 1996. Xyplex Networks is a leading
provider of network access solutions for the enterprise edge market. The
Company designs, develops and markets a comprehensive line of networking
products that allow its customers a migration path from their existing legacy
infrastructures to new and emerging data networking architectures. In addition,
the Company offers high-performance Ethernet and Asynchronous Transfer Mode
(ATM) Local Area Network switching and hub products and provides a full range of
network design, consulting, integration, and support services for small
businesses and large enterprise-wide solutions.
The local area network (LAN) market was born in the 1980's as mainframe
dominance was being seriously challenged by departmental minicomputers
supporting multiple users through terminals and personal computers.
Decentralized computing brought many advantages, but limitations on sharing
information and communicating quickly became evident. LANs provided the
foundation for cooperative computing concepts, better resource sharing, and the
further dissemination of computing power throughout businesses, government
agencies and schools.
3
<PAGE>
In the 1990's, new applications such as digital imaging, client/server, and
multimedia have begun to tax the bandwidth of early LAN technologies such as
Ethernet and Token Ring. The emergence of new technologies such as 100 megabit
per second (Mbps) Fast Ethernet connectivity from the server to the desktop and
ATM are critical in order to keep up with the demands of emerging applications.
In addition, the recent rapid expansion of the Internet as well as e-mail,
multimedia servers, fax, groupware, and video conferencing have made wide area
networks (WANs) a commonplace phenomenon, with networking and computing brought
to the masses.
Looking forward, the development of the telecommunications infrastructure,
deregulation under the Telecommunications Act of 1996, and the arrival of new
technologies can enable high speed services to be brought to the home and
business cost effectively. The xDSL (Digital Subscriber Line), V.34 (analog
modem services), ATM, ISDN, and frame relay markets coupled with remote access
software and switching have the capabilities for high volume deployment by
businesses, carriers, alternative carriers and Internet Service Providers
(ISPs). There is potential for developments in the areas of wide area
networking, the enterprise edge, and the Internet edge. The enterprise edge is
the point in the network where the corporate network connects to the Internet
(via an ISP or telecommunications carrier).
[GRAPHIC DESCRIPTION OF THE ENTERPRISE EDGE MARKET]
PRODUCTS AND SERVICES
Xyplex Networks is a leading provider of network access solutions for the
enterprise edge market. Xyplex currently sells products that meet the needs of
both the corporate "edge" and the Internet service provider "edge" and is well
positioned to take a leadership role at this point in the network. The Company
also offers high-performance Ethernet and ATM switching and hub products.
Principal network access and internetworking products of the Company's
Communications Division include:
Network 9000(R) -- a multi-function 3-, 6- and 15-slot hub that enables the
integration of routing, switching, access serving and media concentration
technologies. Primarily used at the central site of corporate networks and at
the edge of ISP networks, the Network 9000(R) supports any combination of
Ethernet, Fiber Distributed Data Interface (FDDI), Token Ring, Integrated
Service Digital Network (ISDN), ATM, local and remote bridge/router
connectivity.
Network 3000 -- a family of branch office routers that provides a modular,
scaleable solution geared toward accessing the corporate network and the
Internet from remote offices. Any combination of Ethernet, ISDN, Frame Relay
and asynchronous connections is available. RouteRunner(TM) is a low-cost ISDN
router designed to meet the WAN needs of small office home offices and branch
offices such as doctor's offices or sales offices.
4
<PAGE>
MAXserver(R) -- a family of low-cost, scaleable remote access server
solutions that enable terminals, PCs, modems, printers and other asynchronous
devices to connect to the LAN and/or WAN. Ideal for supporting workgroups, the
stackable MAXserver(R) offers 8-40 ports (and up to 280 ports in the modular
Network 9000(R) solution) to provide network access locally and remotely via
dial-up services. A variety of protocols are supported including TCP/IP, IPX,
and Appletalk. Security capabilities such as Kerberos, RADIUS, SecurID,
password and dial-back are also offered.
ControlPoint(TM) -- Xyplex Networks' SNMP-based network management
application that enables network managers to remotely manage the Company's hubs,
routers and access servers via the industry standard SunNet Manager and HP
OpenView platforms, and FocalPoint -- a graphical users interface (GUI)
configuration tool for Xyplex Networks routers that helps network managers
configure internetworks through point and click operations.
Principal LAN switching and hub products of the Company's Communications
division include:
Network 9000(R) -- a hub equipped with a SwitchPlane(TM) fabric that provides
an internal bandwidth of up to 8.4 Gbps to support a large number of non-
blocking LAN switch ports. Switching functions are provided by the 610 LAN
Switch Processor modules and 600 Series Switching I/O modules. The product
supports Ethernet (10 or 100 Mbps) as well as wide area connections.
Model 6701 and 6801 -- low-cost, high-performance standalone Ethernet
workgroup switches, designed for use as workgroup switches or small collapsed
backbones and providing 16-ports of 10 Mbps LAN switching with optional slots
for 100Base-TX, 100Base-FX and FDDI connectivity for server or backbone
connections. These switches are manufactured by Plaintree Systems under an
Original Equipment Manufacturers' ("OEM") agreement.
Enterprise Hub(TM) -- an ATM switching device, available in 5 and 14-slot
chassis, providing up to 155 Mbps switching for connections to other Enterprise
Hubs(TM), legacy LANs, server clusters and bandwidth-hungry workstations. The
Enterprise Hub(TM) offers scaleable bandwidth, high reliability, low cost of
entry and an incremental and modular upgrade to ATM technology. Any mix of hot-
swappable Ethernet, Token Ring, FDDI and ATM modules is offered. The ATM
Enterprise Hub(TM) is able to integrate legacy LANs such as Token Ring, Ethernet
and FDDI, and migrate customers to the new high speed services of ATM. This
product is particularly well-suited to the healthcare sector, a industry that
has experienced significant growth of information technology expenditures.
Sales of Enterprise Hubs(TM) were $30.3 million in fiscal 1996 and $23.4 million
in fiscal 1995, the year in which the Company acquired Whittaker Communications,
Inc.
Xyplex Networks also offers a wide range of service and support programs to
help customers install and manage their networking equipment and a spectrum of
professional services focused on designing and maximizing the customers'
networking. These services include installation, network integration,
consulting, project management and training and a full range of integration and
support with full turn-key networking solutions, including the integration of
third-party products and services with the Company's own products and services.
PRODUCT DEVELOPMENT
The internetworking and remote access engineering development efforts are
focused on network access, network management products and enterprise and ISP
edge products. Future products will continue to leverage the Company's
switching, routing, access server software and high performance transmission
(i.e. ATM) expertise. In order to extend the breadth of the network access
product lines, Xyplex Networks will continue to develop partnerships with
leading edge suppliers of complementary technology.
The next generation of products from Xyplex Networks are being designed to
recognize the requirement to increase speeds over the wide area network. This
will involve leveraging the Company's strong remote access and routing software
and ATM background and building products which combine the two. It will also
require the integration of digital modems and xDSL technologies in the future.
The Communications division spent $17.5 million on research and development
activities in fiscal 1996 and $4.3 million in fiscal 1995, the first year of the
Company's Communications division.
5
<PAGE>
MARKETS AND CUSTOMERS
Xyplex Networks' customers are network managers from Fortune 5000 companies
from virtually all industries, including manufacturing, professional services,
finance, defense, petrochemicals, technology and telecommunications. The
Company has a strong presence the healthcare sector, with equipment installed
more than 1000 major hospitals and healthcare provider organizations worldwide.
In addition, Xyplex Networks has a substantial installed base in municipal
governments and education (both K-12 and higher education) and has made
significant inroads among mid-size ISPs.
The Company's customers are migrating from mainframe-centric networks to a
distributed computing network supporting multiple-remote sites via client-server
applications. The networks they are building support a hybrid of technologies
ranging from Ethernet, FDDI, and ATM.
Xyplex Networks sells to customers through direct and indirect channels,
including value-added resellers, distributors, systems integrators and OEMs.
The Company operates sales offices in the United Kingdom, South Africa, Germany,
France, Asia, and Latin America. In fiscal 1996, approximately 34% of Xyplex
Networks' sales were derived from customers outside the United States.
MANUFACTURING AND SUPPLIERS
Xyplex Networks' primary manufacturing, including purchasing, testing, final
assembly, and quality assurance, has been conducted at its Boxborough,
Massachusetts and Santa Clara, California facilities. Manufacturing is currently
being consolidated in the Boxborough facility. In addition, the Company plans to
close its Santa Clara facility in early 1997 and integrate those operations into
its Littleton facility. Xyplex procures 90% of its product content in the form
of products and subassemblies through subcontractors.
PATENTS, LICENSES AND RELATED MATTERS
Xyplex Networks relies on U.S. and foreign patents, copyrights, trademarks
and trade secrets to establish and maintain proprietary rights in its technology
and products. Although Xyplex Networks believes that its patents and
applications have value, it also believes that its competitive position depends
primarily on the innovative skills, technological expertise and management
abilities of its employees.
Many of Xyplex's products are designed to include software or other
intellectual property licensed from third parties. Xyplex Networks actively
seeks to license software that promotes the compatibility of its products with
industry standards, including standard protocols and architectures. The loss of
rights in software or other intellectual property licensed from a third party
and designed into a particular product might disrupt or delay Xyplex's
distribution of that product. Although it may be necessary in the future to
seek or renew licenses relating to various aspects of its products, Xyplex
Networks believes that based upon past experience and standard industry
practice, such licenses generally could be obtained on commercially reasonable
terms.
BACKLOG
Xyplex Networks manufactures its products based upon its forecasted demand of
its customers worldwide and maintains some inventories of finished products in
advance of receiving orders from its customers. Product orders are generally
placed by the customer on an as-needed basis and products are usually shipped
within two days to two weeks after receipt of an order. Such orders generally
may be rescheduled or canceled by the customer without significant penalty.
Accordingly, Xyplex does not maintain a substantial backlog, and backlog as of
any particular date may not be indicative of actual sales in any succeeding
period. At October 31, 1996, Xyplex's backlog totaled $9.8 million, all which
is expected to be filled in fiscal 1997.
6
<PAGE>
COMPETITION
Competition in the network systems business, formerly characterized by niche-
based competitors focused on a single industry segment, has shifted toward more
broad-based suppliers offering multiple product lines. This has been achieved
through mergers and acquisitions, joint marketing agreements and internally
developed products. This industry consolidation will likely continue,
intensifying competition among a small group of companies with broad product
offerings.
The network access market has experienced significant growth over the past
year, and hardware-based solutions dominate this market today. Principal
competitors include Cisco Systems, Novell, Shiva, Ascend, and Bay Networks.
Xyplex Networks is a significant player in this market segment. The router
market's growth also continues strong despite mounting pressure from LAN
switching and the saturation of customer internetworks. Customers are adopting
lower-priced routers as organizations expand their enterprise internetwork
beyond larger sites and out on the Internet. Currently, the router market is
dominated by Cisco Systems, Bay Networks and 3Com with their high-end and mid-
range product segments. Xyplex is a challenger in the mid-range and low-end
router segment.
Xyplex Networks participates in the LAN switching market at the high-end
segment with the ATM Enterprise Hub(TM), which solves network bandwidth
limitations for an extended number of LANs located in a building or campus
backbone environment. The Enterprise Hub(TM) was the first hub designed with
ATM from the ground up. Xyplex shares the high-end segment with three major
players: Cisco, Fore Systems, and 3Com. In the intelligent hub market, Xyplex's
Network 9000(R) continues to compete with Cabletron Systems, 3Com and Bay
Networks hubs. Xyplex was the first vendor to deliver an integrated suite of
functions ranging from LAN concentration to access server through the Network
9000.
Several of Xyplex Networks' competitors have greater name recognition, more
extensive engineering, manufacturing and marketing capabilities and greater
financial, technological and personnel resources than those available to Xyplex
Networks. However, Xyplex has a broad product line well integrated and
supported by its ControlPoint(TM) network management platform. The Company
believes that this product line, coupled with the Company's reputation for
customer-focused service, will allow Xyplex Networks to continue to compete.
There can be no assurance, however, that Xyplex Networks will be able to compete
successfully in the future with existing or new competitors.
Xyplex(R), Network 9000(R) and MAXserver(R) are registered trademarks of
Xyplex Networks. ControlPoint, RouteRunner(TM) and Enterprise Hub(TM) are
trademarks of Xyplex Networks. All other trademarks are the property of their
respective companies.
DISCONTINUED OPERATIONS
Since the beginning of the Company's divestiture program in 1989, the Company
has sold or spun off its Anjac/Doron, Duall/Wind, Chemical Coatings, Heico
Chemicals, Park Chemical, Ram Chemicals, Special Chemicals, Technibilt, Water
Management, Whittaker Metals, Winters Industries, Yardney Electric Corporation,
and BioWhittaker units. The divestiture program has been substantially
completed. Remaining to be divested is a 996-acre parcel of land formerly used,
until 1987, by the Company's former Bermite division, a discontinued technology
unit. The land is located in the City of Santa Clarita, California,
approximately 35 miles from downtown Los Angeles. In September 1995, the city
granted the entitlements necessary to develop this property as a mixed-use,
residential, commercial, and light industrial development. In February 1996 the
city approved a Development Agreement which, among other things, extended the
ten-year life of the entitlements to over 20 years. See Note 3 to Consolidated
Financial Statements in Part II, Item 8 of the Form 10-K for information about
the parcel remaining to be divested.
7
<PAGE>
ACQUISITIONS
On April 10, 1996, the Company acquired all of the stock of Xyplex, Inc. from
Raytheon Company for a purchase price of $67.5 million in cash, subject to
certain adjustments, and $50.0 million in the form of 1,974,333 newly issued
shares of the Company's common stock. The cash paid to Raytheon was obtained
under an amendment to the Company's credit facility entered into on April 10,
1996. See Note 2 to the Consolidated Financial Statements in Part II, Item 8,
for additional information regarding acquisition. The Company intends to
continue its strategy of growth by selective acquisitions that complement the
Company's existing businesses and product lines at such time as the Company's
financial condition makes such acquisitions feasible.
ENVIRONMENTAL
Compliance with Federal, state and local provisions that have been enacted or
adopted regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment has had no material effect upon
the capital expenditures, earnings or competitive position of the Company, nor
is the Company estimating any material capital expenditures for environmental
control facilities in fiscal 1997 or 1998.
EMPLOYEE RELATIONS
As of October 31, 1996, the Company employed approximately 1,150 persons in
its businesses, about 5% of whom were represented by labor organizations. The
Company believes that it has generally good relations with its employees.
ITEM 2. PROPERTIES.
The Company's corporate headquarters are located in its facilities in Simi
Valley, California, which consist of approximately 276,000 square feet in three
buildings owned by the Company. The Company owns a 30,000 square foot
production facility in Colorado.
The Company also leases three facilities in California which consist of
approximately 305,000 square feet under leases that expire from March 1997 to
January 1999 and two facilities in Massachusetts which consist of approximately
146,000 square feet under leases that expire from 1997 to 1998. The Company
has options to renew certain of these leases for various terms. Approximately
72% of the square footage is used for manufacturing, engineering, and product
development, while the remainder is used for sales, marketing, and other general
and administrative support.
The Company also leases and occupies sales and technical support officers
throughout the United States as well as in Europe, Mexico, Southeast Asia, and
South Africa.
The Company believes that in general its plants and equipment are adequately
maintained, in good operating condition and adequate for the Company's present
needs. The Company regularly upgrades and modernizes its facilities and
equipment and expands it facilities as necessary to meet customer requirements.
ITEM 3. LEGAL PROCEEDINGS.
ENVIRONMENTAL MATTERS
As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law
enacted to address public health and environmental concerns arising with respect
to past treatment and disposal of hazardous substances. The Company also is a
potentially responsible party in a number of actions brought under state laws
patterned after CERCLA.
CERCLA and such other state laws provide for the imposition of clean-up
liability on anyone who arranges for the disposal or treatment of hazardous
substances at designated sites. Accordingly, anyone who generates hazardous
substances may be a potentially responsible party if the treatment, storage, or
disposal facility that
8
<PAGE>
handles the substances becomes the subject of an environmental clean-up under
such laws. This is true even if the treatment, storage, or disposal facility has
the proper licenses and permits issued by appropriate governmental authorities
and treats, stores, or disposes of the hazardous substances in accordance with
the terms of such licenses and permits. The various state environmental agencies
and the U.S. Environmental Protection Agency take the position under these
environmental laws that all responsible parties are jointly and severally liable
for the costs of cleaning up sites subject to their jurisdiction and for any
environmental damages caused by the treatment or disposal of hazardous
substances at such sites.
In nearly all of the environmental matters in which the Company is involved
as a potentially responsible party, the Company contributed a very small amount
(generally much less than 1%) of the total wastes treated or disposed of at
these various treatment or disposal facilities and participates as a so-called
"de minimis" party. De minimis parties are generally allowed to settle their
potential liability for clean-up activities by agreeing with the state or
Federal environmental authorities and the other, larger responsible parties to
bear a share of the past and estimated future clean-up costs based on the volume
of the waste each de minimis party contributed, plus a "premium" or
"multiplier." These premiums or multipliers are designed to allow for the
uncertainty of estimates of future costs and the desirability of settling
liability early to avoid so-called transaction costs, i.e., the legal,
consulting, and other expenses, which tend to consume a significant amount of
the funds actually spent on the resolution of environmental matters.
Where the Company does not qualify for such treatment, the Company's
potential liability on a particular environmental matter could be significant,
or the Company believes that the premium or multiplier for a de minimis
settlement is unreasonable, the Company may elect to participate in the
settlement or remediation activities as, or on the same basis as, a major party,
generally paying its allocated share of remediation expenses and transaction
costs as they are incurred, often over several years.
In addition to the CERCLA and similar actions described above, the Company
also, from time to time, conducts or participates in remedial investigations and
clean-up activities at facilities currently or formerly occupied by its
operating units. In the most significant of these sites, the Company has
"clean closed" 13 of 14 facilities regulated under the Resource Conservation
and Recovery Act at its former Bermite division in Santa Clarita, California.
The Company is currently working to close the 14th of such facilities and to
complete an investigation of the entire 996-acre property in anticipation of the
development of the property for a planned mixed-use residential and commercial
development.
In 1996, the Company made cash expenditures of approximately $1.8 million on
environmental matters, excluding expenditures for clean-up activities at its
former Bermite division. This amount was charged to reserves for environmental
contingencies which were previously established as part of the Company's
divestiture and restructuring program for discontinued operations.
OTHER LEGAL MATTERS
There are also various other claims and suits pending against the Company.
Based on an evaluation, which included consultation with counsel concerning the
legal and factual issues involved, the Company is of the opinion that such
claims and suits pending against the Company, including the environmental
matters discussed above, will not have a material adverse effect, singly or in
the aggregate, on the financial position of the Company. See Note 10 of Notes
to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
9
<PAGE>
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the names, ages and positions of the current
executive officers of the Registrant.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Joseph F. Alibrandi.......... 68 President and Chief Executive Officer
Richard B. Levin............. 46 Vice President and Chief Administrative Officer
Lynne M. O. Brickner......... 44 Vice President and Secretary
John K. Otto................. 42 Vice President and Treasurer
Eva Jonutis.................. 47 Controller
Joseph J. Fernandes.......... 62 President, Aerospace Group
Michael C. Thurk............. 43 President, Xyplex, Inc. and Whittaker
Communications, Inc.
</TABLE>
Mr. Alibrandi joined Whittaker in July 1970 as President and Director and
served as Chief Executive Officer from November 1974 through January 1995. He
became Chairman of the Board in December 1985 and has continuously served in
such capacity since then. He was appointed President and Chief Executive Officer
on September 30, 1996.
Mr. Levin joined Whittaker in May 1994, at which time he was appointed Vice
President, Chief Financial Officer and Secretary. Mr. Levin resigned as Chief
Financial Officer in August 1996 and as Secretary in September 1996. He was
appointed Chief Administrative Officer in October 1996. From 1978 until joining
Whittaker, Mr. Levin was a practicing attorney with the law firm of Stutman,
Treister & Glatt.
Ms. Brickner joined Whittaker in September 1995 as Assistant General Counsel
and Assistant Vice President. She was named Secretary and General Counsel in
September 1996 and as Vice President in October 1996. Prior to joining
Whittaker, Ms. Brickner was a practicing attorney with Kaye, Scholer, Fierman,
Hays & Handler.
Mr. Otto joined Whittaker in 1983 as Whittaker's Manager of Banking and Cash.
He was named Assistant Treasurer in 1986 and Treasurer in 1988. He was
appointed Vice President of the Company in December 1996.
Ms. Jonutis joined Whittaker in 1974 as a cost accountant and served as its
Director of Financial Services from 1987 to 1993. She rejoined Whittaker in
October 1996 and was appointed Controller in December 1996.
Mr. Fernandes joined Whittaker in July 1992 as President of Whittaker
Controls, Inc. He was named President of Whittaker's Aerospace Group on November
1, 1995.
Mr. Thurk joined Whittaker in June 1996 as President of Xyplex, Inc. and of
Whittaker Communications, Inc. Prior to joining Whittaker, he was Senior Vice
President of General DataComm.
The term of office of each executive officer (except for Mr. Fernandes and
Mr. Thurk, who serve at the discretion of the Board of Directors) will expire at
the next annual meeting of the Board of Directors, which is scheduled to be held
on April 4, 1997.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
PRINCIPAL MARKETS
The Common Stock is listed on the New York Stock Exchange and the Pacific
Stock Exchange (Symbol: WKR). The Series A Participating Cumulative Preferred
Stock Purchase Rights are listed on the New York Stock Exchange and the Pacific
Stock Exchange, and, at the present time, trade with the Common Stock and are
not separately transferable. The Series D Participating Convertible Preferred
Stock (the "Series D Preferred Stock") is not listed or traded on any
exchange. See Note 6 of Notes to Consolidated Financial Statements in Part II,
Item 8 of this Form 10-K.
COMMON STOCKHOLDERS
As of December 31, 1996 there were 5,240 registered holders of the Common
Stock.
COMMON STOCK PRICES
The following table sets forth the high and low sales prices of the Common
Stock during Whittaker's two most recent fiscal years.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------
JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
--------------- --------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995.......... 20 5/8 16 1/8 21 1/8 17 3/8 24 5/8 20 23 1/8 18
1996.......... 24 3/4 16 7/8 26 3/8 22 1/4 23 1/8 13 5/8 14 3/4 13 1/8
</TABLE>
DIVIDENDS
Dividends of $0.25 were declared on each share of Series D Preferred Stock,
for each quarter of fiscal 1995 and for the first two quarters of fiscal 1996.
Dividends of $1.25 were declared on each share of the $5.00 Cumulative
Convertible Preferred Stock ("$5.00 Preferred Stock") for the first two
quarters of fiscal 1995. On April 28, 1995, all of the outstanding shares of
$5.00 Preferred Stock were redeemed or converted into Common Stock. No
dividends have been declared on the Common Stock during the two most recent
fiscal years.
Under the Company's current credit facility with a group of banks, there are
restrictions that materially limit the amount of cash dividends that may be paid
on the Common Stock. The Company may pay cash dividends on the Common Stock if
the Company satisfies a minimum tangible net worth requirement and meets a cash
flow test measured at the end of the fiscal quarter immediately preceding the
payment of the dividend, and the cumulative amount of all cash dividends paid on
the Common Stock does not exceed $100,000 plus 20% of the net income of the
Company determined on a cumulative basis from May 1, 1996 through the end of the
fiscal quarter immediately preceding the payment of the dividend. Furthermore,
under the terms of the Company's 7% convertible subordinated note to Hughes
Electronics Corporation, the Company may not pay or declare cash dividends or
redeem shares of the Company if the Company's tangible net worth is less than
$15 million. As of April 30, 1996, the Company's tangible net worth was less
than $15 million and thus has not paid or declared dividends (including any
quarterly dividend for the Series D Preferred Stock) or redeemed shares since
that date. Thus, dividends on the Series D Preferred stock have been accrued
since that date. In the foreseeable future, in light of the Company's current
financial condition and its strategy of using earnings from operations to fund
growth internally, the Company's present intention is to refrain from paying
cash dividends on the Common Stock, even if the Company is otherwise able to do
so under its current credit facility and its convertible subordinated note. See
Note 5 and Note 6 of Notes to Consolidated Financial Statements in Part II, Item
8 of this Form 10-K for further description of the Company's credit facility and
of the convertible subordinated note.
11
<PAGE>
SALES OF UNREGISTERED SECURITIES
During the three most recent fiscal years, the Company has issued 1,974,333
unregistered shares of common stock to Raytheon on April 10, 1996. Such shares
were issued as partial consideration for the Company's acquisition of Xyplex and
the holders of such shares are subject to certain limitations set forth in the
Stockholder's Agreement between Raytheon and the Company. The shares were
issued in reliance upon Section 3(b) and 4(a) of the 1934 Act and Regulation D
promulgated thereunder. A registration statement on Form S-3 covering the
shares was filed by the Company on May 15, 1996.
TRANSFER AGENT AND REGISTRAR FOR COMMON STOCK
CHASE MELLON SHAREHOLDER SERVICES
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
RIGHTS AGENT FOR SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE
RIGHTS
MELLON BANK N.A.
Post Office Box 444
Pittsburgh, Pennsylvania 15230
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
WHITTAKER CORPORATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Sales................................... $ 221,877 $ 159,479 $ 126,448 $ 115,386 $ 159,915
Income (loss) from continuing
operations, before accounting change... $ (17,127) $ 7,865 $ 10,061 $ 7,698 $ 13,377
Cumulative effect of accounting change.. -- -- -- $ 1,512 --
Income (loss) from discontinued
operations............................. -- -- -- $ (1,954) $ 2,300
Net income (loss)....................... $ (17,127) $ 7,865 $ 10,061 $ 7,256 $ 15,677
Earnings (loss) per share
Continuing operations, before
accounting change................... $ (1.70) $ .82 $ 1.06 $ .81 $ 1.42
Accounting change.................... -- -- .16 --
Discontinued operations.............. -- -- (.21) .24
Net income (loss).................... $ (1.70) $ .82 $ 1.06 $ .76 $ 1.66
Average common and common equivalent
shares outstanding (in thousands)...... 10,065 9,625 9,502 9,491 9,407
Dividends per common share.............. -- -- -- -- --
OTHER DATA
Working capital......................... $ (65,731) $ 72,272 $ 79,983 $ 73,924 $ 85,926
Total assets............................ $ 379,484 $ 250,959 $ 209,307 $ 201,869 $ 218,279
Long-term debt.......................... $ 453 $ 70,694 $ 54,742 $ 56,782 $ 66,644
Stockholders' equity.................... $ 131,136 $ 102,424 $ 93,950 $ 83,748 $ 75,200
Current ratio........................... 0.69:1 2.44:1 3.18:1 2.77:1 2.74:1
Capital additions....................... $ 4,800 $ 6,400 $ 2,500 $ 1,300 $ 2,200
Stockholders of record.................. 5,200 5,500 5,700 7,100 8,500
</TABLE>
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
RESULTS OF OPERATIONS
COMPARISON OF 1996 AND 1995
Acquisition of Xyplex. On April 10, 1996, the Company acquired all of the
capital stock of Xyplex, Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon
Company ("Raytheon"). Xyplex is a producer of high-speed internetworking
equipment, terminal servers and shared media products for business local area
networks. Xyplex also provides remote access products that interconnect with
phone companies' wide area networks. The purchase price was $67.5 million in
cash, subject to certain adjustments, and $50.0 million in the form of 1,974,333
newly issued shares of the Company's common stock. Other direct costs
associated with the acquisition were approximately $1.4 million. The cash paid
to Raytheon was obtained from the Company's bank lending group pursuant to an
amendment to the Company's existing credit facility entered into on April 10,
1996. The acquisition was accounted for as a purchase, and the balance sheet of
Xyplex was combined with the Company's balance sheet as of April 30, 1996.
The acquisition of Xyplex resulted in the acquisition of intangible assets
valued at $39.2 million, which is being amortized on a straight-line basis over
periods ranging from five to fifteen years, goodwill of $62.8 million which is
being amortized on a straight-line basis over twenty years, and accrued
liabilities assumed of $14.9 million. Acquired in-process research and
development valued at $11.7 million was expensed at the acquisition date.
Sales of Xyplex products and services contributed substantial revenues to the
Company beginning in the third quarter, as well as resulting in increased
operating expenses. A significant portion of the increase in operating expenses
for 1996 over 1995 was due to the acquisition of Xyplex.
Sales. The Company's sales for fiscal 1996 of $221.9 million increased by
$62.4 million (39.1%) over sales of the prior fiscal year. The increase was due
primarily to $61.0 million of additional sales generated by the Communications
segment, which did not exist prior to April 30, 1995. Aerospace segment sales
for fiscal 1996 increased by $1.4 million (1.1%) over sales of the prior fiscal
year, due to increased sales of aircraft fluid and pneumatic controls devices
substantially offset by reduced sales of defense electronics products and
systems.
The Company has been able to achieve increased sales of its aircraft fluid
and pneumatic control devices over the past three years despite relatively low
new aircraft build rates in 1994 and 1995. Increased emphasis has been placed
on expanding sales from overhaul repairs, retrofits, upgrades and spare
components to end-users such as airlines, cargo carriers, maintenance stations,
military bases and government agencies. New aircraft production is on the rise,
which may further contribute to an improved business climate for these Company
products. The Company has also positioned itself for continued growth in the
Aerospace segment by expanding its product offerings through acquisitions and
growth in related markets, including fire and overheat detection equipment and
industrial markets. During fiscal 1996, the Company continued its prior
practice of marketing its aircraft fluid control and other aerospace products to
manufacturers of industrial, land-based gas turbines, which are similar to jet
engines.
A reduced United States defense budget contributed to both the decline in
sales to the U.S. government and delays in the receipt of new contract bookings
in the Aerospace segment.
Gross margin. The Company's gross margin for fiscal 1996 as a percentage of
sales was 41.5%, compared to 43.6% for the prior fiscal year. The gross margin
for fiscal 1996 consists of Communications segment gross margin of $42.6 million
(46.5% of sales), and Aerospace segment gross margin of $48.6 million (37.3% of
sales). Communications segment margin as a percentage of sales increased from
44.5% in 1995 to 46.5% in 1996 because of sales of higher margin products
related to the 1996 Xyplex acquisition partially offset by an increased
proportion of lower margin service and support revenues. The decrease in
Aerospace segment gross margin percentage from 1995 (43.4% of sales) to 1996
(37.3% of sales) is due to decreased margins on defense electronics products and
the absence in 1996 of several items which contributed $5.0 million to gross
margin in 1995, offset by increased
14
<PAGE>
margins and improved manufacturing yields on commercial aircraft after market
and industrial product lines. Aerospace segment gross margin for fiscal 1995
included a contract claim settlement of $1.1 million, a credit of approximately
$2.1 million for income from the Company's defined benefit pension plan and a
$1.8 million recovery related to the Company's insurance claim for damage from
the 1994 Northridge, California earthquake. Without these items, Aerospace
segment gross margin would have been 40.4% of sales for 1995. Approximately $0.6
million of pension income was reclassified from SG&A expense to cost of sales in
the third quarter of 1995.
Engineering and Development. Engineering and development expenses for fiscal
1996 increased by $12.2 million from the prior fiscal year. Engineering and
development expenses for 1996 consist of Communications segment expenses of
$17.5 million (19.1% of sales) and Aerospace segment expenses of $2.5 million
(1.9% of sales). Communications segment engineering and development expenses
increased by $13.2 million from 1995 to 1996 due to the Xyplex acquisition in
April 1996 and a full year of expense for Whittaker Communications, Inc. ("WCI")
in 1996 compared with only six months of WCI expense following its acquisition
in April 1995. To maintain its competitive market position in the
Communications segment, the Company expects to continue to invest a significant
amount of its resources in the development of new Communications products and
product enhancements. Aerospace segment engineering and development expenses
decreased by $1.0 million from 1995 to 1996, but are expected to grow somewhat
in 1997.
Selling, General and Administrative. SG&A expenses for fiscal 1996 increased
by $39.0 million from the prior fiscal year, from 24.8% of sales in 1995 to
35.4% of sales in 1996, primarily due to the acquisition of Xyplex.
Communications segment SG&A expenses for fiscal 1996 were $45.6 million (49.8%
of sales), which included amortization expense of $6.9 million related to
goodwill and intangible assets. Communications segment SG&A expenses for 1995
were $10.0 million (32.9% of sales), which included amortization expense of $1.0
million related to goodwill and intangible assets.
Aerospace segment SG&A expenses were $31.4 million (24.1% of sales) for
fiscal 1996 compared with $30.4 million (23.5% of sales) for 1995. In 1996,
Aerospace segment SG&A expenses as a percentage of sales increased due to sales
decreases in defense electronics products, credits, as described below, included
in 1995 SG&A expenses partially offset by sales increases in commercial aircraft
and industrial products which were more than proportional to expense increases
and streamlining actions in the defense electronics business unit. In 1995,
Aerospace segment SG&A expenses reflected a credit of approximately $0.5 million
for income from the Company's defined benefit pension plan and a $1.3 million
recovery related to the Company's insurance claim for damage from the 1994
Northridge, California earthquake. Without these items, Aerospace segment SG&A
expenses would have been 24.9% of sales for 1995. Approximately $0.6 million of
pension income was reclassified from SG&A expense to cost of sales in the third
quarter of 1995.
Restructuring Costs. During 1996, the Company incurred certain costs for
restructuring, including severance payments of $2.3 million and move related
costs of $0.3 million. The Communications segment incurred costs of $1.6
million related to streamlining Xyplex and integrating it with WCI. The
Aerospace segment incurred costs of $1.0 million related to the streamlining of
the Company's defense electronics business unit and the move of its Safety
Systems Division from Concord, California to Simi Valley, California. The
Aerospace segment is expected to incur additional restructuring expenses in the
first quarter of fiscal 1997 in connection with the move of its Safety Systems
Division.
Interest Expense. Interest expense increased to $11.0 million for fiscal
1996 from $5.9 million in 1995 primarily as a result of higher interest rates
and the incremental debt related to the acquisition of WCI and Xyplex.
Income Taxes. The Company's effective tax rate for fiscal 1996 was 34.7%,
compared to an effective tax rate of 39.6% for the prior fiscal year. The
nondeductibility of goodwill (WCI in 1995) increases the effective tax rate for
periods with taxable income by increasing the tax provision with respect to
income before taxes. The nondeductibility of goodwill (WCI and Xyplex in 1996)
in a period with taxable losses decreases the effective tax rate by decreasing
the tax benefit with respect to losses.
15
<PAGE>
COMPARISON OF 1995 TO 1994
Sales for the Company for fiscal 1995 were $159.5 million, an increase of
$33.0 million (26.1%) over fiscal 1994. Sales increased in 1995 largely as a
result of the Company's acquisitions of a data networking and communications
business in April 1995, which contributed $30.5 million to 1995 sales, and an
aerospace business in March of 1994. In the aggregate, the acquired businesses
and product lines accounted for $52.3 million of 1995 sales, compared to $10.5
million in 1994, reflecting the implementation of the Company's previously
announced strategy of growth by selective acquisitions to complement the
Company's existing businesses and product lines.
The acquisitions offset decreases in government sales and termination claims.
In the first quarter of 1994, $4.0 million of sales were recognized related to
the partial settlement of a termination claim against a defense electronics
products customer. An additional, final settlement of $1.1 million was
recognized in the second quarter of 1995.
Gross margin for the Company increased in fiscal 1995 to $69.5 million, or
43.6% of sales, from $53.2 million, or 42.0% of sales in fiscal 1994. Gross
margin for the Communications segment was 44.5% in fiscal 1995. Gross margin
for the Aerospace segment increased to 43.4% of sales from 42.0% of sales in
fiscal 1994. Affecting the comparability of the years were three items which
had a net positive impact of $5.0 million on Aerospace gross margin in 1995,
compared to $4.1 million in 1994. The first item was recognition in 1995 of
$1.8 million of gross margin related to the Company's insurance claim for
earthquake damage brought about by the January 17, 1994 Northridge, California
earthquake. The second item was recognition in 1995 of $2.1 million of gross
margin related to the Company's defined benefit pension plan, while related
gross margin in 1994 was $0.6 million. This actuarially determined pension
income is the result of an expected return on plan assets which exceeded the
interest cost on the projected benefit obligation. The last item was a
termination claim settlement which contributed $1.1 million of gross margin in
1995, compared to $3.5 million in 1994. When the effects of these items are
removed from both years, Aerospace segment gross margin as a percentage of sales
was 40.4% in 1995 compared to 40.1% in 1994.
Engineering expenses for the Company as a percentage of sales increased to
4.9% in 1995 from 2.2% in 1994. This increase was due to the inclusion of six
months of results of the Communications segment in 1995. Engineering expenses
as a percentage of sales in the Aerospace segment increased to 2.7% in 1995,
from 2.2% in 1994, due to up-front costs related to its industrial business
product lines.
Selling, general and administrative expenses for the Company as a percentage
of sales increased to 24.8% in 1995 from 24.1% in 1994. In 1995, the Aerospace
segment received a $1.3 million earthquake recovery which was reflected as a
reduction in selling, general and administrative expenses. Excluding the
effects of the termination claim included in 1994 and 1995 revenues, as well as
the earthquake recovery in 1995, the Aerospace segment's selling, general and
administrative expenses as a percentage of sales increased to 19.5% in 1995 from
19.3% in 1994. The Communications segment of the business spends more on
salespeople and marketing programs, as a percentage of sales, than the Aerospace
segment. Consequently, the inclusion of six months of Communications segment
results has increased the overall percentage for the Company.
During the second quarter of 1995, concurrent with the acquisition of WCI, a
charge to earnings was recorded related to acquired in-process research and
development. The effect was to reduce net income for the second quarter and the
year by $1.9 million, or $0.20 per share. During the third quarter of 1995, a
charge to earnings was recorded to reflect restructuring actions at WCI, along
with expenses associated with combining a substantial portion of the Company's
Beaverton, Oregon operation into the WCI operation in Santa Clara, California.
The effect was to reduce net income for the third quarter and year by $0.2
million, or $0.02 per share.
Interest expense increased to $5.9 million for fiscal 1995 from $4.0 million
in fiscal 1994 primarily as a result of higher interest rates and incremental
debt from the purchase of WCI.
GENERAL
In fiscal 1996, 1995, and 1994, approximately 23%, 34%, and 49%,
respectively, of the Company's sales were directly or indirectly attributable to
the United States Government. All of these sales, with the exception of a minor
amount in 1995, relate to the Aerospace segment. Companies engaged in supplying
military equipment to the United States Government are subject to competition,
changes in the continuing availability of Congressional
16
<PAGE>
appropriations, changes in contract timing and scheduling, complexity of designs
and the potential for obsolescence, and other changes which may result from
world events. A loss of Government business, although not anticipated by the
Company, could have a material adverse effect on the Company's operations.
In August 1994, the Company was awarded a cost-reimbursement contract,
currently valued at $12.9 million, from the United States Army to develop three
new versions of the Company's previously developed battlefield electronic
countermeasures system, capable of detonating incoming artillery and mortar
rounds, designated the Shortstop Electronic Protection System ("SEPS").
During 1996 and 1995, the Company met performance requirements and developed
three full scale SEPS development models. The contract did not contribute a
material amount of revenue to the Company in 1996 or 1995, but successful
development of the new SEPS versions slated for delivery starting late in fiscal
1997 could, subject to all of the risks and uncertainties that apply to military
procurement generally, as discussed above, result in subsequent SEPS production
contracts, which could then have a material effect on the Company's sales.
There can be no assurance, however, whether or when any such contracts would be
awarded.
FINANCIAL CONDITION
On April 10, 1996, in conjunction with the purchase of Xyplex, the Company
amended and increased its bank credit facility and borrowed an additional $76.5
million under such facility. At that time the amended credit agreement
consisted of an $85.0 million revolving credit facility with a five-year term
and an $85.0 million term loan repayable in quarterly installments over five
years. The cash payment to Raytheon Company for the purchase of Xyplex on April
10, 1996 was $67.3 million.
At October 31, 1996, the Company's debt totaled $161.9 million, which
consisted of $65.0 million of loans under the revolving credit facility, $81.0
million under the term loan, $15.0 million of convertible subordinated debt, and
$0.9 million of other debt. In addition, there were $12.2 million of letters of
credit outstanding under the revolving credit facility. The Company was not in
compliance with one of its financial ratio covenants under the credit agreement
at July 31, 1996 and with several of the financial ratio covenants at October
31, 1996. The Company has obtained waivers of the defaults up to, but not
including February 28, 1997. Consequently, bank debt in the amount of $136.0
million, which otherwise would have been classified as noncurrent, has been
classified as current. The Company and its bank lending group are currently
discussing alternatives for reducing the Company's bank debt. Some of these
alternative measures may result in financing that is more expensive than the
Company's current bank financing. If a reduction of the bank debt cannot be
achieved, the bank lending group may elect to pursue its remedies, including
acceleration of the total bank indebtedness. There is no assurance that in
future periods, the Company will be in compliance with all of the financial
covenants contained in its amended credit agreement or that additional waivers
of the financial covenants will be obtained. Furthermore, acceleration of the
debt under the bank credit agreement by the bank lending group upon the
Company's failure to comply with a financial covenant would be an event of
default under the $15 million 7% convertible subordinated note issued by the
Company to Hughes Electronics Corporation as partial consideration for its
purchase of WCI in 1995. Because of this possible cross default, the entire $15
million principal balance of the 7% convertible subordinated note has also been
classified as current debt.
The Company believes that its existing cash and available credit will be
adequate to meet future operating cash needs. It is anticipated that the
Company will generate sufficient cash flow to service debt under its amended
credit facility. The cash flow required to service the Company's debt will
reduce its liquidity, which may in turn reduce its ability to fund internal
growth, additional acquisitions, and capital improvements.
Debt as a percent of total capitalization (stockholders' equity plus debt)
was 55.3% at October 31, 1996, compared with 42.8% at October 31, 1995. The
increase in debt was primarily due to the acquisition of Xyplex. The current
ratio at October 31, 1996 was 0.69, compared with 2.44 at October 31, 1995,
while working capital was ($65.7) million at October 31, 1996, compared with
$72.3 million at October 31, 1995. The decreases in the current ratio and
working capital were due to the classification of bank debt and the convertible
subordinated note as current debt because of the Company's noncompliance with
one of the financial ratio covenants in its bank credit agreement at July 31,
1996 and, to a lesser extent, the acquisition of Xyplex. Excluding the debt
reclassification, the current ratio would have been 2.36 and working capital
would have been $85.3 million at October 31, 1996.
17
<PAGE>
Cash flow provided by operations in 1996 was $0.4 million, compared to $20.8
million in 1995. The $20.4 million decrease from 1995 to 1996 was due primarily
to a decrease in net income of $25.0 million, increases in deferred income tax
assets and decreases in operating liabilities, offset in part by higher
depreciation, amortization and an in-process research and development charge.
Capital expenditures during 1996 were $4.8 million, compared to $6.4 million
for 1995. At October 31, 1996, there were approximately $1.0 million of
approved capital expenditures outstanding for the replacement and upgrade of
existing plant and equipment at the Company's various facilities. Funds for
these and other capital expenditures are expected to be provided from
operations. Capital expenditures are subject to limitations by covenants
contained in the Company's credit agreement. It is anticipated that the amounts
permitted by the covenants will be sufficient to allow the Company to continue
to maintain and upgrade existing facilities.
In April of 1996, the Company received a federal income tax refund related to
1987 and 1988 tax returns of $5.2 million and related interest income of $5.2
million. In July of 1996, the Company recognized a federal income tax refund
for research and development tax credits related to its 1988 tax year of $0.5
million and related interest income of $0.3 million.
The Company's program for divestiture of its discontinued operations was
substantially complete by the end of fiscal 1992. A 996-acre parcel of land,
which was formerly used by a discontinued technology unit, remains. The land is
located in the city of Santa Clarita, California, approximately 35 miles from
downtown Los Angeles. In September 1995, the City granted entitlements
necessary to develop this property as a mixed-use residential, commercial, and
light industrial development. The initial term of the entitlements was ten
years. In February 1996, the City approved a development agreement which, among
other things, extended the ten-year term of the entitlements to over 20 years.
The Company is evaluating the most advantageous means to realize the value of
this asset. Cash expenditures related to the environmental remediation of this
property were $4.0 million during 1996.
Subsequent Event
In connection with the integration and streamlining efforts in the Company's
Communications segment, the Company's Board of Directors on January 24, 1997,
approved a plan that will result in a pre-tax charge currently estimated at $10
million during the first quarter of 1997. The charge will be taken to cover the
one-time costs of closing its Santa Clara, California facility and integrating
those operations into its Littleton, Massachusetts facilities. These one-time
costs include severance payments associated with the consolidation and reduction
of the combined workforces, the writedown of assets to net realizable value and
other costs related to this consolidation. The Enterprise Hub product line will
be sold through Xyplex Networks sales channels and will continue to be supported
from the Littleton facilities.
Statements made herein that are not based on historical fact are "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. The risk factors that could cause actual results to differ
from the forward looking statements include delay in developing new programs and
products, inability to qualify for new programs or to develop new products, loss
of existing business and inability to attract new business and customers,
reduced spending by commercial and defense customers and development of
competing products.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of Whittaker Corporation
We have audited the accompanying consolidated balance sheets of Whittaker
Corporation as of October 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended October 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Whittaker Corporation at October 31, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended October 31, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Los Angeles, California
December 16, 1996
19
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS
EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C>
Sales................................................. $ 221,877 $ 159,479 $ 126,448
Costs and expenses
Cost of sales...................................... 129,890 89,974 73,286
Engineering and development........................ 19,964 7,741 2,720
Selling, general and administrative................ 78,562 39,608 30,429
Acquired in-process research and development....... 11,700 3,250 --
Restructuring costs................................ 2,574 382 --
--------- --------- ---------
Operating income (loss)............................... (20,813) 18,524 20,013
Interest expense...................................... 11,018 5,897 3,967
Interest income....................................... (6,299) (568) (568)
Other expense......................................... 684 169 82
--------- --------- ---------
Income (loss) before provision (benefit) for taxes.... (26,216) 13,026 16,532
Provision (benefit) for taxes......................... (9,089) 5,161 6,471
Net income (loss)..................................... $ (17,127) $ 7,865 $ 10,061
========= ========= =========
Earnings (loss) per share $ (1.70) $ 0.82 $ 1.06
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AT OCTOBER 31,
-------------------------
1996 1995
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS
Cash................................................... $ 1,566 $ 161
Receivables............................................ 74,258 64,708
Inventories............................................ 46,087 38,975
Prepaids and other current assets...................... 2,319 2,053
Income taxes recoverable............................... 5,443 1,452
Deferred income taxes.................................. 17,928 15,151
--------- ---------
Total Current Assets................................ 147,601 122,500
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements............................. 5,770 5,770
Buildings and improvements............................. 29,010 27,503
Equipment.............................................. 54,004 44,381
Construction in progress............................... 1,003 405
--------- ---------
89,787 78,059
Less accumulated depreciation and amortization......... (46,421) (36,641)
--------- ---------
43,366 41,418
--------- ---------
OTHER ASSETS
Goodwill, net of amortization.......................... 95,003 33,414
Other intangible assets, net of amortization........... 45,422 10,585
Notes and other noncurrent receivables................. 2,898 4,218
Other noncurrent assets................................ 14,065 11,709
Assets held for sale or development.................... 31,129 27,115
--------- ---------
188,517 87,041
--------- ---------
$ 379,484 $ 250,959
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
AT OCTOBER 31,
------------------------
1996 1995
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt........................ $ 161,482 $ 6,048
Accounts payable............................................ 13,830 14,650
Accrued liabilities......................................... 38,020 29,530
--------- ---------
Total Current Liabilities................................ 213,332 50,228
--------- ---------
OTHER LIABILITIES
Long-term debt.............................................. 453 70,694
Other noncurrent liabilities................................ 12,019 11,340
Deferred income taxes....................................... 22,544 16,273
--------- ---------
Total Other Liabilities.................................. 35,016 98,307
--------- ---------
Commitments and contingencies (Notes 3, 9, and 10)
STOCKHOLDERS' EQUITY
Capital Stock:
Preferred Stock, par value $1 per share, authorized
5,000,000 shares --
$5.00 Cumulative Convertible Preferred Stock,
outstanding 0 shares at October 31, 1996 and
October 31, 1995...................................... -- --
Series D Participating Convertible Preferred
Stock, outstanding 577.18 shares at October 31,
1996 and 895.18 shares at October 31, 1995............ 1 1
Common Stock, authorized 40,000,000 shares --
Par value, $.01 per share, outstanding 11,029,155
shares at October 31, 1996 and 8,588,982 shares
at October 31, 1995..................................... 110 86
Additional paid-in capital.................................. 70,321 19,261
Retained earnings........................................... 60,704 83,076
--------- ---------
Total Stockholders' Equity............................... 131,136 102,424
--------- ---------
$ 379,484 $ 250,959
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
---------------------------------------
1996 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................................. $ (17,127) $ 7,865 $ 10,061
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization................................. 18,639 8,065 5,658
Net periodic pension income................................... (205) (2,720) (782)
Acquired in-process research and development.................. 11,700 3,250 --
Income taxes recoverable...................................... (3,991) (1,386) 3,416
Deferred taxes................................................ (7,183) 2,899 2,913
Changes in operating assets and liabilities:
Receivables................................................... 10,017 8,860 5,555
Inventories and prepaid expenses.............................. 582 (427) (2,372)
Accounts payable and other liabilities........................ (12,003) (5,650) (2,889)
--------- --------- ---------
Net cash provided by operating activities..................... 429 20,756 21,560
--------- --------- ---------
INVESTING ACTIVITIES
Businesses acquired.............................................. (68,740) (31,013) (12,992)
Purchase of property, plant and equipment........................ (4,828) (6,376) (2,545)
Collections of notes receivable.................................. 1,380 1,147 2,553
Increase in assets held for sale or development.................. (4,014) (1,626) (851)
Contingent payments on purchased business........................ (1,839) -- --
Other items, net................................................. 1,663 (1,631) (1,748)
--------- --------- ---------
Net cash used by investing activities............................ (76,378) (39,499) (15,583)
--------- --------- ---------
FINANCING ACTIVITIES
Issuance of convertible subordinated debt........................ -- 15,000 --
Issuance of other debt........................................... 84,800 56,960 --
Reduction of debt................................................ -- (55,500) (2,862)
Reduction (increase) in deferred debt costs...................... (3,281) (808) 119
Dividends paid................................................... (1) (4) (12)
Purchases of common stock........................................ (6,472) (1,094) --
Proceeds from shares issued under stock option plans............. 2,308 843 115
--------- --------- ---------
Net cash provided (used) by financing activities................. 77,354 15,397 (2,640)
--------- --------- ---------
Net increase (decrease) in cash.................................. 1,405 (3,346) 3,337
Cash at beginning of year........................................ 161 3,507 170
--------- --------- ---------
Cash at end of year.............................................. $ 1,566 $ 161 $ 3,507
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest...................................................... $ 9,792 $ 5,079 $ 3,780
========= ========= =========
Income taxes.................................................. $ 280 $ 1,424 $ 3,918
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED OCTOBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------- ---------------- PAID-IN RETAINED
$5.00 SERIESD SHARES AMOUNT CAPITAL EARNINGS TOTAL
------- ------- ------ ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 1, 1993............. $ 2 $1 8,472 $ 85 $17,634 $66,026 $ 83,748
Net income.............................. -- -- -- -- -- 10,061 10,061
Cash dividends--preferred stock......... -- -- -- -- -- (12) (12)
Shares issued under stock option plans.. -- -- 14 -- 115 -- 115
Income tax benefits from stock options
exercised.............................. -- -- -- -- 38 -- 38
--- -- ------ ------ ------- ------- --------
BALANCE AT OCTOBER 31, 1994............. 2 1 8,486 85 17,787 76,075 93,950
Net income.............................. -- -- -- -- -- 7,865 7,865
Cash dividends--preferred stock......... -- -- -- -- -- (4) (4)
Conversion of preferred stock........... (2) -- 4 -- (7) -- (9)
Shares issued under stock option plans.. -- -- 154 1 842 -- 843
Purchases of common stock............... -- -- (55) -- (225) (860) (1,085)
Income tax benefits from stock options
exercised.............................. -- -- -- -- 864 -- 864
--- -- ------ ------ ------- ------- --------
BALANCE AT OCTOBER 31, 1995............. -- 1 8,589 86 19,261 83,076 102,424
Net loss................................ -- -- -- -- -- (17,127) (17,127)
Cash dividends--preferred stock......... -- -- -- -- -- (1) (1)
Conversion of preferred stock........... -- -- 104 1 -- (1) --
Shares issued under stock option plans.. -- -- 660 6 2,213 -- 2,219
Shares reacquired....................... -- -- (298) (3) (1,226) (5,243) (6,472)
Shares issued on acquisition of business -- -- 1,974 20 49,984 -- 50,004
Income tax benefits from stock options
exercised.............................. -- -- -- -- 89 -- 89
--- -- ------ ------ ------- ------- --------
BALANCE AT OCTOBER 31, 1996............. $-- $1 11,029 $110 $70,321 $60,704 $131,136
=== == ====== ====== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles may require management to make certain estimates and
assumptions that could effect the amounts reported in the financial statements
and accompanying notes. These estimates and assumptions include, among other
things, future costs to complete long term contracts, valuation of slow moving
or obsolete inventories, and amounts of estimated liabilities for contingent
losses and future costs of litigation. Actual costs could differ from these
estimates.
(B) Risks and Uncertainties: Certain risks and uncertainties related to the
Company's network systems business could have a material adverse effect on the
financial position of the Company. These risks and uncertainties include the
Company's ability to anticipate future markets, develop products in advance of
its competition and finance the production and delivery of these products in a
timely manner. In the event that circumstances indicate that the goodwill and
intangible assets related to the Company's network systems business may be
impaired, an evaluation of recoverability would be performed to determine if a
write-down of these assets is required.
(C) Inventories: Inventories are stated at the lower of cost or market. Cost
has been determined principally on the first-in, first-out (FIFO) method.
Certain of the Company's inventories relate to long term programs and may
require more than one year to be realized. Inventories consisted of the
following:
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Parts and materials..................... $22,482 $23,518
Work in process......................... 14,162 11,500
Finished goods.......................... 8,349 3,332
Costs relating to long-term contracts... 1,289 1,744
Unliquidated progress billings.......... (195) (1,119)
------- -------
$46,087 $38,975
======= =======
</TABLE>
(D) Intangibles: Goodwill is amortized using the straight-line method over
periods ranging from 20 to 40 years. Other intangible assets principally relate
to acquired intangibles and include patents, technology, and customer lists.
Amortization is recorded on a straight-line basis, generally over periods
ranging from 5 to 15 years.
Accumulated amortization of goodwill and of other intangible assets at
October 31, 1996 amounted to $5,758,000 and $11,836,000, respectively, and at
October 31, 1995 amounted to $2,722,000 and $6,906,000, respectively.
(E) Property and Depreciation: Property, plant and equipment is recorded at
cost. Depreciation is computed principally by use of the straight-line method
based upon the estimated useful lives of such assets, ranging from four to
thirty years. Depreciation of leasehold improvements is computed on a straight-
line basis over the shorter of the estimated useful lives of the improvements or
the terms of the leases. During 1996, 1995 and 1994 depreciation of $10.7
million, $6.1 million, and $4.7 million, respectively, was charged to expense.
(F) Revenue Recognition: For the majority of its operations, the Company
recognizes revenues upon shipment of its product or upon completion of the
services it renders. The Company accrues estimated warranty and installation
costs at the time of shipment. The Company generally uses the percentage-of-
completion method for recognition of revenues and profits on significant long-
term contracts.
25
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(G) Engineering and Development Costs: Company-sponsored engineering and
development costs are expensed as incurred. Costs related to engineering and
development contracts are included in inventory and charged to cost of goods
sold upon recognition of related revenue.
(H) Restructuring Costs: During 1996, the Company incurred certain costs for
restructuring, including severance payments of $2.3 million and relocation costs
of $0.3 million. The Communications segment incurred costs of $1.6 million
related to streamlining Xyplex and integrating it with WCI. The Aerospace
segment incurred costs of $1.0 million related to the streamlining of the
Company's defense electronics business unit and the move of its Safety Systems
Division from Concord, California to Simi Valley, California. The Aerospace
segment is expected to incur additional restructuring expenses in the first
quarter of 1997 in connection with the move of its Safety Systems Division.
(I) Earnings (Loss) Per Share: Earnings (loss) per share have been computed
based on the weighted average number of common and common equivalent shares
outstanding during the periods, after deducting from 1995 net income the
dividend requirements on the $5.00 Cumulative Convertible Preferred Stock.
Common stock equivalents include Series D Participating Convertible Preferred
Stock, on an if converted method and dilutive employee stock options, calculated
using the treasury stock method. Common equivalent shares have been excluded
from the 1996 calculation as antidilutive.
Fully diluted earnings (loss) per share include the additional potential
dilutive effect of employee stock options. The inclusion of additional shares
assuming the conversion of the convertible subordinated debt would have been
antidilutive. Fully diluted earnings (loss) per share are not presented because
the calculations result in dilution of less than 3%.
(J) Reclassification: Certain previously reported amounts have been
reclassified to conform to the current period presentation.
(K) New Accounting Standards: In March of 1995, the Financial Accounting
Standards Board issued a new standard, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," (SFAS 121). The
Company will not be required to adopt this standard until the first quarter of
fiscal 1997. The Company does not expect adoption of this standard to have a
material effect on its consolidated financial statements.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation", effective for the 1996
fiscal year. Under SFAS No. 123, compensation expense for all stock-based
compensation plans would be recognized based on the fair value of the options at
the date of grant using an option pricing model. As permitted under SFAS No.
123, the Company may either adopt the new pronouncement or follow the current
accounting methods as prescribed under APB No. 25. The Company plans to
continue to recognize compensation expense in accordance with APB No. 25.
In October 1996, the Accounting Standards Executive Committee issued SOP 96-1
"Environmental Remediation Liabilities." The Company will not be required to
adopt this standard until fiscal 1998 and has not determined what, if any,
impact the adoption will have on the financial position of the Company.
NOTE 2. ACQUISITIONS
On April 10, 1996, the Company acquired all of the capital stock of Xyplex,
Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon").
Xyplex is a producer of high-speed internetworking equipment, terminal servers
and shared media products for business local area networks. Xyplex also
provides remote access products that interconnect with phone companies' wide
area networks. The purchase price was $67.5 million in cash, subject to certain
adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of
the Company's common stock. Other direct costs associated with the acquisition
were approximately $1.4 million. The cash paid to Raytheon was obtained from
the Company's bank lending group pursuant to an amendment to the Company's
existing credit facility entered into on April 10, 1996.
26
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. ACQUISITIONS--(CONTINUED)
The Xyplex acquisition was accounted for as a purchase and the balance sheet
of Xyplex was combined with the Company's balance sheet as of April 30, 1996.
The transaction resulted in the acquisition of intangible assets valued at $39.2
million, which is being amortized on a straight-line basis over periods ranging
from 5 to 15 years and goodwill of $62.8 million which is being amortized on a
straight-line basis over 20 years. Acquired in-process research and development
valued at $11.7 million was expensed at the acquisition date. The Company also
assumed accrued liabilities of $16.6 million at the acquisition date.
On April 24, 1995, the Company acquired all of the stock of Hughes LAN
Systems, Inc., a subsidiary of Hughes Electronics Corporation. The subsidiary
was renamed Whittaker Communications, Inc. ("WCI") and is a designer and
manufacturer of high speed switching and Asynchronous Transfer Mode ("ATM")
compatible local area network communication hubs and network management software
systems. WCI was acquired for a purchase price of $16.0 million in cash,
subject to certain adjustments, and a $15.0 million 7% convertible subordinated
note. The 7% convertible subordinated note is due on May 1, 2005, and is
convertible into the Company's common stock at a price of $24.25 per share. The
agreement also provides for contingent deferred payments, not to exceed $25
million, over the years 1996 to 1999 based on future sales of WCI's hub products
and derivatives.
The acquisition was accounted for as a purchase and accordingly, the purchase
price was allocated to the net assets acquired based upon their estimated fair
market values. Goodwill amounted to $14.2 million, which is being amortized on
a straight-line basis over 20 years. Other intangible assets which resulted
from the acquisition include developed technology with a value of $3.3 million
and a customer list with a value of $5.6 million which is being amortized on a
straight-line basis over periods ranging from 5 to 15 years. Acquired in-
process research and development valued at $3.3 million was expensed at the
acquisition date. The Company also assumed liabilities of $18.1 million at the
acquisition date.
The accompanying consolidated financial statements of income reflect the
operating results of Xyplex and WCI since the effective dates of the
acquisitions. The pro forma results of operations for 1996 and 1995, assuming
the consummation of the acquisitions and issuance of 7% debt and common stock at
the beginning of each period, are summarized below (in thousands except per
share amounts):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net sales........................... $276,869 $289,072
Net loss............................ (15,630) (6,188)
Loss per share...................... (1.43) (0.58)
</TABLE>
These pro forma results have been prepared for comparative purposes only and
may not be indicative of the results of operations which actually would have
occurred had the combination been in effect at the beginning of the respective
periods or of future results of operations of the consolidated entities.
The Company acquired another business for $13.0 million in cash during fiscal
1994. The acquisition was accounted for under the purchase method, and the
results of operations for 1994 include sales of $10.5 million, related to that
business. This acquisition resulted in goodwill of $5.6 million in 1994 which
is being amortized on a straight-line basis over 40 years.
27
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. ASSETS HELD FOR SALE OR DEVELOPMENT
Assets held for sale or development are carried at the lower of cost or net
realizable value. These assets at October 31, 1996 and October 31, 1995,
include $29.1 million and $25.1 million, respectively, of land formerly used by
a discontinued technology unit. The land is located in the City Santa Clarita,
California, approximately 35 miles from downtown Los Angeles. In September
1995, the City granted the entitlements necessary to develop this property as a
mixed-use, residential commercial, and light industrial development. In
February 1996, the City approved a development agreement which, among other
things, extends the life of the entitlements from 10 years after they were
granted to 20 years after the completion of all environmental remediation of the
property.
The Company is currently exploring the real estate market and evaluating the
most advantageous means to realize the value of this property. One of the
conditions to development of any portion of the property, however, is the
completion of all environmental remediation activities for the entire property.
The Company has completed the remedial investigation of the property and
although there can be no assurance, believes that the remediation activities
themselves can be accomplished within a reasonable period of time and at a
reasonable cost, subject, however, to delays that may result from compliance
with governmental review, hearing and approval procedures. As a result,
realization of value from the property is not likely to occur until such time as
the remediation requirements are completed or are modified or an agreement can
be reached with appropriate governmental authorities on a firm schedule for
completion and approval of the remediation activities.
The Company believes that current real estate market conditions are less
likely to result in realization of the highest value of the property from a cash
sale than either from an agreement with a developer to participate in the
development of the property's infrastructure for sale of parcels to merchant
builders or from the Company's infrastructure development of the property
itself. There can be no assurance, however, that such a development agreement
will be reached or that the Company will have the financial and development
capabilities to develop the property itself. The Company believes that the
undiscounted cash flows from the development of this property will be sufficient
to cover its carrying value as well as the costs to complete remediation
activities.
NOTE 4. RECEIVABLES
Receivables consisted of the following:
<TABLE>
<CAPTION>
October 31,
------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Trade accounts receivable--billed....... $50,380 $37,861
Trade accounts receivable--unbilled..... 21,993 25,213
Other receivables....................... 4,249 2,810
Allowance for doubtful accounts......... (2,364) (1,176)
------- -------
Total receivables....................... $74,258 $64,708
======= =======
</TABLE>
Unbilled receivables represent recoverable costs and accrued profits, not
billable to customers at the balance sheet date, which are generally billable
upon product delivery and acceptance and/or completion of milestones. All
amounts are reduced by appropriate progress billings. Amounts representing
retainages under contracts are not material. Claims subject to further
negotiations and which may not be collected within one year are not significant
at October 31, 1996.
28
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------------
1996 1995
-------------------- --------------------
(IN THOUSANDS)
INTEREST INTEREST
AMOUNT RATE AMOUNT RATE
------- -------- ------- --------
<S> <C> <C> <C> <C>
Borrowings under revolving credit facility.................... $ 65,000 8.6% $29,500 7.6%
Borrowings under term loan.................................... 81,000 8.6% 31,250 7.5%
Other note, payable semiannually to 1999, with
interest at the lesser of 10% or 65% of prime................ 459 5.4% 659 5.7%
7% convertible subordinated note due May 1, 2005
(Note 2)..................................................... 15,000 7.0% 15,000 7.0%
Capitalized lease obligations payable in varying
monthly or quarterly installments through 1999, with
interest rates ranging to 9.67% (Note 9).................... 476 333 8.8%
-------- -------
$161,935 76,742
Less current maturities....................................... 161,482 6,048
-------- -------
$ 453 $70,694
======== =======
</TABLE>
Maturities of long-term debt are as follows for the periods stated:
<TABLE>
<CAPTION>
YEAR ENDING
OCTOBER 31 (IN THOUSANDS)
----------- --------------
<S> <C>
1996................... $161,482
1997................... 345
1998................... 98
1999................... 10
2000................... --
</TABLE>
On January 24, 1995, the Company and a group of banks entered into a credit
agreement which consisted of a $65.0 million revolving credit facility with a
three-year term expiring in January 1998 and a $35.0 million term loan that was
payable in quarterly installments over five years. On April 10, 1996, the
Company and its existing agent bank entered into an amendment to the credit
agreement pursuant to which the amount of the credit facility was increased to
$170.0 million and all of the credit commitments under the agreement were
assigned to the agent bank. At October 31, 1996, the credit facility consisted
of an $85.0 million revolving credit facility that expires in April 2001 and an
$81.0 million term loan payable in quarterly installments until 2001. Interest
on loans outstanding under the credit agreement are based, at the Company's
option, on LIBOR or the agent bank's prime rate and the increment over LIBOR or
the prime rate is based on the levels of cash flow and debt of the Company. At
October 31, 1996, the annual interest rate based on LIBOR was LIBOR plus 3.0%,
and the annual interest rate based on the prime rate was prime plus 1.0%. The
Company is obligated to pay letter of credit fees which, at October 31, 1996,
ranged between 2.625% per annum and 3.125% per annum on the aggregate amount of
outstanding letters of credit, and commitment fees which, at October 31, 1996
were .50% per annum on the unused amount of the revolving credit facility.
Additional borrowings under the amended credit facility were used to fund the
acquisition of Xyplex, and will be used going forward to fund working capital
and other corporate requirements.
29
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. LONG-TERM DEBT--(CONTINUED)
The Company's obligations under the credit agreement are secured by a pledge
of shares of stock of subsidiaries of the Company, accounts receivable,
inventory, equipment, intellectual property and other assets of the Company and
its subsidiaries. The agreement includes financial covenants with respect to
financial leverage, cash flow, and net worth. At July 31, 1996, the Company was
not in compliance with one of the financial ratio covenants, and at October 31,
1996, the Company was not in compliance with several of the financial ratio
covenants. The Company has obtained waivers of the defaults up to, but not
including February 28, 1997. The Company and its bank lending group are
currently discussing alternatives for reducing the Company's bank debt. Some of
these alternative measures may result in financing that is more expensive than
the Company's current bank financing. If a reduction in the bank debt cannot be
achieved, the bank lending group may elect to pursue its remedies, including
accelerating the total bank indebtedness.
On April 24, 1995, the Company issued a $15 million 7.0% convertible
subordinated note to Hughes Electronics Corporation, with a scheduled maturity
on May 1, 2005. The note is convertible at the option of the holder into common
stock of the Company at a conversion price of $24.25 per share, interest is
payable semiannually, and the note is redeemable, at the option of the Company,
at any time with no premium. The note prohibits the Company from paying
dividends or redeeming its capital stock if its tangible net worth is less than
$15 million. Under the Company's 7% convertible subordinated note to Hughes
Electronics Company, the Company may not pay or declare cash dividends or redeem
shares of the Company if the Company's tangible net worth is less than $15
million. As of April 30, 1996, the Company's tangible net worth was less than
$15 million and the Company has not paid or declared dividends (including the
quarterly dividend for the Series D Preferred Stock) or redeemed shares since
that date. Thus, dividends on the Series D Preferred Shares have been accrued
since that date.
There is no assurance that in future periods the Company will be in
compliance with all of the financial covenants contained in its amended credit
agreement, or, that additional waivers of the financial covenants will be
obtained. Acceleration of the debt under the bank credit agreement by the bank
lending group upon the Company's failure to comply with a financial covenant
would be an event of default under the $15 million 7% convertible subordinated
note. Because of this possible cross default, the entire $15 million principal
balance of the 7% convertible subordinated note has been classified as current
debt.
In order to reduce the risk of higher interest expense under the Company's
credit agreement that could result from an increase in LIBOR, the Company in
June 1996 purchased an interest rate cap with an initial notional amount of
$42.5 million. Under the terms of the interest rate cap, the Company will
receive a payment at the end of each quarterly period, as defined in the
interest rate cap, if three-month LIBOR at the beginning of the period exceeds
7.5%. The amount of such payment will be the interest rate cap at the beginning
of such period at an interest rate equal to the difference between 7.5% and
LIBOR at the beginning of such period. The interest rate cap expires in July
1999. The cost of this interest rate cap is being amortized over its 37 month
term. At October 31, 1996, the unamortized cost was $242 thousand.
At October 31, 1996, there were $12.2 million of letters of credit
outstanding under the revolving credit facility.
30
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. CAPITAL STOCK
On April 28, 1995, all the outstanding shares of $5.00 Cumulative Convertible
Preferred Stock were either redeemed or converted into Common Stock. Each share
of the $5.00 Cumulative Convertible Preferred Stock was voting, cumulative and
convertible into 1.854 shares of Common Stock plus $74.16 in cash, was
redeemable, at the Company's option, at $100 per share and was entitled to
preference of $100 per share upon voluntary liquidation and $50 per share upon
involuntary liquidation. Each share of Series D Participating Convertible
Preferred Stock is nonvoting, cumulative and, in connection with a qualifying
transfer, convertible into 326.531 shares of Common Stock. Holders of the
Series D Participating Convertible Preferred Stock, of which there is presently
only one, are entitled to a $1.00 per share liquidation preference and to the
greater of $.25 per share per quarter or any dividends paid in respect of the
number of shares of Common Stock underlying each share of Series D Participating
Convertible Preferred Stock. The Board of Directors is authorized to issue
preferred stock in series, to fix dividend rates, conversion rights, voting
rights, rights and terms of redemption and liquidation preferences, and to
increase or decrease the number of shares of any series.
Common Stock reserved for issuance at October 31, 1996 was as follows:
<TABLE>
<CAPTION>
SHARES IN
THOUSANDS
---------
<S> <C>
For conversion of Series D Participating Convertible Preferred Stock................ 188
For stock options................................................................... 1,797
For conversion of 7% convertible subordinated note.................................. 619
-----
2,604
=====
</TABLE>
On December 16, 1994, the Board of Directors adopted, and on March 24, 1995,
the shareholders approved, an amendment to the Whittaker Corporation Long-Term
Stock Incentive Plan (1989) (the "1989 Plan"), that increased from 1,000,000
to 2,000,000 the number of shares of Common Stock of the Company which may be
made subject to stock options and other awards authorized by the 1989 Plan.
The Company had reserved 1,796,683 shares of Common Stock at October 31, 1996
for future issuances under the 1989 Plan, as well as a prior stock option plan
for employees, and a non-employee director stock option plan. Options to
purchase Common Stock generally are conditioned upon continued employment,
expire from five to ten years after the grant date, and become exercisable in
whole or in part either commencing with the second year or upon the attainment
of certain predetermined goals, or both. The following information for the
three years ended October 31, 1996 relates to options granted from 1981 through
1996 under the plans.
31
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. CAPITAL STOCK--(CONTINUED)
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING PRICE RANGE
----------- --------------
IN THOUSANDS
<S> <C> <C>
Balance, October 31, 1993............. 1,251 2.41 to 15.06
Options granted.................... 191 14.19 to 16.37
Options canceled or expired........ (61) 6.32 to 16.37
Options exercised.................. (14) 4.10 to 15.06
------
Balance, October 31, 1994............. 1,367 2.41 to 16.37
Options granted.................... 544 18.00 to 22.50
Options canceled or expired........ (35) 15.06 to 22.25
Options exercised.................. (154) 3.82 to 18.63
------
Balance, October 31, 1995............. 1,722 2.41 to 22.50
Options granted.................... 1,201 13.44 to 26.25
Options canceled or expired........ (1,150) 13.44 to 26.25
Options exercised.................. (660) 2.41 to 22.50
------
Balance, October 31, 1996............. 1,113 4.10 to 26.25
======
</TABLE>
At October 31, 1996, options for 380,040 shares were exercisable.
The Company also had reserved 618,557 shares of Common Stock at October 31,
1996 for possible conversion of the 7% convertible subordinated note at the
option of the holders.
The Company's Stockholder Rights Plan gives each holder of the Company's
Common Stock one right for each share of Common Stock held. Each right entitles
the holder to purchase from the Company 1/100 of a share of a new series of the
Company's preferred stock (Series A Participating Cumulative Preferred Stock) at
an exercise price of $125 per 1/100 of a share. The rights will become
exercisable and will detach from the Common Stock 10 days after any person or
group acquires 25% or more of the Company's Common Stock, or 10 business days
after any person or group commences a tender or exchange offer which, if
consummated, would result in that person or group owning at least 25% of the
Company's Common Stock.
If any person acquires 25% or more of the Company's Common Stock, each right
will entitle the holder, other than the acquiring person, to purchase for the
exercise price Common Stock of the Company with a value of twice the exercise
price. In addition, if following an acquisition by any person or group of 25%
or more of the Company's Common Stock, the Company is involved in a merger or
other business combination transaction, or sells more than 50% of its assets or
earning power to any person, each right will entitle the holder, other than the
acquiring person, to purchase for the exercise price Common Stock of the
acquiring person with a value of twice the exercise price.
The Company may redeem the rights at $.01 per right at any time until the
tenth day after any person or group has acquired 25% or more of its Common
Stock. The rights will expire November 29, 1998, unless earlier redeemed. The
Stockholder Rights Plan may be supplemented or amended at the direction of the
Company without the approval of the holders of rights, except as otherwise set
forth in the Stockholder Rights Plan. At October 31, 1996, 150,000 preferred
shares were reserved for these rights.
32
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAXES
Income tax expense (benefit) relating to continuing operations consists of
the following:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
1996 1995 1994
-------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current provision -
U.S. Federal........................... $(5,314) $(1,154) $1,247
State.................................. 266 527 1,100
------- ------- ------
(5,048) (627) 2,347
Deferred provision -
U.S. Federal........................... (2,835) 5,634 4,124
State.................................. (1,206) 154 --
------- ------- ------
(4,041) 5,788 4,124
------- ------- ------
Provision (benefit) for taxes............. $(9,089) $ 5,161 $6,471
======= ======= ======
</TABLE>
Foreign income taxes were not material.
The tax expense (benefit) is different than the amount computed by applying
the U.S. federal income tax rate to income (loss) before income taxes. The
reasons for the differences are as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
U.S. federal statutory rate................ (34.0%) 34.2% 34.4%
State taxes, net of U.S. federal income
tax benefit............................... (2.4%) 3.4% 4.3%
Goodwill amortization...................... 3.5% 1.8% --
Other items................................ (1.8%) 0.2% 0.4%
---- ---- ----
Effective tax rate......................... (34.7%) 39.6% 39.1%
==== ==== ====
</TABLE>
33
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAXES--(CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the reported amounts of assets and liabilities in the financial
statements and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities at October 31 are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Receivables valuation................ $ 858 $ 1,416 $ 1,395
Inventory valuation.................. 8,397 4,033 4,030
Self-insurance reserves.............. 1,384 1,737 2,142
Pending refund from federal tax audit -- 5,160 4,031
Reserves for discontinued operations. 1,163 848 1,348
Other................................ 12,553 7,160 7,028
------- ------- -------
Total before valuation allowance........ 24,355 20,354 19,974
Valuation allowance..................... (390) (490) (757)
------- ------- -------
Net deferred tax assets................. $23,965 $19,864 $19,217
======= ======= =======
Deferred tax liabilities:
Excess of tax over book depreciation. $ 1,487 $ 3,450 $ 3,070
Assets held for sale or development.. 7,919 6,148 5,937
Intangible assets.................... 15,667 1,977 --
Pension costs........................ 1,904 1,822 780
Other................................ 2,745 7,589 8,005
------- ------- -------
$29,722 $20,986 $17,792
======= ======= =======
</TABLE>
In March 1996 the Company received a net tax refund of $5.2 million under an
agreement reached with the Internal Revenue Service closing the audit of the
1987 and 1988 income tax returns.
The changes in the valuation allowance are the result of changes in temporary
differences which impact the deferred state income tax provision.
NOTE 8. EMPLOYEE BENEFIT PLANS
Prior to October 31, 1994, most of the Company's domestic employees were
covered by the Whittaker Corporation Employees' Pension Plan (the "Pension
Plan"), its noncontributory defined benefit pension plan. The benefits are
based on years of service and the employee's highest compensation for five
consecutive years during the last ten years of credited service.
Effective October 31, 1994, the Company amended the Pension Plan to
"freeze" benefits for all participants: adjustments for changes in credited
years of service ceased on October 31, 1994 and adjustments for changes in
remuneration ceased on December 31, 1994. The effect of the amendment was to
reduce the Pension Plan's projected benefit obligation at October 31, 1994 by
$3,877,000. The amount was fully absorbed by unrecognized net losses at October
31, 1994 related to the Pension Plan and accordingly, no curtailment gain was
recognized. Vested service continues to accrue in accordance with applicable
Pension Plan provisions, and Pension Plan funding will continue until such time
that the Pension Plan is terminated and all benefit obligations are satisfied.
The Company funds the Pension Plan in accordance with the Employee Retirement
Income Security Act of 1974, as amended (ERISA).
34
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED)
The following table sets forth the Pension Plan's funded status and amounts
recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
OCTOBER 31
----------------------
1996 1995
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$118,782 in 1996 and $123,543 in 1995............................. $(119,525) $(124,457)
========= =========
Projected benefit obligation for service rendered through
October 31, 1994.................................................. (119,525) (124,457)
Plan assets at fair value, government, government agency and
fixed income securities.............................................. 119,892 126,278
--------- ---------
Plan assets in excess of projected benefit obligation................. 367 1,821
Items not yet recognized in earnings:
Unrecognized net loss.............................................. 4,446 2,999
Unrecognized net transition asset at November 1, 1985 net of
amortization....................................................... -- (212)
--------- ---------
Net prepaid pension cost recorded in the consolidated balance sheet.. $ 4,813 $ 4,608
========= =========
</TABLE>
The weighted average discount rates used in determining the actuarial present
value of the projected benefit obligation were 7.5% and 7.0%, respectively, at
October 31, 1996 and 1995. The expected long-term rate of return on plan assets
was 7.5% for the year ended October 31, 1996, and 8.75% for the years ended
October 31, 1995 and 1994. As a result of the amendment described above, there
are no projected increases in future compensation levels.
The Company also sponsors unfunded supplemental nonqualified executive and
director plans. At October 31, 1996, the projected benefit obligation for those
plans totaled $5,516,000, of which $1,048,000 is subject to later amortization.
The remaining $4,468,000 is accrued as a liability in the consolidated balance
sheet.
Effective November 1, 1994, the Company amended its defined contribution
401(k) plan and renamed it the Whittaker Corporation Partnership Plan
("Partnership Plan"). The amendment provided for new investment alternatives,
added a profit sharing component to Company contributions to the Partnership
Plan, and allowed certain rollover contributions from other qualified plans.
The Partnership Plan contains a matched savings provision that permits pretax
employee contributions. Participants can contribute from 1% to 12% of
compensation and receive a maximum matching employer contribution of 50% on up
to 6% of their annual compensation.
In addition to matching of employee contributions, beginning with fiscal
1995, the Company has recorded as expense amounts which may range from 0% to
7.5% of eligible employee compensation, based on the attainment of specified
financial goals by participating divisions of the Company. The Partnership Plan
covers most of the Company's employees, excluding those employed by Xyplex and
WCI. Xyplex and WCI sponsor defined contribution 401(k) plans covering a
majority of their domestic employees under which participants can make pretax
contributions of up to 15% of eligible compensation and receive a matching
contribution of 75% on up to 6% of their eligible compensation.
35
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED)
Total pension and retirement expense was as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost components of funded defined
benefit plan:
Service cost--benefits earned during
the period.......................... $ 540 $ 490 $ 2,253
Interest cost on projected benefit
obligation.......................... 8,500 8,658 8,723
Actual return on plan assets......... (15,892) (20,204) 5,086
Net amortization and deferral........ 6,647 8,336 (16,844)
-------- -------- --------
Net periodic pension (income) for
funded defined benefit plan............ (205) (2,720) (782)
Cost for unfunded defined benefit plans. 703 549 644
Cost for defined contribution plans..... 1,589 2,983 708
-------- -------- --------
Total pension and retirement plan
expense................................ $ 2,087 $ 812 $ 570
======== ======== ========
</TABLE>
NOTE 9. LEASED ASSETS AND LEASE COMMITMENTS
Whittaker has various leases covering real property and equipment.
Property, Plant and Equipment includes $500,000 at October 31, 1996 and
$183,000 at October 31, 1995 for leases that have been capitalized. The
amortization of these assets is included in depreciation expense.
Future minimum payments under capital leases and under noncancellable
operating leases, net of rentals to be received from existing noncancellable
operating subleases, as of October 31, 1996, were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDED OCTOBER 31, LEASES LEASES
----------------------- ------- ---------
(IN THOUSANDS)
<S> <C> <C>
1997................................. $ 308 $2,792
1998................................. 154 2,285
1999................................. 41 743
2000................................. 10 175
2001................................. -- 77
2002 and subsequent.................. -- --
------ ------
Total commitments............................. 513 $6,072
======
Amounts representing interest................. 37
------
Present value of net minimum lease payments... $ 476
======
</TABLE>
Rental expense for operating leases, net of rental income from subleases, was
as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31, (IN THOUSANDS)
----------------------- --------------
<S> <C>
1996................................... $3,282
1995................................... 2,292
1994................................... 1,710
</TABLE>
36
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. COMMITMENTS AND CONTINGENCIES
In certain years, after evaluating the availability and cost of insurance,
the Company did not purchase insurance for certain risks, including workers'
compensation and product liability. Consequently, the Company is without
insurance for various risks, including product liability for certain products it
manufactured. The Company currently has workers' compensation insurance and
product liability insurance for products it currently manufactures. The
Company's insurance carriers have taken the position that in certain cases the
Company is uninsured for environmental matters, a position that the Company
disputes in certain instances.
As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law
enacted to address public health and environmental concerns arising with respect
to the past treatment and disposal of hazardous substances. The Company is also
a potentially responsible party in a number of other actions brought under state
laws patterned after CERCLA. In nearly all of these matters, the Company
contributed a small amount (generally less than 1%) of the total treated or
disposed of waste. In addition to the CERCLA and similar actions described
above, the Company also, from time to time, conducts or participates in remedial
investigations and cleanup activities at facilities currently or formerly
occupied by its operating units. There are also various other claims and suits
pending against the Company.
At October 31, 1996, the Company had provided for its aggregate liability
related to various claims, including uninsured risks and potential claims in
connection with the environmental matters noted above, excluding the
environmental remediation activities related to the property located in the City
of Santa Clarita, California. The amounts provided on the Company's books for
contingencies, including environmental matters, are recorded at gross amounts.
Because of the uncertainty with respect to the amount of probable insurance
recoveries, these potential insurance recoveries are not taken into account as a
reduction of those amounts provided unless an insurance carrier has agreed to
such coverage. The Company does not anticipate that these matters will have a
material adverse effect on the Company's financial position or on its ability to
meet its working capital and capital expenditure needs. Although the Company has
recorded estimated liabilities for contingent losses, including uninsured risks
and claims in connection with environmental matters, in accordance with
generally accepted accounting principles, the absence of or denial of various
insurance coverages and the filing of future environmental claims which are
unknown to the Company at this time represent a potential exposure for the
Company, and the net income of the Company in future periods could be adversely
affected if uninsured losses in excess of amounts recorded were to be incurred.
In connection with the discontinuance of various businesses, the Company
remains liable for certain retained obligations and for certain future claims,
principally environmental and product liability. The noncurrent portion of such
items is included in "Other Noncurrent Liabilities" in the consolidated balance
sheet.
The Company periodically assesses the adequacy of its accruals for these and
other liabilities, as well as the carrying value of assets, related to former
operations and programs and makes adjustments as required. During 1996, certain
of these adjustments were offset, in part, by the reversal of tax related
reserves arising from operations prior to 1990 which were determined to be
excess.
37
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 follow (in millions of
dollars except for per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1996
Sales........................ $44.4 $ 47.6 $ 62.2 $ 67.7 $221.9
Cost of sales................ 24.9 27.5 36.8 40.7 129.9
Net income (loss)............ 1.9 (4.9) (5.9) (8.2) (17.1)
Earnings (loss) per share*... $0.20 $(0.52) $(0.54) $(0.74) $(1.70)
1995
Sales........................ $26.7 $ 31.7 $ 44.3 $ 56.8 $159.5
Cost of sales................ 16.0 19.1 23.1 31.8 90.0
Net income................... 1.7 0.2 1.8 4.2 7.9
Earnings per share........... $0.18 $ 0.02 $ 0.18 $ 0.44 $ 0.82
</TABLE>
* The sums of quarterly per share amounts do not equal the annual
amounts reported since per share calculations are made independently
for each quarter and the full year based upon respective average
shares outstanding.
NOTE 12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Long-term debt: The carrying amounts of the Company's borrowings approximate
their fair value. The Company's bank credit facility is a variable rate
facility that reprices frequently.
Notes receivable: The carrying amounts of the Company's notes receivable
approximate their fair value.
NOTE 13. BUSINESS SEGMENTS
The Company develops specialized aerospace and electronic technologies to
create products and customer solutions for aircraft, defense, communications and
industrial markets. The Company operates in two business segments: Aerospace,
which designs, manufactures, and distributes a wide variety of fluid control
devices and fire detection systems, as well as defense electronics products and
systems, and Communications, which designs, develops, and markets a
comprehensive line of data networking products and services. Prior to fiscal
year 1995, the Company's communications operations were not material enough to
comprise a separate business segment.
Operating profit is total revenue less operating expenses. General corporate
expenses have not been allocated to the business segments and are shown as a
separate expense element of operating profit to reconcile to consolidated
operating income or loss. Identifiable assets are those assets used in the
Company's operations in each industry. Corporate assets are principally cash,
notes receivable, deferred income taxes, and assets held for sale.
38
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. BUSINESS SEGMENTS--(CONTINUED)
Information about Whittaker's operations by business segment at October 31,
1996, 1995, and 1994 and for the years then ended follows (dollars in millions):
<TABLE>
<CAPTION>
DEPRECIATION AND
OPERATING IDENTIFIABLE AMORTIZATION CAPITAL
SALES PROFIT (LOSS) ASSETS EXPENSE EXPENDIRES
------ ------------ ------------ ---------------- ----------
<S> <C> <C> <C> <C> <C>
1996
Aerospace.............. $130.4 $ 20.3 $133.9 $ 6.7 $2.0
Communications......... 91.5 (30.7) 171.0 11.7 2.7
Corporate.............. -- (10.4) 74.6 0.3 0.1
------ ------ ------ ----- ----
Consolidated........... $221.9 $(20.8) $379.5 $18.7 $4.8
====== ====== ====== ===== ====
1995
Aerospace.............. $129.0 $ 29.2 $143.8 $ 5.8 $4.8
Communications......... 30.5 (3.4) 46.9 2.1 0.7
Corporate.............. -- (7.3) 60.3 0.2 0.9
------ ------ ------ ----- ----
Consolidated........... $159.5 $ 18.5 $251.0 $ 8.1 $6.4
====== ====== ====== ===== ====
1994
Aerospace.............. $126.4 $ 26.8 $153.5 $ 5.4 $2.5
Corporate.............. -- (6.8) 55.8 0.3 --
------ ------ ------ ----- ----
Consolidated........... $126.4 $ 20.0 $209.3 $ 5.7 $2.5
====== ====== ====== ===== ====
</TABLE>
Communications operating profit for fiscal 1996 and 1995 reflects the
writeoff of $11.7 million and $3.3 million, respectively, of in-process research
and development cost, which was recorded as an expense at the acquisition date.
In fiscal 1996, 1995, and 1994 approximately 23%, 34%, and 49%, respectively,
of Whittaker's sales were directly or indirectly to the United States
Government. All of those sales, with the exception of a minor amount in 1995,
were attributable to the Aerospace segment. In fiscal 1996, 1995, and 1994
approximately 29%, 27%, and 20%, respectively, of Whittaker's sales arose from
exports to customers outside the United States, primarily in Europe and the
Middle East. Approximately 14% of the Company's accounts receivable are from
the U.S. Government, and the balance is primarily from commercial customers,
prime defense contractors with the U.S. Government, and foreign customers.
NOTE 14. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT AUDITOR (UNAUDITED)
In connection with the integration and streamlining efforts in the
Company's Communications segment, the Company's Board of Directors on January
24, 1997, approved a plan that will result in a pre-tax charge currently
estimated at $10 million during the first quarter of 1997. The charge will be
taken to cover the one-time costs of closing its Santa Clara, California
facility and integrating those operations into its Littleton, Massachusetts
facilities. These one-time costs include severance payments associated with the
consolidation and reduction of the combined workforces, the writedown of assets
to net realizable value and other costs related to this consolidation. The
Enterprise Hub product line will be sold through Xyplex Networks sales channels
and will continue to be supported from the Littleton facilities.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
39
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by Item 10 is incorporated by reference to the
information under the following captions in the Proxy Statement:
CAPTION
Election of Directors--Directors
Compliance with Section 16(a) of the Securities Exchange Act
Certain of the information called for by Item 10 with respect to executive
officers of the Registrant appears as Item 4A in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by Item 11 is incorporated by reference to the
information under the following caption in the Proxy Statement:
CAPTION
Election of Directors--Executive Compensation and Other Information
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by Item 12 is incorporated by reference to the
information under the following caption in the Proxy Statement:
CAPTION
Equity Securities and Principal Holders Thereof
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Item 13 is incorporated by reference to the
information under the following caption in the Proxy Statement:
CAPTION
Election of Directors--Directors
40
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
PAGE
REFERENCE
---------
FORM 10-K
<S> <C>
(A-1) FINANCIAL STATEMENTS:
Report of Independent Auditors.................................................................... 19
Consolidated Statements of Income for the three years ended October 31, 1996...................... 20
Consolidated Balance Sheets as of October 31, 1996 and 1995....................................... 21
Consolidated Statements of Cash Flows for the three years ended October 31, 1996.................. 23
Consolidated Statements of Stockholders' Equity for the three years ended October 31, 1996........ 24
Notes to Consolidated Financial Statements........................................................ 25
</TABLE>
(A-2) FINANCIAL STATEMENT SCHEDULES:
All supplemental schedules are omitted as inapplicable or because the
required information is included in the Consolidated Financial Statements or the
Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
(A-3) EXHIBITS:*
<C> <S>
3.1 Restated Certificate of Incorporation (Exhibit 3.1 to Form 10-K
for fiscal year ended October 31, 1989), as amended on March 16,
1990 (Exhibit 3.1 to Form 10-K for fiscal year ended October 31,
1995).
3.2 Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended
October 31, 1989), as amended on September 30, 1994 (Exhibit 3.2
to Form 10-K for fiscal year ended October 31, 1994). and on
December 16, 1996.
4.1 Reference is made to Exhibit 3.1.
4.2 Reference is made to Exhibit 3.2.
4.3 Rights Agreement dated as of November 18, 1988 between Registrant
and Manufacturers Hanover Trust Company (currently being
performed by Mellon Bank N.A. as rights agent) concerning Series
A Participating Cumulative Preferred Stock Purchase Rights
(Exhibits 1 and 2 to Form 8-A filed on November 23, 1988), as
amended as of June 28, 1989 (Exhibit 4.4 to Form 10-K for fiscal
year ended October 31, 1989).
4.4 Certificate of Designation of Series D Participating Convertible
Preferred Stock (Exhibit 4.2 to Form S-4, Registration No. 33-
29028), as amended on March 16, 1990 (Exhibit 4.4 to Form 10-K
for fiscal year ended October 31, 1995).
4.5 7% Convertible Subordinated Note dated April 24, 1995 (Exhibit
10.1 to Form 8-K dated May 8, 1995).
4.6 Registration Rights Agreement dated April 24, 1995 between
Registrant and Hughes Electronics Corporation (Exhibit 10.1 to
Form 8-K dated May 8, 1995).
4.7 Stockholder's Agreement dated April 10, 1996 between Registrant
and Raytheon Company (Exhibit 4.1 to Form 8-K dated April 24,
1996).
4.8 Term Note dated April 10, 1996 by the Registrant in favor of
NationsBank of Texas, N.A. (Exhibit 4.2 to Form 8-K dated April
24, 1996).
</TABLE>
41
<PAGE>
<TABLE>
<C> <S>
4.9 Revolving Note dated April 10, 1996 by the Registrant in favor of
NationsBank of Texas, N.A. (Exhibit 4.3 to Form 8-K dated April
24, 1996).
(Other instruments defining the rights of holders of long-term
debt are not filed because the total amount of securities
authorized under any such instrument does not exceed 10% of the
consolidated total assets of Registrant. Registrant hereby agrees
to furnish a copy of any such instrument to the Commission upon
request.)
10.1 Amended and Restated 1977 Nonqualified Stock Option Plan (Exhibit
10.5 to Form 10-K for fiscal year ended October 31, 1982).**
10.2 Restated 1980 Nonqualified Stock Option Plan (Exhibit 10.7 to
Form 10-K for fiscal year ended October 31, 1982).**
10.3 Amended and Restated Whittaker Corporation 1992 Stock Option Plan
for Non-Employee Directors.**
10.4 1981 Incentive and Nonqualified Stock Option Plan, as amended
January 22, 1982 (Exhibit 10.7 to Form 10-K for fiscal year ended
October 31, 1981), and as amended June 26, 1987 (Exhibit 10.6 to
Form 10-K for fiscal year ended October 31, 1987).**
10.5 Directors' Deferred Compensation Plan dated February 1983 (Exhibit
10.9 to Form 10-K for fiscal year ended October 31, 1984), as
amended on May 18, 1990 (Exhibit 10.7 to Form 10-K for fiscal
year ended October 31, 1990).**
10.6 Restated Directors' Retirement Plan effective as of August 2,
1985 as amended on January 24, 1991 (Exhibit 10.10 to Form 10-K
for fiscal year ended October 31, 1990), as amended on December
16, 1996.**
10.7 Amended and Restated Whittaker Corporation Long-Term Stock
Incentive Plan (1989).**
10.8 Whittaker Corporation Supplemental Benefit Plan dated November
23, 1988, as amended June 12, 1990 and as amended July 12,
1991.**
10.9 Whittaker Corporation Excess Benefit Plan dated November 23,
1988, as amended June 21, 1990.**
10.10 Whittaker Corporation Supplemental Disability Benefit Plan dated
November 23, 1988.**
10.11 Whittaker Corporation Supplemental Retirement and Disability
Trust Agreement dated November 23, 1988 (Exhibit 10.13 to Form 10-
K for fiscal year ended October 31, 1988).**
10.12 Amended and Restated Whittaker Corporation Supplemental Executive
Retirement Plan, dated as of January 1, 1996, as amended January
24, 1997.**
10.13 Amendment and Restatement of Whittaker Corporation Employees'
Pension Plan dated December 22, 1994, as amended December 15,
1995 (Exhibit 10.10 to Form 10-K for fiscal year ended October
31, 1995), and as amended effective October 1, 1996.**
10.14 Whittaker Corporation Partnership Plan (formerly the Whittaker
Corporation Savings and Stock Investment Plan), as amended and
restated effective November 1, 1994 (Exhibit 10.11 to Form 10-K
for fiscal year ended October 31, 1995) and as amended June 21,
1996 (Exhibit 10.2 to Form 10-Q dated September 13, 1996).**
10.15 Amended and Restated Credit Agreement dated as of April 10, 1996
among Registrant, NationsBank of Texas, N.A., as Agent, and
certain other financial institutions as signatories thereto
(Exhibit 10.2 to Form 8-K dated April 24, 1996).
10.16 First Amendment and Waiver dated as of September 9, 1996 among
Registrant, NationsBank of Texas, N.A., as Agent, and certain
other financial institutions as signatories thereto (Exhibit 10.1
to Form 10-Q dated September 13, 1996).
</TABLE>
42
<PAGE>
<TABLE>
<C> <S>
10.17 Second Amendment and Waiver dated as of October 30, 1996 among
Registrant, NationsBank of Texas, N.A., as Agent, and certain
other financial institutions as signatories thereto.
10.18 Third Amendment and Waiver dated as of December 17, 1996 among
Registrant, NationsBank of Texas, N.A., as Agent, and certain
other financial institutions as signatories thereto.
10.19 Stock Purchase Agreement dated as of March 23, 1995 between
Registrant and Hughes Aircraft Company, as amended on April 24,
1995 (Exhibit 10.1 to Form 8-K dated May 8, 1995).
10.20 Stock Purchase Agreement dated as of March 2, 1996, between
Registrant and Raytheon Company (Exhibit 10.1 to Form 8-K dated
April 24, 1996)
11. Calculation of earnings per share for the three years ended
October 31, 1996.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
</TABLE>
* Exhibits followed by a parenthetical reference are incorporated by reference
to the document described therein. Upon written request to the Secretary of
the Company, a copy of any exhibit referred to above will be furnished
without charge.
** Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K.
(B) REPORTS ON FORM 8-K:
During the quarter ended October 31, 1996, the Company did not file any
reports on Form 8-K.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WHITTAKER CORPORATION
By: /s/ Lynne M. O. Brickner
----------------------------
Lynne M. O. Brickner
Vice President
Date: January 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------- ---------------------- ----------------
<S> <C> <C>
/s/ Joseph F. Alibrandi Director and Principal January 24, 1997
- ----------------------------- Executive Officer
(Joseph F. Alibrandi)
/s/ Eva Jonutis Principal January 24, 1997
- ----------------------------- Accounting Officer
(Eva Jonutis)
/s/ George H. Benter, Jr. Director January 24, 1997
- -----------------------------
(George H. Benter, Jr.)
/s/ George Deukmejian Director January 24, 1997
- -----------------------------
(George Deukmejian)
/s/ Jack L. Hancock Director January 24, 1997
- -----------------------------
(Jack L. Hancock)
/s/ Edward R. Muller Director January 24, 1997
- -----------------------------
(Edward R. Muller)
/s/ Gregory T. Parkos Director January 24, 1997
- -----------------------------
(Gregory T. Parkos)
/s/ Malcolm T. Stamper Director January 24, 1997
- -----------------------------
(Malcolm T. Stamper)
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. * DESCRIPTION NUMBERED PAGE
- -------------- ----------------------------------- -------------
<C> <S> <C>
3.2 Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended
October 31, 1989), as amended on September 30, 1994 (Exhibit
3.2 to Form 10-K for fiscal year ended October 31, 1994). and
on December 16, 1996.
10.3 Amended and Restated Whittaker Corporation 1992 Stock Option
Plan for Non-Employee Directors.
10.6 Restated Directors' Retirement Plan effective as of August 2,
1985 as amended on January 24, 1991 (Exhibit 10.10 to Form 10-K
for fiscal year ended October 31, 1990), as amended on December
16, 1996.
10.7 Amended and Restated Whittaker Corporation Long-Term Stock
Incentive Plan (1989).
10.8 Whittaker Corporation Supplemental Benefit Plan dated November
23, 1988, as amended June 12, 1990 and as amended July 12,
1991.
10.9 Whittaker Corporation Excess Benefit Plan dated November 23,
1988, as amended June 21, 1990.
10.10 Whittaker Corporation Supplemental Disability Benefit Plan
dated November 23, 1988.
10.12 Amended and Restated Whittaker Corporation Supplemental
Executive Retirement Plan, dated as of January 1, 1996, as
amended January 24, 1997.
10.13 Amendment and Restatement of Whittaker Corporation Employees'
Pension Plan dated December 22, 1994, as amended December 15,
1995 (Exhibit 10.10 to Form 10-K for fiscal year ended October
31, 1995), and as amended effective October 1, 1996.
10.17 Second Amendment and Waiver dated as of October 30, 1996 among
Registrant, NationsBank of Texas, N.A., as Agent, and certain
other financial institutions as signatories thereto.
10.18 Third Amendment and Waiver dated as of December 17, 1996 among
Registrant, NationsBank of Texas, N.A., as Agent, and certain
other financial institutions as signatories thereto.
11. Calculation of earnings per share for the three years ended
October 31, 1996.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
</TABLE>
* Exhibits followed by a parenthetical reference are incorporated by reference
to the documents described therein.
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF ADOPTION
OF
RESOLUTIONS
BY
THE BOARD OF DIRECTORS
OF
WHITTAKER CORPORATION
---------------------
WHEREAS, the Board of Directors is authorized to amend the Bylaws of this
corporation.
NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 2(b) of the
Bylaws of this corporation be, and hereby is, amended in its entirety to
read as follows:
"No person may stand for election to, or be elected to, the board of
directors or be appointed by the directors to fill a vacancy on the board
of directors who is 72 years of age or older, who shall have made, or be
making, improper or unlawful use of the corporation's confidential
information, or who has interests which conflict materially with the
interests of the corporation. Directors need not be stockholders."
* * * * * * * * * *
I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and
acting Secretary of Whittaker Corporation; that the foregoing is a full, true
and correct copy of the resolutions adopted at a meeting of the Board of
Directors of Whittaker Corporation held on December 16, 1996, at which meeting a
quorum of said Board was at all times present and acting and that said Board
resolutions have not been modified or rescinded and are in full force and effect
as of the date of this certificate.
Dated: December 18, 1996
/s/ Lynne M. O. Brickner
------------------------
Lynne M. O. Brickner
Secretary
<PAGE>
EXHIBIT 10.3
WHITTAKER CORPORATION
AMENDED AND RESTATED 1992 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
SECTION 1. Purpose. The purposes of the Plan are to attract and
-------
retain highly qualified individuals to serve as directors of the Company, to
encourage non-employee directors to acquire an equity interest in the Company in
order to align more closely the interests of directors with those of the
Company's stockholders, and to compensate non-employee directors for their
contributions to the Company's growth and profitability.
SECTION 2. Definitions. As used in the Plan, the following terms
-----------
shall have the meanings set forth below:
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day except a Saturday, Sunday or other
day on which the New York Stock Exchange is authorized by law to close.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Whittaker Corporation, and any successor thereto.
"Eligible Director" shall mean each director of the Company who is not
an employee of the Company or any of its affiliates.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, (i) with respect to the Shares, as of
any date, the last reported sales price regular way on the New York Stock
Exchange or, if not reported for the New York Stock Exchange, on the Composite
Tape, or, in case no such reported sale takes place on such day, the average of
the reported closing bid and asked quotations on the New York Stock Exchange and
(ii) with respect to any property other than the Shares, the fair market value
of such property determined by such methods or procedures as shall be
established from time to time by the Board.
"Option" shall mean either a "Fixed Option" or a "Formula Option"
granted under Section 5 of the Plan.
"Option Agreement" shall mean any written agreement, contract, or
other instrument or document evidencing any Option, which may, but need not, be
executed or acknowledged by a Participant.
"Participant" shall mean any Eligible Director granted an Option under
the Plan.
<PAGE>
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, government
or political subdivision thereof or other entity.
"Plan" shall mean this Whittaker Corporation 1992 Stock Option Plan
for Non-Employee Directors, as amended and restated on January 24, 1997.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
"Shares" shall mean the common shares of the Company, $.01 par value.
"Termination Date" shall mean the earlier to occur of (i) the first
business day in January of the year [2007] and (ii) the date the Shares are de-
listed from the New York Stock Exchange.
SECTION 3. Administration. The Plan shall be administered by the
--------------
Board. Subject to the terms of the Plan, the Board shall have the power to
interpret the provisions and supervise the administration of the Plan.
SECTION 4. Shares Available for Options.
----------------------------
(a) Shares Available. Subject to adjustment as provided in Section
----------------
4(b):
(i) Calculation of Number of Shares Available. The number of Shares
-----------------------------------------
with respect to which Options may be granted under the Plan shall be one
hundred and fifty thousand (150,000). If, after the effective date of the
Plan, any Shares covered by an Option granted under the Plan are forfeited,
or if an Option otherwise terminates or is canceled without the delivery of
Shares or of other consideration, then the Shares covered by such Option,
or the number of Shares otherwise counted against the aggregate number of
Shares with respect to which Options may be granted, to the extent of any
such forfeiture, termination or cancellation, shall again be, or shall
become, Shares with respect to which Options may be granted.
(ii) Sources of Shares Deliverable Under Options. Any Shares
-------------------------------------------
delivered pursuant to an Option may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
(b) Adjustments. The number and type of Shares with respect to which
-----------
Options may be granted, the number and type of Shares subject to each Option to
be granted, the number and type of Shares subject to outstanding Options, and
the grant or exercise price with respect to any Option shall be appropriately
adjusted by the Board in order to prevent reduction or enlargement of the
benefits of Options that would otherwise result from any extraordinary dividend
or other distribution (whether in the form of cash, securities, or other
property), recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination,
2
<PAGE>
repurchase, or exchange of Shares, issuance of warrants or other rights to
purchase Shares, at a price below fair market value or other similar corporate
event.
SECTION 5. Options.
-------
(a) Fixed Options. On the date of each annual meeting of the
-------------
Company's stockholders, each Eligible Director who is a member of the Board on
such date shall be granted an Option (the "Fixed Option") to acquire one
thousand (1,000) Shares.
(b) Formula Options. On the date of each annual meeting of the
---------------
Company's stockholders, each Eligible Director who is a member of the Board on
such date shall be granted an Option (the "Formula Option") to acquire a number
of Shares based upon the following formula: (x) one hundred fifty percent (150%)
of the Eligible Director's basic annual fee as a member of the Board for the
twelve (12) month period beginning upon the date of grant of such Option,
divided by (y) the product of the "Black-Scholes Percentage" (as defined below)
and the Fair Market Value of a Share on the date of grant of such Option. For
the purposes of the foregoing formula, the "Black-Scholes Percentage" shall be
the percentage obtained by dividing (x) the value of a Formula Option, as
determined by the Board, for one (1) Share under the Black-Scholes option
pricing model using the historical price volatility of the Shares during the
five (5) year period immediately preceding the date of the grant of such Option,
by (y) the Fair Market Value of one (1) Share on the date of grant of such
Option.
(c) Exercise Prices. The exercise price per Share under an Option
---------------
shall be the per Share Fair Market Value on the date of grant of such Option.
(d) Time and Method of Exercise. Except in the case of the death of
---------------------------
a Participant, any Fixed Option granted pursuant to the Plan shall not be
exercisable until the date which is six months from the date of grant of such
Option. Except in case of the death of a Participant, any Formula Option granted
pursuant to the Plan shall not be exercisable until the date which is one (1)
year from the date of grant of such Option. In the case of the death of a
Participant, any Fixed Option or Formula Option held by such Participant that is
not then exercisable shall be immediately exercisable.
(e) General.
-------
(i) Limits on Transfer of Options.
-----------------------------
(A) Each Option and each right under any Option, shall be
exercisable only by the Participant during the Participant's lifetime,
or, if permissible under applicable law, by the Participant's guardian
or legal representative.
(B) No Option and no right under any such Option may be
assigned, alienated, pledged, attached, sold or otherwise transferred
or encumbered by a Participant otherwise than by will or by the laws
of descent and distribution and any such purported assignment,
alienation,
3
<PAGE>
pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company; provided that the designation of a
--------
beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale transfer or encumbrance.
(ii) Term of Options. Subject to Section 5(c)(v), each Option shall
---------------
expire ten years from its date of grant.
(iii) Share Certificate. Certificates for Shares to which a
-----------------
Participant is entitled pursuant to the exercise of any Option shall not be
delivered until the Board determines that such delivery will comply with
all applicable rules, regulations, and other requirements of the SEC, any
stock exchange upon which such Shares are then listed, and any applicable
federal or state laws. Upon delivery, all such certificates shall be
subject to such stop transfer orders and other restrictions as the Board
may deem advisable under the Plan or such rules, regulations, requirements
and laws. The Board may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(iv) Delivery of Shares and Payment of Participant of Consideration.
--------------------------------------------------------------
No Shares shall be delivered pursuant to the exercise of any Option until
payment in full of any amount required to be paid pursuant to the Plan or
the applicable Option Agreement is received by the Company. The holder may
make such payment in cash, cash equivalents or, in whole or in part, in
Shares; provided that the combined value of any cash or cash equivalents
and the Fair Market Value of any Shares tendered to the Company, as of the
date of such tender, is at least equal to the full amount required to be
paid pursuant to the Plan and the applicable Option Agreement to the
Company.
(v) Termination of Service. If a Participant's service as an
----------------------
Eligible Director is terminated for any reason, including death, any Option
held by such Participant shall remain exercisable for one (1) year after
such termination, but in no event beyond the expiration date of such
Option. Upon the expiration of such one (1) year period, any unexercised
Options held by such Participant shall be canceled.
SECTION 6. Amendment and Termination. Except to the extent
-------------------------
prohibited by applicable law and unless otherwise expressly provided in an
Option Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend,
----------------------
discontinue, or terminate the Plan; provided that any such amendment,
alteration, suspension, discontinuation, or termination that would materially
impair the rights of any Participant or a beneficiary thereof as to any
outstanding Option shall not to that extent be effective without the approval of
the affected Participant or beneficiary; and provided further that
-------- -------
notwithstanding any other provision of the Plan or any Option Agreement, without
the approval of the stockholders of the Company no such amendment, alteration,
suspension, discontinuation, or termination shall be made that would:
4
<PAGE>
(i) increase the total number of Shares available for Options under
the Plan, except as provided in Section 4 of the Plan;
(ii) permit Options encompassing rights to purchase Shares to be
granted with per Share exercise or purchase prices of less than the Fair
Market Value of a Share on the date of grant thereof; or
(iii) otherwise cause the Plan to cease to comply with any tax or
regulatory requirement, including for these purposes any approval or other
requirement which is a prerequisite for exemptive relief from Section 16(b)
of the Exchange Act.
(b) Correction of Defects, Omissions and Inconsistencies. Subject to
----------------------------------------------------
Section 6(a), the Board may correct any defect, supply any omission, or
reconcile any inconsistency in the Plan or any Option or Option Agreement in the
manner and to the extent it shall deem necessary to carry the Plan into effect.
In the event of a conflict between any term or provision contained in an Option
or an Option Agreement and a term or provision contained in the Plan, the
applicable terms and conditions of the Plan shall govern and prevail.
SECTION 7. General Provisions.
------------------
(a) Withholding. The Company is hereby authorized to withhold from
-----------
any transfer of Shares pursuant to the exercise of an Option or from any
compensation or other amount owing to a Participant the amount (in cash, Shares
or other property) of any applicable withholding taxes in respect of the
exercise of an Option or any payment or transfer under an Option or under the
Plan and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such taxes. Without
limiting the foregoing, a Participant may elect to satisfy any tax withholding
obligations that may arise upon the exercise of an Option by directing the
Company to withhold a number of Shares otherwise deliverable upon such exercise
having a Fair Market Value equivalent to the amount of such obligation.
(b) No Limit on Other Compensation Arrangements. Nothing contained
-------------------------------------------
in the Plan shall prevent the Company from adopting or continuing in effect
other compensation arrangements (subject to stockholder approval if such
approval is required), and such arrangements may be either generally applicable
or applicable only in specific cases.
(c) Governing Law. The validity, construction, and effect of the
-------------
Plan and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware.
(d) Severability. If any provision of the Plan or any Option is or
------------
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Option, or would disqualify the Plan or any
Option under any law deemed applicable by the Board, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Board,
materially
5
<PAGE>
altering the intent of the Plan or the Option, such provision shall be stricken
as to such jurisdiction, Person or Option and the remainder of the Plan and any
such Option shall remain in full force and effect.
(e) No Trust or Fund Created. Neither the Plan nor any Option shall
------------------------
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company pursuant to an Option, such right shall be no greater than the right
of any unsecured general creditor of the Company.
(f) No Fractional Shares. No fractional Shares shall be issued or
--------------------
delivered pursuant to the Plan or any Option, and the Board shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(g) Headings. Heading are given to the Sections and subsections of
--------
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 8. Effective Date of Plan. The Plan was effective as of June
----------------------
28, 1991, and was approved by the Company's stockholders at their annual meeting
on March 27, 1992. The Amended and Restated Plan shall be effective as of
January 1, 1997, subject to its being approved by the Company's stockholders at
their annual meeting on April 4, 1997. In the event the Company's stockholders
do not so approve the Amended and Restated Plan, the Plan, as approved by the
Company's stockholders at their annual meeting on March 27, 1992, shall remain
in full force and effect, and the Amended and Restated Plan shall be of no
further force or effect.
6
<PAGE>
EXHIBIT 10.6
CERTIFICATE OF ADOPTION
CERTIFIED COPY
OF
RESOLUTIONS
ADOPTED BY
THE BOARD OF DIRECTORS
OF
WHITTAKER CORPORATION
---------------------
WHEREAS, this corporation has implemented a Restated Directors'
Retirement Plan ("Retirement Plan") and the 1992 Stock Option Plan for Non-
Employee Directors ("1992 Plan") to provide certain retirement benefits and
stock option grants to directors of this corporation.
WHEREAS, it is in the best interest of this corporation and its
stockholders to amend the terms of the Retirement Plan and 1992 Plan in
keeping with prevailing trends, issues and concerns of other publicly-owned
corporations similar to this corporation.
WHEREAS, the Board of Directors has the authority under Section 9(c)
of the Retirement Plan to terminate the Retirement Plan and under Section 6
of the 1992 Plan to amend the 1992 Plan.
NOW, THEREFORE, BE IT RESOLVED, that the terms and provisions of
Amendment No. I to the 1992 Plan be, and hereby are, approved in the form
as presented to the Directors.
RESOLVED FURTHER, that the first sentence of Section 4(a)(1) of the
Retirement Plan be amended to include the phrase "ending April 4, 1997" at
the end of such sentence; that Section 4(a)(2)(A) and Section 4(a)(3)(A) of
the Retirement Plan be amended to include the phrase "ending April 4, 1997"
following the word "Director" and preceding the semi-colon; and that
Section 4(a)(2)(B) and Section 4(a)(3)(B) be amended to include the phrase
"ending April 4, 1997" following the word "Director" and preceding the
period.
RESOLVED FURTHER, that the Retirement Plan be terminated in accordance
with the express provisions of the Retirement Plan.
RESOLVED FURTHER, that the effective date of the amendment of
termination of the Retirement Plan shall be as of the date of the approval
of Amendment No. I to the 1992 Plan by the stockholders of this
corporation.
* * * * * * * * * *
<PAGE>
I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and
acting Secretary of Whittaker Corporation; that the foregoing is a full, true
and correct copy of the resolutions adopted at a meeting of the Board of
Directors of Whittaker Corporation held on December 16, 1996, at which meeting a
quorum of said Board was at all times present and acting and that said Board
resolutions have not been modified or rescinded and are in full force and effect
as of the date of this certificate.
Dated: January 24, 1997
/s/ Lynne M. O. Brickner
---------------------------
Lynne M. O. Brickner
Secretary
2
<PAGE>
EXHIBIT 10.7
AMENDED AND RESTATED
WHITTAKER CORPORATION
LONG-TERM STOCK INCENTIVE PLAN (1989)
SECTION 1. Purpose
The purposes of the Whittaker Corporation Long-Term Incentive Plan (1989)
(the "Plan") are to promote the interests of Whittaker Corporation (the
"Company") and its shareholders by (i) attracting and retaining executive
personnel and other key employees of outstanding ability; (ii) motivating
executive personnel and other key employees, by means of performance-related
incentives, to achieve longer-range performance goals; and (iii) enabling such
employees to participate in the long-term growth and financial success of the
Company.
SECTION 2. Definitions
"Affiliate" shall mean any corporation or other entity which is not a
Subsidiary but as to which the Company possesses a direct or indirect ownership
interest and has representation on the board of directors or any similar
governing body.
"Award" shall mean a grant or award under Section 6 through 10, inclusive,
of the Plan, as evidenced in a written document delivered to a Participant as
provided in Sec tion 11(b).
"Board of Directors" shall mean the board of directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean the Compensation and Stock Option Committee of the
Board of Directors.
"Common Stock" or "Stock" shall mean the common stock, par value $.01 per
share, of the Company.
"Corporation" shall mean the Company and its Subsidiaries and Affiliates.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive amounts due the
Participant in the event of the Participant's death. In the absence of an
effective designation by the Participant, Designated Beneficiary shall mean the
Participant's estate.
"Employee" shall mean any employee of the Corporation.
"Incentive Stock Option" shall mean a stock option granted under Section 6
which is intended to meet the requirements of Section 422 of the Code.
<PAGE>
"Nonqualified Stock Option" shall mean a stock option granted under Section
6 which is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
"Participant" shall mean an Employee who is selected by the Committee to
receive an Award under the Plan.
"Payment Value" of an earned Performance Share shall mean the fair market
value of a share of Common Stock on the day of the Committee's determination
under Section 8(c)(2) with respect to the applicable Performance Cycle.
"Performance Cycle" or "Cycle" shall mean the period of years selected by
the Committee during which the performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been earned.
"Performance Goals" shall mean the objectives established by the Committee
for a Performance Cycle, for the purpose of determining the extent to which
Performance Shares which have been contingently awarded for such Cycle are
earned.
"Performance Share" shall mean an award granted pursuant to Section 8 of
the Plan.
"Restricted Period" shall mean the period selected by the Committee during
which a grant of Restricted Stock or Restricted Stock Units may be forfeited to
the Company.
"Restricted Stock" shall mean shares of Common Stock contingently granted
to a Participant under Section 9 of the Plan.
"Restricted Stock Unit" shall mean a fixed or variable dollar denominated
unit contingently awarded under Section 9 of the Plan.
"Stock Appreciation Right" shall mean a right granted under Section 7.
"Stock Unit Award" shall mean an award of Common Stock or units granted
under Section 10.
"Subsidiary" shall mean any corporation or other entity in which the
Company possesses directly or indirectly 50% or more of the total combined
voting power.
"Substitute Awards" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired by
the Corporation or with which the Corporation combines.
2
<PAGE>
SECTION 3. Administration
The Plan shall be administered by the Committee. The Committee shall have
sole and complete authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time deem advisable, and to interpret the terms and provisions of
the Plan. The Committee may delegate to one or more executive officers of the
Company the power to make Awards to Participants who are not executive officers
or directors of the Company provided the Committee shall fix the maximum amount
of such Awards for the group and a maximum for any one Participant. The
Committee's decisions, or the decisions of its delegates, shall be binding upon
all persons, including the Company, stockholders, employees, Participants and
Designated Beneficiaries.
SECTION 4. Eligibility
All Employees who, in the opinion of the Committee, have the capacity for
contributing in a substantial measure to the successful performance of the
Company are eligible to be Participants in the Plan.
SECTION 5. Maximum Amount Available for Awards
(a) The maximum number of shares of Stock in respect of which Awards may be
granted under the Plan shall be 2,000,000 shares of Common Stock. No person may
receive Awards under the Plan in any calendar year that relate to more than
200,000 shares of Stock. Shares of Common Stock may be made available from the
authorized but unissued shares of the Company or from shares reacquired by the
Company, including shares purchased in the open market. In the event that (i) an
Option or Stock Appreciation Right expires or is terminated unexercised as to
any shares of Common Stock covered thereby or (ii) any award in respect of
shares of Common Stock is forfeited or otherwise cancelled for any reason under
the Plan, such shares shall thereafter be again available for award pursuant to
the Plan. In the event that any Option or other Award granted hereunder is
exercised through the delivery of shares of Stock, the number of shares of Stock
available for awards under the Plan shall be increased by the number of shares
of Stock surrendered.
(b) In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, securities or other property),
recapitalization, reorganization, merger, consolidation, split-up, spinoff,
combination, repurchase or exchange of shares, issuance of warrants or other
rights to purchase Common Stock at a price below fair market value or other
similar corporate event affects the Common Stock such that an adjustment is
required in order to preserve the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in its sole discretion,
and in such manner as the Committee may deem equitable, adjust any or all of (1)
the number and kind of shares which may thereafter be made the subject of
Awards, in aggregate and with respect to the individual limit set forth in
Section 5(a), (2) the number and kind of shares (or other securities or assets)
subject to outstanding Awards, and (3) the grant or exercise price with
3
<PAGE>
respect to any Award and/or, if deemed appropriate, make provision for a cash
payment to a Participant or a person who has an outstanding Award; provided that
the number of shares subject to any Award shall always be a whole number.
(c) Any shares of Common Stock underlying Substitute Awards shall not,
except in the case of shares with respect to which Substitute Awards are granted
to Employees who are officers or directors of the Company for purposes of
Section 16 of the Securities Exchange Act of 1934 or any successor section
thereto, be counted against the shares of Common Stock available for Awards
under the Plan.
SECTION 6. Stock Options
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Employees to whom Options shall be
granted, the number of shares to be covered by each Option, the option price
therefor and the conditions and limitations applicable to the exercise of the
Option. The Committee shall establish the option price at the time each Option
is granted, which price, except in the case of an Option that is a Substitute
Award, shall not be less than 100% of the fair market value of the Common Stock
on the date of grant (determined in accordance with procedures established by
the Committee). The Committee shall have the authority to grant Incentive Stock
Options, Nonqualified Stock Options or both. In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and comply
with such rules as may be prescribed by Section 422 of the Code and any
implementing regulations.
(b) Exercise. (1) Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award or thereafter, provided, however,
that in no event may any Option granted hereunder be exercisable after the
expiration of 10 years from the date of such grant. The Committee may impose
such conditions with respect to the exercise of Options, including any relating
to applicable federal or state securities laws, as it may deem necessary or
advisable.
(2) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price, or provision therefor, is received by
the Company. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee, by exchanging shares of Common Stock
owned by the optionee (which are not the subject of any pledge or other security
interest), or by a combination of the foregoing; provided that the combined
value of all cash and cash equivalents and the fair market value of any such
Common Stock so tendered to the Company, value (in accordance with procedures
established by the Committee) as of the date of such tender, is at least equal
to such option price.
SECTION 7. Stock Appreciation Rights
(a) Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom Stock Appreciation
Rights shall be
4
<PAGE>
granted, the number of shares to be covered by each Stock Appreciation Right,
the grant price thereof and the conditions and limitations applicable to the
exercise thereof. Stock Appreciation Rights may be granted in tandem with an
Option, in addition to an Option or freestanding and unrelated to an Option.
Stock Appreciation Rights granted in tandem with or in addition to an Option may
be granted either at the same time as the Option or at a later time. Stock
Appreciation Rights shall not be exercisable earlier than six months after grant
nor after the expiration of 10 years from the date of grant, and except for
Stock Appreciation Rights which are Substitute Awards, shall have a grant price
of not less than 100% of the fair market value of the Common Stock on the date
of grant or, if granted in tandem with an Option but at a later time, on the
date of grant of such Option (determined in accordance with procedures
established by the Committee).
(b) Each Stock Appreciation Right shall entitle the Participant to receive
from the Company with respect to each share covered thereby an amount equal to
the excess of the fair market value of a share of Common Stock on the date of
exercise of the Stock Appreciation Right over the grant price, provided that the
Committee may for administrative convenience determine that, for any Stock
Appreciation Right, which is not related to an Incentive Stock Option and can
only be exercised during limited periods of time in order to satisfy the
conditions of certain rules of the Securities and Exchange Commission, the
exercise of any such Stock Appreciation Right for cash during such limited
period shall be deemed to occur for all purposes hereunder on the day during
such limited period on which the fair market value of the Stock is the highest.
Any such determination by the Committee may be changed by the Committee from
time to time and may govern the exercise of Stock Appreciation Rights granted or
exercised prior to such determination as well as Stock Appreciation Rights
granted or exercised thereafter. The Committee shall determine upon the
exercise of a Stock Appreciation Right whether such Stock Appreciation Right
shall be settled in cash, shares of Common Stock or a combination of cash and
shares of Common Stock.
SECTION 8. Performance Shares
(a) Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees who shall be granted
Performance Shares, the number of Performance Shares to be granted to each
Participant for each Performance Cycle, the Performance Goals for each
Performance Cycle, the duration of each Performance Cycle and the value of each
Performance Share. There may be more than one Performance Cycle in existence at
any one time, and the duration of Performance Cycles may differ from each other.
(b) The Committee shall establish Performance Goals for each Cycle on the
basis of such criteria and to accomplish such objectives as the Committee may
from time to time select. During any Cycle, the Committee may adjust the
Performance Goals for such Cycle as it deems equitable in recognition of unusual
or nonrecurring events affecting the Corporation or changes in applicable tax
laws or accounting principles or such other factors as the Committee may
determine.
5
<PAGE>
(c) (1) The Committee shall, as soon as practicable after the expiration
of each Performance Cycle, determine the number of Performance Shares which have
been earned on the basis of performance in relation to the Performance Goals
established for such Performance Cycle.
(2) Payment Values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable after the Committee's determination under
paragraph (1) above. The Committee shall determine whether Payment Values are
to be distributed in the form of cash, shares of Common Stock or a combination
of cash and shares of Common Stock.
SECTION 9. Restricted Stock and Restricted Stock Units
(a) Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom shares of Restricted
Stock and Restricted Stock Units shall be granted, the number of shares of
Restricted Stock and the number of Restricted Stock Units to be granted to each
Participant, the duration of the Restricted Period during which, and the
conditions under which, the Restricted Stock and Restricted Stock Units may be
forfeited to the Company, and the other terms and conditions of such Awards.
(b) Shares of Restricted Stock and Restricted Stock Units may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as herein
provided, during the Restricted Period. Certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and deposited by him, together with a stock power endorsed in blank, with the
Company or in escrow with an escrow agent designated by the Company. At the
expiration of the Restricted Period, the Company shall deliver or cause such
certificates to be delivered to the Participant. Payment for Restricted Stock
Units shall be made by the Corporation in cash, shares of Common Stock or a
combination of cash and shares of Common Stock.
SECTION 10. Other Stock Based Awards
(a) In addition to Awards granted pursuant to other provisions of the Plan,
subject to the provisions of the Plan, the Committee shall have sole and
complete authority to grant to Participants Stock Unit Awards which can be in
the form of Common Stock or units, the value of which is based, in whole or in
part, on the value of Common Stock. Subject to the provisions of the Plan,
including Section 10(b) below, Stock Unit Awards shall be subject to such terms,
restrictions, conditions, vesting requirements and payment rules (all of which
are sometimes hereinafter collectively referred to as "rules") as the Committee
may determine with sole and complete discretion at the time of grant. The rules
need not be identical for each Stock Unit Award.
(b) In the sole and complete discretion of the Committee, a Stock Unit
Award may be granted subject to the following rules:
6
<PAGE>
(1) Any shares of Common Stock which are part of a Stock Unit Award
may not be assigned, sold, transferred, pledged or otherwise encumbered
prior to the date on which the shares are issued or, if later, the date
provided by the Committee at the time of grant of the Stock Unit Award.
(2) Stock Unit Awards may provide for the payment of cash
consideration by the person to whom such Award is granted or provide that
the Award, and any Common Stock to be issued in connection therewith, if
applicable, shall be delivered without the payment of cash consideration;
provided that for any Common Stock to be purchased in connection with a
Stock Unit Award, except in the case of a Stock Unit Award which is a
Substitute Award, the purchase price shall be at least 50% of the fair
market value of such Common Stock on the date such Award is granted
(determined in accordance with procedures established by the Committee).
(3) Stock Unit Awards may relate in whole or in part to certain
performance criteria established by the Committee at the time of grant.
(4) Stock Unit Awards may provide for deferred payment schedules
and/or vesting over a specified period of employment.
(5) In such circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in part, any
restriction or limitation to which a Stock Unit Award was made subject at
the time of grant.
(c) In the sole and complete discretion of the Committee, an Award, whether
made as a Stock Unit Award under this Section 10 or as an Award granted pursuant
to Sections 6 through 9, may provide the Participant with (i) dividends or
dividend equivalents (payable on a current or deferred basis) and (ii) cash
payments in lieu of or in addition to an Award.
SECTION 11. General Provisions
(a) Withholding. The Corporation shall have the right to deduct from all
amounts paid in cash to a Participant (whether under the Plan or otherwise) any
taxes required by law to be withheld in respect of Awards hereunder to such
Participant. In the case of payments of Awards in the form of Common Stock, at
the Committee's discretion the Participant may be required to pay to the
Corporation the amount of any taxes required to be withheld with respect to such
Common Stock, or in lieu thereof, the Corporation shall have the right to retain
(or the Participant may be offered the opportunity to elect to tender) the
number of shares of Common Stock whose fair market value, determined in
accordance with procedures established by the Committee, equals the amount
required to be withheld.
(b) Awards. Each Award hereunder shall be evidenced by a writing delivered
to the Participant which shall specify the terms and conditions thereof and any
rules applicable thereto, including the effect on such Award of the death,
retirement or other termination of
7
<PAGE>
employment of the Participant and the effect thereon, if any, of a change in
control of the Company.
(c) Nontransferability. No Award shall be assignable or transferable, and
no right or interest of any Participant shall be subject to any lien, obligation
or liability of the Participant, except by will or the laws of descent and
distribution, provided, however, that an Award may be transferable, to the
-------- -------
extent set forth in the applicable Award agreement, (i) if such Award agreement
provisions do not disqualify such Award for exemption under Rule 16b-3 under the
Securities Exchange Act of 1934, or (ii) if such Award is not intended to
qualify for exemption under such rule.
(d) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Corporation. Further,
the Corporation may at any time dismiss a Participant free from any liability,
or any claim under the Plan, except as provided herein or in any agreement
entered into with respect to an Award.
(e) No Rights as Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she has become the holder thereof. Notwithstanding the
foregoing, in connection with each grant of Restricted Stock hereunder, the
applicable Award shall specify if and to what extent the Participant shall not
be entitled to the rights of a stockholder in respect of such Restricted Stock.
(f) Construction of the Plan. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with the
laws of the State of Delaware.
(g) Effective Date. Subject to the approval of the stockholders of the
Company, the Plan shall be effective on the date of initial stockholder
approval. No Awards may be granted under the Plan after the tenth anniversary
of the date of the initial stockholder approval.
(h) Amendment of Plan. The Board of Directors may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement with which or for
which the Board deems it necessary or desirable for the Plan to comply or
qualify, including for these purposes any approval requirement which is a
prerequisite for exemptive relief from Section 16(b) of the Securities Exchange
Act of 1934. Notwithstanding anything to the contrary contained herein, the
Committee may amend the Plan in such manner as may be necessary so as to have
the Plan conform with local rules and regulations.
(i) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award with the Participant's consent at any time prior to payment or
exercise in
8
<PAGE>
any manner not inconsistent with the terms of the Plan, including (1) to change
the date or dates as of which (A) an Option or Stock Appreciation Right becomes
exercisable, (B) a Performance Share is deemed earned or (C) Restricted Stock or
a Restricted Stock Unit becomes nonforfeitable or (2) to cancel and reissue an
Award under such different terms and conditions as it determines, with sole and
complete discretion appropriate.
9
<PAGE>
EXHIBIT 10.8
WHITTAKER CORPORATION
SUPPLEMENTAL BENEFITS PLAN
--------------------------
This Supplemental Benefit Plan (hereinafter referred to as the "Plan") has
been adopted by the Board of Directors of Whittaker Corporation, a Delaware
corporation (hereinafter referred to as the "Company"), effective as of January
1, 1988.
1. Purpose
-------
The purpose of the Plan is to provide supplemental retirement income for
certain Employees who participate in the Whittaker Corporation Employees'
Pension Plan whose retirement benefits are reduced because of the maximum
limitation on annual compensation under Code Section 401(a)(17).
2. Definitions
-----------
The following definitions, set forth in alphabetical order, are used
throughout the Plan. Terms or phrases appearing in capital letters that are not
defined below shall have the same meanings as under the Retirement Plan, as
defined below.
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
(c) "Committee" means the Compensation and Stock Option Committee of the
Board of Directors.
(d) "Participant" means an executive officer of Whittaker Corporation
who satisfies the conditions for eligibility described in Section 3. The term
"Participant" shall also include the Beneficiary of a deceased Participant.
(e) "Retirement Plan" means the Whittaker Corporation Employees' Pension
Plan, as amended from time to time, which is a defined benefit pension plan
qualified under Section 401(a) of the Code.
(f) "Supplemental Benefit" means the benefit described in Section 4.
3. Eligibility to Participate
--------------------------
Each Participant whose aggregate pension benefit under the Retirement
Plan and any other defined benefit pension
-1-
<PAGE>
of an Affiliated Company is reduced by reason of the maximum limitation on
annual compensation under Code Section 401(a)(17).
4. Supplemental Benefits
---------------------
(a) Amount of Benefits
------------------
Each Participant shall be entitled to a Supplemental Benefit under
this Plan in an amount equal to the actuarial equivalent of (i) - [(ii) +
(iii)], where:
(i) equals the aggregate amount of monthly pension benefit payable
to the Participant under the Retirement Plan and any other defined benefit
pension plan of an Affiliated Company on the normal benefit commencement date
specified in the Retirement Plan and such other defined benefit pension plan, as
determined under the normal retirement benefit formula of the Retirement Plan
and such other defined benefit pension plan before applying any provision of the
Plan that would reduce benefits because of the maximum benefit limitations under
Code Section 415 or the maximum dollar limitation on annual compensation under
Code Section 401(a)(17);
(ii) equals the aggregate amount of a Participant's monthly pension
benefit determined in paragraph (i) above after applying the maximum benefit
limitations under Code Section 415 and the maximum dollar limitation on annual
compensation under Code Section 401(a)(17); and
(iii) equals the aggregate amount of the monthly pension benefit
payable to the Participant pursuant to the terms of the Whittaker Corporation
Excess Benefit Plan, as amended from time to time thereafter.
(b) Form of Benefits
----------------
The Supplemental Benefit determined in subsection (a) above shall be
paid to the Participant in the form of a monthly, straight-life annuity. The
amount of such annuity shall be determined by the actuary for the Retirement
Plan using the actuarial assumptions set forth in the Retirement Plan for
purposes of determining the actuarial equivalent of alternative forms of
benefits.
5. Vesting
-------
Subject to the rights of general creditors as set forth in Section 7 and
the right of the Company to discontinue the Plan as provided in Section 10, a
Participant shall have a vested and nonforfeitable interest in the Supplemental
Benefit
-2-
<PAGE>
to the same extent and in the same manner as the Participant's benefits become
vested under the Retirement Plan.
6. Commencement of Benefits
------------------------
The Supplemental Benefit under this Plan shall commence on the later of:
(a) the date on which the Participant is first eligible to begin receiving a
benefit under the Retirement Plan; or (b) the first day of the month next
following the date of the Participant's Severance from the Company.
7. Funding of Benefits
-------------------
(a) The Plan shall be unfunded and each Participant shall have the
status of a general unsecured creditor with respect to the Company's obligation
to make payments under this Plan. All benefits payable under the Plan shall be
paid from the Company's general assets, and nothing contained in the Plan shall
require the Company to set aside or hold in trust any funds for the benefit of a
Participant. Any funds of the Company available to pay benefits under the Plan
shall be subject to the claims of general creditors of the Company and may be
used for any purpose by the Company.
(b) Notwithstanding the provisions of subsection (a), the Company may,
at the direction, and in the absolute discretion, of the Board of Directors,
transfer to the trustee of one or more trusts established for the benefit of one
or more Participants assets from which all or a portion of the benefits provided
under the Plan will be satisfied, provided that such assets held in trust shall
at all times be subject to the claims of general unsecured creditors of the
Company, and no Participant shall at any time have a prior claim to such assets.
8. Administration of the Plan
--------------------------
The Committee shall administer the Plan. The Committee shall keep a
written record of its action and proceedings regarding the Plan and all dates,
records and documents relating to its administration of the Plan. The Committee
is authorized to interpret the Plan, to make, amend and rescind such rules as it
deems necessary for the proper administration of the Plan, to make all other
determinations necessary or advisable for the administration of the Plan and to
correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent that the Committee deems desirable to carry
the Plan into effect. The powers and duties of the Committee shall include,
without limitation, the following:
-3-
<PAGE>
(a) Resolving all questions relating to the eligibility Of an Employee
to become a Participant;
(b) Determining the amount of benefits payable to Participants and
authorizing and directing the Company with respect to the payment of benefits
under the Plan;
(c) Construing and interpreting the Plan whenever necessary to carry out
its intention and purpose and making and publishing such rules for the
regulation of the Plan as are not inconsistent with the terms of the Plan; and
(d) Compiling and maintaining all records it determines to be necessary,
appropriate or convenient in connection with the administration of the Plan.
Any action taken or determination made by the Committee shall, except as
otherwise provided in Section 11 below, be conclusive on all parties. No member
of the Committee shall vote on any matter relating specifically to such member.
In the event that a majority of the members of the Committee will be
specifically affected by any action proposed to be taken (as opposed to being
affected in the same manner as each other Participant in the Plan), such action
shall be taken by the Board of Directors.
Notwithstanding the foregoing, the Committee may delegate to one or more
persons or entities any or all of the responsibilities, duties or powers of the
Committee under this Plan.
9. Claims Procedure
----------------
(a) If a Participant (hereinafter referred to as the "Claimant") does
not receive the timely payment of the benefits which the Claimant believes are
due under the Plan, the Claimant may make a claim for benefits in the manner
hereinafter provided.
All claims for benefits under the Plan shall be made in writing and
shall be signed by the Claimant. Claims shall be submitted to a representative
designated by the Committee and hereinafter referred to as the "Claims
Coordinator." If the Claimant does not furnish sufficient information with the
claim for the Claims Coordinator to determine the validity of the claim, the
Claims Coordinator shall indicate to the Claimant any additional information
which is necessary for the Claims Coordinator to determine the validity of the
claim.
-4-
<PAGE>
Each claim hereunder shall be acted on and approved or disapproved
by the Claims Coordinator within 90 days following the receipt by the Claims
Coordinator of the information necessary to process the claim.
In the event the Claims Coordinator denies a claim for benefits in
whole or in part, the Claims Coordinator shall notify the Claimant in writing of
the denial of the claim and notify the Claimant of his or her right to a review
of the Claims Coordinator's decision by the Committee. Such notice by the Claims
Coordinator shall also set forth, in a manner calculated to be understood by the
Claimant, the specific reason for such denial, the specific provisions of the
Plan on which the denial is based, a description of any additional material or
information necessary to perfect the claim with an explanation of the Plan's
appeals procedure as set forth in this Section.
If no action is taken by the Claims Coordinator on an Claimant's
claim within 90 days after receipt by the Claims Coordinator, such claim shall
be deemed to be denied for purposes of the following appeals procedure.
(b) Any Claimant whose claim for benefits is denied in whole or in part
may appeal for a review of the decision by the Committee. Such appeal must be
made within three months after the Claimant has received actual or constructive
notice of the denial as provided above. An appeal must be submitted in writing
within such period and must:
(i) request a review by the Committee of the claim for benefits
under the Plan;
(ii) set forth all of the grounds upon which the Claimant's request
for review is based and any facts in support thereof; and
(iii) set forth any issues or comments which the Claimant deems
pertinent to the appeal.
The Committee shall regularly review appeals by Claimants. The
Committee shall act upon each appeal within 60 days after receipt thereof unless
special circumstances require an extension of the time for processing, in which
case a decision shall be rendered by the Committee as soon as possible but not
later than 120 days after the appeal is received by the Committee.
The Committee shall make a full and fair review of each appeal and any
written materials submitted by the Claimant in connection therewith. The
Committee may
-5-
<PAGE>
require the Claimant to submit such additional facts, documents or other
evidence as the Committee in its discretion deems necessary or advisable in
making its review. The Claimant shall be given the opportunity to review
pertinent documents or materials upon submission of a written request to the
Committee, provided the Committee finds the requested documents or materials are
pertinent to the appeal.
On the basis of its review, the Committee shall make an independent
determination of the Claimant's eligibility for benefits under the Plan. The
decision of the Committee on any claim for benefits shall be final and
conclusive upon all parties thereto.
In the event the Committee denies an appeal in whole or in part, the
Committee shall give written notice of the decision to the Claimant, which
notice shall set forth, in a manner calculated to be understood by the Claimant,
the specific reasons for such denial and which shall make specific reference to
the pertinent provisions of the Plan on which the Committee's decision is based.
10. Miscellaneous
-------------
(a) Nothing in the Plan shall confer upon a Participant the right to
continue in the employ of the Company or an Affiliated Company or shall limit or
restrict the right of the Company or any Affiliated Company to terminate the
employment of a Participant at any time with or without cause.
(b) Except as otherwise provided in the Plan, no right or benefit under
the Plan shall be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber or charge such right or benefit shall be void. No such right or
benefit shall in any manner be liable for or subject to the debts, liabilities
or torts of a Participant. In addition, none of the rights of a Participant are
transferable by inter vivos gift or testamentary disposition.
(c) The Plan may be amended at any time by the Committee provided such
amendment does not have the effect of increasing, directly or indirectly, the
benefit of any Participant. The Plan may also be amended or terminated by the
Board of Directors at any time, and any amendment adopted by the Board of
Directors shall supersede any prior or later amendment adopted by the Committee
that is inconsistent with the action of the Board of Directors. No amendment
shall have the effect of decreasing a Participant's accrued benefit.
-6-
<PAGE>
(d) The Plan is intended to provide benefits for "management or highly
compensated" employees within the meaning of Sections 201, 301 and 401 of ERISA,
and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of
ERISA. Accordingly, except for Supplemental Benefits in pay status, in the event
it is determined by a court of competent jurisdiction or by an opinion of
counsel based on judicial decisions or administrative pronouncements of the
Department of Labor that the Plan constitutes an employee pension benefit plan
within the meaning of Section 3(2) of ERISA, which is not so exempt, in the sole
discretion of the Board of Directors either (i) the Plan shall thereafter be
modified and operated and administered in such a manner as to comply with the
provisions of Parts 2, 3 and 4 of Title I of ERISA or (ii) the Plan shall
terminate and no further benefits shall accrue hereunder. If the Plan is
terminated, the benefit of each Participant accrued under the Plan on the date
of termination shall be paid immediately to such Participant in a single lump
sum payment.
(e) If any benefit payment hereunder becomes payable to a Participant
determined by the Committee to be under any legal incapacity, payments under
this Plan shall be made to the guardian or legal representative of such person
and such payment shall constitute a full and complete discharge of all
obligations under this Plan to the Participant.
(f) If multiple claims are received by the Committee with respect to
any benefits payable under this Plan, payment by the Committee to such person or
persons as the Committee determines to be entitled to receive such payment shall
constitute a full and complete discharge of all obligations with respect to such
payment. Benefit payment under this Plan may be suspended by the Committee
pending resolution to the satisfaction of the Committee of multiple claims.
(g) If any provision in the Plan is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way.
(h) The Plan shall be construed and governed in all respects in
accordance with applicable federal law and, to the extent not preempted by such
federal law, in accordance with the law of the State of California.
-7-
<PAGE>
Executed at Los Angeles, California this 23rd day of November, 1988.
---- --------
WHITTAKER CORPORATION
By: /s/ ^^??^^
----------------------
Its: VP
-----------------
-8-
<PAGE>
the beginning thereof.
WHEREAS the Board of Directors of this corporation (the "Board") previously
adopted the Whittaker Corporation Supplemental Benefit Plan (the "Plan"); and
WHEREAS Section 10(c) of the Plan provides that the Board may amend the
Plan at any time, and the Board has determined that it is now necessary and
appropriate to amend the Plan as hereinafter set forth.
NOW, THEREFORE, BE IT RESOLVED that Section 2 of the Plan is hereby amended
by adding the following new paragraphs at the end thereof:
"(g) `Day of Service' means, in the case of any Employee, each day
during any period commencing with the day on which the Employee first enters
into active service as an Employee on or following his most recent date of
rehire by the Company or any Affiliated Company and ending on the date of his
next following Severance. If an Employee's Severance date is the date of his
retirement, discharge or voluntary termination of employment, then Day of
Service shall also include each day between such Severance date and the date
upon which the Employee recommences active service as an Employee if the
Employee recommences such active service Prior to:
(1) The first anniversary of such Severance date if such
Severance date did not occur during an absence from service by the Employee for
a reason other than retirement, discharge or voluntary termination of
employment; or
4
<PAGE>
(2) The first anniversary of the date on which the Employee was
first absent from service for a reason other than retirement, discharge or
voluntary termination of employment if such Severance date occurred during such
absence.
Credit for Days of Service shall be given with respect to periods
of military service to such extent and for such purposes as are required by
applicable federal law. Credit for Days of Service shall be given with respect
to service performed for an operating unit, division or subsidiary of any
corporation, trade or business that is acquired by the Company or any Affiliated
Company commencing on the effective date of such acquisition. Notwithstanding
the provisions of paragraph (1), the Board of Directors or the Committee by
resolution may provide that, for purposes of determining Vested Service, credit
for Days of Service also shall be given with respect to service performed for
such an entity prior to the effective date of the acquisition. Finally, Days of
Service shall include any period of service that constitutes service with a
predecessor employer within the meaning of Section 414(a)(1) of the Code.
(h) 'Early Retirement Age' means the date on which a Participant
attains age 55 and completes at least 10 years of Vested Service, as determined
for purposes of this Plan and the Retirement Plan.
(i) 'Normal Retirement Age' means the date on which a Participant
attains age 65. Notwithstanding the foregoing, effective with respect to
Participants who are hired after attaining age 60 and after December 31, 1988,
Normal Retirement Age means the fifth anniversary of the date on which such a
Participant becomes a Participant in the Plan.
(j) 'Severance' means a Participant's termination of employment with
the Company and all Affiliated Companies for any reason at any time.
(k) 'Vested Service' means the number of years of an Employee's Vested
Service determined according to this subsection. An Employee shall be deemed to
accrue a full year of Vested Service for each calendar year during which he
completes at least 365 Days of Service as an Employee. In addition, an Employee
shall be deemed to accrue a fractional year of Vested Service in any calendar
year in which he
5
<PAGE>
completes one or more but less than 365 Days of Service as an Employee.
Such fractional year of Vested Service shall be computed by dividing the
number of Days of Service completed by the Employee during such calendar
year by 365."
RESOLVED FURTHER that Section 5 of the Plan is hereby amended in its
entirety to read as follows:
"5. Reduction of Excess Benefits
----------------------------
Notwithstanding any provision of the Plan to the contrary, the
Supplemental Benefit of each Participant who has a Severance prior to the date
on which he attains Normal Retirement Age and is not again an Employee on such
date shall be proportionately reduced in accordance with the following schedule:
Participant's Years Reduction
of Vested Service Percentage
- ------------------- ----------
Less than 5 100%
At least 5 0%"
RESOLVED FURTHER that Section 6 of the Plan is hereby amended in its
entirety to read as follows:
"6. Commencement of Benefits
The Supplemental Benefit under this Plan shall commence on the first
day of the month next following the later of: (a) the date on which the
Participant has a Severance; (b) in the case of a Participant who completes
at least 10 years of Vested Service prior to his Severance, the date on
which the Participant attains Early Retirement Age; or (c) in the case of a
Participant who does not complete at least 10 years of Vested Service prior
to his Severance, the date on which the Participant attains Normal
Retirement Age."
RESOLVED FURTHER that the last two paragraphs of Section 8 of the Plan are
hereby amended to read as follows:
"Notwithstanding the foregoing, the Committee may delegate to one or
more persons or entities any or all of the responsibilities, duties or powers of
the Committee under this Plan. Any action taken or determination made by the
Committee or its delegatees shall, except as otherwise provided in
6
<PAGE>
Section 10, be conclusive as to all parties. Neither a member of the
Committee nor a delegatee may vote on, or take any action with respect to,
any matter relating to such member or delegatee. If a delegatee cannot take
any action with respect to a matter, such action shall be taken by the
Committee. Similarly, if a majority of the members of the Committee cannot
take any action with respect to a matter, such action shall be taken by the
Board of Directors."
RESOLVED FURTHER that the first sentence of Section 10(b) of the Plan is
hereby amended by deleting the phrase "Except as otherwise provided in the
Plan," from the beginning thereof.
RESOLVED FURTHER that Section 10(c) of the Plan is hereby amended by adding
the following two sentences at the end thereof:
"If the Plan is terminated, no additional Supplemental Benefits shall
accrue after the termination date. Any Supplemental Benefits that have
already accrued as of the termination date shall be distributed at the time
and in the manner specified in Section 4(b) and Section 6, above."
RESOLVED FURTHER that Section 10(d) of the Plan is hereby amended in its
entirety to read as follows:
"The Plan is intended to provide benefits for 'management or highly
compensated employees' within the meaning of Sections 201, 301 and 401 of
ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4
of Title I of ERISA. Accordingly, if a court of competent jurisdiction, the
Department of Labor or the Internal Revenue Service, as the case may be,
makes a final determination that the Plan constitutes an employee pension
benefit plan within the meaning of Section 3(2) of ERISA, which is not so
exempt, then in the sole discretion of the Board of Directors either (i)
the Plan shall thereafter be modified and operated and administered in such
a manner as to comply with the provisions of Parts 2, 3 and 4 of Title I of
ERISA, or (ii) the Plan shall terminate and no further benefits shall
accrue hereunder. If the Plan is so terminated, then, notwithstanding
Section 10(c), the benefit accrued under the Plan as of the termination
date by each Participant (including a Participant whose benefit is in pay
status) shall be paid to such Participant in a single lump sum payment
within 30
7
<PAGE>
days after the termination date."
RESOLVED FURTHER that Section 10 of the Plan is hereby amended by moving
Section 10(f) to the end of Section 9 and redesignating Sections 10(g) and 10(h)
as Sections 10(f) and 10(g), respectively.
8
<PAGE>
* * * * * * * * * * * * *
I, Edward R. Muller, do hereby certify that I am the duly elected and
acting Secretary of Whittaker Corporation: that the foregoing is a full, true
and correct copy of the resolutions adopted at a meeting of the Board of
Directors of Whittaker Corporation held May 18, 1990, at which meeting a quorum
of said Board was at all times present and acting and that said resolutions have
not been modified or rescinded and are in full force and effect as of the date
of this certificate.
Date: June 12, 1990
/s/ Edward R. Muller
------------------------
Edward R. Muller
Secretary
11
<PAGE>
CERTIFIED COPY OF RESOLUTIONS
OF THE BOARD OF DIRECTORS OF
WHITTAKER CORPORATION
WHEREAS the Board of Directors of this corporation (the "Board")
previously adopted the Whittaker Corporation Supplemental Benefit Plan (the
"Plan"); and
WHEREAS Section 10(c) of the Plan provides that the Board may amend
the Plan at any time, and the Board has determined that it is now necessary
and appropriate to amend the Plan as hereinafter set forth.
NOW, THEREFORE, BE IT RESOLVED that Section 4(a)(i) of the Plan is
hereby amended in its entirety to read as follows:
"(i) equals the aggregate amount of monthly pension benefit
payable to the Participant under the Retirement Plan (without regard
to the Third Amendment to such Plan) and any other defined benefit
pension plan of an Affiliated Company on the normal benefit
commencement date specified in the Retirement Plan and such other
defined benefit pension plan, as determined under the normal
retirement benefit formula of the Retirement Plan (without regard to
the Third Amendment to such Plan) and such other defined benefit
pension plan before applying any provisions of such plans that would
reduce benefits because of the maximum benefit limitations under Code
Section 415 or the maximum dollar limitation on annual compensation
under Code Section 401(a)(17);".
* * * * * * * * * * *
I, Nadine D. Leonsky, do hereby certify that I am a duly elected and acting
Assistant Secretary of Whittaker Corporation; that the foregoing is a full, true
and correct copy of resolutions adopted at a meeting of the Board of Directors
of Whittaker Corporation held November 9, 1990, at which meeting a quorum of
said Board was at all times present and acting and that said resolutions have
not been modified or rescinded and are in full force and effect as of the date
of this certificate.
Date: July 12, 1991
/s/ Nadine D. Leonsky
------------------------
Nadine D. Leonsky
Assistant Secretary
<PAGE>
EXHIBIT 10.9
WHITTAKER CORPORATION
EXCESS BENEFIT PLAN
-------------------
This Excess Benefit Plan (hereinafter referred to as the "Plan") has been
adopted by the Board of Directors of Whittaker Corporation, a Delaware
corporation (hereinafter referred to as the "Company"), effective as of January
1, 1988.
1. Prior Plan
----------
This Plan amends, restates and supercedes the provisions of the
Whittaker Corporation Supplemental Benefit Plan effective September 1, 1982,
relating to the payment of benefits to certain participants of the Whittaker
Corporation Employees' Pension Plan whose benefits under such Plan are reduced
because of the limitations under Code Section 415 (the "Prior Plan"). The
provisions of this Plan shall only apply to (a) participants in the Prior Plan
whose benefits under such Prior Plan were not in pay status on January 1, 1988,
and (b) individuals who become eligible to participate herein on or after
January 1, 1988.
2. Purpose
-------
The purpose of the Plan is to provide additional retirement income for
certain Employees who participate in the Whittaker Corporation Employees'
Pension Plan whose retirement benefits are reduced because of the limitations
under Code Section 415.
3. Definitions
-----------
The following definitions, set forth in alphabetical order, are used
throughout the Plan. Terms or phrases appearing in capital letters that ar not
defined below shall have the same meanings as under the Retirement Plan, as
defined below.
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
(c) "Committee" means the Compensation and Stock Option Committee of
the Board of Directors.
(d) "Excess Benefit" means the benefit described in Section 5.
-1-
<PAGE>
(e) "Participant" means an executive officer of Whittaker Corporation
who satisfies the conditions for eligibility described in Section 4. The term
"Participant" shall also include the Beneficiary of a deceased Participant.
(f) "Retirement Plan" means the Whittaker Corporation Employees'
Pension Plan, as amended from time to time, which is a defined benefit pension
plan qualified under Section 401(a) of the Code.
4. Eligibility to Participate
--------------------------
Each Participant whose aggregate pension benefit under the Retirement
Plan and any other defined benefit pension of an Affiliated Company is reduced
by reason of the maximum benefit limitations of Code Section 415 shall become a
Participant in the Plan.
5. Excess Benefits
---------------
(a) Amount of Benefits
------------------
Each Participant shall be entitled to an Excess Benefit under
this Plan in an amount equal to the actuarial equivalent of the difference
between (i) and (ii), where:
(i) equals the aggregate amount of monthly pension benefit
payable to the Participant under the Retirement Plan and any other defined
benefit pension plan of an Affiliated Company on the normal benefit commencement
date specified in the Retirement Plan and such other defined benefit pension
plan, as determined under the normal retirement benefit formula of the
Retirement Plan and such other defined benefit pension plan before applying any
provision of the Plan that would reduce benefits because of the maximum benefit
limitations under Code Section 415; and
(ii) equals the aggregate amount of a Participant's monthly
pension benefit determined in paragraph (i) above after applying the maximum
benefit limitations under Code Section 415.
(b) Form of Benefits
----------------
The Excess Benefit determined in subsection (a) above shall be
paid to the Participant in the form of a monthly, straight-life annuity. The
amount of such annuity shall be determined by the actuary for the Retirement
Plan using the actuarial assumptions set forth in the Retirement Plan for
purposes of determining the actuarial equivalent of alternative forms of
benefits.
-2-
<PAGE>
6. Vesting
-------
Subject to the rights of general creditors as set forth in Section 8
and the right of the Company to discontinue the Plan as provided in Section 11,
a Participant shall have a vested and nonforfeitable interest in the Excess
Benefit to the same extent and in the same manner as the Participant's benefits
become vested under the Retirement Plan.
7. Commencement of Benefits
------------------------
The Excess Benefit under this Plan shall commence on the later of: (a)
the date on which the Participant is first eligible to begin receiving a benefit
under the Retirement Plan; or (b) the first day of the month next following the
date of the Participant's Severance from the Company.
8. Funding of Benefits
-------------------
(a) The Plan shall be unfunded and each Participant shall have the
status of a general unsecured creditor with respect to the Company's obligation
to make payments under this Plan. All benefits payable under the Plan shall be
paid from the Company's general assets, and nothing contained in the Plan shall
require the Company to set aside or hold in trust any funds for the benefit of a
Participant. Any funds of the Company available to pay benefits under the Plan
shall be subject to the claims of general creditors of the Company and may be
used for any purpose by the Company.
(b) Notwithstanding the provisions of subsection (a), the Company
may, at the direction, and in the absolute discretion, of the Board of
Directors, transfer to the trustee of one or more trusts established for the
benefit of one or more Participants assets from which all or a portion of the
benefits provided under the Plan will be satisfied, provided that such assets
held in trust shall at all times be subject to the claims of general unsecured
creditors of the Company, and no Participant shall at any time have a prior
claim to such assets.
9. Administration of the Plan
--------------------------
The Committee shall administer the Plan. The Committee shall keep a
written record of its action and proceedings regarding the Plan and all dates,
records and documents relating to its administration of the Plan. The Committee
is authorized to interpret the Plan, to make, amend and rescind such rules as it
deems necessary for the proper administration of the Plan, to make all other
determinations
-3-
<PAGE>
necessary or advisable for the administration of the Plan and to correct any
defect or supply any omission or reconcile any inconsistency in the Plan in the
manner and to the extent that the Committee deems desirable to carry the Plan
into effect. The powers and duties of the Committee shall include, without
limitation, the following:
(a) Resolving all questions relating to the eligibility of an
Employee to become a Participant;
(b) Determining the amount of benefits payable to Participants and
authorizing and directing the Company with respect to the payment of benefits
under the Plan;
(c) Construing and interpreting the Plan whenever necessary to carry
out its intention and purpose and making and publishing such rules for the
regulation of the Plan as are not inconsistent with the terms of the Plan; and
(d) Compiling and maintaining all records it determines to be
necessary, appropriate or convenient in connection with the administration of
the Plan.
Any action taken or determination made by the Committee shall, except
as otherwise provided in Section 11 below, be conclusive on all parties. No
member of the Committees shall vote on any matter relating specifically to such
member. In the event that a majority of the members of the Committee will be
specifically affected by any action proposed to be taken (as opposed to being
affected in the same manner as each other Participant in the Plan), such action
shall be taken by the Board of Directors.
Notwithstanding the foregoing, the Committee may delegate to one or
more persons or entities any or all of the responsibilities, duties or powers of
the Committee under this Plan.
10. Claims Procedure
----------------
(a) If a Participant (hereinafter referred to as the "Claimant") does
not receive the timely payment of the benefits which the Claimant believes are
due under the Plan, the Claimant may make a claim for benefits in the manner
hereinafter provided.
All claims for benefits under the Plan shall be made in writing
and shall be signed by the Claimant. Claims shall be submitted to a
representative designated by the Committee and hereinafter referred to as the
"Claims Coordinator." If the Claimant does not furnish sufficient
-4-
<PAGE>
information with the claim for the Claims Coordinator to determine the validity
of the claim, the Claims Coordinator shall indicate to the Claimant any
additional information which is necessary for the Claims Coordinator to
determine the validity of the claim.
Each claim hereunder shall be acted on and approved or
disapproved by the Claims Coordinator within 90 days following the receipt by
the Claims Coordinator of the information necessary to process the claim.
In the event the Claims Coordinator denies a claim for benefits
in whole or in part, the Claims Coordinator shall notify the Claimant in writing
of the denial of the claim and notify the Claimant of his or her right to a
review of the Claims Coordinator's decision by the Committee. Such notice by the
Claims Coordinator shall also set forth, in a manner calculated to be understood
by the Claimant, the specific reason for such denial, the specific provisions of
the Plan on which the denial is based, a description of any additional material
or information necessary to perfect the claim with an explanation of the Plan's
appeals procedure as set forth in this Section.
If no action is taken by the Claims Coordinator on an Claimant's
claim within 90 days after receipt by the Claims Coordinator, such claim shall
be deemed to be denied for purposes of the following appeals procedure.
(b) Any Claimant whose claim for benefits is denied in whole or in
part may appeal for a review of the decision by the Committee. Such appeal must
be made within three months after the Claimant has received actual or
constructive notice of the denial as provided above. An appeal must be submitted
in writing within such period and must:
(i) request a review by the Committee of the claim for
benefits under the Plan;
(ii) set forth all of the grounds upon which the Claimant's
request for review is based and any facts in support thereof; and
(iii) set forth any issues or comments which the Claimant deems
pertinent to the appeal.
The Committee shall regularly review appeals by Claimants. The
Committee shall act upon each appeal within 60 days after receipt thereof unless
special circumstances require an extension of the time for processing, in which
case a decision shall be rendered by the Committee as soon as
-5-
<PAGE>
possible but not later than 120 days after the appeal is received by the
Committee.
The Committee shall make a full and fair review of each appeal and
any written materials submitted by the Claimant in connection therewith. The
Committee may require the Claimant to submit such additional facts, documents or
other evidence as the Committee in its discretion deems necessary or advisable
in making its review. The Claimant shall be given the opportunity to review
pertinent documents or materials upon submission of a written request to the
Committee, provided the Committee finds the requested documents or materials are
pertinent to the appeal.
On the basis of its review, the Committee shall make an
independent determination of the Claimant's eligibility for benefits under the
Plan. The decision of the Committee on any claim for benefits shall be final and
conclusive upon all parties thereto.
In the event the Committee denies an appeal in whole or in part,
the Committee shall give written notice of the decision to the Claimant, which
notice shall set forth, in a manner calculated to be understood by the Claimant,
the specific reasons for such denial and which shall make specific reference to
the pertinent provisions of the Plan on which the Committee's decision is based.
11. Miscellaneous
-------------
(a) Nothing in the Plan shall confer upon a Participant the right to
continue in the employ of the Company or an Affiliated Company or shall limit or
restrict the right of the Company or any Affiliated Company to terminate the
employment of a Participant at any time with or without cause.
(b) Except as otherwise provided in the Plan, no right or benefit under
the Plan shall be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber or charge such right or benefit shall be void. No such right or
benefit shall in any manner be liable for or subject to the debts, liabilities
or torts of a Participant. In addition, none of the rights of a Participant are
transferable by inter vivos gift or testamentary disposition.
(c) The Plan may be amended at any time by the Committee provided such
amendment does not have the effect of increasing, directly or indirectly, the
benefit of any Participant. The Plan may also be amended or terminated by the
-6-
<PAGE>
Board of Directors at any time, and any amendment adopted by the Board of
Directors shall supersede any prior or later amendment adopted by the Committee
that is inconsistent With the action of the Board of Directors. No amendment
shall have the effect of decreasing a Participant's accrued benefit.
(d) If any benefit payment hereunder becomes payable to a Participant
determined by the Committee to be under any legal incapacity, payments under
this Plan shall be made instead to the guardian or legal representative of such
person and such payment shall constitute a full and complete discharge of all
obligations under this Plan to the Participant.
(e) If multiple claims are received by the Committee with respect to
any benefits payable under this Plan, payment by the Committee to such person or
persons as the Committee determines to be entitled to receive such payment shall
constitute a full and complete discharge of all obligations under this Plan with
respect to such payment. Benefit payments under this Plan may be suspended by
the Committee pending resolution of multiple claims to the satisfaction of the
Committee.
(f) If any provision in the Plan is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way.
(g) The Plan shall be construed and governed in all respects in
accordance with the law of the State of California.
Executed at Los Angeles, California this 23rd day of November, 1988.
WHITTAKER CORPORATION
By: /s/ ??
---------------------
Its: VP
-----------------
-7-
<PAGE>
CERTIFIED COPY OF RESOLUTIONS
OF THE BOARD OF DIRECTORS OF
WHITTAKER CORPORATION
WHEREAS the Board of Directors of this corporation (the "Board")
previously adopted the Whittaker Corporation Excess Benefit Plan (the "Plan");
and
WHEREAS Section 11(c) of the Plan provides that the Board may amend
the Plan at any time, and the Board has determined that it is now necessary and
appropriate to amend the Plan as hereinafter set forth.
NOW, THEREFORE, BE IT RESOLVED that Section 3 of the Plan is hereby
amended by adding the following new paragraphs at the end thereof:
"(g) `Day of Service' means, in the case of any Employee, each
day during any period commencing with the day on which the Employee first
enters into active service as an Employee on or following his most recent
date of rehire by the company or any Affiliated Company and ending on the
date of his next following Severance. If an Employee's Severance date is
the date of his retirement, discharge or voluntary termination of
employment, then Day of Service shall also include each day between such
Severance date and the date upon which the Employee recommences active
service as an Employee if the Employee recommences such active service
prior to:
(l) The first anniversary of such Severance date if such
Severance date did not occur during an absence from service by the Employee
for a reason other than retirement, discharge or voluntary termination of
employment; or
(2) The first anniversary of the date on which the Employee
was first absent from service for a reason other than retirement, discharge
or voluntary termination of employment if such Severance date occurred
during such absence.
Credit for Days of Service shall be given with respect to
periods of military service to such extent and for such purposes as are
required by applicable federal law. Credit for Days of Service shall be
given with respect to service performed for an operating unit, division or
subsidiary of any corporation, trade or business that is acquired by the
Company or any Affiliated Company commencing on
<PAGE>
the effective date of such acquisition. Notwithstanding the provisions of
paragraph (l), the Board of Directors or the committee by resolution may
provide that, for purposes of determining Vested Service, credit for Days
of Service also shall be given with respect to service performed for such
an entity prior to the effective date of the acquisition. Finally, Days of
Service shall include any period of service that constitutes service with a
predecessor employer within the meaning of Section 414(a)(1) of the Code.
(h) `Early Retirement Age' means the date on which a
Participant attains age 55 and completes at least 10 years of Vested
Service, as determined for purposes of this Plan and the Retirement Plan.
(i) `Normal Retirement Age' means the date on which a
Participant attains age 65. Notwithstanding the foregoing, effective with
respect to Participants who are hired after attaining age 60 and after
December 31, 1988, Normal Retirement Age means the fifth anniversary of the
date on which such a Participant becomes a Participant in the Plan.
(j) `Severance' means a Participant's termination of
employment with the Company and all Affiliated Companies for any reason at
any time.
(k) `Vested Service' means the number of years of an
Employee's Vested Service determined according to this subsection. An
Employee shall be deemed to accrue a full year of Vested Service for each
calendar year during which he completes at least 365 Days of Service as an
Employee. In addition, an Employee shall be deemed to accrue a fractional
year of Vested Service in any calendar year in which he completes one or
more but less than 365 Days of Service as an Employee. Such fractional year
of Vested Service shall be computed by dividing the number of Days of
Service completed by the Employee during such calendar year by 365."
RESOLVED FURTHER that Section 6 of the Plan is hereby amended in its
entirety to read as follows:
"6. Reduction of Excess Benefits
----------------------------
Notwithstanding any provision of the Plan to the contrary, the Excess
Benefit of each Participant who has a Severance prior to the date
2
<PAGE>
on which he attains Normal Retirement Age and is not again an Employee on
such date shall be proportionately reduced in accordance with the following
schedule:
Participant's Years Reduction
of Vested Service Percentage
------------------- ----------
Less than 5 100%
At least 5 0%"
RESOLVED FURTHER that Section 7 of the Plan is hereby amended in its
entirety to read as follows:
"7. Commencement of Benefits
------------------------
The Excess Benefit under this Plan shall commence on the first day of
the month next following the later of: (a) the date on which the
Participant has a Severance; (b) in the case of a Participant who completes
at least 10 years of Vested Service prior to his Severance, the date on
which the Participant attains Early Retirement Age; or (c) in the case of a
Participant who does not complete at least 10 years of Vested Service prior
to his Severance, the date on which the Participant attains Normal
Retirement Age."
RESOLVED FURTHER that the last two paragraphs of Section 9 of the Plan are
hereby amended to read as follows:
"Notwithstanding the foregoing, the Committee may delegate to one or
more persons or entities any or all of the responsibilities, duties or
powers of the Committee under this Plan. Any action taken or determination
made by the Committee or its delegatees shall, except as otherwise provided
in Section 11, be conclusive as to all parties. Neither a member of the
Committee nor a delegatee may vote on, or take any action with respect to,
any matter relating to such member or delegatee. If a delegatee cannot
take any action with respect to a matter, such action shall be taken by the
Committee. Similarly, if a majority of the members of the Committee cannot
take any action with respect to a matter, such action shall be taken by the
Board of Directors."
RESOLVED FURTHER that the first sentence of Section 11(b) of the Plan is
hereby amended by deleting the phrase "Except as otherwise provided in the
Plan," from
3
<PAGE>
the beginning thereof.
RESOLVED FURTHER that Section 11(c) of the Plan is hereby amended by adding
the following two sentences at the end thereof:
"If the Plan is terminated, no additional Excess Benefits shall accrue
after the termination date. Any Excess Benefits that have already accrued
as of the termination date shall be distributed at the time and in the
manner specified in Section 5(b) and Section 7, above."
RESOLVED FURTHER that Section 11 of the Plan is hereby amended by moving
Section 11(e) to the end of Section 10 and redesignating Sections 11(f) and
11(g) as Sections 11(e) and 11(f), respectively.
4
<PAGE>
"(i) in a single, lump sum payment to be made on the first day of the month
next following the date of the Participant's death, or"
RESOLVED FURTHER that Section VII of the Plan is hereby amended by adding
the following new paragraph at the end thereof:
* * * * * * * * * * * *
I, Edward R. Muller, do hereby certify that I am the duly elected and
acting Secretary of Whittaker Corporation; that the foregoing is a full, true
and correct copy of the resolutions adopted at a meeting of the Board of
Directors of Whittaker Corporation held May 18, 1990, at which meeting a quorum
of said Board was at all times present and acting and that said resolutions have
not been modified or rescinded and are in full force and effect as of the date
of this certificate.
Date: June 12, 1990
/s/ Edward R. Muller
--------------------
Edward R. Muller
Secretary
11
<PAGE>
EXHIBIT 10.10
WHITTAKER CORPORATION
SUPPLEMENTAL DISABILITY BENEFIT PLAN
------------------------------------
This Supplemental Disability Benefit Plan (hereinafter referred to as the
"Plan") has been adopted by the Board of Directors of Whittaker Corporation, a
Delaware corporation (hereinafter referred to as the "Company"), effective as of
January 1, 1988.
1. Prior Plan
----------
This Plan amends, restates and supersedes the provisions of the
Whittaker Corporation Supplemental Benefit Plan effective September 1, 1982,
relating to the payment of disability benefits to certain participants of the
Whittaker Corporation Insured Income Continuation Plan whose benefits under such
Plan are reduced because of the Five Thousand Dollar ($5,000) maximum monthly
benefit limitation provided in such Plan (the "Prior Plan"). The provisions of
this Plan shall only apply to (a) participants in the Prior Plan whose benefits
under such Prior Plan were not in pay status on January 1, 1988, and (b)
individuals who become eligible to participate herein on or after January 1,
1988.
2. Purpose
-------
The purpose of the Plan is to provide supplemental disability income
for certain Employees who participate in the Whittaker Corporation Insured
Income Continuation Plan whose disability benefits are reduced because of the
maximum dollar amount of the monthly benefit provided in such Plan.
3. Definitions
-----------
The following definitions, set forth in alphabetical order, are used
throughout the Plan. Terms or phrases appearing in capital letters that are not
defined below shall have the same meanings as under the Retirement Plan, as
defined below.
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
(c) "Committee" means the Compensation and Stock Option Committee of
the Board of Directors.
-1-
<PAGE>
(d) "Supplemental Disability Benefit" means the benefit described in
Section 5.
(e) "Insured Plan" means the Whittaker Corporation Insured Income
Continuation Plan, as amended from time to time, which is an insured disability
plan.
(f) "Participant" means an executive officer of Whittaker Corporation
who satisfies the conditions for eligibility described in Section 4. The term
"Participant" shall also include the Beneficiary of a deceased Participant.
(g) "Retirement Plan" means the Whittaker Corporation Employees' Pension
Plan, as amended from time to time, which is a defined benefit pension plan
qualified under Section 401(a) of the Code.
4. Eligibility to Participate
--------------------------
Each Participant whose monthly disability benefit under the Insured Plan
is reduced because of the maximum dollar amount of the monthly benefit provided
in such Plan shall become a Participant in the Plan.
5. Supplemental Benefits
---------------------
(a) Amount of Benefits
------------------
Each Participant shall be entitled to a monthly Supplemental
Disability Benefit under this Plan in an amount equal to the difference between
(i) and (ii); where:
(i) equals the monthly disability benefit that would be payable to
the Participant under the Insured Plan before applying the maximum dollar amount
of the monthly benefit limitation provided in such Plan; and
(ii) equals the maximum dollar amount of the monthly benefit
provided in such Plan.
(b) Form of Benefits
----------------
The Supplemental Disability Benefit determined in subsection (a)
above shall be paid to the Participant in the same form and subject to the same
terms, conditions and restrictions as disability benefits payable under the
Insured Plan.
6. Commencement of Benefits
------------------------
The Supplemental Disability Benefit under this Plan shall be paid or
shall commence at the same time as the
-2-
<PAGE>
Participant's disability benefit is paid or commences under the Insured Plan.
7. Funding of Benefits
-------------------
(a) The Plan shall be unfunded and each Participant shall have the status
of a general unsecured creditor with respect to the Company's obligation to make
payments under this Plan. All benefits payable under the Plan shall be paid from
the Company's general assets, and nothing contained in the Plan shall require
the Company to set aside or hold in trust any funds for the benefit of a
Participant. Any funds of the Company available to pay benefits under the Plan
shall be subject to the claims of general creditors of the Company and may be
used for any purpose by the Company.
(b) Notwithstanding the provisions of subsection (a), the Company may, at
the direction, and in the absolute discretion, of the Board of Directors,
transfer to the trustee of one or more trusts established for the benefit of one
or more Participants assets from which all or a portion of the benefits provided
under the Plan will be satisfied, provided that such assets held in trust shall
at all times be subject to the claims of general unsecured creditors of the
Company, and no Participant shall at any time have a prior claim to such assets.
8. Administration of the Plan
--------------------------
The Committee shall administer the Plan. The Committee shall keep a
written record of its action and proceedings regarding the Plan and all dates,
records and documents relating to its administration of the Plan. The Committee
is authorized to interpret the Plan, to make, amend and rescind such rules as it
deems necessary for the proper administration of the Plan, to make all other
determinations necessary or advisable for the administration of the Plan and to
correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent that the Committee deems desirable to carry
the Plan into effect. The powers and duties of the Committee shall include,
without limitation, the following:
(a) Resolving all questions relating to the eligibility of an Employee to
become a Participant;
(b) Determining the amount of benefits payable to Participants and
authorizing and directing the Company with respect to the payment of benefits
under the Plan;
(c) Construing and interpreting the Plan whenever necessary to carry out
its intention and purpose and
-3-
<PAGE>
making and publishing such rules for the regulation of the Plan as are not
inconsistent with the terms of the Plan; and
(d) Compiling and maintaining all records it determines to be
necessary, appropriate or convenient in connection with the administration of
the Plan.
Any action taken or determination made by the Committee shall,
except as otherwise provided in Section 11 below, be conclusive on all parties.
No member of the Committee shall vote on any matter relating specifically to
such member. In the event that a majority of the members of the Committee will
be specifically affected by any action proposed to be taken (as opposed to being
affected in the same manner as each other Participant in the Plan), such action
shall be taken by the Board of Directors.
Notwithstanding the foregoing, the Committee may delegate to one
or more persons or entities any or all of the responsibilities, duties or powers
of the Committee under this Plan.
9. Claims Procedure
----------------
(a) If a Participant (hereinafter referred to as the "Claimant")
does not receive the timely payment of the benefits which the Claimant believes
are due under the Plan, the Claimant may make a claim for benefits in the manner
hereinafter provided.
All claims for benefits under the Plan shall be made in
writing and shall be signed by the Claimant. Claims shall be submitted to a
representative designated by the Committee and hereinafter referred to as the
"Claims Coordinator." If the Claimant does not furnish sufficient information
with the claim for the Claims Coordinator to determine the validity of the
claim, the Claims Coordinator shall indicate to the Claimant any additional
information which is necessary for the Claims Coordinator to determine the
validity of the claim.
Each claim hereunder shall be acted on and approved or
disapproved by the Claims Coordinator within 90 days following the receipt by
the Claims Coordinator of the information necessary to process the claim.
In the event the Claims Coordinator denies a claim for
benefits in whole or in part, the Claims Coordinator shall notify the Claimant
in writing of the denial of the claim and notify the Claimant of his or her
right to a review of the Claims Coordinator's decision by the Committee. Such
notice by the claims Coordinator shall also set forth, in a manner
-4-
<PAGE>
calculated to be understood by the Claimant, the specific reason for such
denial, the specific provisions of the Plan on which the denial is based, a
description of any additional material or information necessary to perfect the
claim with an explanation of the Plan's appeals procedure as set forth in this
Section.
If no action is taken by the Claims Coordinator on an Claimant's claim
within 90 days after receipt by the Claims Coordinator, such claim shall be
deemed to be denied for purposes of the following appeals procedure.
(b) Any Claimant whose claim for benefits is denied in whole or in part may
appeal for a review of the decision by the Committee. Such appeal must be made
within three months after the Claimant has received actual or constructive
notice of the denial as provided above. An appeal must be submitted in writing
within such period and must:
(i) request a review by the Committee of the claim for benefits under
the Plan;
(ii) set forth all of the grounds upon which the Claimant's request for
review is based and any facts in support thereof; and
(iii) set forth any issues or comments which the Claimant deems
pertinent to the appeal.
The Committee shall regularly review appeals by Claimants. The Committee
shall act upon each appeal within 60 days after receipt thereof unless special
circumstances require an extension of the time for processing, in which case a
decision shall be rendered by the Committee as soon as possible but not later
than 120 days after the appeal is received by the Committee.
The Committee shall make a full and fair review of each appeal and any
written materials submitted by the Claimant in connection therewith. The
Committee may require the Claimant to submit such additional facts, documents or
other evidence as the Committee in its discretion deems necessary or advisable
in making its review. The Claimant shall be given the opportunity to review
pertinent documents or materials upon submission of a written request to the
Committee, provided the Committee finds the requested documents or materials are
pertinent to the appeal.
On the basis of its review, the Committee shall make an independent
determination of the Claimant's eligibility for benefits under the Plan. The
decision of the
-5-
<PAGE>
Committee on any claim for benefits shall be final and conclusive upon all
parties thereto.
In the event the Committee denies an appeal in whole or in part,
the Committee shall give written notice of the decision to the Claimant, which
notice shall set forth, in a manner calculated to be understood by the Claimant,
the specific reasons for such denial and which shall make specific reference to
the pertinent provisions of the Plan on which the Committee's decision is based.
10. Miscellaneous
-------------
(a) Nothing in the Plan shall confer upon a Participant the right to
continue in the employ of the Company or an Affiliated Company or shall limit
or restrict the right of the Company or any Affiliated Company to terminate the
employment of a Participant at any time with or without cause.
(b) Except as otherwise provided in the Plan, no right or benefit under
the Plan shall be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber or charge such right or benefit shall be void. No such right or
benefit shall in any manner be liable for or subject to the debts, liabilities
or torts of a Participant. In addition, none of the rights of a Participant are
transferable by inter vivos gift.
(c) The Plan may be amended at any time by the Committee provided such
amendment does not have the effect of increasing, directly or indirectly, the
benefit of any Participant. The Plan may also be amended or terminated by the
Board of Directors at any time, and any amendment adopted by the Board of
Directors shall supersede any prior or later amendment adopted by the Committee
that is inconsistent with the action of the Board of Directors. No amendment
shall have the effect of decreasing a Participant's accrued benefit.
(d) The Plan is intended to provide benefits for "management or highly
compensated" employees within the meaning of Sections 201, 301 and 401 of ERISA,
and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of
ERISA. Accordingly, except for Supplemental Benefits in pay status, in the event
it is determined by a court of competent jurisdiction or by an opinion of
counsel based on judicial decisions or administrative pronouncements of the
Department of Labor that the Plan constitutes an employee pension benefit plan
within the meaning of Section 3(2) of ERISA, which is not so exempt, in the sole
discretion of the Board of Directors either (i) the Plan shall thereafter be
modified and operated and administered in such a manner as to comply with the
-6-
<PAGE>
provisions of Parts 2, 3 and 4 of Title I of ERISA or (ii) the Plan shall
terminate and no further benefits shall accrue hereunder. If the Plan is
terminated, the benefit of each Participant accrued under the Plan on the date
of termination shall be paid immediately to such Participant in a single lump
sum payment.
(e) If any benefit payment hereunder becomes payable to a Participant
determined by the Committee to be under any legal incapacity, payments under
this Plan shall be made instead to the guardian or legal representative of such
person and such payment shall constitute a full and complete discharge of all
obligations under this Plan to the Participant.
(f) If multiple claims are received by the Committee with respect to any
benefits payable under this Plan, payment by the Committee to such person or
persons as the Committee determines to be entitled to receive such payment shall
constitute a full and complete discharge of all obligations under this Plan with
respect to such payment. Benefit payments under this Plan may be suspended by
the Committee pending resolution of multiple claims to the satisfaction of the
Committee.
(g) If any provision in the Plan is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way.
(h) The Plan shall be construed and governed in all respects in accordance
with applicable federal law and, to the extent not preempted by such federal
law, in accordance with the law of the State of California.
Executed at Los Angeles, California this 23rd day of November, 1988.
---- --------
WHITTAKER CORPORATION
BY: __________________________
ITS: _____________________
-7-
<PAGE>
EXHIBIT 10.12
WHITTAKER CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(AMENDED AND RESTATED)
<PAGE>
WHITTAKER CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - INTRODUCTION I-1
1.01 Purpose I-1
1.02 Effective Date and Term I-1
1.03 Participation I-1
1.04 Participation Agreement I-1
1.05 Applicability of ERISA I-2
ARTICLE I - DEFINITIONS II-1
2.01 Affiliated Company II-1
2.02 Average Monthly Compensation II-1
2.03 Benefit Accrual Percentage II-1
2.04 Board; Board of Directors II-1
2.05 Change in Control II-1
2.06 Code II-2
2.07 Committee II-2
2.08 Compensation II-2
2.09 Covered Employer II-2
2.10 Defined Benefit Plan II-3
2.11 Early Retirement II-3
2.12 Effective Date II-3
2.13 ERISA II-3
2.14 50% Joint and Survivor Annuity II-3
2.15 401(k) Plan II-3
2.16 Full-Time Employment II-3
2.17 Normal Benefit Date II-3
2.18 Normal Benefit Form II-4
2.19 Normal Retirement II-4
2.20 Participant II-4
2.21 Payment Commencement Date II-4
2.22 Plan II-4
2.23 Retirement; Retirement Date II-4
2.24 Service Years II-5
2.25 Single Life Annuity II-5
2.26 Specified Rate II-5
2.27 Sponsor II-5
2.28 Spouse II-5
2.29 Termination II-5
2.30 Termination Date II-6
2.31 Termination for Cause II-6
</TABLE>
i
<PAGE>
WHITTAKER CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE III - ADMINISTRATION OF THE PLAN III-1
3.01 Administration III-1
3.02 Board and Committee Authority; Rules and Regulations III-1
3.03 Appointment of Agents III-1
3.04 Leave of Absence III-2
3.05 Actuarial Assumptions III-2
ARTICLE IV - BENEFITS IV-1
4.01 Eligibility and Vesting IV-1
4.02 Form of Supplemental Benefit IV-1
4.03 Payment of Supplemental Benefit IV-2
4.04 Monthly Annuity Amount IV-2
4.05 Target Monthly Benefit IV-2
4.06 Monthly Offset Amount IV-3
4.07 Special Rules for Early Retirement IV-7
4.08 Termination other than Early or Normal Retirement IV-7
4.09 Termination of Plan Participation IV-7
4.10 Disability IV-8
4.11 Change of Control IV-8
4.12 Termination for Cause IV-8
ARTICLE V - DEATH OF A PARTICIPANT V-1
5.01 Termination by Reason of Death V-1
5.02 Form and Payment of Death Benefit V-1
5.03 Monthly Death Benefit Amount V-1
ARTICLE VI - MISCELLANEOUS PROVISIONS VI-1
6.01 Payments During Incapacity VI-1
6.02 Prohibition Against Assignment VI-1
6.03 Binding Effect VI-1
6.04 No Transfer of Interest VI-1
6.05 Amendment or Termination of the Plan VI-2
6.06 No Right to Employment VI-2
6.07 Notices VI-2
6.08 Governing Law VI-3
6.09 Titles and Headings; Gender of Terms VI-3
6.10 Severability VI-3
6.11 Tax Effect of Plan VI-3
6.12 Entire Agreement VI-4
</TABLE>
ii
<PAGE>
WHITTAKER CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
INTRODUCTION
1.01 PURPOSE. The Whittaker Corporation Supplemental Executive Retirement
-------
Plan was originally established by the Board of Directors of the Sponsor to
enable the Sponsor and such Affiliated Companies to attract, retain and motivate
selected executives of the Sponsor and such Affiliated Companies by providing to
such executives certain additional retirement income as more fully set forth
herein. The Plan is hereby amended and restated to make certain technical
corrections and clarifications.
1.02 EFFECTIVE DATE AND TERM. The amended and restated Plan is adopted
-----------------------
effective as of January 1, 1996, and shall continue in effect until terminated
by the Board of Directors.
1.03 PARTICIPATION. Participation in this Plan is open only to those
-------------
executives of the Sponsor or any Affiliated Company who are selected for
participation in the Plan by the President of the Sponsor and approved by the
Board of Directors. The participation in this Plan by any such executive, and
the payment of any benefits under this Plan to any such executive, shall be
governed by the terms of this Plan and by the terms of the Participation
Agreement entered into by such executive with respect to this Plan pursuant to
Section 1.04 hereof. Participation in this Plan shall constitute a waiver of
all rights to benefits under the Whittaker Corporation Supplemental Benefit Plan
and the Whittaker Corporation Excess Benefit Plan.
1.04 PARTICIPATION AGREEMENT. As a condition to the commencement of
-----------------------
participation in this Plan, each executive selected and approved for
participation in the Plan as provided in Section 1.03 hereof shall enter into an
agreement covering such executive's participation in the Plan (a "Participation
Agreement"), which agreement shall be executed by the Sponsor and such executive
and, if such executive is employed by an Affiliated Company, such Affiliated
Company. Each Participation Agreement shall include such terms and conditions
relating to the executive's participation in the Plan as the President of the
Sponsor may deem appropriate.
I-1
<PAGE>
Participation in this Plan shall constitute a waiver of all rights to benefits
under the Whittaker Corporation Supplemental Benefit Plan and the Whittaker
Corporation Excess Benefit Plan.
1.05 APPLICABILITY OF ERISA. This Plan is intended to be a "top-hat" plan
----------------------
- - that is, an unfunded plan maintained primarily for the purpose of providing
deferred compensation to a select group of management or highly compensated
employees within the meaning of ERISA.
I-2
<PAGE>
ARTICLE II
DEFINITIONS
2.01 AFFILIATED COMPANY. "Affiliated Company" means only Whittaker
------------------
Corporation, a Delaware corporation, and such other affiliates, if any, of the
Sponsor as the Board may from time to time expressly designate as having the
status of an Affiliated Company for purposes of this Plan.
2.02 AVERAGE MONTHLY COMPENSATION. "Average Monthly Compensation" means,
----------------------------
with respect to any Participant and as of any date of reference (the
"Determination Date"), the quotient obtained by dividing (a) the highest
aggregate amount of Compensation earned by such Participant during any
consecutive 36-month period prior to (or ending on) such Determination Date, by
(b) a factor of 36. Notwithstanding the preceding sentence, in the case of a
Participant who, as of any applicable Determination Date, has not been employed
by one or more Covered Employers during at least the consecutive 36-month period
ending on such Determination Date, such participant's Average Monthly
Compensation as of such Determination Date shall be the quotient obtained by
dividing (i) the total amount of Compensation earned by such Participant prior
to (and including) such Determination Date, by (ii) a factor equal to the number
of months prior to (and including) such Determination Date during which such
Participant was employed by a Covered Employer.
2.03 BENEFIT ACCRUAL PERCENTAGE. "Benefit Accrual Percentage" means, with
--------------------------
respect to any Participant and as of any date of reference, the percentage
obtained by multiplying (a) 60%, by (b) a fraction (not to exceed 1) having a
numerator equal to such Participant's Service Years (determined as of such
reference date), and having a denominator equal to the greater of fifteen years
or the total number of Service Years such Participant would have if such
Participant continued in the employ of Sponsor uninterrupted through Normal
Retirement.
2.04 BOARD; BOARD OF DIRECTORS. "Board" and "Board of Directors" each
-------------------------
mean the board of directors of the Sponsor.
2.05 CHANGE IN CONTROL. "Change in Control" means (1) any consolidation
-----------------
or merger of the Sponsor in which the Sponsor is not the surviving corporation,
other than a merger of the Sponsor in which the holders of common stock or
assets of the Sponsor immediately prior to the
II-1
<PAGE>
merger have the same proportionate ownership of the surviving corporation
immediately after the merger; or (2) any sale, lease exchange or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Sponsor; or (3) during any period of two
consecutive years, the individuals who at the beginning of such period
constitute the Board of Directors of the Sponsor cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Sponsor's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors still in office who were
directors at the beginning of that period; or (4) the acquisition after the date
hereof by any person (as such term is used in section 13(d) and 14(d) of the
Securities and Exchange Act of 1934, as amended, but excluding the Sponsor and
any Affiliated Company) that results in such person holding directly or
indirectly 20% or more of the combined voting power of the then outstanding
securities of the Sponsor as a result of a tender or exchange offer, open market
purchase(s), privately-negotiated purchase(s) or otherwise; or (5) the
acquisition by any person(s), firm(s), employee benefit plan(s) or
corporation(s) of direct or indirect ownership of 20% or more of the assets of
the Sponsor which do not own at least 10% of the assets of the Sponsor as of
January 1, 1996.
2.06 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
----
2.07 COMMITTEE. "Committee" means the committee (if any) that the Board
---------
appoints to administer this Plan as set forth in Section 3.01 hereof, provided,
however, the Committee shall contain at least one non-employee.
2.08 COMPENSATION. "Compensation" means, with respect to any Participant,
------------
the base salary paid to such Participant by any Covered Employer, including any
amounts not currently includible in such Participant's gross income by reason of
any amount deferred for the period pursuant to any non-qualified deferred
compensation arrangement between the Participant and any Covered Employer or,
Code Section 402(e)(3) and/or Code Section 125. Except as provided in the
following sentence, Compensation shall also include any annual or other short
term bonus paid by any Covered Employer to a Participant other than any bonus
paid to a Participant who is a division manager. Notwithstanding the foregoing,
the Committee shall have the sole and absolute discretion to determine, at the
time of any award under a bonus plan, or the payment of any bonus, that such
bonus does not constitute Compensation for purposes of this Plan.
2.09 COVERED EMPLOYER. "Covered Employer" means and includes both (a) the
----------------
Sponsor, and (b) any Affiliated Company.
II-2
<PAGE>
2.10 DEFINED BENEFIT PLAN. "Defined Benefit Plan" means the Whittaker
--------------------
Corporation Employees' Pension Plan, which was frozen effective as of October
31, 1994.
2.11 EARLY RETIREMENT. "Early Retirement" means, with respect to any
----------------
Participant, any Retirement of such Participant other than Normal Retirement,
which occurs before the Participant attains age 65, and on or after the date
Participant has attained age 55 and completed at least 10 Service Years. The
Participant shall specify the date on which he wishes to commence Early
Retirement in a written request for benefits to the Board.
2.12 EFFECTIVE DATE. "Effective Date" means January 1, 1996.
--------------
2.13 ERISA. "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended.
2.14 50% JOINT AND SURVIVOR ANNUITY. "50% Joint and Survivor Annuity"
------------------------------
means an annuity which (a) provides a specified level monthly benefit during the
life of the primary beneficiary, and (b) following the death of the primary
beneficiary, provides a level monthly benefit to, and during the remaining life
of, such primary beneficiary's surviving spouse (if any) equal to 50% of the
monthly benefit provided to such primary beneficiary.
2.15 401(K) PLAN. "401(k) Plan" means the Whittaker Corporation
-----------
Partnership Plan, as such Plan is in effect as of the Effective Date hereof and
as it may be amended from time to time hereafter.
2.16 FULL-TIME EMPLOYMENT. "Full-Time Employment" means, with respect to
--------------------
any Participant, any employment or independent contractor relationship with any
organization or person, whether or not the Sponsor or an Affiliated Company,
pursuant to which such Participant performs services on a regular and continuous
basis, provided, however, that any such relationship shall not constitute Full-
Time Employment unless the Participant devotes at least an average of 35 hours
per week to the performance of services pursuant to such relationship. For
purposes of determining as of any given date whether the Participant meets the
35-hour requirement set forth in the preceding sentence, no more than the three-
month period immediately preceding such given date shall be taken into account.
2.17 NORMAL BENEFIT DATE. "Normal Benefit Date" means, with respect to
-------------------
any Participant, the ninetieth (90th) day immediately following the day upon
which such Participant attains (or is expected to attain) age 65.
II-3
<PAGE>
2.18 NORMAL BENEFIT FORM. "Normal Benefit Form" means a Single Life
-------------------
Annuity, starting at age 65.
2.19 NORMAL RETIREMENT. "Normal Retirement" means, with respect to any
-----------------
Participant, any Retirement of such Participant having a Retirement Date which
falls on or after the date such Participant attains age 65.
2.20 PARTICIPANT. "Participant" means any executive of the Sponsor or any
-----------
Affiliated Company who is selected and approved for participation in this Plan
as provided in Section 1.03 hereof and who has executed a Participation
Agreement as required under Section 1.04 hereof.
2.21 PAYMENT COMMENCEMENT DATE. "Payment Commencement Date" means, with
-------------------------
respect to any Participant, the ninetieth (90th) day after the earlier of (a)
such Participant's Early Retirement, or (b) the later to occur of (i) such
Participant's Termination Date and (ii) age 65.
2.22 PLAN. "Plan" means this Whittaker Corporation Supplemental Executive
----
Retirement Plan adopted as of the Effective Date hereof and as it may be amended
from time to time.
2.23 RETIREMENT; RETIREMENT DATE. "Retirement" occurs with respect to any
---------------------------
Participant only if and when such Participant permanently ceases, for whatever
reason (whether voluntary or involuntary and including death or Disability), all
Full-Time Employment. The temporary cessation of a Participant's Full-Time
Employment shall not constitute Retirement. The cessation of a Participant's
Full-Time Employment shall be deemed to be temporary if, following such
cessation, such Participant commences (or intends to commence) actively seeking
Full-Time Employment; provided, however, that if such Participant subsequently
abandons his search (or intended search) for Full-Time Employment prior to
obtaining such Full-Time Employment, such Participant shall be deemed to incur
Retirement at the time of such abandonment. The determination as to whether
(and when) a Participant incurs Retirement shall be made solely by the Board
based on such evidence as the Board, in its discretion, deems appropriate. Such
evidence may, but is not required to include a representation of Retirement
presented to the Board by the Participant. If, following a determination by the
Board that a Participant has incurred Retirement, such participant recommences
Full-Time Employment, such Participant shall nevertheless be deemed for all
purposes of this Plan to have incurred Retirement in accordance with the Board's
original determination. A Participant's "Retirement Date" shall be the first
day, as determined by the Board, on which such Participant meets the
requirements of Retirement as set forth in this Section 2.23. Notwithstanding
the foregoing requirements, a
II-4
<PAGE>
Participant who has attained age 65 shall be deemed to meet the requirements of
this Section 2.23 when such Participant permanently ceases Full-Time Employment
with all Covered Employers. Subsequent Full-Time Employment with an entity
other than a Covered Employer will be disregarded for purposes of the preceding
sentence.
2.24 SERVICE YEARS. "Service Years" means with respect to any
-------------
Participant, the whole number of complete years (disregarding any incomplete
year) elapsing during the period commencing on the date such Participant
initially commenced employment with any Covered Employer and ending on such
Participant's final Termination Date. In the case of any Participant who (a)
commenced employment with a Covered Employer, (b) terminated such employment,
and (c) prior to the Effective Date hereof, re-commenced employment with any
Covered Employer, such Participant shall be credited with Service Years for
those periods prior to the Effective Date hereof during which he was actually
employed by any Covered Employer notwithstanding the fact that such pre-
Effective Date employment with such covered Employer(s) was not continuous.
Except as otherwise provided in Section 3.04 hereof (concerning leaves of
absence), or as otherwise designated by the Participation Agreement, it is
intended that a Participant shall cease earning Service Years upon his incurring
any Termination after the Effective Date hereof, regardless of whether such
Participant is thereafter employed by the Sponsor, an affiliate of the Sponsor
or any Affiliated Company.
2.25 SINGLE LIFE ANNUITY. "Single Life Annuity" means an annuity which
-------------------
provides a specified level monthly benefit until the death of the beneficiary.
2.26 SPECIFIED RATE. "Specified Rate" means an interest rate equal to 8%
--------------
per annum, or such other annual interest rate as the Board may from time to time
designate as the Specified Rate, with any such designation to be given effect
only on a prospective basis.
2.27 SPONSOR. "Sponsor" means Whittaker Corporation, a Delaware
-------
corporation.
2.28 SPOUSE. "Spouse" means, with respect to any Participant, only that
------
person (if any) to whom such Participant is married as of such Participant's
Termination Date, provided, however, that a person who has been married to a
Participant for less than one year as of such Participant's Termination Date
shall not be deemed to be the "Spouse" of such Participant.
2.29 TERMINATION. "Termination" means the voluntary or involuntary
-----------
termination of a Participant's employment with the Sponsor and all Affiliated
Companies for any reason (including Disability or death). The determination as
to whether a Participant's Termination
II-5
<PAGE>
constitutes Retirement shall be made by the Board in accordance with the
provisions of Section 2.23 hereof.
2.30 TERMINATION DATE. "Termination Date" means, with respect to any
----------------
Participant, the effective date of such Participant's Termination.
2.31 TERMINATION FOR CAUSE. "Termination for Cause" means, with respect
---------------------
to any Participant, a Termination (whether voluntary or involuntary) incurred by
such Participant as a result of any one or more of the following causes:
(a) The Participant's substantial neglect of his duties and
responsibilities as an employee of the Sponsor or any Affiliated
Company;
(b) The Participant's theft or other misappropriation of, or any
malfeasance with respect to, any property of the Sponsor or any
Affiliated Company;
(c) A conviction of the Participant for any criminal offense, whether or
not involving property of the Sponsor or any Affiliated Company,
unless the Board reasonably determines such conviction will not
adversely affect either (i) the reputation of the Sponsor or any
Affiliated Company, or (ii) the Participant's ability to effectively
perform his duties and responsibilities as an employee of the Sponsor
or any Affiliated Company;
(d) The Participant's use of illegal drugs or alcohol to an extent that
such use interferes with his ability to perform, in an acceptable
manner, his duties and responsibilities as an employee of the Sponsor
or any Affiliated Company;
(e) The Participant's solicitation of business on behalf of, or diversion
of business to, any competitor of the Sponsor or any Affiliated
Company with whom the Participant expects to become employed or
otherwise associated following such Participant's Termination.
The determination as to whether (and when) a Participant incurs a
Termination for Cause shall be made by the Board in its sole discretion.
II-6
<PAGE>
ARTICLE III
ADMINISTRATION OF THE PLAN
3.01 ADMINISTRATION. This Plan shall be administered by the Board of
--------------
Directors, provided however, that the Board may, in its discretion, delegate the
administration of this Plan to a Committee composed of at least two individuals
appointed from time to time by the Board. Any member of the Board or the
Committee may be a Participant in this Plan, provided however, that any action
to be taken by the Board or Committee solely with respect to the particular
interest in this Plan of a Board or Committee member who is also a Participant
in this Plan shall be taken by the remaining members of the Board or Committee.
3.02 BOARD AND COMMITTEE AUTHORITY; RULES AND REGULATIONS. The Board
----------------------------------------------------
shall have discretionary authority to (a) make, amend, interpret and enforce all
appropriate rules and regulations for the administration of the Plan, and (b)
decide or resolve, in its discretion, any and all questions, including
interpretations of the Plan and any questions of fact, as may arise in
connection with the Plan. If a Committee is appointed by the Board pursuant to
Section 3.01 hereof to administer the Plan, such Committee shall have authority
to take or approve, in its discretion, all such actions relating to the Plan
(including, without limitation, actions described in the preceding sentence) as
may be taken or approved by the Board; provided, however, that the Committee
shall have no authority (i) to approve executives for participation in the Plan,
(ii) to approve the terms of any Participation Agreement, (iii) to amend or
terminate the Plan, or (iv) to terminate a Participant's participation in the
Plan pursuant to Section 4.09 hereof. Notwithstanding the preceding sentence,
the Board may, by written notice to the Committee, withdraw all or any part of
the Committee's authority at any time, in which case such withdrawn authority
shall immediately revest in the Board. Any decision or action of the Board
(and, subject to the limitations set forth herein above, any decision or action
of the Committee, if appointed) in respect of any question arising out of or in
connection with the administration, interpretation and application of this Plan
and the rules and regulations promulgated hereunder and all factual questions
shall be final, conclusive and binding upon all persons having any interest in
the Plan.
3.03 APPOINTMENT OF AGENTS. In the administration of this Plan, the Board
---------------------
and/or the Committee may from time to time employ agents (which may include
officers and/or employees
III-1
<PAGE>
of the Sponsor) and delegate to them such administrative duties as the Board or
the Committee (as applicable) deems appropriate.
3.04 LEAVE OF ABSENCE. In the event the Participant takes a leave of
----------------
absence from active employment with the Sponsor or any Affiliated Company, the
Committee shall determine, in its discretion, (a) whether such leave of absence
shall be deemed to constitute a Termination for purposes of this Plan, and (b)
if such leave of absence is not deemed to constitute a Termination under this
Plan, whether such Participant shall continue to earn Service Years during such
leave of absence notwithstanding the provisions of Section 2.24 hereof. The
Committee shall establish such standards and procedures as may be necessary so
that, with respect to any determinations made by the Committee pursuant to
either clause (a) or clause (b) of the preceding sentence, Participants in
substantially similar circumstances shall be treated substantially alike.
3.05 ACTUARIAL ASSUMPTIONS. In any case in which it is necessary to make
---------------------
actuarial adjustments in order to carry out the provisions of this Plan
(including, without limitation, the provisions requiring the determination of an
actuarially equivalent benefit under Section 4.02 hereof), the following rules
shall apply:
(a) The interest/discount rate assumed in making such actuarial
adjustments shall be a fixed rate equal to the Specified Rate then in
effect at the time such actuarial adjustments are calculated; and,
(b) The mortality table used in making such actuarial adjustments shall
be the 1971 Unisex Group Annuity Table (85% of male rate and 15% of
female rate).
III-2
<PAGE>
ARTICLE IV
BENEFITS
4.01 ELIGIBILITY AND VESTING. Except as otherwise provided in Section
-----------------------
4.12 and Article V hereof, upon incurring Termination, a Participant shall
receive a supplemental benefit under this Plan (a "Supplemental Benefit"), which
Supplemental Benefit shall be paid to the extent vested, in such form and
amounts, and at such times, as provided under this Plan. Notwithstanding the
foregoing, and except as otherwise provided in Sections 4.10 and 4.11 hereof, a
Participant who incurs a Termination shall be entitled to receive a Supplemental
Benefit under this Plan only to the extent such Participant is vested in such
Benefit. A Supplemental Benefit shall vest and become nonforfeitable up to a
maximum of 100% as follows:
SERVICE YEARS VESTED PERCENTAGE
------------- -----------------
Less than 6 years 0%
6 years but less than 7 years 10%
7 years but less than 8 years 20%
8 years but less than 9 years 30%
9 years but less than 10 years 40%
10 years but less than 11 years 50%
11 years but less than 12 years 60%
12 years but less than 13 years 70%
13 years but less than 14 years 80%
14 years but less than 15 years 90%
15 or more years 100%
A Supplemental Benefit shall also be 100% vested upon the death or Disabled
status of a Participant.
4.02 FORM OF SUPPLEMENTAL BENEFIT. Any Participant who is entitled to a
----------------------------
Supplemental Benefit pursuant to Section 4.01 hereof shall receive such
Supplemental Benefit in the form of an annuity, which annuity shall provide a
series of level monthly payments for a period determined in accordance with the
rules set forth hereinbelow. With respect to any Participant, the amount of the
level monthly payment provided by such annuity (the "Monthly
IV-1
<PAGE>
Annuity Amount") shall be determined in accordance with Section 4.04 hereof,
subject to such modifications as may be applicable under this Section 4.02:
(a) Except as provided in subsection (b) below, a Participant shall
receive his Supplemental Benefit in the Normal Benefit Form specified
in Section 2.18.
(b) A Participant who is entitled to receive a Supplemental Benefit may,
with the consent of the Board elect in writing, on such form
designated by the Plan Administrator and received by the Plan
Administrator at least 15 months prior to the Payment Commencement
Date, to receive his Supplemental Benefit in the form of a 50% Joint
and Survivor Annuity. Notwithstanding such election, such
Participant shall be entitled to receive his Supplemental Benefit in
the form of a 50% Joint and Survivor Annuity only if such Participant
has a spouse as of such Participant's Termination Date and also has
been married continuously for at least one year preceding such
Participant's Retirement Date. The amount of the Supplemental
Benefit so designated by the Participant shall be the Actuarial
Equivalent of the amount otherwise payable to the Participant in the
Normal Benefit Form pursuant to Section 2.18. If such election is not
made or is invalid or void, the Participant's Supplemental Benefit
shall be paid in the Normal Benefit Form specified in Section 2.18.
4.03 PAYMENT OF SUPPLEMENTAL BENEFIT. Notwithstanding any other
-------------------------------
provisions of this Plan, payment of a Participant's Supplemental Benefit (or any
portion thereof) shall commence on such Participant's Payment Commencement Date.
4.04 MONTHLY ANNUITY AMOUNT. Except to the extent modified pursuant to
----------------------
Sections 4.01 or 4.02 hereof, a Participant's "Monthly Annuity Amount" shall be
the amount of such Participant's Target Monthly Benefit (as defined in Section
4.05 hereof) reduced, but not below zero, by such Participant's Monthly Offset
Amount (as defined in Section 4.06 hereof).
4.05 TARGET MONTHLY BENEFIT. A Participant's "Target Monthly Benefit"
----------------------
shall be determined as of his Termination Date and shall be the amount
calculated by multiplying (a) the Participant's Average Monthly Compensation
determined as of his Termination Date, by (b) his Benefit Accrual Percentage
determined as of his Termination Date (or if later, the date of a finding of
Disabled status) by (c) his vesting percentage as of his Termination Date under
Section 4.01.
IV-2
<PAGE>
4.06 MONTHLY OFFSET AMOUNT. A Participant's "Monthly Offset Amount" shall
---------------------
be the amount equal to the sum of (1) such Participant's Social Security Offset
Amount, plus (2) such Participant's Qualified Offset Amount (both as defined
herein below).
(a) A Participant's "Social Security Offset Amount" shall be determined
in accordance with the following rules:
(i) In the case of any Participant whose Termination constitutes
Normal Retirement, such Participant's Social Security Offset
Amount shall be 50% of the amount of the monthly Primary
Social Security Benefit (as calculated by the Board under
paragraph (iii) below) to which such Participant is entitled
following such Termination.
(ii) In the case of any Participant whose Termination does not
constitute Normal Retirement (either because such Termination
does not constitute Retirement or because such Termination
constitutes Early Retirement), such Participant's Social
Security Offset Amount shall be 50% of the amount of the
monthly Primary Social Security Benefit (as calculated by the
Board under paragraph (iii) below) to which such Participant
would be entitled commencing on his Normal Benefit Date paid
to such Participant in the Normal Benefit Form if, with
respect to the period (if any) between such Participant's
Termination Date and his Normal Benefit Date, (A) such
Participant had continued to earn a constant monthly salary
equal to the Participant's Compensation for the month
immediately preceding the month of such Participant's
Termination, and (B) the Social Security wage base and other
provisions of the Social Security law relevant to the
determination of benefits thereunder (including any
applicable regulations and/or other pronouncements, such as
wage base and other provisions) in effect as of such
Participant's Termination Date had remained unchanged.
(iii) Each Participant shall submit to the Committee, for use in
calculating such Participant's Primary Social Security
Benefit and the corresponding Social Security Offset Amount
under paragraphs (i) or (ii) above, as applicable, either (A)
a written earnings history obtained from the Social Security
Administration, or (B) written evidence satisfactory to the
Committee showing that, such Participant has never earned
wages subject to the jurisdiction of the U.S. Social Security
system (e.g., a foreign Participant
IV-3
<PAGE>
with no U.S. wages). In the event a Participant fails to
comply with the requirements of the preceding sentence within
90 days following such Participant's Payment Commencement
Date, the Participant's Primary Social Security Offset
Benefit (for purposes of calculating his Social Security
Offset Amount under paragraphs (i) or (ii) above, as
applicable) shall be determined by the Committee using an
estimated wage history, applying a salary scale projected
backwards from the Participant's Retirement Date, and based
on (I) for the two years prior to the Participant's
Retirement Date, an increase of six percent (6%) per annum,
and (II) for the period prior to such two year period, the
actual change in average wages from year to year as
determined by the Social Security Administration. Such
estimated wage history shall be deemed correct for all
purposes of this Plan.
(iv) A Participant's Social Security Offset Amount shall be
determined without regard to any suspension or reduction of
the Participant's Primary Social Security benefits after
Retirement due to post Retirement earnings.
(b) A Participant's "Qualified Plan Offset Amount" shall be the sum of
the Defined Benefit Plan Offset Amount and the 401(k) Plan Offset
Amount determined with respect to such Participant under the
following provisions, as applicable:
(i) With respect to any Participant who was a Participant in the
Defined Benefit Plan, such Participant's "Defined Benefit
Plan Offset Amount" shall be the employer-provided portion
(i.e., the portion attributable to employer contributions) of
the amount of the monthly annuity payment to which such
Participant would be entitled under the Defined Benefit Plan
if his benefit thereunder were paid in the Normal Benefit
Form commencing on his Normal Benefit Date. The "Defined
Benefit Plan Offset Amount" shall be zero with respect to any
Participant who was not a participant in the Defined Benefit
Plan, or to any Participant who would have become a
participant in the Defined Benefit Plan following the date
such Plan's benefit accruals were frozen.
(ii) With respect to any Participant, such Participant's "401(k)
Plan Offset Amount" shall be the amount of the monthly
annuity payment to which such Participant would be entitled
if the balance (determined as of such
IV-4
<PAGE>
Participant's Payment Commencement Date) in such
Participant's 401(k) Offset Account (as defined herein below)
were paid to such Participant in the Normal Benefit Form
commencing on his Normal Benefit Date. For purposes of this
paragraph (ii), a Participant's "401(k) Offset Account" shall
be a hypothetical account established and maintained with
respect to such Participant as follows: A Participant's
401(k) Offset Account shall be established as of December 31,
1995, and such 401(k) Offset Account shall have an initial
balance equal to the actual balance (if any) as of
December 31, 1995, in the account maintained under the 401(k)
Plan for employer contributions made with respect to such
Participant (excluding any employer contributions not
currently includible in gross income by reason of Code
Section 402(e)(3)). Thereafter (A) commencing with the 1996
calendar year and ending with the calendar year in which such
Participant incurs a Termination (the "Termination Year"),
the balance in such Participant's 401(k) Offset Account shall
be increased as of the end of each such calendar year (or, in
the case of the Termination Year, as of such Participant's
Termination Date) by the amount of such Participant's
Hypothetical Employer Contribution (as defined in paragraph
(iii) below) for such calendar year and the actual employer
profit sharing contribution made for such calendar year with
respect to such Participant under the terms of the 401(k)
Plan; and (B) commencing January 1, 1996, and ending on such
Participant's Payment Commencement Date, such Participant's
401(k) Offset Account shall also be increased as if the
balance in such account (as increased from time to time by
the Hypothetical Employer Contributions Described in Clause
(A) above) were earning interest, compounded annually, (I)
from January 1, 1996, until such Participant's Termination
Date, at the Specified Rate applicable from time to time, and
(II) from such Participant's Termination Date until his
Payment Commencement Date, at the Specified Rate in effect as
of such Participant's Termination Date.
(iii) As used in paragraph (ii) above, "Hypothetical Employer
Contribution" means, with respect to any Participant, (A) for
any calendar year prior to such Participant's Termination
Year the maximum employer matching contribution that would
have been made for such calendar year with respect to such
Participant under the terms of the 401(k) Plan
IV-5
<PAGE>
(disregarding the limits imposed by reason of Code Section
401(m)) assuming such Participant's before-tax deferral to
the 401(k) Plan for such calendar year is equal to his
Hypothetical Participant Deferral (as defined in paragraph
(iv) below) with respect to such calendar year; and (B) for
such Participant's Termination Year, an amount equal to the
product obtained by multiplying (i) the Hypothetical Employer
Contribution determined with respect to such Participant for
the immediately preceding calendar year, by (ii) a fraction
having a numerator equal to the number of days in such
Termination Year prior to and including such Participant's
Termination Date, and having a denominator equal to 365.
(iv) For purposes of paragraph (iii) above, the "Hypothetical
Participant Deferral" applicable to any Participant for any
calendar year shall be the amount determined under the
following provisions, whichever is applicable:
(A) If, with respect to any calendar year, the 401(k) Plan
administrative committee does not take any action,
either during or after the close of such year, to
reduce the level of Participant deferrals permitted to
be made by any 401(k) Plan Participant for such year,
then the Hypothetical Participant Deferral with respect
to any Participant for such calendar year shall be the
lesser of (I) the maximum amount such Participant would
be permitted to contribute to the 401(k) Plan for such
year under Code Section 402(g), or (II) the maximum
amount the Participant would be permitted to contribute
under the terms of the 401(k) Plan.
(B) If, with respect to any calendar year, the 401(k) Plan
administrative committee takes action during and/or
after such year to reduce the level of Participant
deferrals permitted to be made by any 401(k) Plan
Participant for such year, then the Hypothetical
Participant Deferral with respect to any Participant
for such year shall be the lesser of (I) the maximum
amount such Participant would be permitted to
contribute to the 401(k) Plan for such year under Code
Section 402(g), or (II) the product determined by
multiplying such Participant's compensation for such
year (as determined under the 401(k) Plan for anti-
discrimination testing purposes), by the
IV-6
<PAGE>
maximum "actual deferral percentage" for any highly
compensated employee for such year (as determined under
Code Section 401(k)(3)(B) after giving effect to any
corrections made following the close of such year)
applicable to "highly-compensated employees" (as
defined in Code Section 414(q)).
4.07 SPECIAL RULES FOR EARLY RETIREMENT. In the case of any Participant
----------------------------------
who incurs Early Retirement, such Participant's Monthly Annuity Amount shall be
determined as provided in Section 4.04 hereof, and then shall be reduced to
reflect the commencement of benefits on a date earlier than the Normal Benefit
Date as follows:
(a) If the Participant's Early Retirement commences on or after the first
day of the month next following his sixty-second birthday, then the
reduction shall be 0.25% for each full month by which the date of
Early Retirement precedes the first day of the month next following
his attainment of age 65.
(b) If the Participant's Early Retirement commences prior to the first
day of the month next following his sixty-second birthday, then the
reduction shall be 9.00% (representing the reduction from age 65 to
age 62 described in paragraph (a) above) plus 0.50% for each full
month by which the date of Early Retirement precedes the first day of
the month next following his sixty-second birthday.
4.08 TERMINATION OTHER THAN EARLY OR NORMAL RETIREMENT. In the case of
-------------------------------------------------
any Participant who incurs a Termination (other than a Termination for Cause)
prior to meeting the requirements of Early Retirement or Normal Retirement, such
Participant's Monthly Annuity Amount shall be determined as provided in Section
4.04 hereof. In such case, the applicable Payment Commencement Date shall be
the ninetieth (90th) day after the date the Participant meets the requirements
of Early Retirement or Normal Retirement at the election of such Participant,
subject to the provisions of Section 4.07 in the case of Early Retirement.
4.09 TERMINATION OF PLAN PARTICIPATION. In the event that the Board of
---------------------------------
Directors in its sole discretion determines that a Participant's employment
performance is no longer at a level which merits continued participation in the
Plan, the Board may terminate such Participant's participation in the Plan
(without necessarily terminating such Participant's employment) as of the date
specified by the Board (the "Participation Severance Date"). Accordingly,
notwithstanding any other provision of this Plan, the Supplemental Benefit
payable to any Participant whose Plan participation is terminated pursuant to
this Section 4.09 shall be
IV-7
<PAGE>
calculated by taking into account, in determining the amount of such
Participant's Target Monthly Benefit and whether such Participant has met the
vesting requirement of Section 4.01 hereof, only the Service Years and
Compensation earned by such Participant as of his Participation Severance Date.
Such Supplemental Benefit shall be paid to the Participant pursuant to the
provisions of Section 4.03 herein.
4.10 DISABILITY. In the event that a Participant incurs a Termination as
----------
a result of such Participant's becoming Disabled, the Supplemental Benefit
payable to such Participant under this Plan shall be determined with regard to
the vesting requirement applicable to Disabled status under Section 4.01 hereof.
For purposes of this Plan, a Participant shall be deemed to be "Disabled" if and
when, as a result of injury or sickness, such Participant is permanently
impaired to such an extent that he cannot perform, and is not reasonably
expected ever to be able to perform, each of the material duties of his position
of employment with the Sponsor or any Affiliated Company. For the purpose of
determining whether a Participant is Disabled, the Board may require the
Participant to submit to an examination by a competent physician or medical
clinic selected by the Board. The final determination as to whether (and when)
a Participant is Disabled shall be made by the Board in its sole discretion.
4.11 CHANGE OF CONTROL. Notwithstanding any other provision of this Plan,
-----------------
upon a Change in Control, all Participants in the Plan shall be fully vested in
their Supplemental Benefits. All Participants shall be entitled to the
Supplemental Benefit they would otherwise receive pursuant to this Article IV
hereof. Upon and following a Change of Control, no Participant shall be removed
from the Plan, nor shall his benefit at the time of the Change in Control be
terminated, modified, reduced or eliminated without his express written consent.
4.12 TERMINATION FOR CAUSE. Notwithstanding any other provision of this
---------------------
Plan except Section 4.11, a Participant who incurs a Termination for Cause prior
to a Change of Control shall not be entitled to a Supplemental Benefit,
regardless of Service Years, under this Plan.
1V-8
<PAGE>
ARTICLE V
DEATH OF A PARTICIPANT
5.01 TERMINATION BY REASON OF DEATH. In the event that a Participant
------------------------------
incurs a Termination by reason of his death, (a) such Participant shall not be
entitled to receive a Supplemental Benefit under this Plan, and (b) if such
Participant has a Spouse at the time of his death, such Participant's Spouse
(the "Surviving Spouse") shall be entitled to receive a special benefit (a
"Death Benefit") at the times and in the amounts set forth in this Article V.
No Death Benefit shall be paid in respect of any Participant who does not have a
Spouse at the time of his death.
5.02 FORM AND PAYMENT OF DEATH BENEFIT. A Surviving Spouse who is
---------------------------------
entitled to receive a Death Benefit pursuant to Section 5.01 hereof shall
receive such Death Benefit in the form of a Single Life Annuity which provides a
level monthly payment equal to the Monthly Death Benefit Amount specified in
Section 5.03 hereof. Except as otherwise provided hereinbelow, payment of a
Surviving Spouse's Death Benefit shall commence on the Payment Commencement Date
which would have been applicable to the Participant if such Participant was
assumed to have incurred a Termination on the date of death.
5.03 MONTHLY DEATH BENEFIT AMOUNT. The "Monthly Death Benefit Amount"
----------------------------
applicable to any Surviving Spouse shall be an amount equal to the 50% survivor
portion of the Monthly Annuity Amount of the Supplemental Benefit (accrued as of
the date of death) that would have been payable to the deceased Participant
under Article IV hereof, modified, if applicable, by the provisions of Section
4.07, provided, however, that the determination of such Monthly Annuity Amount
shall take into account the following assumptions and special rules:
(a) In the case of a Participant who dies after the date on which the
Participant met the requirements for Early Retirement, such
Participant shall be assumed to have elected an immediate 50% Joint
and Survivor Annuity on the day before his death. In the case of a
Participant who dies on or before the date on which the Participant
would have met the requirements for Early Retirement, such
Participant shall be assumed to have incurred a Termination on the
date of death, survived to Early Retirement and elected a 50% Joint
and Survivor A nnuity at Early Retirement and died following such
date.
V-1
<PAGE>
(b) Such Monthly Annuity Amount shall be determined as if the Participant
was 100% vested in the Supplemental Benefit accrued as of the date of
death.
(c) The Payment Commencement Date used in determining such Monthly
Annuity Amount shall be deemed to be the Surviving Spouse's date of
Early Retirement (disregarding any provision in Article IV to the
contrary. The provisions of Section 4.07 hereof shall be applied in
determining the deceased Participant's Monthly Annuity Amount.
V-2
<PAGE>
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 PAYMENTS DURING INCAPACITY. In the event a Participant (or
--------------------------
Beneficiary) is under mental or physical incapacity at the time of any payment
to be made to such Participant (or Beneficiary) pursuant to this Plan, any such
payment may be made to the conservator or other legally appointed personal
representative having authority over and responsibility for the person or estate
of such Participant (or Beneficiary), as the case may be, and for purposes of
such payment references in this Plan to the Participant (or Beneficiary) shall
mean and refer to such conservator or other personal representative, whichever
is applicable. In the absence of any lawfully appointed conservator or other
personal representative of the person or estate of the Participant (or
Beneficiary), any such payment may be made to any person or institution that has
apparent responsibility for the person and/or estate of the Participant (or
Beneficiary) as determined by the Committee. Any payment made in accordance
with the provisions of Section 6.01 to a person or institution other than the
Participant (or Beneficiary) shall be deemed for all purposes of this Plan as
the equivalent of a payment to such Participant (or Beneficiary), and the
Sponsor shall have no further obligation or responsibility with respect to such
payment.
6.02 PROHIBITION AGAINST ASSIGNMENT. Except as otherwise expressly
------------------------------
provided in Section 6.01 hereof, the rights, interests and benefits of a
Participant under this Plan (a) may not be sold, assigned, transferred, pledged,
hypothecated, gifted, bequeathed or otherwise disposed of to any other party by
such Participant or any Beneficiary, executor, administrator, heir, distributee
or other person claiming under such Participant, and (b) shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation, gift, bequest or other disposition of such
rights, interests or benefits contrary to the foregoing provisions of this
Section 6.02 shall be null and void and without effect.
6.03 BINDING EFFECT. The Provisions of this Plan shall be binding upon
--------------
the Sponsor, the Participants, all Affiliated Companies employing any
Participants, and any successor-in-interest to the Sponsor.
6.04 NO TRANSFER OF INTEREST. Benefits under this Plan shall be payable
-----------------------
solely from the general assets of the Sponsor (and, with respect to any
Participant who is an employee of an Affiliated Company, also from the general
assets of such Affiliated Company), and no person
VI-1
<PAGE>
shall be entitled to look to any other source for payment of such benefits. The
Sponsor (and, if applicable, any Affiliated Company) shall have and possess all
title to, and beneficial interest in, any and all funds or reserves maintained
or held by the Sponsor (or such Affiliated Company) on account of any obligation
to pay benefits as required under this Plan, whether or not earmarked as a fund
or reserve for such purpose; any such funds, other property or reserves shall be
subject to the claims of the creditors of the Sponsor (or such Affiliated
Company), and the provisions of this Plan are not intended to create, and shall
not be interpreted as vesting, in any Participant, Beneficiary or other person,
any right to or beneficial interest in any such funds, other property or
reserves. Nothing in this Section 6.04 shall be construed or interpreted as
prohibiting or restricting the establishment of a grantor trust within the
meaning of Code Section 671 which is unfunded for purposes of Sections 201(2),
301(a)(3), and 401(a)(l) of ERISA, from which benefits under this Plan may be
payable.
6.05 AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors may
------------------------------------
amend this Plan from time to time in any respect that it deems appropriate or
desirable, and the Board may terminate this Plan at any time; provided, however,
that any such amendment or termination may not, without the written consent of a
Participant, eliminate or reduce the Supplemental Benefit that has accrued with
respect to such Participant as of the effective date of such amendment or
termination. For purposes of this Section 6.05, the Supplemental Benefit that
has accrued with respect to any Participant as of the date of any amendment of
termination of the Plan shall be deemed to be the Supplemental Benefit to which
such Participant would be entitled pursuant to Article IV hereof if such
Participant incurred Retirement immediately prior to such Plan amendment or Plan
termination.
6.06 NO RIGHT TO EMPLOYMENT. This Plan is voluntary on the part of the
----------------------
Sponsor and its Affiliated Companies, and the Plan shall not be deemed to
constitute an employment contract between any Participant and the Sponsor or any
Affiliated Company, nor shall the adoption or existence of the Plan or any
provision contained in the Plan be deemed to be a required condition of the
employment of any Participant. Nothing contained in this Plan shall be deemed
to give any Participant the right to continued employment with the Sponsor or
any Affiliated Company, and the Sponsor and its Affiliated Companies may
terminate any Participant at any time with or without cause, with or without
prior notice, in which case the Participant's rights arising under this Plan
shall be only those expressly provided under the terms of this Plan.
6.07 NOTICES. All notices, requests, or other communications (hereinafter
-------
collectively referred to as "Notices") required or permitted to be given
hereunder or which are given with
VI-2
<PAGE>
respect to this Plan shall be in writing and may be personally delivered, or may
be deposited in the United States mail, postage prepaid and addressed as
follows:
To the Sponsor any Affiliated Whittaker Corporation
Company or the Committee at: Attention: Board of Directors
1955 Surveyor Avenue
Simi Valley, California 93063-3386
To Participant at: The Participant's residential mailing
address as reflected in the Sponsor's or
Affiliated Company's employment
records
A Notice which is delivered personally shall be deemed given as of the date
of personal delivery, and a Notice mailed as provided herein shall be deemed
given on the second business day following the date so mailed. Any Participant
may change his address for purposes of Notices hereunder pursuant to a Notice to
the Committee, given as provided herein, advising the Committee of such change.
The Sponsor, any Affiliated Company and/or the Committee may at any time change
its address for purposes of Notices hereunder.
6.08 GOVERNING LAW. This Plan shall be governed by, interpreted under,
-------------
and construed and enforced in accordance with ERISA as a Top Hat plan.
6.09 TITLES AND HEADINGS; GENDER OF TERMS. Article and Section headings
------------------------------------
herein are for reference purposes only and shall not be deemed to be part of the
substance of this Plan or in any way to enlarge or limit the meaning or
interpretation of any provision in this Plan. Use in this Plan of the
masculine, feminine or neuter gender shall be deemed to include each of the
omitted genders wherever the context so requires.
6.10 SEVERABILITY. In the event that any provision of this Plan is found
------------
to be invalid or otherwise unenforceable by a court or other tribunal of
competent jurisdiction, such invalidity or unenforceability shall not be
construed as rendering any other provision contained herein invalid or
unenforceable, and all such other provisions shall be given full force and
effect to the same extent as though the invalid and unenforceable provision was
not contained herein.
6.11 TAX EFFECT OF PLAN. Neither the Sponsor nor any Affiliated Company
------------------
warrants any tax benefit nor any financial benefit under the Plan. Without
limiting the foregoing, the Sponsor and each Affiliated Company and their
directors, officers, employees and agents shall be held harmless by the
Participant from, and shall not be subject to any liability on account of, any
VI-3
<PAGE>
Federal or State tax consequences or any consequences under ERISA of any
determination as to the amount of Plan benefits to be paid, the method by which
Plan benefits are paid, the persons to whom Plan benefits are paid, or the
commencement or termination of the payment of Plan benefits.
6.12 ENTIRE AGREEMENT. The Plan represents the entire agreement regarding
----------------
nonqualified retirement benefits provided by Sponsor to each Participant.
Further, the Plan supersedes all Participant benefits or accruals under the
Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation
Excess Benefit Plan.
IN WITNESS WHEREOF, the Sponsor has caused this Plan to be executed by its
duly authorized officer effective as of the Effective Date hereof.
WHITTAKER CORPORATION
By______________________________________
Title___________________________________
VI-4
<PAGE>
WHITTAKER CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AGREEMENT
<PAGE>
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is made and entered into this ____________ day of
_______________________, 1995, by and between Whittaker Corporation, a Delaware
corporation (hereinafter referred to as the "Sponsor"), and __________________,
an executive of the Sponsor (hereinafter referred to as the "Executive").
WITNESSETH
WHEREAS, the Executive is employed by the Sponsor or an Affiliated Company; and
WHEREAS, the Sponsor recognizes the value of the services performed by the
Executive and wishes to offer a supplemental retirement benefit to the Executive
as an inducement to remain as an employee; and
WHEREAS, the Executive wishes to be assured that he will be entitled to a
supplemental retirement benefit if he continues to render substantial services
to the Sponsor; and
WHEREAS, the Sponsor had previously established the Whittaker Corporation
Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan to
provide certain supplemental benefits; and
WHEREAS, the Sponsor and Executive wish to revise the supplemental benefits to
be provided to the Executive; and
WHEREAS, the Sponsor hereto has established the Whittaker Corporation
Supplemental Executive Retirement Plan (hereinafter referred to as the "Plan")
to supersede all benefits provided to the Executive under the Whittaker
Corporation Supplemental Benefit Plan and Whittaker Corporation Excess Benefit
Plan; and
WHEREAS, the Whittaker Corporation Supplemental Executive Retirement Plan
provides the terms and conditions upon which the Sponsor shall pay such
supplemental retirement benefits to those executives of the Sponsor who are
selected for participation in the Plan by the President of the Sponsor and
approved by the Board of Directors; and
WHEREAS, the parties hereto intend that the Plan be considered an unfunded
arrangement, maintained primarily to provide deferred compensation benefits for
the Executive, a member of a select group of management and a highly compensated
employee of the Sponsor, within the meaning of the Employee Retirement Security
Act of 1974 (ERISA) as amended; and
NOW, THEREFORE, in consideration of the premises and of the mutual promises
herein contained, the parties hereto agree to be bound by the terms and
conditions set forth in the Plan and as set forth herein below:
1. All capitalized terms used, but not defined herein, shall have the meaning
ascribed to them in the Plan.
<PAGE>
2. The terms and conditions of the Executive's participation in the Plan shall
be governed by the provisions of the Plan. Any additional terms and conditions
of the Executive's participation shall be designated in an Addendum to this
agreement.
3. The Executive hereby designates the Form of Supplemental Benefit from the
choices below as the desired form of distribution of the Supplemental Benefit:
[ ] Single Life Annuity
[ ] 50% Joint and Survivor Annuity
If no election is made or the election is invalid or void, the Supplemental
Benefit shall be paid in the form of a Single Life Annuity.
4. If the Executive is married at the time of his death, his surviving spouse
shall receive the applicable Death Benefit pursuant to the terms and conditions
of the Plan. The following individual is married to the Executive and is hereby
designated as the Executive's Surviving Spouse for purposes of receiving the
Executive's Death Benefit:
_________________________________
If the Executive is not married, no person shall be designated as the Surviving
Spouse and no Death Benefit shall be paid pursuant to Article V of the Plan.
5. The Executive shall promptly notify the Sponsor of any changes in his
marital status.
6. By executing this Agreement, Executive waives all rights to benefits under
the Whittaker Corporation Supplemental Benefit Plan and the Whittaker
Corporation Excess Benefit Plan.
IN WITNESS WHEREOF, the Sponsor and the Executive have executed this agreement
to be effective as of the day and year first above written.
_______________________ _________________________
Sponsor Executive
<PAGE>
CERTIFIED COPY
OF
RESOLUTION
ADOPTED BY
THE BOARD OF DIRECTORS
OF
WHITTAKER CORPORATION
---------------------
WHEREAS, this corporation adopted the Whittaker Corporation Amended and
Restated Supplemental Executive Retirement Plan, effective January 1, 1996
(the "Plan").
WHEREAS, this corporation may amend the Plan at any time.
NOW THEREFORE, BE IT RESOLVED, that the second sentence of Section 2.08 of
the Plan is hereby amended in its entirety as follows:
"Except as provided in the following sentence, Compensation shall also
include any annual or other short term bonus paid by any Covered
Employer to a Participant other than the amount of any bonus in excess
of $100,000 paid to a Participant who is a division manager."
* * * * * * * * * *
I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and
acting Secretary of Whittaker Corporation; that the foregoing is a full, true
and correct copy of the resolutions adopted at a meeting of the Board of
Directors of Whittaker Corporation held on January 24, 1997, at which meeting a
quorum of said Board was at all times present and acting and that said Board
resolutions have not been modified or rescinded and are in full force and effect
as of the date of this certificate.
Dated: January 24, 1997
/s/ Lynne M. O. Brickner
------------------------------------
Lynne M. O. Brickner
Secretary
<PAGE>
EXHIBIT 10.13
CERTIFIED COPY
OF
RESOLUTION
ADOPTED BY
THE BOARD OF DIRECTORS
OF
WHITTAKER CORPORATION
---------------------
WHEREAS, Whittaker Corporation (hereafter the "Employer"), a Delaware
corporation, maintains the Whittaker Corporation Employees' Pension Plan as
amended and restated effective as of January 1, 1994 (hereafter the
"Plan"); and
WHEREAS, pursuant to Article XIII of the Plan, the Employer may amend the
Plan from time to time; and
WHEREAS, the Board of Directors (hereafter the "Board") desires to amend
the Plan.
NOW THEREFORE, BE IT RESOLVED that the Plan be amended as follows effective
as of January 1, 1996:
Subsection (a) of Section 5.10 shall be amended and restated in its
entirety as follows:
"(a) General Rule. If a Participant who is receiving periodic retirement
benefits from the Plan and who has been receiving such benefits for less
than 12 consecutive months either again becomes an Employee of a
Participating Company or pursuant to an agreement between a Participating
Company and a Leasing Organization (as defined in Section 2.05(a)) performs
services for the Participating Company, the Participant's retirement
benefits will be suspended for each calendar month during which the
Participant completes at least 40 Hours of Service with a Participating
Company in Section 203(a)(3)(B) Service. Similarly, a retirement benefit
which commences later than Normal Benefit Commencement Date will be
computed as if the Employee had been receiving benefits since Normal
Benefit Commencement Date and had been reemployed, without actuarial
increase for amounts which would have been subject to suspension under the
preceding sentence."
* * * * * * * * * *
<PAGE>
I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and
acting Secretary of Whittaker Corporation; that the foregoing is a full, true
and correct copy of the resolutions adopted at a meeting of the Board of
Directors of Whittaker Corporation held on October 18, 1996, at which meeting a
quorum of said Board was at all times present and acting and that said Board
resolutions have not been modified or rescinded and are in full force and effect
as of the date of this certificate.
Dated: December 19, 1996
/s/ Lynne M. O. Brickner
----------------------------
Lynne M. O. Brickner
Secretary
<PAGE>
EXHIBIT 10.17
SECOND AMENDMENT AND WAIVER
DATED AS OF OCTOBER 30, 1996
This SECOND AMENDMENT AND WAIVER (this "Waiver") is among WHITTAKER
CORPORATION, a Delaware corporation (the "Borrower"), the Financial Institutions
party to the Credit Agreement referred to below (the "Lenders"), and NATIONSBANK
OF TEXAS, N.A., as agent (the "Agent") for the Lenders thereunder.
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders and the Agent have entered into an
Amended and Restated Credit Agreement dated as of April 10, 1996 (as amended to
date, the "Credit Agreement"; capitalized terms used and not otherwise defined
herein have the meanings assigned to such terms in the Credit Agreement).
2. The Borrower has requested that the Lenders (i) waive, during the
period starting on and including November 3, 1996 to (but not including)
December 18, 1996 (the "Waiver Period"), any Default arising as a result of non-
compliance with Section 6.04(a), (b) or (c) of the Credit Agreement, and (ii)
amend the Credit Agreement to permit a sale-leaseback transaction that would not
otherwise be permitted under the terms of the Credit Agreement.
3. The Required Lenders are, on the terms and conditions stated
below, willing to grant the requests of the Borrower.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date
------------------------------
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 3 hereof, the Credit Agreement is hereby amended as follows:
(a) Section 1.01 of the Credit Agreement is amended by adding
thereto, in appropriate alphabetical order, the following defined terms:
"`FIRST AMENDMENT' means the First Amendment and Waiver dated as of
---------------
September 9, 1996 among the Borrower, the Lenders and the Agent.
`SECOND AMENDMENT' means the Second Amendment and Waiver dated as of
----------------
October 30, 1996 among the Borrower, the Lenders and the Agent.
`SECOND AMENDMENT EFFECTIVE DATE' means the first date on which each
-------------------------------
of the conditions set forth in Section 3 of the Second Amendment is
satisfied or waived."
(b) The definition of the term "Applicable Margin" appearing in
Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
<PAGE>
"`APPLICABLE MARGIN' means, with respect to any Base Rate Advances or
-----------------
Eurodollar Rate Advances, a percentage per annum determined by reference to the
applicable Cash Flow Ratio as set forth below:
<TABLE>
<CAPTION>
Applicable Margin for Applicable Margin for
Cash Flow Ratio Base Rate Advances Eurodollar Rate Advances
--------------- --------------------- ------------------------
<S> <C> <C>
less than 1.75:1.0 0.0% 1.00%
1.75:1.0 or greater, but 0.0% 1.375%
less than 2.50:1.0
2.50:1.0 or greater, but 0.25% 1.625%
less than 3.25:1.0
3.25:1.0 or greater, but 0.50% 1.875%
less than 4.00:1.0
4.00:1.0 or greater, but 1.00% 2.500%
less than 5.00:1.0
5.00 or greater 1.00% 3.00%
</TABLE>
The Applicable Margin for each Base Rate Advance and Eurodollar Rate Advance
shall be determined by reference to the Cash Flow Ratio in effect from time to
time; provided, however, that (i) from and after the Second Amendment Effective
-------- -------
Date until receipt by the Agent of the Borrower's audited financial statements
for the fiscal year ended October 31, 1996 and the related Compliance
Certificate required pursuant to Section 6.03(e), the Cash Flow Ratio shall be
deemed to be 5.00:1.0 or greater, (ii) no change (except pursuant to the
foregoing clause (i) and except as provided in clause (iii) below) in the
Applicable Margin shall be effective until three Business Days after the date on
which the Agent receives financial statements pursuant to Section 6.03(c) or (d)
and a Compliance Certificate delivered pursuant to Section 6.03(e),
demonstrating such Cash Flow Ratio, (iii) if at any time, and for so long as, a
Default has occurred and is continuing based on the Borrower's failure to
deliver the financial statements and Compliance Certificates required pursuant
to Section 6.03(c), (d) and (e), as the case may be, the Cash Flow Ratio shall
be deemed to be 5.00:1.0 or greater and any change in the Applicable Margin
resulting from such deemed Cash Flow Ratio shall be effective, (iv) except as
provided in the following clause (v), upon the effectiveness of any change in
the Applicable Margin, the new Applicable Margin shall be given retroactive
effect as to each outstanding Advance to the then most recent of (a) the first
day of the then current fiscal quarter of the Borrower, and (b) the last date on
which interest was due and payable in respect of such Advance, and (v) upon the
effectiveness of any change in the Applicable Margin pursuant to the foregoing
clause (i), or pursuant to the foregoing clause (ii) at any time when the
Applicable Margin is determined pursuant to the foregoing clause (iii), the new
Applicable Margin shall be given effect only as of the effectiveness thereof
(and shall not be given retroactive effect)."
(c) Section 6.02(b)(vi) of the Credit Agreement is hereby amended by
adding thereto, immediately following the words "aggregate outstanding principal
amount", the following: "for all such
2
<PAGE>
Debt (other than any Debt in respect of a Capitalized Lease, if any, of the
properties subject to the sale-leaseback transaction permitted under Section
6.02(e)(ix))".
(d) Section 6.02(e) of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of Section 6.02(e)(vii), (ii)
deleting the period at the end of Section 6.02(e)(viii) and replacing it with
"; and" and (iii) adding thereto a new Section 6.02(e)(ix) to read as follows:
"(ix) the sale by the Borrower of its three building office
complex located in Simi Valley, California in connection with a sale-lease
back of such property but only if such sale (A) is for fair market value
and is consummated on or prior to January 30, 1997, (B) is for cash and
results in gross cash proceeds to the Borrower of not less than
$13,000,000, and (C) the lease obligations entered into in connection
therewith do not require payments by the Borrower or any of its
Subsidiaries in excess of $2,500,000 in any period of twelve consecutive
months."
SECTION 2. WAIVER. Effective as of (and including) November 3, 1996
------
and subject to the satisfaction of the conditions precedent set forth in Section
3 hereof, the Lenders hereby waive, during the Waiver Period only, any Default
arising as a result of non-compliance with Section 6.04(a), (b) or (c) of the
Credit Agreement.
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Waiver shall become
---------------------------
effective when (a) the Agent has executed this Waiver and has received
counterparts of this Waiver executed by the Borrower and the Required Lenders
and counterparts of the Consent appended hereto (the "Consent") executed by each
of the Guarantors and Grantors (as defined in the Security Agreement) listed
therein (such Guarantors and Grantors, together with the Borrower, each a "Loan
Party" and, collectively, the "Loan Parties"), and (b) the Agent shall have
received favorable opinions of (i) Latham & Watkins, special counsel to the
Borrower, as to the enforceability of this Waiver and the Loan Documents as
modified hereby and as to such other matters as the Agent or the Required
Lenders may reasonably request, and (ii) the Vice President-General Counsel of
the Borrower, as to the due authorization, execution and delivery of this Waiver
and as to such other matters as the Agent or the Required Lenders may reasonably
request.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents
------------------------------
and warrants as follows:
(A) AUTHORITY. The Borrower and each other Loan Party has the
---------
requisite corporate power and authority to execute and deliver this Waiver
or the Consent, as applicable, and to perform its obligations hereunder and
under the Loan Documents (as modified hereby) to which it is a party. The
execution, delivery and performance by the Borrower of this Waiver and by
each other Loan Party of the Consent, and the performance by each Loan
Party of each Loan Document (as modified hereby) to which it is a party
have been duly approved by all necessary corporate action of such Loan
Party and no other corporate proceedings on the part of such Loan Party are
necessary to consummate such transactions.
(B) ENFORCEABILITY. This Waiver has been duly executed and
--------------
delivered by the Borrower. The Consent has been duly executed and
delivered by each Guarantor. This
3
<PAGE>
Waiver and each Loan Document (as modified hereby) is the legal, valid and
binding obligation of each Loan Party party hereto or thereto, enforceable
against such Loan Party in accordance with its terms, and is in full force
and effect.
(C) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties contained in each Loan Document (other than any such
representations or warranties that, by their terms, are specifically made
as of a date other than the date hereof) are correct on and as of the date
hereof as though made on and as of the date hereof.
(D) NO DEFAULT. After giving effect to this Waiver, no event
----------
has occurred and is continuing that constitutes a Default.
SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) Upon
---------------------------------------------
and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to "the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as modified hereby.
(b) Except as specifically modified above, the Credit Agreement and
all other Loan Documents, are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the Collateral Documents and all of the Collateral
described therein do and shall continue to secure the payment of all Secured
Obligations under and as defined therein, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this Waiver shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
SECTION 6. EXECUTION IN COUNTERPARTS. This Waiver may be executed in
-------------------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Waiver or the Consent by telefacsimile shall be effective as delivery of a
manually executed counterpart of this Waiver or such Consent.
SECTION 7. GOVERNING LAW. This Waiver shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
[Signature Pages Follow]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
WHITTAKER CORPORATION,
a Delaware corporation
By: /s/ John K. Otto
-------------------------------------------
John K. Otto
Treasurer
NATIONSBANK OF TEXAS, N.A.,
as Agent
By: /s/ Andrea C. Defterios
-------------------------------------------
Andrea C. Defterios
Vice President
S-1
<PAGE>
Lenders:
-------
NATIONSBANK OF TEXAS, N.A.
By: /s/ Andrea C. Defterios
-------------------------------------------
Andrea C. Defterios
Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By: /s/ Lori Y. Kannegieter
-------------------------------------------
Title: Managing Director
CIBC INC.
By: /s/ R. Wagner
-------------------------------------------
Title: Agent
CITY NATIONAL BANK, N.A.
By: /s/ Erich Bollinger
-------------------------------------------
Title: Vice President
COMERICA BANK-CALIFORNIA
By: /s/ Scott J. Smith
-------------------------------------------
Title: Assistant Vice President
IMPERIAL BANK
By: /s/ John F. Farrace
-------------------------------------------
Title: Assistant Vice President
S-2
<PAGE>
KREDIETBANK N.V.
By: /s/ Robert Snauffer
-------------------------------------------
Title: Vice President
By: /s/ Tod R. Angus
-------------------------------------------
Title: Vice President
SANWA BANK CALIFORNIA
By:
-------------------------------------------
Title:
SUMITOMO BANK OF CALIFORNIA, N.A.
By:
-------------------------------------------
Title:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Perry Vavoules
-------------------------------------------
Title: Senior Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ William Swiontek
-------------------------------------------
Title: Vice President
S-3
<PAGE>
EXHIBIT 10.18
THIRD AMENDMENT AND WAIVER
TO WHITTAKER CORPORATION
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF DECEMBER 17, 1996
This THIRD AMENDMENT AND WAIVER (this "Amendment") is among WHITTAKER
CORPORATION, a Delaware corporation (the "Borrower"), the Financial Institutions
party to the Credit Agreement referred to below (the "Lenders"), NATIONSBANK OF
TEXAS, N.A., as agent (the "Agent") for the Lenders thereunder and CIBC INC., as
co-agent ("Co-Agent") for the Lenders thereunder.
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders, the Co-Agent and the Agent have entered
into an Amended and Restated Credit Agreement dated as of April 10, 1996 (as
amended to date, the "Credit Agreement"; capitalized terms used and not
otherwise defined herein have the meanings assigned to such terms in the Credit
Agreement).
2. The Borrower has requested that the Lenders, among other things,
(i) waive, during the period starting on and including December 18, 1996 to (but
not including) February 28, 1997 (the "Waiver Period"), any Default arising as a
result of non-compliance with Section 6.04(a), (b), (c) or (d) of the Credit
Agreement; and (ii) consent to an incentive compensation plan for employees of
certain of the Borrower's Subsidiaries.
3. The Lenders are, on the terms and conditions stated below, willing
to grant the request of the Borrower.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date
------------------------------
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 4 hereof, the Credit Agreement is hereby amended as follows:
(a) Section 1.01 of the Credit Agreement is amended by adding
thereto, in appropriate alphabetical order, the following defined terms:
`COMMUNICATIONS SUBSIDIARIES' means Xyplex, Inc., a Massachusetts
---------------------------
corporation, Whittaker Communications, Inc., a California corporation, and
each of their respective Subsidiaries and any Subsidiary of the Borrower
formed solely for the purpose of holding the capital stock of the other
Communications Subsidiaries.
`DEBT REDUCTION AMOUNT' means an amount equal to the sum of (a)
--------------------- ---
the aggregate amount of prepayments made by the Borrower to the Agent under
the Credit
<PAGE>
Agreement on or after the Third Amendment Effective Date and applied to the
reduction of Term Advances pursuant to Section 2.05 plus (b) the aggregate
----
amount of HLS Subordinated Debt that, on or after the Third Amendment Date,
is converted into common stock of the Borrower or into other capital stock
of the Borrower, in either event, on terms reasonably satisfactory to the
Required Lenders (it being understood and agreed that the amount under this
clause (b) as of any date shall be determined by the Agent based on an
officer's certificate delivered to the Agent on or prior to such date
setting forth such amount and on such other evidence, if any, as the Agent
or the Required Lenders may reasonably require).
`DEED OF TRUST' has the meaning set forth in Section 6.01(j).
-------------
.
`ENVIRONMENTAL INDEMNITY' has the meaning set forth in Section
-----------------------
6.01(j).
`FIRST REDUCTION DATE' means the first date on which the Debt
--------------------
Reduction Amount equals or exceeds $15,000,000.
`REDUCTION AMOUNT' has the meaning specified in Section
----------------
2.05(b)(viii).
`SECOND REDUCTION DATE' means the first date on which the Debt
---------------------
Reduction Amount equals or exceeds $30,000,000.
`THIRD AMENDMENT' means the Third Amendment and Waiver to
---------------
Whittaker Corporation Amended and Restated Credit Agreement dated as of
December 17, 1996, among the Borrower, the Lenders, the Agent and the Co-
Agent.
`THIRD AMENDMENT EFFECTIVE DATE' means the first date on which
------------------------------
each of the conditions set forth in Section 4 of the Third Amendment is
satisfied or waived."
(c) The following definitions in Section 1.01 of the Credit Agreement
are hereby amended as set forth below:
(i) The definition of "Applicable Margin" is hereby amended and
restated in its entirety as follows:
"`APPLICABLE MARGIN' means, (a) if the First Reduction Date
-----------------
has not occurred on or prior to January 31, 1997, then from January
31, 1997 through and including the First Reduction Date, 2.00% with
respect to Base Rate Advances and 4.50% with respect to Eurodollar
Rate Advances, (b) if the Second Reduction Date has not occurred on or
prior to January 31, 1997, then from the later to occur of (i) January
31, 1997 and (ii) the First Reduction Date and through and including
the Second Reduction Date, 2.00% with respect to Base Rate Advances
and 4.00% with respect to Eurodollar Rate Advances, and (c) at all
times prior to January 31, 1997 and at all times after the Second
Reduction Date, with respect to any Base Rate Advances or Eurodollar
Rate Advances, a percentage per annum determined by reference to the
applicable Cash Flow Ratio as set forth below:
2
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin for Applicable Margin for
Cash Flow Ratio Base Rate Advances Eurodollar Rate Advances
--------------- --------------------- ------------------------
<S> <C> <C>
less than 1.75:1.0 0.0% 1.00%
1.75:1.0 or greater, but 0.0% 1.375%
less than 2.50:1.0
2.50:1.0 or greater, but 0.25% 1.625%
less than 3.25:1.0
3.25:1.0 or greater, but 0.50% 1.875%
less than 4.00:1.0
4.00:1.0 or greater, but 1.00% 2.500%
less than 5.00:1.0
5.00 or greater 1.00% 3.00%
</TABLE>
At all times during which clause (c) above shall be applicable, the
Applicable Margin for each Base Rate Advance and Eurodollar Rate
Advance shall be determined by reference to the Cash Flow Ratio in
effect from time to time; provided, however, that (i) from and after
-------- -------
the Second Amendment Effective Date until receipt by the Agent of the
Borrower's audited Financial Statements for the Fiscal Year ended
October 31, 1996 and the related Compliance Certificate required
pursuant to Section 6.03(e), the Cash Flow Ratio shall be deemed to be
5.00:1.0 or greater, (ii) no change (except as provided in clause
(iii) or clause (v) below) in the Applicable Margin shall be effective
until three Business Days after the date on which the Agent receives
financial statements pursuant to Section 6.03(c) or (d) and a
Compliance Certificate delivered pursuant to Section 6.03(e),
demonstrating such Cash Flow Ratio, (iii) if at any time, and for so
long as, a Default has occurred and is continuing based on the
Borrower's failure to deliver the financial statements and Compliance
Certificates required pursuant to Section 6.03(c), (d) and (e), as the
case may be, the Cash Flow Ratio shall be deemed to be 5.00:1.0 or
greater and any change in the Applicable Margin resulting from such
deemed Cash Flow Ratio shall be effective, (iv) except as provided in
the following clause (v), upon the effectiveness of any change in the
Applicable Margin, the new Applicable Margin shall be given
retroactive effect as to each outstanding Advance to the then most
recent of (a) the first day of the then current fiscal quarter of the
Borrower, and (b) the last date on which interest was due and payable
in respect of such Advance, and (v) upon the effectiveness of any
change in the Applicable Margin (A) pursuant to the foregoing clause
(ii) at any time when the Applicable Margin is determined pursuant to
the foregoing clause (iii), or (B) as a result of the occurrence of
the First Reduction Date or the Second Reduction Date, the new
Applicable Margin shall be given effect only as of the effectiveness
thereof (and shall not be given retroactive effect)."
(ii) The definition of "Collateral Documents" in Section 1.01 of
the Credit Agreement is hereby amended by adding the following immediately
after the words "Security
3
<PAGE>
Agreement,": "any Deed of Trust or Environmental Indemnity executed
pursuant to Section 6.01(j),".
(d) Section 2.04(b) of the Credit Agreement is amended and restated
in its entirety to read as follows:
"(b) Mandatory Reductions of the Revolving Commitments. The
-------------------------------------------------
Revolving Facility shall be automatically and permanently reduced on a pro
rata basis on each date on which prepayment thereof is required to be made
pursuant to Sections 2.05(b)(ii), (iii), (iv), (v) or (vi), in an amount
equal to the applicable Reduction Amount, provided that each such reduction
--------
of the Revolving Facility shall be made ratably among the Revolving Lenders
in accordance with their Revolving Commitments."
(e) Section 2.05(b)(ii) of the Credit Agreement is amended and
restated in its entirety as follows:
"(ii) Permitted Refinancings and Certain Other Debt. When the
---------------------------------------------
Borrower issues, creates or otherwise incurs Debt which is a Permitted
Refinancing, or which is Debt permitted under Section 6.02(b)(iii), the
Borrower shall, on the date of receipt of the proceeds thereof, prepay the
Advances in an amount equal to the principal amount of such Debt so
incurred (or, if greater in the case of any revolving credit or working
capital facility, the maximum amount available to be borrowed (assuming
compliance with all conditions for borrowing)). Each such payment shall be
applied first, to the prepayment of scheduled principal installments of the
-----
Term Advances in inverse order of maturity, until the Term Advances are
repaid in full, and second, to the prepayment of the Revolving Facility as
------
set forth in Section 2.05(b)(viii)."
(f) Section 2.05(b)(iii) of the Credit Agreement is amended and
restated in its entirety to read as follows:
"(iii) SPECIFIED BERMITE LAND PROCEEDS. On the first Business
-------------------------------
Day after any Specified Bermite Land Proceeds are received by the Borrower
or any of its Subsidiaries, the Borrower shall prepay the Advances in an
amount equal to such Specified Bermite Land Proceeds. Each such payment
shall be applied first, to the scheduled principal installments of the Term
-----
Advances (ratably in accordance with the respective principal amounts of
each such installment), until the Term Advances are repaid in full and,
second, to the prepayment of the Revolving Facility as set forth in Section
------
2.05(b)(viii)."
(g) Section 2.05(b)(iv) of the Credit Agreement is amended by
deleting the last four lines of such Section beginning with the words "pay to
each Term Lender" and inserting the following in lieu thereof:
"prepay the Advances in an amount equal to such Net Cash Proceeds. Each
such payment shall be applied first, to the scheduled principal
-----
installments of the Term Advances (ratably in accordance with the
respective principal amounts of each such installment), until the Term
Advances are repaid in full and, second, to the prepayment of the Revolving
------
Facility as set forth in Section 2.05(b)(viii)."
4
<PAGE>
(h) Section 2.05(b)(v) of the Credit Agreement is amended by deleting
the last nine lines of such Section beginning with the words "pay to each Term
Lender" and inserting the following in lieu thereof:
"prepay the Advances in an amount equal to 100% of such Net Cash Proceeds.
Each such payment shall be applied first, to the scheduled principal
-----
installments of the Term Advances in inverse order of maturity, until the
Term Advances are repaid in full and, second, to the prepayment of the
------
Revolving Facility as set forth in Section 2.05(b)(viii)."
(i) Section 2.05(b)(vi) of the Credit Agreement is amended by
deleting the last eight lines of such Section beginning with the words "pay to
each Term Lender" and inserting the following in lieu thereof:
"prepay the Advances in an amount equal to 50% of such Excess Cash Flow.
Each such payment shall be applied first, to the scheduled principal
-----
installments of the Term Advances (ratably in accordance with the
respective principal amounts of each such installment), until the Term
Advances are repaid in full and, second, to the prepayment of the Revolving
------
Facility as set forth in Section 2.05(b)(viii)."
(j) Section 2.05(b) of the Credit Agreement is amended by adding
thereto a new Section 2.05(b)(viii) to read as follows:
"(viii) APPLICATION OF CERTAIN PREPAYMENTS. Prepayments of the
----------------------------------
Revolving Facility made pursuant to Sections 2.05(b)(ii), (iii), (iv), (v)
and (vi) shall be first applied to prepay L/C Advances then outstanding
-----
until such Advances are paid in full, second applied to prepay Revolving
------
Advances then outstanding (ratably in accordance with the respective
principal amounts of each such Advance) until such Advances are paid in
full, and third deposited in the L/C Cash Collateral Account to cash
-----
collateralize 100% of the aggregate Available Amount of the Letters of
Credit then outstanding; and, in the case of any such prepayments, the
amount remaining (if any) after the prepayment in full of the L/C Advances
and Revolving Advances then outstanding and the 100% cash collateralization
of the aggregate Available Amount of Letters of Credit then outstanding
(the sum of such prepayment amounts, cash collateralization amounts and
remaining amount being referred to herein as the "Reduction Amount") may be
----------------
retained by the Borrower and the Revolving Facility shall be permanently
reduced as set forth in Section 2.04(b). Upon the drawing of any Letter of
Credit for which funds are on deposit in the L/C Cash Collateral Account,
such funds shall be applied to reimburse the applicable Issuing Bank or the
Revolving Lenders, as applicable."
(k) Section 2.07 is amended by adding thereto a new section 2.07(d)
to read as follows:
"(d) Certain Post-Closing Fees. If the First Reduction Date has
-------------------------
not occurred on or prior to February 28, 1997, the Borrower agrees to pay
to the Agent on such date, in accordance with Section 2.09(a), for the
account of each Lender, a fee equal to 0.15% of the sum of the principal
amount of all outstanding Advances owed to such Lender, the Unused
Revolving Commitment, if any, of such Lender and, in the case of each
Revolving Lender, such Lender's Pro Rata share of the aggregate outstanding
Letter of Credit Obligations as of such date."
5
<PAGE>
(l) Section 6.01 of the Credit Agreement is amended by adding a new
Section 6.01(j) to read as follows:
"(j) DEED OF TRUST. Within 30 days after receipt of a written request
-------------
by the Agent (acting at the direction or with the consent of the Required
Lenders), the Borrower shall deliver to the Agent the following:
(i) a Deed of Trust, Assignment of Rents and Fixture Filing,
granting the Agent a first priority lien on the Bermite Land, duly executed
and acknowledged by Whittaker Porta Bella Development, Inc. and otherwise
in form and substance reasonably satisfactory to the Agent (as amended,
supplemented or otherwise modified from time to time, the "DEED OF TRUST")
-------------
in proper form for recordation in the Official Records of Los Angeles
County, California;
(ii) a First American Title Insurance Company 1992 ALTA loan
policy of title insurance (the "TITLE INSURANCE POLICY") in favor of the
----------------------
Agent, in such amount as the Agent shall determine, insuring the validity
and priority of the Deed of Trust and otherwise in form and substance
reasonably satisfactory to the Agent;
(iii) an environmental indemnity agreement, executed by the
Borrower and Whittaker Porta Bella Development, Inc. with respect to the
Bermite Land in form and substance reasonably satisfactory to the Agent (as
amended, supplemented or otherwise modified from time to time, the
"ENVIRONMENTAL INDEMNITY"); and
------------------------
(iv) a favorable opinion of the Vice President-General Counsel
of the Borrower, as to the due authorization, execution and delivery of the
Deed of Trust, the Environmental Indemnity, and as to such other matters as
the Agent or the Required Lenders may reasonably request."
(m) Section 6.02(g)(viii) is amended by deleting the "and" at the end
thereof.
(n) Section 6.02(g)(ix) is amended by deleting the period at the end
thereof and adding "; and" in lieu thereof.
(o) Section 6.02(g) is amended by adding thereto a new Section
6.02(g)(x) as follows:
"(x) so long as no Event of Default has occurred and is
continuing, the granting of stock options by the Communications
Subsidiaries to their employees in an aggregate amount not to exceed 8% of
the number of shares of issued and outstanding common stock of the
Communications Subsidiaries at the time of the grant."
(p) Section 6.03(b) of the Credit Agreement is amended and restated
in its entirety as follows:
"(b) Monthly and Semi-Monthly Reports. (i) Not later than 21
--------------------------------
Business Days after the end of each fiscal month of the Borrower (subject
to the proviso set forth below), a written report for such fiscal month,
which shall set forth, for such month and as of the last Business Day of
such month, in substantially the form submitted to the Lenders (as defined
therein) pursuant to the Original Credit Agreement, Consolidated and
consolidating summaries
6
<PAGE>
of sales and profits for that month and for the period from the beginning
of the current fiscal year to the end of that month, showing in comparative
form for such month and year-to-date periods (A) the Consolidated figures
for the corresponding periods of the previous fiscal year and (B) the
Consolidated figures for the corresponding periods contained in the most
recent plan or budget delivered pursuant to Section 6.03(f), (ii) not later
than 30 Business Days after the end of each fiscal month of the Borrower
(subject to the proviso set forth below) (A) the Consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as at the
end of such month, (B) Consolidated and consolidating statements of income
of the Borrower and its Subsidiaries as at the end of such month and (C)
Consolidated and consolidating statements of cash flow of the Borrower and
its Subsidiaries, in each case, for such month and for the period from the
beginning of the current fiscal year to the end of that month, showing in
comparative form the Consolidated figures for the corresponding periods of
the previous fiscal year; provided, however, that in the case of a fiscal
-------- -------
month which (x) is the last fiscal month of any of the first three fiscal
quarters of a fiscal year, the foregoing reports for that month shall be
delivered no later than 45 calendar days after the last day of that month,
and (y) is the last fiscal month of a fiscal year, the foregoing reports
for that month shall be delivered no later than 90 calendar days after the
last day of that month; and (iii) on January 15, 1997, and on the first and
fifteenth day of each month thereafter a written estimate of Consolidated
and consolidating weekly cash flow of the Borrower and its Subsidiaries for
the immediately following four weeks. All of the foregoing reports shall
be in reasonable detail and certified by the chief financial officer,
controller or treasurer of the Borrower as, to the extent applicable,
having been prepared in accordance with GAAP and as fairly presenting the
financial condition, results of operations and cash flows of the Borrower
and its Subsidiaries as at the dates and for the period indicated, subject
to changes resulting from audit and normal year-end adjustments.".
SECTION 2. WAIVER. Effective as of (and including) December 18, 1996
------
and subject to the satisfaction of the conditions precedent set forth in Section
3 hereof, the Lenders hereby waive, during the Waiver Period only, any Default
arising as a result of non-compliance with Section 6.04(a), (b), (c) or (d) of
the Credit Agreement.
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
---------------------------
effective when each of the following conditions has been satisfied (the
"Effective Date"):
(a) the Agent has executed this Amendment and has received
counterparts of this Amendment executed by the Borrower and the Required
Lenders and counterparts of the Consent appended hereto (the "Consent")
executed by each of the Guarantors and Grantors (as defined in the Security
Agreement) listed therein (such Guarantors and Grantors, together with the
Borrower, each a "Loan Party" and, collectively, the "Loan Parties");
(b) the Borrower has paid to the Agent in accordance with
Section 2.09(a) of the Credit Agreement for the account of each Lender, a
fee equal to 0.15% of the sum of the principal amount of all outstanding
Advances owed to such Lender, the Unused Revolving Commitment, if any, of
such Lender and, in the case of each Revolving Lender, such Lender's Pro
Rata share of the aggregate outstanding Letter of Credit Obligations as of
such date; and
(c) the Agent has received favorable opinions of (i) Latham &
Watkins, special counsel to the Borrower, as to the enforceability of this
Amendment, the Consent and the Loan Documents as modified hereby and as to
such other matters as the Agent or the Required Lenders
7
<PAGE>
may reasonably request, and (ii) the Vice President General Counsel of the
Borrower, as to the due authorization, execution and delivery of this
Amendment, the Consent and as to such other matters as the Agent or the
Required Lenders may reasonably request.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents
------------------------------
and warrants as follows:
(a) AUTHORITY. The Borrower and each other Loan Party has the
---------
requisite corporate power and authority to execute and deliver this
Amendment or the Consent, as applicable, and to perform its obligations
hereunder and under the Loan Documents (as modified hereby) to which it is
a party. The execution, delivery and performance by the Borrower of this
Amendment and by each other Loan Party of the Consent, and the performance
by each Loan Party of each Loan Document to which it is a party have been
duly approved by all necessary corporate action of such Loan Party and no
other corporate proceedings on the part of such Loan Party are necessary to
consummate such transactions.
(b) ENFORCEABILITY. This Amendment has been duly executed and
--------------
delivered by the Borrower. The Consent has been duly executed and
delivered by each Guarantor and Grantor. This Amendment and each Loan
Document (as modified hereby) is the legal, valid and binding obligation of
each Loan Party hereto or thereto, enforceable against such Loan Party in
accordance with its terms, and is in full force and effect.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties contained in each Loan Document (other than any such
representations or warranties that, by their terms, are specifically made
as of a date other than the date hereof) are correct on and as of the date
hereof as though made on and as of the date hereof.
(d) NO DEFAULT. After giving effect to this Amendment, no event
----------
has occurred and is continuing that constitutes a Default.
SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) Upon
---------------------------------------------
and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to "the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as modified hereby.
(b) Except as specifically modified above, the Credit Agreement and
all other Loan Documents, are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the Collateral Documents and all of the Collateral
described therein do and shall continue to secure the payment of all Secured
Obligations under and as defined therein, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as an amendment of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute an amendment of any provision of any of the Loan Documents.
8
<PAGE>
SECTION 6. EXECUTION IN COUNTERPARTS. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Amendment or the Consent by telefacsimile shall be effective as delivery of a
manually executed counterpart of this Amendment or such Consent.
SECTION 7. GOVERNING LAW. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
SECTION 8. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on
-------------------------
demand all out-of-pocket expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Amendment and any other documents prepared or obtained in connection
therewith, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent with respect thereto and with respect to
advising the Agent as to its rights and responsibilities hereunder and
thereunder and the costs of the Title Insurance Policy. Borrower further agrees
to pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), of the Agent, the Co-Agent and the
Lenders in connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Amendment, including, without limitation,
reasonable counsel fees and expenses in connection with the enforcement of
rights under this Section 8.
[Signature Pages Follow]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
WHITTAKER CORPORATION,
a Delaware corporation
By: /s/ John K. Otto
-------------------------------------------
John K. Otto
Treasurer
NATIONSBANK OF TEXAS, N.A.,
as Agent
By: /s/ Andrea C. Defterios
-------------------------------------------
Andrea C. Defterios
Vice President
CIBC INC.,
as Co-Agent
By: /s/ R. Wagner
-------------------------------------------
Title: Agent
S-1
<PAGE>
Lenders:
-------
NATIONSBANK OF TEXAS, N.A.
By: /s/ Andrea C. Defterios
-------------------------------------------
Andrea C. Defterios
Vice President
CIBC INC.
By: /s/ R. Wagner
-------------------------------------------
Title: Agent
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By: /s/ Lori Y. Kannegieter
-------------------------------------------
Title: Managing Director
CITY NATIONAL BANK, N.A.
By: /s/ Gregory Meis
-------------------------------------------
Title: Vice President
COMERICA BANK-CALIFORNIA
By: /s/ Scott J. Smith
-------------------------------------------
Title: Assistant Vice President
IMPERIAL BANK
By: /s/ Ray Vadalma
-------------------------------------------
Title: Senior Vice President
S-2
<PAGE>
KREDIETBANK N.V.
By: /s/ Robert Snauffer
-------------------------------------------
Title: Vice President
By: /s/ Tod R. Angus
-------------------------------------------
Title: Vice President
SANWA BANK CALIFORNIA
By:
-------------------------------------------
Title:
SUMITOMO BANK OF CALIFORNIA, N.A.
By:
-------------------------------------------
Title:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Perry Vavoules
-------------------------------------------
Title: Senior Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ William Swiontek
-------------------------------------------
Title: Vice President
S-3
<PAGE>
CONSENT
DATED AS OF DECEMBER 17, 1996
The undersigned, as Guarantors under the "Guaranty" and as Grantors
under the "Security Agreement" (as such terms are defined in and under the
Credit Agreement referred to in the foregoing Amendment), each hereby consents
and agrees to the foregoing Third Amendment and Waiver and hereby confirms and
agrees that (i) the Guaranty, the Security Agreement and the Confirmation are,
and shall continue to be, in full force and effect and are hereby ratified and
confirmed in all respects except that, upon the effectiveness of, and on and
after the date of, the said Amendment, each reference in the Guaranty, the
Security Agreement and the Confirmation to the Credit Agreement, "thereunder",
"thereof" or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended by the said Amendment and
(ii) the Security Agreement and the Confirmation and all of the Collateral
described therein do, and shall continue to, secure the payment of all of the
Secured Obligations as defined in the Security Agreement.
BLUE BELL LEASE, INC., a California corporation, METROPOLITAN
FINANCIAL SERVICES CORPORATION, a Colorado corporation, PARK
CHEMICAL COMPANY, a Michigan corporation, WHITTAKER
COMMUNICATIONS, INC., a California corporation,WHITTAKER
CONTROLS, INC., a California corporation, WHITTAKER CORP., a
Maine corporation, WHITTAKER ORDNANCE, INC., a Delaware
corporation, WHITTAKER PORTA BELLA DEVELOPMENT, INC., a
California corporation, WHITTAKER SERVICES CORPORATION, a
California corporation, WHITTAKER TECHNICAL PRODUCTS, INC., a
Colorado corporation, WHITTAKER DEVELOPMENT CO., a Delaware
corporation and XYPLEX, INC., a Massachusetts corporation
By: /s/ John K. Otto
-------------------------------------------------
John K. Otto
Treasurer of each of the foregoing Loan Parties
<PAGE>
EXHIBIT 11
WHITTAKER CORPORATION
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
EARNINGS ($ IN 000)
Income (Loss)................................... ($17,127) $7,865 $10,061
Deduct:
Dividends on $5.00 Cumulative
Convertible Preferred Stock..... - (4) (12)
-------- ------- -------
Net income (loss) used in primary earnings
per share calculations.................. ($17,127) $7,861 $10,049
======== ======= =======
AVERAGE COMMON AND COMMON EQUIVALENT SHARES (IN 000)
Weighted average number of common
shares outstanding...................... 10,065 8,531 8,481
Common equivalent shares:
Series D Participating Convertible
Preferred Stock................. - 292 292
Stock options included under
treasury stock method........... - 802 729
-------- ------- -------
Total........................................... 10,065 9,625 9,502
======== ======= =======
Primary Earnings (Loss) Per Share............... ($1.70) $0.82 $1.06
======== ====== =======
</TABLE>
<PAGE>
WHITTAKER CORPORATION
CALCULATION OF EARNINGS PER SHARE (Continued)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
FULLY DILUTED EARNINGS PER SHARE
EARNINGS ($ IN 000)
Net income used in primary earnings
per share calculations.................. ($17,127) $7,861 $10,049
Adjustments: - - -
Net income (loss) used in fully diluted
earnings per share calculations......... ($17,127) $7,861 $10,049
======== ====== =======
AVERAGE SHARES USED TO CALCULATE FULLY DILUTED
EARNINGS PRE SHARE (IN 000)
Average common and common equivalent
shares, above........................... 10,065 9,625 9,502
Add:
Additional stock options included under
treasury stock method........... - - 88
-------- ------ -------
Total........................................... 10,065 9,625 9,590
======== ====== =======
Fully Diluted Earnings (Loss) Per Share......... ($1.70) $0.82 $1.05
======== ====== =======
</TABLE>
<PAGE>
WHITTAKER CORPORATION
CALCULATION OF EARNINGS PER SHARE (Continued)
NOTES
Earnings per share nave been computed based on the weighted average number of
common and common equivalent shares outstanding during the periods, after
deducting from net income for 1995 and 1994 the the dividend requirements on the
then outstanding $5.00 Cumulative Convertible Preferred Stock. Common stock
equivalents include Series D Participating Preferred Stock and dilutive employee
stock options calculated using the treasury stock method. For 1994 fully diluted
earnings per share include the additional potential dilutive effect of employee
stock options.
Common equivalent shares have been excluded from the 1996 calculations and
additional shares assuming conversion of subordinated convertible debt have been
excluded from the 1996 and 1995 calculations as inclusion of such shares would
have been antidilutive.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
WHITTAKER CORPORATION
A DELAWARE CORPORATION
<TABLE>
<CAPTION>
PLACE OF
NAME OF COMPANY INCORPORATION
- --------------- -------------
<S> <C>
U.S. SUBSIDIARIES
- -----------------
Blue Bell Lease, Inc. California
Metropolitan Financial Services Colorado
Corporation
Park Chemical Company Michigan
Whittaker Communications, Inc. California
Whittaker Controls, Inc. California
Whittaker Corp. Maine
Whittaker Development Co. Delaware
Whittaker Ordnance, Inc. Delaware
Whittaker Political Action California
Committee, Inc.
Whittaker Porta Bella California
Development, Inc.
Whittaker Services Corporation California
Whittaker Technical Colorado
Products, Inc.
Xyplex, Inc. Massachusetts
FOREIGN SUBSIDIARIES
- --------------------
Whittaker Communications England
Limited
Whittaker International, Inc. Barbados
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment
Number 2 to Registration Statement Number 2-74481 on Form S-8 dated January 28,
1983, as amended and supplemented to date, Post-Effective Amendment Number 3 to
Registration Statement Number 2-74481 on Form S-8 dated October 10, 1983, Post-
Effective Amendment Number 1 to Registration Statement Number 2-97149 on Form S-
8 dated September 30, 1985, Post-Effective Amendment Number 3 to Registration
Statement Number 2-76480 on Form S-8 dated April 22, 1985, Post-Effective
Amendment Number 2 to Registration Statement Number 2-70806 on Form S-8 dated
May 20, 1981, Post-Effective Amendment Numbers 2, 1-A and 1-B to Registration
Statement Number 33-04320 on Form S-4 dated March 26, 1986, as supplemented and
amended to date, Post-Effective Amendment Numbers 2-A and 2-B to Registration
Statement Number 33-04320 on Form S-8 to Form S-4 dated June 1, 1987,
Registration Statement Numbers 33-35762 and 33-35763 on Form S-8 dated July 6,
1990, Registration Statement Number 33-52295 on Form S-8 dated February 16,
1994, Registration Statement Number 33-58323 on Form S-8 dated March 31, 1995,
and Registration Statement Number 333-03753 on Form S-3 dated May 15, 1996 of
our report dated December 16, 1996 with respect to the consolidated financial
statements of Whittaker Corporation in the Annual Report (Form 10-K) for the
year ended October 31, 1996. We also consent to the reference to our firm under
the caption "Experts" in the aforementioned Registration Statements insofar as
that reference relates to our report for the year ended October 31, 1996.
ERNST & YOUNG LLP
Los Angeles, California
January 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 556
<SECURITIES> 1,010
<RECEIVABLES> 76,622
<ALLOWANCES> 2,364
<INVENTORY> 46,087
<CURRENT-ASSETS> 147,601
<PP&E> 89,787
<DEPRECIATION> 46,421
<TOTAL-ASSETS> 379,484
<CURRENT-LIABILITIES> 213,332
<BONDS> 453
0
1
<COMMON> 110
<OTHER-SE> 131,025
<TOTAL-LIABILITY-AND-EQUITY> 379,484
<SALES> 221,877
<TOTAL-REVENUES> 221,877
<CGS> 129,890
<TOTAL-COSTS> 129,890
<OTHER-EXPENSES> 34,238
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,018
<INCOME-PRETAX> (26,216)
<INCOME-TAX> (9,089)
<INCOME-CONTINUING> (17,127)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,127)
<EPS-PRIMARY> (1.70)
<EPS-DILUTED> 0
</TABLE>
