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# = pound sterling
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED MAY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-3085
WYMAN-GORDON COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-1992780
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
244 WORCESTER STREET, BOX 8001, 01536-8001
GRAFTON, MASSACHUSETTS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
508-839-4441
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
None None
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $1 PAR VALUE
(TITLE OF CLASS)
Indicate by a 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of July 25, 1998: $331,343,000
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT JULY 25, 1998
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<S> <C>
Common Stock, $1 Par Value 36,558,983 Shares
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's "Proxy Statement for Annual Meeting of
Stockholders" on October 21, 1998 are incorporated into Part III.
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ITEM 1. BUSINESS
THE COMPANY
Wyman-Gordon Company is a leading manufacturer of high-quality,
technologically advanced forging and investment casting components for the
commercial aviation, commercial power and defense industries. The Company
produces metal components to exacting customer specifications for technically
demanding applications such as jet turbine engines, airframes and land-based and
marine gas turbine engines. The Company also produces extruded seamless thick
wall pipe, made from steel and other alloys for use primarily in the oil and gas
industry and commercial power generation plants. The Company produces components
for most of the major commercial and United States defense aerospace programs.
The Company's unique combination of manufacturing facilities and broad range of
metallurgical skills allows it to serve its customers effectively and to lead
the development of new metal technologies for its customers' applications.
Through its Scaled Composites and Scaled Technology Works subsidiaries, the
Company engages in research, development, engineering and manufacture of
composite airframe structures. In fiscal years 1998 and 1997, the Company's
total revenues were $752.9 million and $608.7 million, respectively.
The Company employs three manufacturing processes: forging, investment
casting and composite production. The Company's forging process involves heating
metal and shaping it through pressing or extrusion. Forged products represented
77% of the Company's total revenues in the year ended May 31, 1998. Castings is
a process in which molten metal is poured into molds. Cast products represented
21% of the Company's total revenues in the year ended May 31, 1998. The
Company's composite business designs, fabricates and tests composite airframe
structures for the aerospace market. The composite business represented 2% of
the Company's total revenues in fiscal year 1998.
STRATEGY
In order to better serve its customers, the Company has refocused its
organizational structure towards end-markets served (i.e., aircraft turbines,
aircraft structural components and energy products) rather than manufacturing
processes used (i.e., forging, casting or composites). As a result, the
Company's business units will be responsible for specific market sectors or
customers. The purpose of this new structure is to enhance the Company's ability
to anticipate and adapt to customer demands and market opportunities.
The Company intends to strengthen its position in the aerospace market and
diversify into new markets by leveraging its manufacturing capabilities and
expertise in high-performance materials. By diversifying its business mix, the
Company intends to lessen its reliance on the aerospace industry and mitigate
the impact of the cyclicality of that industry. The Company intends to achieve
its goals through the following initiatives:
Continue Performance Improvements and Cost Reductions. The Company has
significantly improved its performance in recent years and is committed to
continuing to streamline its operations and its cost structure. The Company has
successfully completed the consolidation of Cameron Forged Products Company
("Cameron"), which was acquired from Cooper Industries, Inc. ("Cooper") in May
1994. As a result of the elimination of duplicate facilities, improved
throughput, and increased efficiencies of scale, the Company estimates that its
total production and selling costs are more than $30 million lower on an
annualized basis than such costs would have been under the cost structures of
the Company and Cameron prior to the acquisition. Building upon the performance
improvements achieved in recent years, the Company continually strives to
increase utilization rates, reduce inventory requirements and reduce operating
expenses and other costs.
Enhance Strategic Alliances with Customers and Suppliers. The Company and
certain of its customers and raw material suppliers have undertaken various
initiatives to improve quality, shorten manufacturing cycle times and reduce
costs at each stage of production. Teams from each of the participating
companies meet regularly to share information and to develop plans to improve
the efficiency of the entire supply chain. In addition, the Company believes it
will be able to provide higher value-added, custom-tailored products to its
customers by working more closely with its customers in the early stages of
product development. In
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July 1998, in connection with the formation of the titanium castings joint
venture described below, the Company entered into a transaction with Titanium
Metals Corporation, ("TIMET") in which TIMET acquired the Company's titanium
vacuum arc remelting facility in Millbury, Massachusetts, and the Company and
TIMET entered into a long-term agreement pursuant to which the Company will
acquire a substantial portion of its titanium raw material requirements.
Develop New Applications and Enter New Markets. The Company believes that
its expertise in the manufacture of metal components with enhanced fatigue- and
temperature-resistant properties gives it the ability to design new applications
for its current markets and to enter new markets. For example, the Company has
been able to enter the power generation market by utilizing its knowledge of
nickel-based alloys and manufacturing technology for aerospace turbines to
manufacture advanced components for land-based gas turbines. The Company is also
applying its expertise in investment casting, particularly in titanium, to enter
new markets, such as oil and gas and power generation.
Pursue Acquisitions or Joint Ventures. The Company intends to pursue
selective acquisitions and joint ventures that will enable the Company to
leverage its manufacturing expertise and metallurgical skills. The Company
believes that pursuing joint ventures will be increasingly important to its
future growth. For example, foreign joint ventures to produce components for the
aerospace industry may provide the Company with the opportunity to allow its
customers to meet local content requirements as they expand into foreign
markets. In addition, joint ventures may enable the Company to secure raw
material supplies or reduce costs. In 1998, the Company acquired International
Extruded Products, LLC ("IXP") of Buffalo, New York. IXP produces extruded
seamless pipe in sizes generally smaller than those produced by the Company at
its other facilities. In addition, IXP produces certain clad pipe in which a
corosion resistant inner layer is bonded to an outer layer of a different, less
expensive alloy, and pipes made of corosion resistant alloys of titanium and
other metals. The Company believes that the IXP product line broadens its own
offerings and will allow the Company to offer more comprehensive piping packages
to meet customer needs. In July 1998, the Company formed a joint venture with
TIMET which combines the Company's titanium castings operations in Franklin, New
Hampshire with TIMET's titanium castings operations in Albany, Oregon. The
Company believes that the joint venture, which is 80.1% owned by the Company,
will allow it to expand its offering of cast titanium products.
Leverage Expertise with Larger Aerospace Components. The Company believes
that its technological expertise in manufacturing large-scale components and
experience in producing and utilizing sophisticated alloys will enable it to
capitalize on the industry trend toward widebody aircraft with larger and more
sophisticated engines. These aircraft require larger airframe structural parts
and engine components manufactured with high-purity alloys, both of which are
particular strengths of the Company.
MARKETS AND PRODUCTS
The principal markets served by the Company are aerospace and energy.
Revenue by market for the respective periods were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
----------------- ----------------- -----------------
% OF % OF % OF
REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL
-------- ----- -------- ----- -------- -----
(000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Aerospace................... $607,844 81% $475,131 78% $362,706 73%
Energy...................... 114,186 15 97,117 16 92,991 19
Other....................... 30,883 4 36,494 6 43,927 8
-------- --- -------- --- -------- ---
Total....................... $752,913 100% $608,742 100% $499,624 100%
======== === ======== === ======== ===
</TABLE>
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Aerospace Products
Aerospace Turbine Products. The Company manufactures components from
sophisticated titanium and nickel alloys for jet engines manufactured by General
Electric Company ("GE"), the Pratt & Whitney Division ("Pratt & Whitney") of
United Technologies Corporation ("United Technologies"), Rolls-Royce ("Rolls
Royce") and CFM International S.A. Such jet engines are used on substantially
all commercial aircraft produced by the Boeing Company ("Boeing") and Airbus
Industrie, S.A. ("Airbus"). The Company's forged engine parts include fan discs,
compressor discs, turbine discs, seals, spacers, shafts, hubs and cases. Cast
engine parts include thrust reversers, valves and fuel system parts such as
combustion chamber swirl guides. Rotating parts (which include fan, compressor
and turbine discs) must be manufactured to precise quality specifications. The
Company believes it is the leading producer of these rotating components for use
in large turbine aircraft engines. Jet engines may produce in excess of 100,000
pounds of thrust and may subject parts to temperatures reaching 1,350 degrees
Fahrenheit. Components for such extreme conditions therefore require precision
manufacturing and expertise with high-purity titanium and nickel-based alloys.
Aerospace Structural Products. The Company's airframe structural
components, such as landing gear, bulkheads and wing spars, are used on every
model of airplane manufactured by Boeing and the Airbus A321, A330 and A340. In
addition, the Company's structural components are used on a number of military
aircraft and in other defense-related applications, including the C-17 transport
and the new F-22 fighter being jointly developed by Lockheed Martin Corporation
("Lockheed") and Boeing. The Company also produces dynamic rotor forgings for
helicopters.
Aerospace structural products include wing spars, engine mounts, struts,
landing gear beams, landing gear, wing hinges, wing and tail flaps, housings,
and bulkheads. These parts may be made of titanium, steel, aluminum and other
alloys, as well as composite materials. Forging is particularly well suited for
airframe parts because of its ability to impart greater strength per unit of
weight to metal than other manufacturing processes. Investment casting can
produce complex shapes to precise, repeatable dimensions.
The Company has been a major supplier of the beams that support the main
landing gear assemblies on the Boeing 747 for many years and supplies main
landing gear beams for the Boeing 777. The Company forges landing gear and other
airframe structural components for the Boeing 737, 747, 757, 767 and 777, and
the Airbus A321, A330 and A340. The Company produces structural forgings for the
F-15, F-16 and F/A-18 fighter aircraft and the Black Hawk helicopter produced by
Sikorsky Aircraft Corporation, a subsidiary of United Technologies. The Company
also produces large, one-piece bulkheads for Lockheed and Boeing for the F-22
fighter.
Energy Products
The Company is a major supplier of extruded seamless thick wall pipe used
in critical piping systems in both fossil fuel and nuclear commercial power
plants worldwide as well as in oil and gas industry applications. The Company
produces rotating components, such as discs and spacers, and valve components
for land-based steam turbine and gas turbine generators, and in addition, also
manufactures shafts, cases, and compressor and turbine discs for marine gas
engines. The Company believes the energy sector provides it with an opportunity
to build on its manufacturing capabilities and metallurgical know-how gained
from manufacturing products for the aerospace industry. The April 1998
acquisition of IXP enhances this opportunity.
The Company produces a variety of mechanical and structural tubular forged
products, primarily in the form of extruded seamless pipe, for the domestic and
international energy markets, which include nuclear and fossil-fueled power
plants, cogeneration projects and retrofit and life extension applications.
These tubular forged products also have ordnance and other military
applications. Aluminum, steel, and titanium products are manufactured at the
Company's Houston, Texas forging facility where one of the world's largest
vertical extrusion presses extrudes pipe up to 48 inches in diameter and seven
inches in wall thickness and bar stock from six to 32 inches in diameter.
Lengths of pipe and bar stock vary from ten to 45 feet, with a maximum forged
weight of 20 tons. Similar equipment and capabilities are in operation at the
Company's Livingston,
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Scotland, and Buffalo, New York, forging facilities. Additionally, the Houston
press extrudes powder billets for use in aircraft turbine engine forgings.
Other Products
The Company supplies products to builders of military ordnance. Examples of
forged products include steel casings for bombs and rockets. For naval defense
applications, the Company supplies components for propulsion systems for nuclear
submarines and aircraft carriers as well as pump, valve, structural and non-
nuclear propulsion forgings. The Company also manufactures extruded missile,
rocket and bomb casings and supplies extruded products for nuclear submarines
and aircraft carriers, including thick wall piping for nuclear propulsion
systems, torpedo tubes and catapult launch tubes. The Company also extrudes
powders for other alloy powder manufacturers.
Through its investment casting operations, which utilize a process of
pouring molten metal into a mold, the Company manufactures products for
commercial applications such as food processing, semiconductor manufacturing,
diesel turbochargers and sporting equipment. The Company is actively seeking to
identify alternative applications for its capabilities, such as in the
automotive and other commercial markets.
CUSTOMERS
The Company has approximately 275 active customers that purchase forgings,
approximately 800 active customers that purchase investment castings and
approximately 20 active customers that purchase composite structures. The
Company's principal customers are similar across all of these production
processes. Five customers accounted for 51%, 48% and 47% of the Company's
revenues for the years ended May 31, 1998, 1997 and 1996, respectively. GE and
United Technologies (primarily Pratt & Whitney division and Sikorsky) each
accounted for 10% or more of revenues for the years ended May 31, 1998, 1997 and
1996.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
----------------- ----------------- -----------------
% OF % OF % OF
REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL
-------- ----- -------- ----- -------- -----
(000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
GE.................................. $169,894 23% $156,764 26% $134,830 27%
United Technologies................. 76,786 10 60,921 10 53,116 11
</TABLE>
Boeing and Rolls-Royce are also significant customers of the Company.
Because of the relatively small number of customers for some of the Company's
principal products, those customers exercise significant influence over the
Company's prices and other terms of trade.
The Company has become actively involved with its aerospace customers
through supply chain management initiatives, joint development relationships and
cooperative research and development, engineering, quality control, just-in-time
inventory control and computerized design programs. The Company believes that
greater involvement in the design and development of components for its
customers' products will result in significant efficiencies and will allow the
Company to better serve its customers.
MARKETING AND SALES
The Company markets its products principally through its own sales
engineers and makes only limited use of independent manufacturers'
representatives. Substantially all sales are made directly to original equipment
manufacturers.
The Company's sales are not subject to significant seasonal fluctuations.
A substantial portion of the Company's revenues are derived from long-term,
fixed-price agreements ("LTAs") with major engine and aircraft manufacturers.
These contracts are typically "requirements" contracts under which the purchaser
commits to purchase a given portion of its requirements of a particular
component from the Company. Actual purchase quantities are typically not
determined until shortly before the year in which products are to be delivered.
The Company has increased its efforts to obtain LTAs with
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customers which contain price adjustments which would compensate the Company for
increased raw material costs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- General."
BACKLOG
The Company's firm backlog includes the sales prices of all undelivered
units covered by customers' orders for which the Company has production
authorization. The Company's firm backlog in the various markets served by the
Company has been as follows:
<TABLE>
<CAPTION>
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
------------------- ----------------- -----------------
% OF % OF % OF
BACKLOG TOTAL BACKLOG TOTAL BACKLOG TOTAL
---------- ----- -------- ----- -------- -----
(000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Aerospace.......................... $ 908,633 88% $767,989 86% $499,103 83%
Energy............................. 94,314 9 99,172 11 66,341 11
Other.............................. 27,145 3 28,664 3 32,994 6
---------- --- -------- --- -------- ---
Total.............................. $1,030,092 100% $895,825 100% $598,438 100%
========== === ======== === ======== ===
</TABLE>
At May 31, 1998, approximately $716.8 million of total firm backlog was
scheduled to be shipped within one year (compared to $671.6 million at May 31,
1997 and $437.0 million at May 31, 1996) and the remainder in subsequent years.
Sales during any period include sales which were not part of backlog at the end
of the prior period. Customer orders in firm backlog are subject to rescheduling
or termination for customer convenience and as a result of market fluctuations
in the commercial aerospace industry. However, in certain cases, the Company is
entitled to an adjustment in contract amounts. Because of the cyclical nature of
order entry experienced by the Company and its dependence on the aerospace
industry, there can be no assurance that order entry will continue at current
levels or that current firm purchase orders will not be canceled or delayed.
Accordingly, the Company's backlog is not necessarily indicative of the
Company's revenues for any future period or periods.
MANUFACTURING PROCESSES
The Company employs three manufacturing processes: forging, investment
casting and composites production.
Forging
The Company's forging process involves heating metal and shaping it through
pressing or extrusion. The Company forges titanium and steel alloys, as well as
high temperature nickel alloys. Forging is conducted on hydraulic presses with
capacities ranging up to 55,000 tons. The Company believes that it is the
leading producer of rotating components for use in turbine aircraft engines.
These parts are forged from purchased ingots which are converted to billet in
the Company's cogging presses and from alloy metal powders (primarily nickel
alloys) which are produced, consolidated and extruded into billet entirely at
the Company's facilities.
The Company manufactures its forgings at its facilities in Grafton and
Worcester, Massachusetts; Houston, Texas; Buffalo, New York; and Livingston,
Scotland. The Company also operates an alloy powder metal facility in Brighton,
Michigan; vacuum remelting facilities in Houston, Texas which produce steel and
nickel alloy ingots; and a plasma arc melting facility for the production of
titanium electrodes and ingots in Millbury, Massachusetts. The Company has eight
large closed die hydraulic forging presses rated as follows: 18,000 tons, 35,000
tons and 50,000 tons in Grafton Massachusetts; 20,000 tons, 29,000 tons and
35,000 tons in Houston, Texas; 12,000 tons in Buffalo, New York and 30,000 tons
in Livingston, Scotland. The Company reinstalled the 20,000 ton multi-ram press
in Houston at a cost of approximately $6 million and began operating it at the
end of fiscal year 1997. The addition of this press substantially increased the
Company's forging capacity. The 35,000 ton vertical extrusion press in Houston
can also be operated as a 55,000 ton hydraulic forging press. The Company also
operates two open die cogging presses used to convert ingot into
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billet rated at 2,000 tons and 1,375 tons at its Grafton, Massachusetts
location. The Company produces isothermal forgings on its forging press rated at
8,000 tons at its Worcester, Massachusetts location.
The Company employs the following five forging processes:
- Open-Die Forging. In this process, the metal is pressed between dies
that never completely surround the metal, thus allowing the metal to be
observed during the process. Typically, open-die forging is used to
create relatively simple, preliminary shapes to be further processed by
closed die forging.
- Closed-Die Forging. Closed-die forging involves pressing heated metal
into the required shapes and size determined by machined impressions in
specially prepared dies which completely surround the metal. In hot-die
forging, both titanium and nickel alloys can be forged using this
process, in which the dies are heated to a temperature of approximately
1300 degreesF. This process allows metal to flow more easily within the
die cavity which produces forgings with superior surface finish,
metallurgical structures with tighter tolerances and enhanced
repeatability of the part shape.
- Conventional/Multi-Ram. The closed-die, multi-ram process utilized on
the Company's 30,000 and 20,000 ton presses enables the Company to
produce extremely complex forgings such as valve bodies with multiple
cavities in a single heating and pressing cycle. Dies may be split either
on a vertical or a horizontal plane and shaped punches may be operated by
side rams, piercing rams, or both. Multi-ram forging enables the Company
to produce a wide variety of shapes, sizes and configurations. The
process also optimizes grain flow and uniformity of deformation and
reduces machining requirements.
- Isothermal Forging. Isothermal forging is a closed-die process in which
the dies are heated to the same temperature as the metal being forged,
typically in excess of 1,900 degrees Fahrenheit. The forged material
typically consists of nickel alloy powders. Because of the high die
temperatures necessary for forming these alloys, the dies are made of
refractory metals, typically molybdenum, so that the die retains its
strength and shape during the forging process. Because the dies may
oxidize at these elevated temperatures, the forging process is carried on
in a vacuum or inert gas atmosphere. The Company's isothermal press also
allows it to produce near-net shape components (requiring less machining
by the customer) made from titanium alloys, which can be an important
competitive advantage in times of high titanium prices. The Company
carries on this process in its 8,000-ton isothermal press.
- Extrusion. The Company's 35,000 ton vertical extrusion press is one of
the largest and most advanced extrusion presses in the world. Extrusions
are produced for applications in the oil and gas industry, including
tension leg platforms, riser systems and production manifolds. The
extrusion process is facilitated by manipulators capable of handling work
pieces weighing up to 20 tons, rotary hearth furnaces and a 14,000 ton
blocking press. The Company's extrusion press is capable of producing
thick wall seamless pipe with outside diameters up to 48 inches and wall
thicknesses from 1/2 inch up to seven inches. Solid extrusions can be
manufactured from six to 32 inches in diameter. Typical lengths vary from
ten to 45 feet. Powder materials can also be compacted and extruded into
forging billets utilizing this press. The 30,000 ton press in Scotland
has similar extrusion capabilities in addition to its multi-ram forging
capabilities. The 12,000 ton press in Buffalo, New York is capable of
producing seamless pipe with outside diameters up to 20 inches and wall
thicknesses from 3/8 inches up to three inches.
Metal Production. The Company's Brighton, Michigan powder metal facility
has the capability to atomize, process, and consolidate (by hot isostatic
pressing) alloy metal powders for use in aerospace, medical implant,
petrochemical, hostile environment oil and gas drilling and production, and
other applications. This facility has an annual production capacity of up to
500,000 pounds of alloy powder. After production of the powder, the Company
consolidates the metal by extrusion using its 35,000 ton press in Houston, and
the extruded billets are then forged into critical jet engine components on the
Company's 8,000 ton isothermal press in Worcester, Massachusetts.
The Company's vacuum arc remelting ("VAR") shop in Houston, Texas has five
computer-controlled VAR furnaces which process electrodes up to 42 inches in
diameter that weigh up to 40,000 pounds. The Houston VAR furnaces are used to
remelt purchased electrodes into high purity alloys for internal use. In
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addition, the VAR furnaces are used for toll melting. These vacuum metallurgy
techniques provide consistently high levels of purity, low gas content, and
precise control over the solidification process. This minimizes segregation in
complex alloys and results in improved mechanical properties, as well as hot and
cold workability.
The Company's plasma arc melting ("PAM") facility in Millbury is capable of
producing high quality titanium ingot and nickel alloy powder. The Company has
entered into a joint venture with Pratt & Whitney and certain Australian
investors to produce nickel alloy ingots in Perth, Australia, some of which the
Company utilizes as raw materials for its forging and casting products.
Support Operations. The Company manufactures some of its own forging dies
out of high-strength steel and molybdenum. These dies can weigh in excess of 100
tons and can be up to 25 feet in length. In manufacturing its dies, the Company
utilizes its customers' drawings and engineers the dies using CAD/CAM equipment
and sophisticated computer models that simulate metal flow during the forging
process. This activity improves die design and process control and permits the
Company to enhance the metallurgical characteristics of the forging.
The Company also has at its three major forging locations machine shops
with computer aided profiling equipment, vertical turret lathes and other
equipment that it employs to shape rough machine products. The Company also
operates rotary and car-bottom furnaces for heat treatment to enhance the
performance characteristics of the forgings.
Testing. Because the Company's products are for high performance end uses,
rigorous testing is necessary and is performed internally by Company engineers.
Throughout the manufacturing process, numerous tests and inspections are
performed to insure the final quality of each product; statistical process
control techniques are also applied throughout the entire manufacturing process.
The Company subjects its products to extensive quality inspection and contract
qualification procedures involving zyglo, chemical etching, ultrasonic, red dye,
hardness, and electrical conductivity testing facilities.
Investment Castings
The Company's investment castings operations use high-volume production
equipment and both air-melt and vacuum-melt furnaces to produce a wide variety
of complex investment castings. Castings are made of a range of metal alloys
including steel, aluminum, nickel, titanium and magnesium. The Company's
castings operations are conducted in facilities located in Groton, Connecticut;
Franklin and Tilton, New Hampshire; Carson City, Nevada; San Leandro, California
and Albany, Oregon.
In July 1998, the Company and TIMET combined their respective titanium
casting operations in Tilton, New Hampshire and Albany, Oregon into Wyman Gordon
Titanium Castings, LLC, a Delaware limited liability company, (the "Joint
Venture"), 80.1% owned by the Company and 19.9% by TIMET. The parties have
agreed, in general, that the TIMET Venture will be the exclusive means by which
they conduct their titanium castings operations.
The Company produces its investment castings by the "lost wax" process, a
method developed in China over 5,000 years ago. The initial step in producing
investing castings is to create a wax form of the ultimate metal part by
injecting molten wax into an aluminum mold, known as a "tool." These tools are
produced to the specifications of the customer and are primarily purchased from
outside die makers, although the Company maintains internal tool-making
capabilities. The wax patterns are then mechanically coated with a ceramic
slurry in a process known as investment. This forms a ceramic shell which is
subsequently air-dried and hardened under controlled environmental conditions.
Next, the wax inside this shell is melted and removed in a high temperature
steam autoclave and the molten wax is recycled. In the next, or "foundry" stage,
metal is melted in an electric furnace in either an air or vacuum environment
and poured into the ceramic shell. After cooling, the ceramic shells are removed
by vibration, chipping or various types of water or air blasting. The metal
parts are then cleaned in a high temperature caustic bath, followed by water
rinsing. In the finishing stage, the castings are finished by grinding and
polishing to remove excess metal. The final product then
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undergoes a lengthy series of testing (radiography, fluorescent penetrant,
magnetic particle and dimensional) to ensure quality and consistency.
Composites
The Company's composites subsidiary, Scaled Composites, located in Mojave,
California, designs, fabricates and tests composite airframe structures made by
layering carbon graphite and other fibers with epoxy resins for the aerospace
market. During fiscal year 1998, the Company completed the construction of a
120,000-square-foot facility in Montrose, Colorado, where the Company's
subsidiary, Scaled Technology Works, manufactures airplane components,
principally those designed by Scaled Composites.
OPERATING FACILITIES
The following table sets forth certain information with respect to the
Company's operating facilities at May 31, 1998, all of which are owned. The
Company believes that its operating facilities are well maintained, are suitable
to support the Company's business and are adequate for the Company's present and
anticipated needs. On average, during the Company's fiscal year 1998, the
Company's forging, investment castings and composites facilities were operating
at approximately 78%, 76% and 77% of their total productive capacity,
respectively.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
LOCATION FOOTAGE PRIMARY FUNCTION
- -------- ----------- --------------------------
<S> <C> <C>
Brighton, Michigan................................... 34,500 Alloy Powder Production
Grafton, Massachusetts............................... 85,420 Administrative Offices
Grafton, Massachusetts............................... 843,200 Forging
Houston, Texas....................................... 1,283,800 Forging
Livingston, Scotland................................. 405,200 Forging
Millbury, Massachusetts.............................. 104,125 Research and Development,
Metals Production
Worcester, Massachusetts............................. 22,300 Forging
Buffalo, New York (2 plants)......................... 235,000 Forging
Carson City, Nevada.................................. 55,000 Casting
Franklin, New Hampshire.............................. 43,200 Casting
Groton, Connecticut (2 plants)....................... 162,550 Casting
San Leandro, California.............................. 60,000 Casting
Tilton, New Hampshire................................ 94,000 Casting
Mojave, California................................... 67,000 Composites
Montrose, Colorado................................... 120,000 Composites
</TABLE>
RAW MATERIALS
Raw materials used by the Company in its forgings and castings include
titanium, nickel, steel, aluminum, magnesium and other metallic alloys. The
composites operation uses high strength fibers such as fiberglass or graphite,
as well as materials such as foam and epoxy, to fabricate composite structures.
The major portion of metal requirements for forged and cast products are
purchased from major metal suppliers producing forging and casting quality
material as needed to fill customer orders. The Company has two or more sources
of supply for all significant raw materials. Its principal suppliers of nickel
alloys include Special Metals Corporation, Allegheny Teledyne, Inc., and
Carpenter Technologies Corporation. Its principal suppliers of titanium alloys
are TIMET, Oregon Metallurgical Corp. and RMI Titanium Company. In July 1998,
the Company exchanged certain assets of its Millbury, Massachusetts titanium
vacuum arc remelting facility for certain assets of TIMET's Albany, Oregon
titanium castings business. In connection with such exchange the Company and
TIMET entered into a long term supply agreement pursuant to which the Company
will acquire a substantial portion of its titanium raw material requirements
from TIMET. The
8
<PAGE> 10
Company's powder metal facility in Brighton, Michigan produces nickel alloy
powder and high quality titanium ingots. In addition the Company is a
participant in the joint venture to produce nickel alloy ingots, and the Company
utilizes a portion of the output of its Australian joint venture for its own
use.
The titanium and nickel alloys utilized by the Company have a relatively
high dollar value. Accordingly, the Company attempts to recover and recycle
scrap materials such as machine turnings, forging flash, scrapped forgings, test
pieces and casting sprues, risers and gates.
In the event a customer cancels an order for which material has been
purchased, the Company may, under certain circumstances, obtain reimbursement
from the customer if the material cannot be diverted to other uses. Costs of
material already on hand, along with any conversion costs incurred, are
generally billed to the customer unless transferable to another order. As demand
for the Company's products grew during recent fiscal years, and prices of raw
materials have risen, the Company experienced raw material shortages and
production delays. During fiscal year 1997 and the first six months of fiscal
year 1998, the Company's suppliers of nickel and titanium alloys experienced
increases in the market prices of the elements (e.g., nickel, titanium, cobalt),
that they use in fabricating their products. Because the Company's suppliers
generally have alternative markets for their products where they may have
greater ability to increase their prices, production in some cases was diverted
to alternative markets. As a result, during fiscal year 1997 and the first six
months of 1998, the Company's lead time for deliveries from its suppliers
expanded from 20 weeks to 50 weeks or more. In the last six months this trend
has started to change. New capacities at these suppliers combined with a
flatening in overall demand is causing some softening in price and reductions in
lead times back toward 20 weeks. In response to these supply problems, the
Company has sought price increases and other financial considerations from its
customers which would permit it to increase the price it pays to suppliers. In
addition, the Company and certain of its customers and suppliers have undertaken
active programs for supply chain management which have helped to reduce the
overall lead times for deliveries of raw materials.
Many of the Company's customer contracts have fixed prices for extended
time periods and do not provide complete price adjustments for changes in the
prices of raw materials such as metals. The Company attempts to reduce its risk
with respect to its customer contracts by procuring long-term contracts with
suppliers of metal alloys, but the Company's supply contracts typically do not
completely insulate the Company from fluctuations in the prices of raw
materials.
ENERGY USAGE
The Company is a large consumer of energy. Energy is required primarily for
heating metals to be forged and melting metals to be cast, melting of ingots,
heat-treating products after forging and casting, operating forging presses,
melting furnaces, die-sinking, mechanical manipulation and pollution control
equipment and space heating. Supplies of natural gas, oil and electricity used
by the Company have been sufficient and there is no anticipated shortage for the
future. However, significant increases in the price of or shortages in these
energy supplies may have an adverse impact on the Company's results of
operations.
9
<PAGE> 11
EMPLOYEES
As of May 31, 1998, the Company had approximately 4,285 employees, of whom
1,145 were executive, administrative, engineering, research, sales and clerical
and 3,140 were production and craft. Approximately 49% of the production and
craft employees, consisting of employees in the forging business, are
represented by unions. The Company has entered into collective bargaining
agreements with these union employees as follows:
<TABLE>
<CAPTION>
NUMBER OF
EMPLOYEES COVERED
BY BARGAINING
LOCATION AGREEMENTS INITIATION DATE EXPIRATION DATE
- -------- ----------------- ---------------- ------------------
<S> <C> <C> <C>
Grafton, Millbury and
Worcester,
Massachusetts............. 582 April 6, 1997 March 24, 2002
Houston, Texas.............. 616 August 10, 1998 August 12, 2001
45 August 7, 1995 September 27, 1998
Livingston, Scotland........ 203 December 1, 1995 November 30, 1998
35 February 1, 1996 January 31, 1999
Buffalo, New York........... 52 October 21, 1996 June 6, 1999
-----
Total............. 1,533
=====
</TABLE>
The Company believes it has good relations with its employees, but there
can be no assurances that the Company will not experience a strike or other work
stoppage or that acceptable collective bargaining agreements can be negotiated
when the existing collective bargaining agreements expire.
RESEARCH AND PATENTS
The Company maintains research and development departments at both
Millbury, Massachusetts, and Houston, Texas, which are engaged in applied
research and development work primarily relating to the Company's forging
operations. The Company works closely with customers, universities and
government technical agencies in developing advanced forging and casting
materials and processes. The Company's Castings Operations conduct research and
development related to advanced casting materials and processes at its Groton,
Connecticut, and Tilton, New Hampshire, facilities. The Company's composites
operation conducts research and development related to aerospace composite
structures at the Mojave, California, facility. The Company spent approximately
$3.3 million, $2.9 million and $1.6 million on applied research and development
work during the years ended May 31, 1998, 1997 and 1996, respectively. Although
the Company owns patents covering certain of its processes, the Company does not
consider that these patents are of material importance to the Company's business
as a whole. Most of the Company's products are manufactured to customer
specifications and, consequently, the Company has few proprietary products.
COMPETITION
Most of the Company's production capabilities are possessed in varying
degrees by other companies in the industry, including both domestic and foreign
manufacturers. Competition in each of the Company's current product markets is
cyclical, intensifying during upturns and lessening during downturns, but such
cyclicality of competition is especially present in aerospace structural
products markets because of the cyclical nature of the commercial and defense
aerospace industries. In the aerospace turbine products market, the Company's
largest competitors are Ladish Co., Inc., Fortech, S.A. and Thyssen AG. In the
aerospace structural products market, Alcoa Corporation and Schultz Steel
Company are the Company's largest competitors. In the energy products market,
the Company faces mostly international competition from Mannesmann A.G. and
Sumitomo Corporation, among others. In the aerospace castings products market,
Howmet Corporation and Precision Cast Parts Corp. are the Company's largest
competitors.
In the future, the Company may face increased competition from
international companies which currently have the required manufacturing
equipment, but may lack sufficient technological or financial
10
<PAGE> 12
resources, and may be hampered by lower productivity. International competition
in the forging and casting processes may also increase in the future as a result
of strategic alliances among aircraft prime contractors and foreign companies,
particularly where "offset" or "local content" requirements create purchase
obligations with respect to products manufactured in or directed to a particular
country. Competition is often intense among the companies currently involved in
the industry. Competitive advantages are afforded to those with high quality
products, low cost manufacturing, excellent customer service and delivery and
engineering and production expertise. The Company believes that it has strength
in these areas, but there can be no assurance that the Company can maintain its
share of the market for any of its products.
ENVIRONMENTAL REGULATIONS
The Company's operations are subject to extensive, stringent and changing
federal, state and local environmental laws and regulations, including those
regulating the use, handling, storage, discharge and disposal of hazardous
substances and the remediation of alleged environmental contamination.
Accordingly, the Company is involved from time to time in administrative and
judicial inquiries and proceedings regarding environmental matters.
Nevertheless, the Company believes that compliance with these laws and
regulations will not have a material adverse effect on the Company's operations
as a whole. However, it is not possible to predict accurately the amount or
timing of costs of any future environmental remediation requirements. The
Company continues to design and implement a system of programs and facilities
for the management of its raw materials, production processes and industrial
waste to promote compliance with environmental requirements. As of May 31, 1998,
aggregate environmental reserves amounted to $16.5 million, which includes
expected cleanup expenses estimated between $4.4 million and $5.4 million upon
the eventual sale of the Worcester facility, certain environmental issues,
including the remediation of on-site landfills, at Cameron amounting to
approximately $3.5 million, $5.6 million in remediation projects at the Grafton
facility, $0.9 million for remediation at the Buffalo facility and $1.1 million
for various Superfund sites. There can be no assurance that the actual costs of
remediation will not eventually materially exceed the amount presently accrued.
Pursuant to an agreement entered into with the U.S. Air Force upon the
acquisition of the Grafton facility from the federal government in 1982, the
Company agreed to make expenditures totaling $20.8 million for environmental
management and remediation at that site during the period 1982 through 1999, of
which $4.0 million remained as of May 31, 1998. These expenditures will not
resolve the Company's obligations to federal and state regulatory authorities,
who are not parties to the agreement, however, and the Company expects to incur
an additional amount, currently estimated at approximately $3.5 million, to
comply with current federal and state environmental requirements governing the
investigation and remediation of contamination at the site.
The Company's Grafton facility was formerly included in the U.S. Nuclear
Regulatory Commission's ("NRC") May 1992 Site Decommissioning Management Plan
("SDMP") for low-level radioactive waste as the result of the disposal of
magnesium thorium alloys at the facility in the 1960s and early 1970s under
license from the Atomic Energy Commission. On March 31, 1997, the NRC informed
the Company that jurisdiction for the Grafton site had been transferred to the
Commonwealth of Massachusetts Department of Public Health (the "DPH") and that
the Grafton facility had been removed from the SDMP. Although it is unknown what
specific remediation and disposal requirements may be imposed on the Company by
the DPH, the Company believes that a reserve of $1.5 million recorded on its
books is sufficient to cover all costs. There can be no assurance, however, that
such reserve will be adequate to cover any obligations that the DPH may
ultimately impose on the Company.
The Company, together with numerous other parties, has been named a PRP
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") for the cleanup of the following Superfund sites: Operating
Industries, Monterey Park, California; Cedartown Municipal Landfill, Cedartown,
Georgia; PSC Resources, Palmer, Massachusetts; the Harvey GRQ site, Harvey,
Illinois; the Berlin & Farrow site, Swartz Creek, Michigan; the Gemme/Fournier
site, Leicester, Massachusetts; and the Salco, Inc. site, Monroe, Michigan. The
Company believes that a reserve of $1.1 million recorded on its books is
sufficient to cover all costs.
11
<PAGE> 13
At the Gemme/Fournier site, a proposed agreement would allocate 33% of the
cleanup costs to the Company. In September 1995, a consulting firm retained by
the PRP group made a preliminary remediation cost estimate of $1.4 million to
$2.8 million. The Company's insurance company is defending the Company's
interests, and the Company believes that any recovery against the Company would
be offset by recovery of insurance proceeds.
The Company expects to incur between $4.4 and $5.4 million in cleanup
expenses upon the planned sale of its Worcester, Massachusetts facility to
remedy certain contamination discovered on site. The Massachusetts Department of
Environmental Protection has classified the site as a Tier II site under the
Massachusetts Contingency Plan.
PRODUCT LIABILITY EXPOSURE
The Company produces many critical engine and structural parts for
commercial and military aircraft. As a result, the Company faces an inherent
business risk of exposure to product liability claims. The Company maintains
insurance against product liability claims, but there can be no assurance that
such coverage will continue to be available on terms acceptable to the Company
or that such coverage will be adequate for liabilities actually incurred. The
Company has not experienced any material loss from product liability claims and
believes that its insurance coverage is adequate to protect it against any
claims to which it may be subject.
LEGAL PROCEEDINGS
In addition to the matters disclosed below, at May 31, 1998, the Company
was involved in certain legal proceedings arising in the normal course of its
business. The Company believes the outcome of these matters will not have a
material adverse effect on the Company.
On December 22, 1996, a serious industrial accident occurred at the
Houston, Texas, facility of Wyman-Gordon Forgings, Inc. ("WGFI"), a wholly-owned
subsidiary of the Company, in which eight employees were killed and two others
injured.
OSHA conducted an investigation of the accident. On June 18, 1997, WGFI
reached an agreement with OSHA, settling citations resulting from the accident.
The injured workers and the decedents' families have asserted claims
against the Company and WGFI. WGFI has also received claims from several
employees of a subcontractor claiming to have been injured at the time of the
accident as well as from one current employee.
To date, the Company has settled all claims that could be brought by three
of the decedents' families on terms acceptable to the Company and its insurance
carriers and in addition has reached agreement for the settlement of the claims
of the family of a fourth decedent. The Company has also settled most of the
claims of the subcontractor employees. The Company thus far has been unable to
achieve settlements with the other claimants, and, on October 24, 1997, a
lawsuit was filed in the District Court of Harris County, Texas, on behalf of
three of the decedents' families against the Company, WGFI and Cooper-Cameron
Corporation. One of the injured employees has subsequently filed a motion to be
included in the lawsuit. Trial of the lawsuit is currently set for January,
1999.
In general, under Texas statutory law, an employee's exclusive remedy
against an employer for an on-the-job injury is the benefits of the Texas
Workers' Compensation Act. WGFI, the employer of the deceased employees, has
workers' compensation insurance coverage and the injured employees and
beneficiaries of the deceased employees are receiving workers' compensation
payments. Under applicable law, however, statutory beneficiaries of employees
killed in the course and scope of their employment may recover punitive (but not
compensatory) damages in excess of workers compensation benefits. However, to do
so, they must prove that the employer was grossly negligent. The protection of
the workers compensation exclusive remedy provision may not extend to the
Company as parent corporation of WGFI. Therefore, with regard to the October 24,
1997 lawsuit and any future lawsuits brought on behalf of those killed or
injured in the Houston accident or their families against the Company, if (i)
the court finds that the Company had a legal duty to WGFI and its employees,
(ii) the evidence supports a finding that the Company acted negligently in its
duty to WGFI and
12
<PAGE> 14
its employees and (iii) such negligence had a causal connection with the
accident, the plaintiffs might be able to recover compensatory damages against
the Company. If it is shown that the Company's conduct amounted to gross
neglect, and that conduct is found to be a cause of the accident, the plaintiffs
may be able to recover punitive damages against the Company.
It is not possible at this time to determine the extent, if any, to which
WGFI or the Company could be held liable in connection with the accident. The
Company maintains general liability and employer's liability insurance for
itself and its subsidiaries under various policies with aggregate coverage
limits of approximately $29 million, a portion of which has been expended in the
settlements to date. While WGFI has tendered the defense of the various claims
to the Company's insurance carriers, there can be no assurance that the full
insurance coverage will be available. Based on the Company's experience in the
settlement negotiations to date, the Company believes that there is a
substantial risk that the pending and threatened claims will not be settled for
an aggregate amount within its insurance coverage limits. The Company
anticipates that, as with the currently pending lawsuit, any additional lawsuits
will include claims for alleged compensatory as well as punitive damages that in
the aggregate could substantially exceed the Company's available insurance
coverage. The Company intends to vigorously defend all lawsuits that have been
or may be filed relating to the accident. However, if one or more such lawsuits
were to be prosecuted successfully by the plaintiffs and a judgment were to be
obtained by one or more plaintiffs in such lawsuits and sustained on appeal,
litigation costs, including the cost of pursuing any appeals, and the cost of
paying such a judgment, to the extent not covered by insurance, could have a
material adverse effect on the Company's financial condition and the results of
operations, particularly if any such judgment includes awards for punitive
damages.
On September 25, 1997, the Company received a subpoena from the United
States Department of Justice informing it that the United States Department of
Defense and other federal agencies had commenced an investigation with respect
to the manufacture and sale of investment castings at the Company's Tilton, New
Hampshire, facility. The focus of the investigation is whether the Company
failed to comply with required quality control procedures for cast aerospace
parts and whether the Company shipped cast components that did not meet
applicable specifications, which could be a violation of federal requirements.
The investigating agencies have directed the Company to furnish various
documents and information relating to the subject of the investigation. The
Company is cooperating fully with the investigation, and in addition, has
substantially completed its own investigation, which was supervised by the
Company's outside attorneys and conducted by quality and process auditors from
another casting facility of the Company and by the Company's internal attorneys.
Such investigation has identified certain departures from Company policies and
procedures which have been addressed. The federal investigation may result in
criminal or civil charges being brought against the Company which could result
in civil damages and penalties and criminal liability if the Company were found
to have violated federal laws. Based on the Company's own investigation to date,
the Company does not believe that the federal investigation is likely to result
in a material adverse impact on the Company's financial condition or results of
operations, although no assurance as to the outcome or impact of that
investigation can be given.
13
<PAGE> 15
MANAGEMENT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David P. Gruber........................... 56 Chairman and Chief Executive Officer
J. Douglas Whelan......................... 59 President, Chief Operating Officer and
Director
Edward J. Davis........................... 51 Vice President, Chief Financial Officer and
Treasurer
Sanjay N. Shah............................ 47 Vice President, Corporate Strategy Planning
and Business Development
J. Stewart Smith.......................... 56 President, Manufacturing
Colin Stead............................... 59 Senior Vice President, Quality and
Technology
Wallace F. Whitney, Jr.................... 55 Vice President, General Counsel and Clerk
Frank J. Zugel............................ 53 President, Marketing
E. Paul Casey............................. 68 Director
Warner S. Fletcher........................ 53 Director
Robert G. Foster.......................... 60 Director
Russell E. Fuller......................... 72 Director
Charles W. Grigg.......................... 59 Director
M Howard Jacobson......................... 65 Director
Judith S. King............................ 63 Director
Robert L. Leibensperger................... 59 Director
Andrew E. Lietz........................... 59 Director
H. John Riley, Jr. ....................... 57 Director
David A. White, Jr. ...................... 56 Director
</TABLE>
DAVID P. GRUBER was elected Chairman and Chief Executive Officer of the
Company on October 15, 1997, having previously served as President and Chief
Executive Officer since May 1994 and as President and Chief Operating Officer
since he joined the Company in October 1991. Prior to joining the Company, Mr.
Gruber served as Vice President, Advanced Ceramics, of Compagnie de Saint Gobain
(which acquired Norton Company in 1990), a position he held with Norton Company
since 1987. Mr. Gruber previously held various executive and technical positions
with Norton Company since 1978. He is a Director of State Street Corporation, a
Trustee of the Manufacturers' Alliance for Productivity and Innovation, and a
member of the Mechanical Engineering Advisory Committee of Worcester Polytechnic
Institute.
J. DOUGLAS WHELAN was elected President and Chief Operating Officer of the
Company on October 15, 1997, having previously served as President, Forgings
since he joined the Company in March 1994. He joined the Company's Board of
Directors in 1998. Prior to joining the Company, he had served for a short time
as the President of Ladish Co., Inc., a forging company in Cudahy, Wisconsin,
and prior thereto, had been Vice President, Operations of Cameron, with which
company and its predecessors he had been employed since 1965 in various
executive capacities. Mr. Whelan is a Director of Sifco Industries, Inc. and a
member of the President's Council of Manufacturers Alliance.
EDWARD J. DAVIS was elected Vice President, Chief Financial Officer and
Treasurer in February 1998. Prior to joining the Company, Mr. Davis had served
as Executive Vice President and Chief Financial Officer of General Ship
Acquisition Corporation, Boston, Massachusetts since 1992, and as Senior Manager
of Price Waterhouse & Company from 1989 to 1992.
SANJAY N. SHAH was elected Vice President, Corporate Strategy Planning and
Business Development in May 1994, having previously served as Vice President and
Assistant General Manager of the Company's Aerospace Forgings Division. He has
held a number of executive, research, engineering and manufacturing positions at
the Company since joining the Company in 1975.
14
<PAGE> 16
J. STEWART SMITH was elected President, Manufacturing of the Company on
October 15, 1997, having previously served as Vice President, Manufacturing and
Engineering of the Forgings Division since 1994. Prior to that time, Mr. Smith
had held various technical and manufacturing positions with Cameron and its
predecessors since joining that company in 1978.
COLIN STEAD was elected Senior Vice President, Quality and Technology of
the Company on October 15, 1997, having previously served as Vice President,
Quality and Metallurgy of the Forgings Division since 1994. Prior thereto, he
had served in various technical and quality positions with Cameron and its
predecessors since joining that company in 1984.
WALLACE F. WHITNEY, JR. joined the Company in 1991. Prior to that time, he
had been Vice President, General Counsel and Secretary of Norton Company since
1988, where he had been employed in various legal capacities since 1973.
FRANK J. ZUGEL was elected President, Marketing of the Company on October
15, 1997, having previously served as President, Investment Castings, since he
joined the Company in 1993. Prior to that time, he had served as President of
Stainless Steel Products, Inc., a metal fabricator for aerospace applications,
since 1992.
E. PAUL CASEY, Chairman and General Partner, Metapoint Partners, Peabody,
Massachusetts (an investment partnership which he established in 1988), has been
a Director of the Company since 1993. He served as Vice Chairman of Textron,
Inc. from 1986 to 1987 and as Chief Executive Officer and President of Ex-Cell-O
Corporation during 1978 to 1986. Mr. Casey is a Director of Comerica, Inc. and
Hood Enterprises, Inc., a Trustee of Henry Ford Health Care System and President
of the Hobe Sound, Florida Community Chest.
WARNER S. FLETCHER, Attorney and Director of the law firm of Fletcher,
Tilton & Whipple, P.C., Worcester, Massachusetts, has been a Director of the
Company since 1987. Mr. Fletcher is an Advisory Director of Bank of Boston,
Worcester. He is also Chairman of The Stoddard Charitable Trust, a Trustee of
The Fletcher Foundation, the George I. Alden Trust, Worcester Polytechnic
Institute, Worcester Foundation for Experimental Biology, Bancroft School and
the Worcester Art Museum.
ROBERT G. FOSTER, President, Chief Executive Officer and Chairman of the
Board of Commonwealth BioVentures, Inc., Portland, Maine (a venture capital
company engaged in biotechnology) since 1987. Director of the Company since
1989. Term expires in 2000. He is also a Director of United Timber Corp.,
Meridian Medical Technologies, Phytera, the Small Enterprise Growth Fund for the
State of Maine, Intellicare American and Epic Pharmaceuticals.
RUSSELL E. FULLER, Chairman of REFCO, Inc., (a supplier of specialty
industrial products), has been a Director of the Company since 1988. Mr. Fuller
is Chairman and Treasurer of The George F. and Sybil H. Fuller Foundation and a
Trustee of The Medical Center of Central Massachusetts. He is also Trustee of
the Massachusetts Biotechnology Research Institute and the Worcester County
Horticultural Society.
CHARLES W. GRIGG, Chairman and Chief Executive Officer of SPS Technologies,
Inc. (a manufacturer of high technology products in the field of fastening,
precision components and materials handling), was elected a Director in 1996.
Prior to joining SPS Technologies in 1993, Mr. Grigg spent ten years at Watts
Industries, Inc. (a Massachusetts manufacturer of valves for industrial
applications), the last nine of which as President and Chief Operating Officer.
M HOWARD JACOBSON, Senior Advisor, Bankers Trust, New York, has been a
Director of the Company since 1993. Term expires in 1999. Mr. Jacobson was for
many years President and Treasurer and a Director of Idle Wild Foods, Inc. until
that company was sold in 1986. Mr. Jacobson is a Director of Allmerica Financial
Corporation, Stonyfield Farm, Inc. and Boston Chicken, Inc. He is Chairman of
the Overseers of WGBH Public Broadcasting, the Massachusetts Biotechnology
Research Institute, a Trustee of the Worcester Foundation for Biomedical
Research, a Trustee of the Worcester Polytechnic Institute, Umass Memorial
Healthcare and a member of the Harvard University Overseers' Committee on
University Resources. He is also a member of the Commonwealth of Massachusetts
Board of Higher Education.
15
<PAGE> 17
JUDITH S. KING, Trustee and Treasurer of The Stoddard Charitable Trust, has
been a Director of the Company since 1990.
ROBERT L. LEIBENSPERGER, Executive Vice President, Chief Operating Officer
and President -- Bearings of The Timken Company, Canton, Ohio (a manufacturer of
precision bearings.) Mr. Leibensperger joined the Company's Board of Directors
in January 1998. Mr. Leibensperger has been employed by The Timken Company since
1960, where he held various research, engineering, sales and marketing, and
executive positions. Mr. Leibensperger is a member of the American Bearing
Manufacturers Association Executive Committee, the Council on Competitiveness
Global R&D Committee, the Stark County (Ohio) Capital Campaigns Committee, the
Cultural Center for the Arts (Canton, Ohio) House & Grounds Committee and the
Goodwill Industries (Canton, Ohio) Transportation Services Committee.
ANDREW E. LIETZ, President and Chief Executive Officer and Director of
HADCO Corporation, Salem, New Hampshire. (Manufacturer of electronic
interconnect products.) Mr. Lietz joined the Company's Board of Directors in
January 1998. Mr. Lietz has held various executive positions with HADCO
Corporation since 1984. He is director of EnergyNorth, Inc., Business and
Industry Association and National Electronics Manufacturing Initiative, as well
as a member of the advisory Board of New Hampshire Whittemore School of Business
and the Executive Committee of New Hampshire Industrial Research Center.
H. JOHN RILEY, JR., Chairman and Chief Executive Officer of Cooper, has
been a Director of the Company since 1994. Mr. Riley has served in a series of
executive positions at Cooper since 1982. He was named President and Chief
Operating Officer of Cooper in 1992, Chief Executive Officer in 1995 and
Chairman in 1996. He is a Director and Chairman of Central Houston, Inc., a
Director of Junior Achievement, Inc. and Junior Achievement of Southeast Texas,
The Houston Symphony, The Houston Forum, The Greater Houston Partnership, and
the Business Committee for the Arts. He also is a member of the Business Round
Table and a Trustee of the Museum of Fine Arts in Houston, and the
Manufacturers' Alliance for Productivity and Innovation.
DAVID A. WHITE, JR., Senior Vice President of Strategic Planning for
Cooper, was elected a Director in 1996. Since joining Cooper as a Planning
Analyst in 1971, Mr. White has served in various planning and finance
capacities. In 1980, he was named Vice President and General Manager of the
Cooper Power Tools Division and in 1988 he became Vice President, Corporate
Planning and Development. He assumed his present position in 1996. Mr. White
serves as Vice Chairman of the Strategic Planning and Development Council of the
Manufacturers' Alliance for Productivity and Innovation.
ITEM 2. PROPERTIES
The response to ITEM 2. PROPERTIES incorporates by reference the paragraphs
captioned "Facilities" included in ITEM 1. BUSINESS.
ITEM 3. LEGAL PROCEEDINGS
The response to ITEM 3. LEGAL PROCEEDINGS incorporates by reference the
paragraphs captioned "Environmental Regulations" and "Legal Proceedings"
included in ITEM 1. BUSINESS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended May 31, 1998.
16
<PAGE> 18
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Wyman-Gordon Company's common stock, par value $1.00 per share, is traded
in the over-the-counter market and prices of its common stock appear daily in
the NASDAQ National Market Quotation System. The table below lists the quarterly
price range per share for the years ended May 31, 1998 and 1997. The quarterly
price range per share is based on the high and low sales prices. At May 31,
1998, there were approximately 1,741 holders of record of the Company's common
stock.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997
------------- ----------------
HIGH LOW HIGH LOW
----- ---- ----- ----
<S> <C> <C> <C> <C>
First quarter............................................... $28 1/4 $23 3/8 $21 1/4 $15 3/8
Second quarter.............................................. 30 20 3/8 24 3/8 19 5/8
Third quarter............................................... 22 1/8 16 1/2 23 3/8 17 7/8
Fourth quarter.............................................. 23 1/8 19 3/4 23 11/16 18 1/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data and other operating
information of Wyman-Gordon Company. The selected financial data in the table
are derived from the consolidated financial statements of Wyman-Gordon Company.
The data should be read in conjunction with the consolidated financial
statements, related notes, other financial information and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included herein.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994(1) 1993(2)
---------- -------- -------- -------- -------- --------
(UNAUDITED)
(000'S OMITTED, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(3):
Revenues......................... $ 752,913 $608,742 $499,624 $396,639 $224,694 $239,761
Gross profit..................... 115,646 97,634 78,132 49,388 6,878 20,673
Other charges (credits)(4)....... (4,900) 23,083 2,717 (710) 35,003 2,453
Income (loss) from operations.... 68,892 30,322 37,699 13,718 (63,657) (8,428)
Net income (loss)(5)............. 33,890 50,023 25,234 1,039 (72,403) (60,004)
BASIC PER SHARE DATA:
Income (loss) per share before
extraordinary item and
cumulative effect changes in
accounting principles.......... $ 1.07 $ 1.40 $ 0.72 $ 0.03 $ (4.09) $ (0.95)
Net income (loss) per share(5)... .93 1.40 0.72 0.03 (4.09) (3.35)
Dividends paid per share......... -- -- -- -- -- --
DILUTED PER SHARE DATA:
Income (loss) per share before
extraordinary item and
cumulative effect changes in
accounting principles.......... $ 1.05 $ 1.35 $ 0.70 $ 0.03 $ (4.02) $ (0.95)
Net income (loss) per share(5)... .91 1.35 0.70 0.03 (4.02) (3.34)
Dividends paid per share......... -- -- -- -- -- --
Shares used to compute income
(loss) per share:
Basic.......................... 36,331 35,825 35,243 34,813 17,700 17,936
Diluted........................ 37,357 37,027 36,241 35,148 17,992 17,965
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994(1) 1993(2)
---------- -------- -------- -------- -------- --------
(UNAUDITED)
(000'S OMITTED, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF
PERIOD)(3):
Working capital.................. $ 223,764 $166,205 $116,534 $ 93,062 $ 91,688 $ 90,685
Total assets..................... 551,610 454,371 375,890 369,064 394,747 286,634
Long-term debt................... 162,573 96,154 90,231 90,308 90,385 90,461
Stockholders' equity............. 204,820 164,398 109,943 80,855 72,483 88,349
OTHER DATA:
Order backlog (at end of
period)........................ $1,030,092 $895,825 $598,438 $468,721 $389,407 $256,259
</TABLE>
- ---------------
(1) On May 24, 1994, the Company's Board of Directors voted to change the
Company's fiscal year end from one which ended on December 31 to the
Saturday nearest to May 31. For financial reporting purposes, the year end
is stated as May 31. The Statement of Operations Data for the year ended May
31, 1994 is unaudited.
The following table sets forth Summary Consolidated Statement of Operations
Data, which has been derived from the Company's audited financial
statements, for the five months ended May 31, 1994 (000's omitted, except
per-share amounts):
<TABLE>
<S> <C>
Revenue................................................... $ 86,976
Gross profit.............................................. (4,931)
Other charges (credits) and environmental charges......... 32,550
Income (loss) from operations............................. (55,805)
Net income (loss)......................................... (61,370)
Per share data:
Net income (loss) per share............................. $ (3.32)
Dividends paid per share................................ --
</TABLE>
(2) Including Cameron's financial results for the year ended December 31, 1993,
the Company's pro forma unaudited revenues, loss before the cumulative
effect of changes in accounting principles and net loss would have been
$389,300,000, $(39,300,000) and $(82,300,000), respectively.
(3) On May 26, 1994, the Company acquired Cameron Forged Products Company
("Cameron") from Cooper Industries, Inc. The Selected Consolidated Financial
Data include the accounts of Cameron from the date of the acquisition.
Cameron's operating results from May 26, 1994 to May 31, 1994 are not
material to the consolidated statement of operations for the year ended May
31, 1994.
On April 9, 1998, the Company acquired International Extruded Products, LLC
("IXP"). The Selected Consolidated Financial Data include the accounts of
IXP from the date of acquisition. IXP's operating results from April 9, 1998
to May 31, 1998 are not material to the consolidated statement of operations
for the year ended May 31, 1998.
(4) In November 1993, the Company sold substantially all of the net assets and
business operations of Wyman-Gordon Composites, Inc. and recorded a non-cash
charge on the sale of $2,500,000.
In May 1994, the Company recorded charges of $6,500,000 related to the
closing of a castings facility, $24,100,000 related to restructuring and
integration of Cameron and $2,000,000 for environmental investigation and
remediation costs.
During the year ended May 31, 1996, the Company provided $1,900,000 in order
to recognize its 25.0% share of the net losses of its Australian joint
venture and to reduce the carrying value of such joint venture.
Additionally, the Company provided $800,000 to reduce the carrying value of
the cash surrender value of certain company-owned life insurance policies.
18
<PAGE> 20
During the year ended May 31, 1997, the Company recorded other charges of
$23,100,000, which included $4,600,000 to provide for the costs of workforce
reductions at the Company's Grafton, Massachusetts, Forging facility,
$3,400,000 to the write-off and disposal of certain forging equipment,
$2,300,000 to reduce the carrying value and dispose of certain assets of the
Company's titanium castings operations, $1,200,000 to consolidate the
titanium castings operations, $2,500,000 to reduce the carrying value of the
Australian joint venture, $5,700,000 to reduce the carrying value of the
cash surrender value of certain Company-owned life insurance policies,
$1,900,000 to reduce the carrying value of a building held for sale and
$250,000 to reduce the carrying value of other assets. Other charges
(credits) in the year ended May 31, 1997 also included a charge of
$1,200,000, net of insurance recovery of $6,900,000, related to the accident
at the Houston, Texas, facility of Wyman-Gordon Forgings, Inc. in December
1996.
Other charges (credits) in the year ended May 31, 1998 includes a credit of
$4,000,000 for the recovery of cash surrender value of certain company-owned
life insurance policies, a credit of $1,900,000 resulting from the disposal
of a building held for sale and a charge of $1,000,000 to provide for costs
as a result of the six-month shutdown of the 29,000-ton press at the
Company's Houston, Texas, forging facility.
(5) Includes a charge of $43,000,000, or $2.39 per share, in fiscal year 1993
relating to the Company's adoption of SFAS 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" ("SFAS 106") and SFAS 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 106 requires postretirement
benefit obligations to be accounted for on an accrual basis rather than the
"expense as incurred" basis formerly used. The Company elected to recognize
the cumulative effect of these accounting changes in the year ended December
31, 1993.
In the year ended May 31, 1997, net tax benefits of $25,680,000 were
recognized, including a refund of prior years' income taxes amounting to
$19,680,000, plus interest of $3,484,000, and $6,500,000 related to the
expected realization of NOLs in future years and $10,250,000 related to
current NOLs benefit offsetting $10,750,000 of current income tax expense.
The refund relates to the carryback of tax net operating losses to tax years
1981, 1984 and 1986 under the applicable provisions of Internal Revenue Code
Section 172(f).
In the year ended May 31, 1998, the Company provided $16,355,000 for income
taxes, net of a tax benefit of approximately $1,800,000 relating to the
utilization of NOL carryforwards. In addition, the Company has recorded a
$2,920,000 tax benefit against the extraordinary loss of $8,112,000
associated with the early extinguishment of the Company's 10 3/4% Senior
Notes.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
YEAR ENDED MAY 31, 1998 ("FISCAL YEAR 1998") COMPARED TO YEAR ENDED MAY 31,
1997
("FISCAL YEAR 1997")
The Company's revenue increased 23.7% to $752.9 million in fiscal year 1998
from $608.7 million in fiscal year 1997 as a result of higher sales volume and
higher sales prices at the Company's Forgings and Castings Divisions. These
revenue increases during fiscal year 1998 as compared to fiscal year 1997 are
reflected by market as follows: a $132.7 million (27.9%) increase in aerospace,
a $17.1 million (17.6%) increase in energy and a $5.6 million (15.4%) decrease
in other. The reasons for the strength in the aerospace market were higher
airplane and engine build rates and higher demands for spares by aerospace
engine prime contractors. Although there were higher shipments to aerospace
customers during fiscal year 1998, the shipments to aerospace customers were
impacted by the Company's 29,000 ton press being out of service for repairs for
six months. The increase in energy revenue was a result of higher shipments of
land-based gas turbine products in fiscal year 1998 compared to fiscal year
1997. The cause of the decrease in other markets is primarily due to the decline
in the titanium golf club head business as the Company exited this business.
Revenues in fiscal year 1997 were limited by raw material shortages and
production delays caused by capacity constraints of the Company's suppliers.
Revenues in fiscal year 1998 were limited due to lower than anticipated
productivity of recent equipment and personnel additions, unanticipated repairs
of equipment and inconsistencies in raw material deliveries corresponding to
customer requirements, as noted above.
19
<PAGE> 21
The Company's backlog increased to $1,030.1 million at May 31, 1998 from
$895.8 million at May 31, 1997. This increase resulted from the following
factors:
1. Higher build rates of the Company's engine and airframe customers,
2. Higher prices for the Company's aerospace products, and
3. An increase in overdue orders to customer delivery dates as a
result of shipping delays at the Company due to equipment repairs and raw
material unavailability.
The Company does not expect that this rate of increase in backlog will
continue since it expects that customer orders will not increase at the same
rates as in the recent past, and that capacity enhancements, refurbishments and
additions installed by the Company will enable the Company to meet its customer
demands in a more timely fashion. Of the Company's total current backlog, $716.8
million is shippable in the next twelve months. Because of the additional
production capacity, generated from equipment enhancements, refurbishments and
additions, the Company believes that it will be able to fulfill those
twelve-month requirements.
The Company's gross margins were 15.4% in fiscal year 1998 as compared to
16.0% in fiscal year 1997. Gross margin in fiscal year 1998 was negatively
affected by the impact of the Company's 29,000 ton press being taken out of
service for repairs for six months. During the six month period the press was
out of service, the work scheduled on the 29,000 ton press was performed on
alternative presses at a significant cost. The Company has estimated that gross
margin in fiscal year 1998 was negatively impacted by approximately 2.3% as a
result of underabsorption, inefficiencies and other items, all of which include
extra labor, higher overtime, tooling modifications and higher scrap and rework
costs. In addition, gross margin in fiscal year 1998 was negatively affected by
other production inefficiency costs related to equipment downtime in the
Company's Forgings operations, personnel additions and the reinstallation and
start-up of two major forge presses. The Company expects that the addition of
these presses and recent repair and enhancement of the Company's 29,000 ton
press in Houston will improve the Company's ability to meet its customer
requirements. Gross margin in fiscal year 1997 was negatively affected by higher
raw material costs which could not be passed on to customers as a result of the
then-existing long-term agreements with customers and by price and demand
declines within the titanium golf club head business.
There was no LIFO charge (credit) impacting gross margins in fiscal year
1998. In fiscal year 1997, gross margin was negatively impacted by a LIFO charge
of $1.6 million.
Selling, general and administrative expenses increased 16.8% to $51.7
million during fiscal year 1998 from $44.2 million during fiscal year 1997.
Selling, general and administrative expenses as a percentage of revenues
improved to 6.9% in fiscal year 1998 from 7.3% in fiscal year 1997. The
improvement as a percent of revenues was primarily the result of higher
revenues. Although selling, general and administrative expense in fiscal year
1998 improved, it includes higher costs associated with relocating employees,
development costs associated with the Company's composite operations and $2.0
million higher compensation expense, as compared to fiscal year 1997, associated
with the Company's performance share program.
During fiscal year 1998, the Company recorded net other credits of $4.9 million.
Such other credits include $1.9 million resulting from the disposal of a
building held for sale and $4.0 million for the recovery of cash surrender value
of certain Company-owned life insurance policies offset by other charges of $1.0
million to provide for costs as a result of the shutdown of the 29,000 ton press
at the Company's Houston, Texas, forging facility.
During fiscal year 1997, the Company recorded other charges of $23.1
million. Such other charges included $4.6 million to provide for the costs of
workforce reductions at the Company's Grafton, Massachusetts, facility, $3.4
million to write off and disposal of certain forging equipment, $2.3 million to
reduce the carrying value and dispose of certain assets of the Company's
titanium castings operations, $1.2 million to consolidate the titanium castings
operations, $2.5 million to recognize the Company's 25.0% share of the net
losses of its Australian joint venture and to reduce the carrying value of such
joint venture, $0.3 million relating to expenditures for an investment in
another joint venture, $5.7 million to reduce the carrying value of
20
<PAGE> 22
the cash surrender value of certain Company-owned life insurance policies and
$1.2 million of costs, net of insurance recovery of $6.9 million, related to the
Houston accident and $1.9 million to reduce the carrying value of the Jackson,
Michigan, facility being held for sale.
As of May 31, 1997, the Company had fully written off its investment in the
Australian joint venture. However, in the future, the Company may make
additional capital contributions to the Australian joint venture to satisfy its
cash or other requirements and may be required to recognize its share of any
additional losses or may write off such additional capital contributions. There
were no contributions made to the joint venture in fiscal year 1998.
Interest expense increased $1.7 million to $12.5 million in fiscal year
1998 compared to $10.8 million in fiscal year 1997. The increase results
primarily from an issuance of $150.0 million of 8% Senior Notes offset by
repayment of $84.7 million of 10 3/4% Senior Notes.
Miscellaneous, net was an expense of $0.9 million in fiscal year 1998 as
compared to income of $4.8 million in fiscal year 1997. Miscellaneous, net in
fiscal year 1998, included a $0.7 million loss on the sale of fixed assets.
Miscellaneous, net in fiscal year 1997 included interest income on a refund of
prior years' income taxes amounting to $3.5 million and a $2.0 million gain on
the sale of fixed assets.
The Company provided $16.4 million for income taxes, net of a tax benefit
of approximately $1.8 million relating to the utilization of NOL carryforwards.
In addition, the Company has recorded a $2.9 million tax benefit against the
extraordinary loss of $8.1 million associated with the early extinguishment of
the Company's 10 3/4% Senior Notes.
Net tax benefits of $25.7 million were recognized in fiscal year 1997,
including a refund of prior years' income taxes amounting to $19.7 million and
$6.5 million related to the expected realization of NOLs in the future years and
$10.3 million related to current NOLs benefit offsetting $10.8 million of
current income tax expense. The refund related to the carryback of tax net
operating losses to tax years 1981, 1984 and 1986 under applicable provisions of
Internal Revenue Code Section 172(f).
In fiscal year 1998, net income before extraordinary item was $39.1
million, or $1.05 per share (diluted), and net income, including extraordinary
item, was $33.9 million, or $.93 per share (diluted). In fiscal year 1998, the
Company recorded an extraordinary charge of $5.2 million, or $.14 per share
(diluted), net of tax, in connection with the extinguishment of $84.7 million of
its 10 3/4% Senior Notes. In fiscal year 1997, the Company reported net income
of $50.0 million, or $1.40 per share (diluted). The decrease resulted from the
items described above.
YEAR ENDED MAY 31, 1997 ("FISCAL YEAR 1997") COMPARED TO YEAR ENDED MAY 31,
1996 ("FISCAL YEAR 1996")
The Company's revenue increased 21.8% to $608.7 million in fiscal year 1997
from $499.6 million in fiscal year 1996 as a result of higher sales volume at
the Company's Forgings and Castings Divisions. These sales volume increases
during fiscal year 1997 as compared to fiscal year 1996 are reflected by market
as follows: a $112.4 million (31.0%) increase in aerospace, a $4.1 million
(4.4%) increase in energy and a $7.4 million (16.9%) decrease in other. The
reasons for the strength in the aerospace market were higher airplane and engine
build rates and higher demands for spares by aerospace engine prime contractors.
Although there were higher extruded pipe shipments to energy customers for
fiscal 1997, the shipments to energy customers were impacted by the 10 week
shutdown of the 35,000 ton vertical extrusion press in Houston due to the
industrial accident at the Houston, Texas, facility of Wyman-Gordon Forgings,
Inc. The cause of the decrease in other markets is primarily due to the decline
in the titanium head golf club business because of oversupply, cost
disadvantages and decreased demand. Revenues in fiscal year 1996 and, to a
lesser extent, in fiscal year 1997 were limited by raw material shortages and
production delays caused by capacity constraints of the Company's suppliers. The
Company believes that the increase in order activity reflects a continued
increase in spares demand and new business resulting from increasing production
rates on commercial aircraft by commercial airframe primes.
21
<PAGE> 23
The Company's backlog increased to $895.8 million at May 31, 1997 from
$598.4 million at May 31, 1996. This increase resulted from the following
factors:
1. Higher build rates of the Company's engine and airframe customers,
2. Higher prices for the Company's aerospace products, particularly
as reflected in the new long-term agreements ("LTAs") which went into
effect on January 1, 1997, and
3. An increase in overdue orders to customer delivery dates as a
result of shipping delays at the Company due to capacity constraints and
raw material unavailability.
The Company does not expect that this rate of increase in backlog will
continue since it expects that customer orders will not increase at the same
rates as in the recent past, that prices will moderate and that capacity
additions installed by the Company and its suppliers will enable the Company to
meet its customer demands in a more timely fashion. Of the Company's total
current backlog, $671.6 million is shippable in the next twelve months. Because
of the additional production capacity that the Company and its suppliers are
installing, the Company believes that it will be able to fulfill those
twelve-month requirements.
The Company's gross margins were 16.0% in fiscal year 1997 as compared to
15.6% in fiscal year 1996. The improvement in gross margins resulted from higher
production volumes, continued emphasis on cost reductions, productivity gains
resulting from the Company's continuing efforts toward focusing forging
production of rotating parts for jet engines in its Houston, Texas, facility and
forging production of airframe structures and large turbine parts in its
Grafton, Massachusetts, facility and continuing realization of cost reductions
from synergies associated with the integration of Cameron in fiscal year 1996
and fiscal year 1997. The Company believes that the improvements in gross margin
would have been greater except that the Company incurred higher raw material
costs which could not be passed on to customers as a result of the then-existing
LTAs with its customers. Beginning in the second half of fiscal year 1996,
higher demand required the Company to purchase certain raw materials under terms
not covered by LTAs with its vendors. The current rebound in demand for many of
these raw materials, especially nickel and titanium, resulted in significant
market price increases which negatively affected the Company's gross margins.
The Company began to see pricing relief for its products in early calendar 1997,
when certain LTAs that the Company negotiated with its customers went into
effect, allowing the Company to pass some raw material price increases on to its
customers.
Gross margins in fiscal year 1997 were also negatively impacted by price
and demand declines within the titanium golf club head business because of
oversupply, cost disadvantages and decreased demand.
Gross margin was negatively impacted by a LIFO charge of $1.6 million in
fiscal year 1997 as compared to a favorable impact by a LIFO credit of $4.9
million in fiscal year 1996.
Selling, general and administrative expenses increased 17.3% to $44.2
million during fiscal year 1997 from $37.7 million during fiscal year 1996.
Selling, general and administrative expenses as a percentage of revenues
improved to 7.3% in fiscal year 1997 from 7.6% in fiscal year 1996. The
improvement as a percent of revenues is the result of higher revenues.
During fiscal year 1997, the Company recorded other charges of $23.1
million. Such other charges include $4.6 million to provide for the costs of
workforce reductions at the Company's Grafton, Massachusetts, Forging facility,
$3.4 million to write off and dispose of certain Forging equipment, $2.3 million
to reduce the carrying value and dispose of certain assets of the Company's
titanium castings operations, $1.2 million to consolidate the titanium castings
operations, $2.5 million to recognize the Company's 25.0% share of the net
losses of its Australian joint venture and to reduce the carrying value of such
joint venture, $0.3 million relating to expenditures for an investment in
another joint venture, $5.7 million to reduce the carrying value of the cash
surrender value of certain Company-owned life insurance policies, $1.2 million
of costs, net of insurance recovery of $6.9 million, related to the Houston
accident and $1.9 million to reduce the carrying value of the Jackson, Michigan,
facility being held for sale.
As of May 31, 1997, the Company had fully written off its investment in the
Australian joint venture. However, in the future, the Company may make
additional capital contributions to the Australian joint
22
<PAGE> 24
venture to satisfy its cash or other requirements and may be required to
recognize its share of any additional losses or may write off such additional
capital contributions.
During fiscal year 1996, the Company provided $1.9 million in order to
recognize its 25.0% share of the net losses of its Australian joint venture and
to reserve for amounts loaned to the Australian joint venture during fiscal year
1996 and to provide for expenditures for an investment in an additional joint
venture. Additionally, other charges (credits) includes a charge of $0.8 million
in fiscal year 1996 to reduce the carrying value of the cash surrender value of
certain Company-owned life insurance policies.
Interest expense was $10.8 million in fiscal year 1997 and $11.3 million in
fiscal year 1996. The decrease results from lower borrowings outstanding under
the Company's U.K. Credit Agreement.
Miscellaneous, net was income of $4.8 million in fiscal year 1997 as
compared to an expense of $1.2 million in fiscal year 1996. Miscellaneous, net
in fiscal year 1997 includes interest income on the refund of prior years'
income taxes amounting to $3.5 million and a $2.0 million gain on the sale of
fixed assets. Miscellaneous, net in fiscal year 1996 includes a $0.3 million
gain on the sale of marketable securities.
Net tax benefits of $25.7 million were recognized in fiscal year 1997
including a refund of prior years' income taxes amounting to $19.7 million and
$6.5 million related to the expected realization of NOLs in the future years and
$10.3 million related to current NOLs benefit offsetting $10.8 million of
current income tax expense. The refund relates to the carryback of tax net
operating losses to tax years 1981, 1984 and 1986 under applicable provisions of
Internal Revenue Code Section 172(f). There was no provision or benefit recorded
for income taxes in fiscal year 1996.
The Company expects that in the year ended May 31, 1998, income tax
provisions will approximate statutory rates subject to utilization of state
NOLs.
Net income was $50.0 million, or $1.36 per share, in fiscal year 1997 and
$25.2 million, or $.70 per share in fiscal year 1996. The $24.8 million
improvement results from the items described above.
LIQUIDITY AND CAPITAL RESOURCES
The increase in the Company's cash of $12.6 million to $64.6 million at May
31, 1998 from $52.0 million at May 31, 1997 resulted primarily from net
borrowings from debt of $55.5 million, cash provided by operating activities of
$14.4 million, issuance of common stock of $12.4 million in connection with
employee compensation and benefit plans and $0.7 million of proceeds from the
sale of fixed assets, offset by capital expenditures of $48.0 million,
acquisition of IXP of $15.5 million, $4.6 million repurchase of common stock and
$2.3 million payment to Cooper Industries, Inc. ("Cooper"). The $2.3 million
payment to Cooper was made in accordance with the Company's $4.6 million
promissory note payable to Cooper under the terms of the Stock Purchase
Agreement with Cooper related to the acquisition of Cameron Forged Products
Company in May 1994. The remaining $2.3 million was paid on June 30, 1998.
23
<PAGE> 25
The increase in the Company's working capital of $57.6 million to $223.8
million at May 31, 1998 from $166.2 million at May 31, 1997 resulted primarily
from (in millions):
<TABLE>
<S> <C>
Net income.................................................. $ 33.9
Decrease in:
Long-term restructuring, integration disposal and
environmental.......................................... (0.8)
Long-term benefit liabilities............................. (2.5)
Deferred taxes and other.................................. (1.8)
Other changes in stockholders' equity..................... (1.3)
Increase in:
Intangible and other assets............................... (2.3)
Long-term debt............................................ 66.4
Property, plant and equipment, net........................ (43.6)
Pension liability......................................... 1.8
Issuance of common stock.................................. 7.8
------
Increase in working capital.......................... $ 57.6
======
</TABLE>
Earnings before interest, taxes, depreciation, amortization, other charges
(credits) and extraordinary item ("EBITDA") increased $7.5 million to $86.6
million in fiscal year 1998 from $79.1 million in fiscal year 1997. The EBITDA
increases reflect higher profitability.
EBITDA should not be considered a substitute for net income as an indicator
of operating performance or as an alternative to cash flow as a measure of
liquidity, in each case determined in accordance with generally accepted
accounting principles. Investors should be aware that EBITDA as shown above may
not be comparable to similarly titled measures presented by other companies, and
comparisons could be misleading unless all companies and analysts calculate this
measure in the same fashion.
As of May 31, 1998, the Company estimated the remaining cash requirements
for the 1997 restructuring to be $3.7 million. Of such amount, the Company
expects to spend approximately $2.5 million during fiscal year 1999 and $1.2
million thereafter.
As of May 31, 1998, the Company estimated the remaining cash requirements
for the integration of Cameron and direct costs associated with the acquisition
of Cameron to be $1.5 million, of which the Company expects to spend
approximately $0.6 million during fiscal year 1999 and $0.9 million thereafter.
The Company spent $0.6 million in fiscal year 1998 for non-capitalizable
environmental projects and has a reserve with respect to environmental matters,
the balance of which is $16.5 million, of which it expects to spend $2.0 million
in fiscal year 1999 and the remainder in future periods on non-capitalizable
environmental activities.
The Company from time to time expends cash on capital expenditures for more
cost-effective operations, environmental projects and joint development programs
with customers. In fiscal year 1998, capital expenditures amounted to $48.0
million and are expected to be approximately $40.0 to $45.0 million in fiscal
year 1999.
On December 15, 1997, the Company issued $150.0 million of 8% Senior Notes
due 2007 under an indenture between the Company and a bank as trustee. The 8%
Senior Notes were issued at a price of 99.323% of face value and pay interest
semi-annually in arrears on June 15 and December 15 of each year, commencing
June 15, 1998. The 8% Senior Notes are general unsecured obligations of the
Company, are non-callable for a five-year period and are senior to any future
subordinated indebtedness of the Company. The Company used approximately $90.7
million of the net proceeds from the sale of the 8% Senior Notes to repurchase
$84.7 million (94%) of its outstanding 10 3/4% Senior Notes due 2003.
The Company's revolving receivables-backed credit facility (the
"Receivables Financing Program") provides the Company with an aggregate maximum
borrowing capacity of $65.0 million (subject to a
24
<PAGE> 26
borrowing base), with a letter of credit sub-limit of $35.0 million. The term of
the Receivables Financing Program is five years with a renewal option. As of May
31, 1998, the total availability under the Receivables Financing Program was
$65.0 million, there were no borrowings and letters of credit amounting to $8.4
million were outstanding.
Wyman-Gordon Limited, the Company's subsidiary located in Livingston,
Scotland, entered into a credit agreement ("the U.K. Credit Agreement") with
Clydesdale Bank PLC ("Clydesdale") effective June 27, 1997. The maximum
borrowing capacity under the U.K. Credit Agreement is #2,000,000 (approximately
$3,200,000) with separate letter of credit and guarantee limits of #1,000,000
(approximately $1,600,000) each. Borrowings bear interest at 1% over
Clydesdale's base rate. In the event that borrowings by way of overdraft are
allowed to exceed the agreed limit, interest on the excess borrowings will be
charged at the rate of 1.5% per annum over Clydesdale's base rate. The U.K.
Credit Agreement is secured by all present and future assets of Wyman-Gordon
Limited (including without limitation, accounts receivable, inventory, property,
plant and equipment, intellectual property, intercompany loans, and other real
and personal property). The U.K. Credit Agreement contains covenants
representations and warranties customary for such facilities. There were no
borrowings outstanding at May 31, 1998 or May 31, 1997. At May 31, 1998, and May
31, 1997, Wyman-Gordon Limited had outstanding #975,000 (approximately
$1,590,000), and #935,000 (approximately $1,534,000) respectively, of letters of
credit or guarantees under the U.K. Credit Agreement.
The primary sources of liquidity available to the Company to fund
operations and other future expenditures include available cash ($64.6 million
at May 31, 1998), borrowing availability under the Company's Receivables
Financing Program, cash generated by operations and reductions in working
capital requirements through planned inventory reductions and accounts
receivable management. The Company believes that it has adequate resources to
provide for its operations and the funding of restructuring, integration,
capital and environmental expenditures.
IMPACT OF INFLATION
The Company's earnings may be affected by changes in price levels and in
particular, changes in the price of basic metals. The Company's contracts
generally provide for fixed prices for finished products with limited protection
against cost increases. The Company would therefore be affected by changes in
prices of the raw materials during the term of any such contract. The Company
attempts to minimize this risk by entering into fixed price arrangements with
raw material suppliers and, where possible, negotiating price escalators into
its customer contracts to offset a portion of raw material cost increases.
ACCOUNTING AND TAX MATTERS
Effective February 28, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128
replaces the previously reported primary and fully diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented and, where necessary, restated to
conform to the SFAS 128 requirements.
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130"). The implementation of SFAS
130 will require that the components of comprehensive income be reported in the
financial statements. Implementation of this new Standard is required for the
year ending May 31, 1999 ("Fiscal Year 1999").
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). The implementation of SFAS 131 will require the disclosure of
segment information utilizing the approach that the Company uses to manage its
internal organization. Implementation of this Standard is required for the year
ending May 31, 1999.
25
<PAGE> 27
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers' Disclosures about Pensions and Other Post Retirement
Benefits" ("SFAS 132"). SFAS 132 standardizes disclosure requirements of
Statement Nos. 87, "Employers' Accounting for Pensions", and 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". Implementation of
this Standard is required for the year ending May 31, 1999.
YEAR 2000
The Year 2000 computer issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the computer programs in the Company's computer systems and plant equipment
systems that have time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruptions of operations, including, among other things,
a temporary inability to process transactions, send invoices or engage in
similar normal business activities.
The Company's overall Year 2000 project approach and status is as follows:
<TABLE>
<CAPTION>
STAGE OF ESTIMATED TIMETABLE
DESCRIPTION OF APPROACH: COMPLETION: FOR COMPLETION:
- ------------------------ ----------- -------------------
<S> <C> <C>
Computer Systems:
Assess systems for possible Year 2000 impact.............. 100% Completed
Modify or replace non-compliant systems................... 40% May 31,1999
Test systems with system clocks set at current date....... 40% May 31,1999
Test systems off-line with system clocks set at various
Year 2000 related critical dates....................... 10% May 31,1999
Plant Equipment:
Computer-dependent plant equipment assessment and
compliance procedures performed........................ 10% May 31,1999
</TABLE>
The Company has completed a comprehensive inventory of substantially all
computer systems and programs. All hardware required for stand alone testing of
systems has been installed in order to perform off-line testing for Year 2000
program compliance. The Company has identified all software supplied by outside
vendors that are not Year 2000 compliant. With respect to approximately 90% such
non-compliant software the Company has acquired the most recent release and is
currently testing such versions for Year 2000 compliance. All software developed
in-house has been reviewed and necessary modifications have been completed and
are in the final stages of testing.
In addition to assessing the Company's Year 2000 readiness, the Company has
contacted and sent questionnaires regarding Year 2000 readiness to most of its
suppliers. Over 70% have responded thus far. Of this amount, the majority of the
Company's top suppliers have responded and believe they will be Year 2000
compliant prior to December 31, 1999. On-site audits of our key suppliers are
currently being coordinated in order to assess their Year 2000 system readiness.
The Company is using both internal and external resources to reprogram, or
replace, and test software for Year 2000 modifications. The Year 2000 project is
40% complete and the Company anticipates completing the project by mid-1999.
Maintenance or modification costs will be expensed as incurred, while the costs
of new information technology will be capitalized and amortized in accordance
with Company policy. The Company is uncertain of the cost of making its
computer-dependent plant-equipment Year 2000 compliant due to the early stages
of this part of the Year 2000 computer project. The estimated cost of the Year
2000 computer project, including software modifications, consultants,
replacement costs for non-compliant systems and internal personnel costs, based
on presently available information, is not material to the financial operations
of the Company and is estimated at approximately $0.8 million. However, if such
modifications and conversions are not made, or are not completed in time, the
Year 2000 computer issue could have a material impact on the operations of the
Company.
26
<PAGE> 28
The Company is currently making Year 2000 contingency plans. The Company
has multiple business systems at different locations. In case of the failure of
a system at one location, the Company's contingency plan is to evaluate the use
of an alternate compliant business system at another location. The Company will
continue to assess possible contingency plan solutions.
The forecast costs and the date on which the Company believes it will
complete its Year 2000 computer modifications are based on its best estimates,
which, in turn, were based on numerous assumptions of future events, including
third-party modification plans, continued availability of resources and other
factors. The Company cannot be sure that these estimates will be achieved and
actual results could differ materially from those anticipated.
OTHER MATTERS
On December 22, 1996, a serious industrial accident occurred at the
Houston, Texas, facility of WGFI. For details of the accident, refer to "Legal
Proceedings" within this Form 10-K.
"FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY"
Certain statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations contain "forward-looking" information (as
defined in the Private Securities Litigation Reform Act of 1995). The words
"believe," "expect," "anticipate," "intend," "estimate," "assume" and other
similar expressions which are predictions of or indicate future events and
trends and which do not relate to historical matters identify forward-looking
statements. In addition, information concerning raw material prices and
availability, customer orders and pricing, and industry cyclicality and their
impact on gross margins and business trends, as well as liquidity and sales
volume are forward-looking statements. Reliance should not be placed on
forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, which are in some cases beyond the control of
the Company and may cause the actual results, performance or achievements of the
Company to differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking statements.
Certain factors that might cause such differences include, but are not
limited to, the following: The Company's ability to successfully negotiate
long-term contracts with customers and raw materials suppliers at favorable
prices and other terms acceptable to the Company, the Company's ability to
obtain required raw materials and to supply its customers on a timely basis and
the cyclicality of the aerospace industry.
For further discussion identifying important factors that could cause
actual results to differ materially from those anticipated in forward-looking
statements, see "Business -- The Company," "Customers," "Marketing and Sales,"
"Backlog," "Raw Materials," "Energy Usage," "Employees," "Competition,"
"Environmental Regulations," "Product Liability Exposure" and "Legal
Proceedings".
27
<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
To the Stockholders of Wyman-Gordon Company:
We have prepared the financial statements included herein and are
responsible for all information and representations contained therein. Such
financial information was prepared in accordance with generally accepted
accounting principles appropriate in the circumstances, based on our best
estimates and judgements.
Wyman-Gordon maintains accounting and internal control systems which are
designed to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and to produce records adequate for preparation of financial
information. These systems are established and monitored in accordance with
written policies which set forth management's responsibility for proper internal
accounting controls and the adequacy of these controls subject to continuing
independent review by our external auditors, Ernst & Young LLP.
To assure the effective administration of internal control, we carefully
select and train our employees, develop and disseminate written policies and
procedures and provide appropriate communication channels. We believe that it is
essential for the Company to conduct its business affairs in accordance with the
highest ethical standards.
The financial statements have been audited by Ernst & Young LLP,
Independent Auditors, in accordance with generally accepted auditing standards.
In connection with their audit, Ernst & Young LLP has developed an understanding
of our accounting and financial controls, and conducted such tests and related
procedures as it considers necessary to render their opinion on the financial
statements.
The financial data contained in these financial statements were subject to
review by the Audit Committee of the Board of Directors. The Audit Committee
meets periodically during the year with Ernst & Young LLP and with management to
review accounting, auditing, internal control and financial reporting matters.
We believe that our policies and procedures provide reasonable assurance
that operations are conducted in conformity with applicable laws and with our
commitment to a high standard of business conduct.
David P. Gruber Signature
David P. Gruber
Chairman and Chief Executive Officer
Edward J. Davis Signature
Edward J. Davis
Vice President, Chief Financial
Officer and
Treasurer
28
<PAGE> 30
WYMAN-GORDON COMPANY
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of Wyman-Gordon Company:
We have audited the accompanying consolidated balance sheets of
Wyman-Gordon Company and subsidiaries as of May 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended May 31, 1998. Our audits also
included the financial statement schedule of Wyman-Gordon Company listed in Item
14(a). These consolidated financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule 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
Wyman-Gordon Company and subsidiaries at May 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
'Ernst & Young Signature
Boston, Massachusetts
June 25, 1998
29
<PAGE> 31
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
---------- ---------- ----------
(000'S OMITTED, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C>
Revenue.................................................... $752,913 $608,742 $499,624
-------- -------- --------
Cost of goods sold......................................... 637,267 511,108 421,492
Selling, general and administrative expenses............... 51,654 44,229 37,716
Other charges (credits).................................... (4,900) 23,083 2,717
-------- -------- --------
684,021 578,420 461,925
-------- -------- --------
Income from operations..................................... 68,892 30,322 37,699
-------- -------- --------
Other deductions (income):
Interest expense......................................... 12,548 10,822 11,272
Miscellaneous, net....................................... 907 (4,843) 1,193
-------- -------- --------
13,455 5,979 12,465
-------- -------- --------
Income before income taxes................................. 55,437 24,343 25,234
Provision (benefit) for income taxes....................... 16,355 (25,680) --
-------- -------- --------
Income before extraordinary item........................... 39,082 50,023 25,234
Extraordinary item net of income tax benefit (Note D)...... 5,192 -- --
-------- -------- --------
Net income................................................. $ 33,890 $ 50,023 $ 25,234
======== ======== ========
Basic net income per share:
Income before extraordinary item......................... $ 1.07 $ 1.40 $ .72
Extraordinary item, net of tax........................... (.14) -- --
-------- -------- --------
Net income............................................... $ .93 $ 1.40 $ .72
======== ======== ========
Diluted net income per share:
Income before extraordinary item......................... $ 1.05 $ 1.35 $ .70
Extraordinary item, net of tax........................... (.14) -- --
-------- -------- --------
Net income............................................... $ .91 $ 1.35 $ .70
======== ======== ========
Shares used to compute net income per share:
Basic.................................................... 36,331 35,825 35,243
Diluted.................................................. 37,357 37,027 36,241
</TABLE>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these financial statements.
30
<PAGE> 32
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1998 1997
-------- --------
(000'S OMITTED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 64,561 $ 51,971
Accounts receivable......................................... 124,658 119,159
Inventories................................................. 133,134 92,332
Prepaid expenses............................................ 6,710 7,789
Deferred income taxes....................................... -- 6,500
-------- --------
Total current assets.............................. 329,063 277,751
-------- --------
Property, plant and equipment, net.......................... 197,363 153,737
Intangible assets........................................... 19,461 19,255
Other assets................................................ 5,723 3,628
-------- --------
Total assets...................................... $551,610 $454,371
======== ========
LIABILITIES
Borrowings due within one year.............................. $ 3,017 $ 77
Accounts payable............................................ 51,590 62,092
Accrued liabilities and other............................... 50,692 49,377
-------- --------
Total current liabilities......................... 105,299 111,546
-------- --------
Restructuring, integration, disposal and environmental...... 17,314 18,172
Long-term debt.............................................. 162,573 96,154
Pension liability........................................... 2,908 1,102
Deferred income taxes and other............................. 14,066 15,861
Postretirement benefits..................................... 44,630 47,138
STOCKHOLDERS' EQUITY
Preferred stock, no par value: Authorized 5,000,000 shares;
none issued............................................... -- --
Common stock, par value $1.00 per share:
Authorized 70,000,000 shares; issued 37,052,720........... 37,053 37,053
Capital in excess of par value.............................. 28,037 27,608
Retained earnings........................................... 148,847 114,957
Equity adjustments.......................................... 1,465 2,763
Treasury stock, 543,077 and 1,001,199 shares at May 31, 1998
and 1997.................................................. (10,582) (17,983)
-------- --------
Total stockholders' equity........................ 204,820 164,398
-------- --------
Total liabilities and stockholders' equity........ $551,610 $454,371
======== ========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these financial statements.
31
<PAGE> 33
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
-------- -------- --------
(000'S OMITTED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................. $ 33,890 $ 50,023 $ 25,234
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary loss on debt retirement.................... 5,192 -- --
Depreciation and amortization............................ 23,473 20,872 17,428
Deferred income taxes.................................... 6,500 (6,500) --
Other charges (credits).................................. -- 19,145 846
Losses on equity investment.............................. -- 2,734 1,871
Changes in assets and liabilities:
Accounts receivable...................................... (1,547) (24,430) (15,709)
Inventories.............................................. (38,219) (27,235) 12,940
Prepaid expenses and other assets........................ 727 4,754 3,118
Accrued restructuring, integration, disposal and
environmental......................................... (3,536) (3,950) (6,837)
Income and other taxes payable........................... (123) (5,241) 3,631
Accounts payable and accrued and other liabilities....... (11,931) 17,839 (7,250)
-------- -------- --------
Net cash provided by operating activities............. 14,426 48,011 35,272
-------- -------- --------
INVESTING ACTIVITIES:
Investment in acquired subsidiaries...................... (15,460) -- --
Capital expenditures..................................... (48,017) (34,123) (18,331)
Proceeds from sale of fixed assets....................... 869 559 1,718
Other, net............................................... (221) (921) (1,664)
-------- -------- --------
Net cash (used) by investing activities............... (62,829) (34,485) (18,277)
-------- -------- --------
FINANCING ACTIVITIES:
Payment to Cooper Industries, Inc........................ (2,300) -- --
Net borrowings (repayments) of debt...................... 55,463 5,923 (3,915)
Net proceeds from issuance of common stock............... 12,433 7,325 3,198
Repurchase of common stock............................... (4,603) (4,937) --
-------- -------- --------
Net cash provided (used) by financing activities...... 60,993 8,311 (717)
-------- -------- --------
Increase in cash........................................... 12,590 21,837 16,278
Cash, beginning of period.................................. 51,971 30,134 13,856
-------- -------- --------
Cash, end of period........................................ $ 64,561 $ 51,971 $ 30,134
======== ======== ========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these financial statements.
32
<PAGE> 34
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
---------------- CAPITAL IN
SHARES PAR EXCESS OF RETAINED EQUITY TREASURY
ISSUED VALUE PAR VALUE EARNINGS ADJUSTMENTS STOCK TOTALS
------ ------- ---------- -------- ----------- -------- --------
(000'S OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1995....... 37,053 $37,053 $40,118 $ 39,700 $ 63 $(36,079) $ 80,855
Net income................ 25,234 25,234
Stock plans............... (6,486) 8,626 2,140
Savings/Investment Plan
match.................. (341) 1,399 1,058
Pension equity
adjustment............. 1,403 1,403
Currency translation...... (747) (747)
------ ------- ------- -------- ------ -------- --------
Balance, May 31, 1996....... 37,053 37,053 33,291 64,934 719 (26,054) 109,943
Net income................ 50,023 50,023
Stock plans............... (5,838) 11,106 5,268
Stock repurchase.......... (4,937) (4,937)
Savings/Investment Plan
match.................. 155 1,902 2,057
Pension equity
adjustment............. (23) (23)
Currency translation...... 2,067 2,067
------ ------- ------- -------- ------ -------- --------
Balance, May 31, 1997....... 37,053 37,053 27,608 114,957 2,763 (17,983) 164,398
Net income................ 33,890 33,890
Stock plans............... 12 9,982 9,994
Stock repurchase.......... (4,603) (4,603)
Savings/Investment Plan
match.................. 417 2,022 2,439
Pension equity
adjustment............. (901) (901)
Currency translation...... (397) (397)
------ ------- ------- -------- ------ -------- --------
Balance, May 31, 1998....... 37,053 $37,053 $28,037 $148,847 $1,465 $(10,582) $204,820
====== ======= ======= ======== ====== ======== ========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these financial statements.
33
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is engaged principally in the design, engineering, production
and marketing of high-technology forged and investment cast metal and composite
components used for a wide variety of aerospace and power generation
applications.
The Company maintains its books using a 52/53 week year ending on the
Saturday nearest to May 31. For purposes of the consolidated financial
statements, the year-end is stated at May 31. The years ended May 31, 1998, 1997
and 1996 consisted of 52 weeks.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Revenue Recognition: Sales and income are recognized at the time products
are shipped.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications: Where appropriate, prior year amounts have been
reclassified to permit comparison.
Cash and Cash Equivalents: Cash equivalents include short-term investments
with maturities of less than three months at the time of investment.
Inventories: Inventories are valued at both the lower of first-in,
first-out (FIFO) cost or market, or for certain forgings raw material and
work-in-process inventories, the last-in, first-out (LIFO) method. On certain
orders, usually involving lengthy raw material procurement and production
cycles, progress payments received from customers are reflected as a reduction
of inventories. Product repair costs are expensed as incurred.
Long-Term, Fixed Price Contracts: A substantial portion of the Company's
revenues is derived from long-term, fixed price contracts with major engine and
aircraft manufacturers. These contracts are typically "requirements" contracts
under which the purchaser commits to purchase a given portion of its
requirements of a particular component from the Company. Actual purchase
quantities are typically not determined until shortly before the year in which
products are to be delivered. Losses on such contracts are provided when
available information indicates that the sales price is less than a fully
allocated cost projection.
Depreciable Assets: Property, plant and equipment, including significant
renewals and betterments, are capitalized at cost and are depreciated on the
straight-line method. Generally, depreciable lives range from 10 to 20 years for
land improvements, 10 to 40 years for buildings and 5 to 15 years for machinery
and equipment. Tooling production costs are primarily classified as machinery
and equipment and are capitalized at cost less associated reimbursement from
customers and depreciated over 5 years. Depreciation expense amounted to
$22,835,000, $20,168,000 and $16,723,000 in the years ended May 31, 1998, 1997
and 1996, respectively.
Bank Fees: Bank fees and related costs of obtaining credit facilities are
recorded as other assets and amortized over the term of the facilities.
Net Income per Share: In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"). SFAS 128 replaces the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per share. Basic
per-share data are computed based on the weighted average number of common
shares outstanding during each year. Common stock equivalents related to
outstanding stock options are included in diluted per-share computations unless
their inclusion would be antidilutive. All earnings per share amounts for all
periods have been presented, and where necessary, restated to conform to the
SFAS 128 requirements.
34
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Credit Risk: Financial instruments that potentially
subject the Company to concentration of credit risk consist primarily of
temporary cash investments and trade receivables. The Company restricts
investment of temporary cash investments to financial institutions with high
credit standing. The Company has approximately 1,100 active customers. However,
the Company's accounts receivable are concentrated with a small number of
Fortune 500 companies with whom the Company has long-standing relationships.
Accordingly, management considers credit risk to be low. Five customers
accounted for 50.5%, 47.7% and 47.3% of the Company's revenues during the years
ended May 31, 1998, 1997 and 1996, respectively. General Electric Company
("GE")and United Technologies Corporation ("UT") each accounted for 10%, or
more, of the Company's revenues as follows:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 % 1997 % 1996 %
-------- --- -------- --- -------- ---
($000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
GE............................... $169,894 23 $156,764 26 $134,830 27
UT............................... 76,786 10 60,921 10 53,116 11
</TABLE>
Currency Translation: For foreign operations, the local currency is the
functional currency. Assets and liabilities are translated at year-end exchange
rates, and statement of income items are translated at the average exchange
rates for the year. Translation adjustments are reported in equity, adjustments
as a separate component of stockholders' equity, which also includes exchange
gains and losses on certain intercompany balances of a long-term investment
nature.
Research and Development: Research and development expenses, including
related depreciation, amounted to $3,290,000, $2,895,000 and $1,630,000 for the
years ended May 31, 1998, 1997 and 1996, respectively.
Intangible Assets: Intangible assets consist primarily of costs of
acquired businesses in excess of net assets acquired and are amortized on a
straight line basis over periods up to 35 years. On a periodic basis, the
Company estimates the future undiscounted cash flows of the businesses to which
the costs of acquired businesses in excess of net assets acquired relate in
order to ensure that the carrying value of such intangible asset has not been
impaired.
Accounting for Stock-Based Compensation: The Company has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), in accounting for its employee stock option plans because
the alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"), requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, when the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Impairment of Long-Lived Assets: Effective June 1, 1996, the Company
adopted Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121"). SFAS 121 prescribes the accounting for the impairment of
long-lived assets that are to be held and used in the business and similar
assets to be disposed of. The adoption has not had a material effect on earnings
or the financial position of the Company.
Reporting Comprehensive Income: In June 1997, the Financial Accounting
Standards Board issued Statement No. 130 "Reporting Comprehensive Income" ("SFAS
130"). The implementation of SFAS 130 will require that the components of
comprehensive income be reported in the financial statements. Implementation of
this new Standard is required for the year ending May 31, 1999.
Segment Reporting: In June 1997, the Financial Accounting Standards Board
issued Statement No. 131 "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). The implementation of SFAS 131 will require
the disclosure of segment information utilizing the approach that
35
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company uses to manage its internal organization. Implementation of this
Standard is required for the year ending May 31, 1999.
Pensions and Other Post Retirement Benefits: In February 1998, the
Financial Accounting Standards Board issued Statement No. 132, "Employers'
Disclosures about Pensions and Other Post Retirement Benefits" ("SFAS 132").
SFAS 132 standardizes disclosure requirements of Statement No's. 87, "Employers'
Accounting for Pensions," and 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions." Implementation of this Standard is required for
the year ending May 31, 1999.
B. ACQUISITION
The Company acquired International Extruded Products, LLC ("IXP"), a
specialty manufacturer of extruded seamless wall pipe, on April 9, 1998 for
approximately $15,460,000. The acquisition was financed through operating cash.
The acquisition was accounted for as a purchase and the net assets and results
of operations have been included in the consolidated financial statements since
the date of acquisition. The purchase price was allocated on the basis of the
estimated fair market value of the assets acquired and the liabilities assumed.
This acquisition did not materially impact consolidated results, therefore no
pro forma information is provided.
C. BALANCE SHEET INFORMATION
Components of selected captions in the consolidated balance sheets follow:
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1998 1997
-------- --------
(000'S OMITTED)
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and improvements............................ $133,401 $108,496
Machinery and equipment..................................... 330,337 292,103
Under construction.......................................... 27,065 21,789
-------- --------
490,803 422,388
Less: accumulated depreciation.............................. 293,440 268,651
-------- --------
$197,363 $153,737
======== ========
INTANGIBLE ASSETS:
Pension intangible.......................................... $ 1,847 $ 937
Costs in excess of net assets acquired...................... 28,786 28,786
Less: accumulated amortization.............................. (11,172) (10,468)
-------- --------
$ 19,461 $ 19,255
======== ========
OTHER ASSETS:
Cash surrender value of Company-owned life insurance
policies.................................................. $ 1,105 $ 1,041
Other....................................................... 4,618 2,587
-------- --------
$ 5,723 $ 3,628
======== ========
ACCRUED LIABILITIES AND OTHER:
Accrued payroll and benefits................................ $ 12,520 $ 12,602
Restructuring, integration, disposal and environmental
reserves.................................................. 5,330 7,108
Other....................................................... 32,842 29,667
-------- --------
$ 50,692 $ 49,377
======== ========
</TABLE>
36
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
D. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1998 1997
-------- --------
(000'S OMITTED)
<S> <C> <C>
Raw material................................................ $ 50,050 $ 36,990
Work-in-process............................................. 92,136 65,742
Other....................................................... 4,221 2,905
-------- --------
146,407 105,637
Less progress payments...................................... 13,273 13,305
-------- --------
$133,134 $ 92,332
======== ========
</TABLE>
At May 31, 1998 and 1997 approximately 38% and 37%, respectively, of
inventories are valued at LIFO cost. If all inventories valued at LIFO cost had
been valued at FIFO cost or market which approximates current replacement cost,
inventories would have been $18,262,000 higher than reported at May 31, 1998 and
1997.
LIFO inventory quantities increased in the year ended May 31, 1998 and
1997. LIFO inventory quantities were reduced in the year ended May 31, 1996,
resulting in the liquidation of LIFO inventories carried at the lower costs
prevailing in prior years compared with the cost of current purchases which has
a favorable effect on income from operations. Inflation and deflation have
negative and positive effects on income from operations, respectively. The
effects of lower quantities and inflation were as follows:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
(000'S OMITTED)
<S> <C> <C> <C>
Lower quantities........................................ $-- $ -- $5,448
Inflation............................................... -- (1,600) (526)
-- ------- ------
Net increase (decrease) to income from operations....... $-- $(1,600) $4,922
== ======= ======
</TABLE>
E. SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consisted of the following:
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1998 1997
-------- -------
(000'S OMITTED)
<S> <C> <C>
Borrowings due within one year:
Current portion of long-term debt......................... $ 3,017 $ 77
-------- -------
Total borrowings due within one year.............. $ 3,017 $ 77
======== =======
Long-term debt:
10 3/4% Senior Notes...................................... $ 5,275 $90,000
8% Senior Notes........................................... 150,000 --
Industrial Revenue Bond................................... 5,600 6,000
Other..................................................... 1,698 154
-------- -------
Total long-term debt.............................. $162,573 $96,154
======== =======
</TABLE>
37
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 15, 1997, the Company issued $150,000,000 of 8% Senior Notes
due 2007 ("8% Senior Notes") under an indenture between the Company and a bank
as trustee. The 8% Senior Notes were issued at a price of 99.323% of face value
and pay interest semi-annually in arrears on June 15 and December 15 of each
year, commencing June 15, 1998. The 8% Senior Notes are general unsecured
obligations of the Company, are non-callable for a five year period, and are
senior to any future subordinated indebtedness of the Company. The Company used
approximately $90,750,000 of the net proceeds from the sale of the 8% Senior
Notes to repurchase $84,725,000 (94%) of its outstanding 10 3/4% Senior Notes
due 2003 ("10 3/4% Senior Notes").
In conjunction with the extinguishment of the 10 3/4% Senior Notes, the
Company recorded an extraordinary loss, net of income tax benefit of $2,920,000,
amounting to $5,192,000. The extraordinary after-tax loss relates to (i) the
premium related to the retirement of the 10 3/4% Senior Notes, (ii) the
write-off of certain deferred debt issue expenses and (iii) fees and expenses
payable by the Company with respect to the tender offer for the 10 3/4% Senior
Notes.
The estimated fair value of the combined 8% and 10 3/4% Senior Notes was
$157,067,000 and $96,300,000 at May 31, 1998 and 1997, respectively, based on
third party valuations.
In December 1996, the Company issued an Industrial Revenue Bond (the "IRB")
for the construction of a facility in Montrose, Colorado amounting to
$6,000,000. The IRB bears an interest rate approximating 3.9%, fluctuating
weekly. The fair value approximates market value. The Company maintains a letter
of credit to collateralize the IRB.
On May 20, 1994, the Company initiated, through a subsidiary, Wyman-Gordon
Receivables Corporation ("WGRC"), a revolving credit agreement with a group of
five banks ("Receivables Financing Program"). WGRC is a separate corporate
entity from Wyman-Gordon Company and its other subsidiaries, with its own
separate creditors. WGRC's business is the purchase of accounts receivable from
Wyman-Gordon Company and certain of its subsidiaries ("Sellers"), and neither
WGRC on the one hand nor the Sellers (or subsidiaries or affiliates of the
Sellers) on the other have agreed to pay or make their assets available to pay
creditors of others. WGRC's creditors have a claim on its assets prior to those
assets becoming available to any creditors of any of the Sellers. The facility
provides for a total commitment by the banks of up to $65,000,000, including a
letter of credit subfacility of up to $35,000,000. Interest on borrowings is
charged at LIBOR plus 0.625% or based on the bank's base rate.
There were no borrowings outstanding under the Receivables Financing
Program at May 31, 1998 and 1997. At May 31, 1998 and 1997, the total
availability under the Receivables Financing Program was $65,000,000 and
$45,310,000, respectively, there were no borrowings against the available
amounts in either year and letters of credit amounting to $8,373,000 and
$7,007,000 were outstanding, respectively.
Wyman-Gordon Limited, the Company's subsidiary located in Livingston,
Scotland, entered into a credit agreement ("the U.K. Credit Agreement") with
Clydesdale Bank PLC ("Clydesdale") effective June 27, 1997. The maximum
borrowing capacity under the U.K. Credit Agreement is #2,000,000 (approximately
$3,200,000) with separate letter of credit and guarantee limits of #1,000,000
(approximately $1,600,000) each. Borrowings bear interest at 1% over
Clydesdale's base rate. In the event that borrowings by way of overdraft are
allowed to exceed the agreed limit, interest on the excess borrowings will be
charged at the rate of 1.5% per annum over Clydesdale's base rate. The U.K.
Credit Agreement is secured by all present and future assets of Wyman-Gordon
Limited (including without limitation, accounts receivable, inventory, property,
plant and equipment, intellectual property, intercompany loans, and other real
and personal property). The U.K. Credit Agreement contains covenants
representations and warranties customary for such facilities. There were no
borrowings outstanding at May 31, 1998 or May 31, 1997. At May 31, 1998, and May
31, 1997, Wyman-Gordon Limited had outstanding #975,000 (approximately
$1,590,000), and #935,000 (approximately $1,534,000) respectively, of letters of
credit or guarantees under the U.K. Credit Agreement.
38
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For the years ended May 31, 1998 and 1997, the weighted average interest
rate on short-term borrowings was 6.5% and 6.8%, respectively.
Annual maturities of long-term debt in the next five years amount to
$3,017,000 for 1999, $1,241,000 for 2000, $1,198,000 for 2001, $1,234,000 for
2002, $6,500,000 for 2003 and $152,400,000 thereafter. On June 30, 1998, the
Company made a final principal payment of $2,300,000 under the Company's
promissory note to Cooper Industries, Inc. provided under the terms of the
"Stock Purchase Agreement" with Cooper Industries, Inc.
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
(000'S OMITTED)
<S> <C> <C> <C>
Interest on debt.............................. $11,319 $ 9,795 $10,003
Capitalized interest........................ -- (528) (262)
Amortization of financing fees and other.... 1,229 1,555 1,531
------- ------- -------
Interest expense............................ $12,548 $10,822 $11,272
======= ======= =======
</TABLE>
Total interest paid approximates "Interest on debt" stated in the table
above.
F. RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (CREDITS)
Cameron Purchase Cash Costs:
On May 26, 1994, the Company acquired Cameron Forged Products Company
("Cameron") from Cooper Industries, Inc. Included as part of the Cameron
purchase price allocation, the Company recorded $12,200,000 for direct cash
costs related to the acquisition and integration of Cameron, for relocation of
Cameron machinery and dies, severance of Cameron personnel and other costs.
During the year ended May 31, 1995, the Company made $4,100,000 of cash charges
against the reserves and it was determined that the cash costs of the
acquisition were $5,200,000 lower than originally estimated. There have been no
significant changes to the Company's May 31, 1995 estimates of the remaining
integration activities. The Company made $2,400,000 of cash charges against
these reserves in the years ended May 31, 1998, 1997 and 1996. The remaining
activities will require estimated cash outlays of $100,000 in the year ended May
31, 1999 and $400,000 thereafter.
1994 Cameron Integration Costs:
Based on the Company's plans for the integration of Cameron, in May 1994,
the Company recorded an integration restructuring charge totalling $24,100,000
to provide for relocating machinery, equipment, tooling and dies of the Company
as well as relocation and severance costs related to personnel of the Company
and the write-down of certain assets of the Company, including portions of metal
production facilities and certain forging, machining and testing equipment to
net realizable value as a result of consolidating certain systems and
facilities, idling certain machinery and equipment, and eliminating certain
processes, departments and operations as a result of the acquisition.
During the year ended May 31, 1995, after a year of evaluating the combined
forgings operations and concluding that most of its integration activities had
been completed or were adequately provided for within the remaining integration
restructuring reserves, the Company determined that severance and other
personnel costs were $1,900,000 lower and movement of machinery, equipment and
tooling and dies costs were $2,500,000 lower than originally estimated.
Additionally, certain machinery and equipment redundancies as a result of the
integration of Cameron's operations with those of the Company's were $2,300,000
higher than original estimates. As a result, the Company took into income from
operations in 1995, an integration restructuring credit in the amount of
$2,100,000. There have been no significant changes to the Company's May 31, 1995
estimates of the remaining integration activities. The Company made a total of
$4,700,000 of
39
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cash charges against these reserves during the years ended May 31, 1998, 1997
and 1996. At May 31, 1998, the Company estimates these remaining integration
activities will require cash outlays of approximately $500,000 in the year ended
May 31, 1999 and $500,000 thereafter. Most of these future expenditures
represent costs associated with consolidation and reconfiguration of production
facilities and relocation or severance costs.
1997 Restructuring:
The Company recorded a charge totalling $11,500,000 which included
$4,600,000 to provide for the costs of workforce reductions at the Company's
Grafton, Massachusetts Forging facility, $3,400,000 to write-off and dispose of
certain Forging equipment, $2,300,000 to reduce the carrying value and dispose
of certain assets of the Company's titanium castings operations and $1,200,000
to consolidate the titanium castings operations. The Company made a total of
$2,700,000 of cash charges against these reserves during the years ended May 31,
1998 and 1997 and estimates that the remaining severance and other personnel
costs, disposal of Forging equipment and consolidation of the titanium castings
operations will require cash outlays of $2,500,000 in the year ended May 31,
1999 and $1,200,000 thereafter.
40
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of charges made or estimated to be made against restructuring,
integration and disposal reserves is as follows:
<TABLE>
<CAPTION>
FIVE MONTHS
ENDED YEAR
MAY 31, 1994 YEAR YEAR YEAR ENDED
AND FOR THE ENDED ENDED ENDED MAY 31,
YEAR ENDED MAY 31, MAY 31, MAY 31, 1999 AND
TOTAL MAY 31, 1995 1996 1997 1998 THEREAFTER
------- ------------ ------- ------- ------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C> <C> <C>
CAMERON PURCHASE CASH COSTS:
Cost of relocating Cameron's
machinery and equipment and
tooling and dies.............. $ 3,200 $ 1,700 $ 300 $ 800 $ 100 $ 300
Severance of Cameron personnel... 3,800 2,400 1,200 -- -- 200
------- ------- ------ ------ ------ ------
Total Cameron purchase
cash costs............. $ 7,000 $ 4,100 $1,500 $ 800 $ 100 $ 500
======= ======= ====== ====== ====== ======
1994 CAMERON INTEGRATION COSTS:
Cash:
Movement of machinery, equipment
and tooling and dies.......... $ 4,300 $ 800 $1,500 $ 900 $ 400 $ 700
Severance and other personnel
costs......................... 4,000 1,800 1,600 200 100 300
------- ------- ------ ------ ------ ------
Total cash charges....... 8,300 2,600 3,100 1,100 500 1,000
------- ------- ------ ------ ------ ------
Non-Cash:
Asset revaluation................ 13,700 13,700 -- -- -- --
Credits to reserves.............. 2,100 2,100 -- -- -- --
------- ------- ------ ------ ------ ------
Total non-cash charges... 15,800 15,800 -- -- -- --
------- ------- ------ ------ ------ ------
Total 1994 Cameron
integration costs...... $24,100 $18,400 $3,100 $1,100 $ 500 $1,000
======= ======= ====== ====== ====== ======
1995 OTHER CHARGES:
Non-Cash:
Credits to 1994 Cameron
integration costs............. $(2,100) $(2,100) $ -- $ -- $ -- $ --
------- ------- ------ ------ ------ ------
Total 1995 other
charges................ $(2,100) $(2,100) $ -- $ -- $ -- $ --
======= ======= ====== ====== ====== ======
1997 RESTRUCTURING:
Cash:
Severance and other personnel
costs......................... $ 2,200 $ -- $ -- $ 200 $1,400 $ 600
Disposal of Forging equipment.... 2,300 -- -- -- 400 1,900
Castings titanium operations..... 1,900 -- -- 700 -- 1,200
------- ------- ------ ------ ------ ------
Total cash charges....... 6,400 -- -- 900 1,800 3,700
------- ------- ------ ------ ------ ------
NON-CASH:
Severance and other personnel
costs......................... 2,400 -- -- 2,400 -- --
Asset write-off and
revaluation................... 2,700 -- -- 2,700 -- --
------- ------- ------ ------ ------ ------
Total non-cash charges... 5,100 -- -- 5,100 -- --
------- ------- ------ ------ ------ ------
Total 1997
Restructuring.......... $11,500 $ -- $ -- $6,000 $1,800 $3,700
======= ======= ====== ====== ====== ======
</TABLE>
41
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Charges (Credits):
Other charges (credits) also include non-cash charges to reduce the
carrying value of certain non-operating other assets as follows:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
(000'S OMITTED)
<S> <C> <C> <C>
Australian Joint Venture.................................... $ -- $ 2,484 $1,871
Cash surrender value of Company-owned life insurance
policies.................................................. -- 5,745 846
Building held for sale...................................... -- 1,900 --
Other....................................................... (1,000) 250 --
------- ------- ------
$(1,000) $10,379 $2,717
======= ======= ======
</TABLE>
Other charges (credits) in the year ended May 31, 1998 include a credit of
$4,000,000 for the recovery of cash surrender value of certain Company-owned
life insurance policies and a credit of $1,900,000 resulting from the disposal
of a building held for sale.
G. ENVIRONMENTAL MATTERS
The Company is subject to extensive, stringent and changing federal, state
and local environmental laws and regulations, including those regulating the
use, handling, storage, discharge and disposal of hazardous substances and the
remediation of alleged environmental contamination. Accordingly, the Company is
involved from time to time in administrative and judicial inquiries and
proceedings regarding environmental matters. Nevertheless, the Company believes
that compliance with these laws and regulations will not have a material adverse
effect on the Company's operations as a whole. However, it is not possible to
predict accurately the amount or timing of costs of any future environmental
remediation requirements. The Company continues to design and implement a system
of programs and facilities for the management of its raw materials, production
processes and industrial waste to promote compliance with environmental
requirements. As of May 31, 1998, aggregate environmental reserves amounted to
$16,509,000 and have been provided for expected cleanup expenses estimated
between $4,400,000 and $5,400,000 upon the eventual sale of the Worcester
facility, certain environmental issues at Cameron amounting to approximately
$3,500,000 and the exposures noted in the following paragraphs, which include
certain capitalizable amounts for environmental management and remediation
projects.
Pursuant to an agreement entered into with the U.S. Air Force upon the
acquisition of the Grafton facility from the federal government in 1982, the
Company agreed to make expenditures totalling $20,800,000 for environmental
management and remediation at the site during the period 1982 through 1999, of
which $4,000,000 remained as of May 31, 1998. These expenditures will not
resolve the Company's obligations to federal and state regulatory authorities,
who are not parties to the agreement, however, the Company expects to incur an
additional amount, currently estimated at $ 3,500,000, to comply with current
federal and state environmental requirements governing the investigation and
remediation of contamination at the site.
The Company's Grafton facility was formerly included in the U.S. Nuclear
Regulatory Commission's ("NRC") May 1992 Site Decommissioning Management Plan
("SDMP") for low-level radioactive waste as the result of the disposal of
magnesium thorium alloys at the facility in the 1960s and early 1970s under
license from the Atomic Energy Commission. On March 31, 1997, the NRC informed
the Company that jurisdiction for the Grafton site had been transferred to the
Commonwealth of Massachusetts Department of Public Health and that the Grafton
facility had been removed from the SDMP. Although it is unknown what specific
disposal requirements may be placed on the Company by the Massachusetts
Department of Public Health, the Company believes that a reserve of $1,500,000
recorded on its books is sufficient to cover all costs.
42
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company, together with numerous other parties, has been named a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") for the cleanup of the
following Superfund sites: Operating Industries, Monterey Park, California;
Cedartown Municipal Landfill, Cedartown, Georgia; PSC Resources, Palmer,
Massachusetts; the Harvey GRQ site, Harvey, Illinois; the Berlin & Farrow site,
Swartz Creek, Michigan; the Gemme/Fournier site, Leicester, Massachusetts; and
the Salco, Inc. site, Monroe, Michigan. The Company believes that a reserve of
$1,150,000 recorded on its books is sufficient to cover all costs.
At the Gemme/Fournier site, a proposed agreement would allocate 33% of the
cleanup costs to the Company. In September 1995, a consulting firm retained by
the PRP group made a preliminary remediation cost estimate of $1,400,000 to
$2,800,000. The Company's insurer is defending the Company's interests, and the
Company believes that any recovery against the Company would be offset by
recovery of insurance proceeds.
H. BENEFIT PLANS
The Company and its subsidiaries have pension plans covering substantially
all employees. Benefits are generally based on years of service and a fixed
monthly rate or average earnings during the last years of employment. Pension
plan assets are invested in equity and fixed income securities, pooled funds
including real estate funds and annuities. Company contributions are determined
based upon the funding requirements of U.S. and other governmental laws and
regulations.
A reconciliation between the amounts recorded on the consolidated balance
sheets and the summary tables of the funding status of the pension plans are as
follows:
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1998 1997
------- -------
(000'S OMITTED)
<S> <C> <C>
Pension liability per balance sheet......................... $(2,908) $(1,102)
Prepaid (accrued) pension expense included in prepaid
expenses in the balance sheet............................. (3,417) 95
U.K. prepaid pension expense (pension liability)............ 84 89
------- -------
Net U.S. prepaid pension expense (pension liability)........ $(6,241) $ (918)
======= =======
</TABLE>
U.S. Pension Plans
Effective April 30, 1996, two of the Company's U.S. pension plans which had
accumulated benefits exceeding assets were merged into the plan which had assets
exceeding the accumulated benefits.
Pension expense for the U.S. pension plans included the following
components:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
-------- -------- --------
(000'S OMITTED)
<S> <C> <C> <C>
Service cost....................................... $ 4,961 $ 4,298 $ 3,042
Enhanced benefit package for early retirement...... -- 3,775 --
Interest cost on projected benefit obligation...... 12,179 11,302 11,662
Actual return on assets............................ (45,296) (17,804) (36,188)
Net amortization and deferral of actuarial gains
(losses)......................................... 32,573 4,722 23,412
-------- -------- --------
Net pension expense................................ $ 4,417 $ 6,293 $ 1,928
======== ======== ========
Assumed long-term rate of return on plan assets.... 10.0% 10.0% 10.0%
======== ======== ========
</TABLE>
43
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the funding status of the U.S. pension plans and a
reconciliation to the amounts recorded in the consolidated balance sheets are as
follows:
<TABLE>
<CAPTION>
MAY 31, 1998
------------------------------------
ASSETS ACCUMULATED
EXCEEDING BENEFITS
ACCUMULATED EXCEEDING
BENEFITS ASSETS TOTAL
----------- ----------- --------
(000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................... $151,934 $ 9,376 $161,310
Nonvested................................................. 3,934 615 4,549
-------- -------- --------
Accumulated benefit obligation............................ 155,868 9,991 165,859
Impact of forecasted salary increases during future
periods................................................ 13,638 1,211 14,849
-------- -------- --------
Projected benefit obligation for employee service to
date................................................... 169,506 11,202 180,708
Current fair market value of plan assets.................... 195,987 -- 195,987
-------- -------- --------
Excess (shortfall) of plan assets over (under) projected
benefit obligation........................................ 26,481 (11,202) 15,279
Unrecognized net (gain) loss................................ (29,950) 2,315 (27,635)
Unrecognized net (asset) obligation at transition........... 1,140 881 2,021
Unrecognized prior service cost............................. 6,537 966 7,503
Adjustment required to recognize minimum liability.......... -- (2,824) (2,824)
Net periodic pension cost March 30, 1998 to May 31, 1998.... (458) (278) (736)
Contributions March 30, 1998 to May 31, 1998................ -- 151 151
-------- -------- --------
Net prepaid pension expense (pension liability)............. $ 3,750 $ (9,991) $ (6,241)
======== ======== ========
Estimated annual increase in future salaries................ 4-5%
Weighted average discount rate.............................. 7.0%
---
---
</TABLE>
44
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the funding status of the U.S. pension plans and a
reconciliation to the amounts recorded in the consolidated balance sheets are as
follows:
<TABLE>
<CAPTION>
MAY 31, 1997
------------------------------------
ASSETS ACCUMULATED
EXCEEDING BENEFITS
ACCUMULATED EXCEEDING
BENEFITS ASSETS TOTAL
----------- ----------- --------
(000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................... $146,771 $ 6,965 $153,736
Nonvested................................................. 935 392 1,327
-------- ------- --------
Accumulated benefit obligation............................ 147,706 7,357 155,063
Impact of forecasted salary increases during future
periods................................................ 12,878 2,024 14,902
-------- ------- --------
Projected benefit obligation for employee service to
date................................................... 160,584 9,381 169,965
Current fair market value of plan assets.................... 164,977 -- 164,977
-------- ------- --------
Excess (shortfall) of plan assets over (under) projected
benefit obligation........................................ 4,393 (9,381) (4,988)
Unrecognized net (gain) loss................................ (8,190) 728 (7,462)
Unrecognized net (asset) obligation at transition........... 1,655 1,116 2,771
Unrecognized prior service cost............................. 8,842 1,192 10,034
Adjustment required to recognize minimum liability.......... -- (1,013) (1,013)
Net periodic pension cost March 30, 1997 to May 31, 1997.... (202) (218) (420)
Contributions March 30, 1997 to May 31, 1997................ -- 160 160
-------- ------- --------
Net prepaid pension expense (pension liability)............. $ 6,498 $(7,416) $ (918)
======== ======= ========
Estimated annual increase in future salaries................ 3-5%
Weighted average discount rate.............................. 7.50%
----
----
</TABLE>
U.K. Pension Plan
Pension expense for the U.K. pension plan included the following:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
(000'S OMITTED)
<S> <C> <C> <C>
Service cost.......................................... $ 746 $ 629 $ 579
Interest cost......................................... 1,695 1,507 1,300
Expected return on assets............................. (1,800) (1,640) (1,283)
------- ------- -------
Net pension expense......................... $ 641 $ 496 $ 596
======= ======= =======
</TABLE>
45
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The U.K. pension plan's assets and liabilities were rolled over from the
former Cameron plan during fiscal 1996. The funded status of the U.K. pension
plan is as follows:
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1998 1997
-------- --------
(000'S OMITTED,
EXCEPT PERCENTAGES)
<S> <C> <C>
Fair value of plan assets................................... $27,187 $22,007
Projected benefit obligation................................ 25,780 21,164
------- -------
Plan assets greater than projected benefit obligation....... 1,407 843
Unrecognized net gain....................................... (1,323) (754)
------- -------
Prepaid pension cost........................................ $ 84 $ 89
======= =======
Accumulated benefits........................................ $25,554 $19,436
======= =======
Vested benefits............................................. $24,365 $19,436
======= =======
Assumed long-term rate of return on plan assets............. 6.25% 8.0%
Weighted average discount rate.............................. 6.25% 8.0%
Rate of salary increase..................................... 3.25% 5.0%
</TABLE>
Defined Contribution Plan
The Company also makes a 401(k) plan available to most full-time employees.
Employer contributions to the defined contribution plan are made at the
Company's discretion and are reviewed periodically. There were no cash
contributions in the years ended May 31, 1998 and 1997. Cash contributions
amounted to $26,000 for the year ended May 31, 1996. Additionally, for the years
ended May 31, 1998, 1997 and 1996, the Company contributed 100,409, 97,696 and
79,426 shares of common stock from Treasury to its defined contribution plan,
respectively, and recorded expense relating thereto of $2,439,000, $2,057,000
and $1,058,000, respectively.
I. OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits, the Company and its subsidiaries
provide most retired employees with health care and life insurance benefits. The
majority of these health care and life insurance benefits are provided through
insurance companies, some of whose premiums are computed on a cost plus basis.
Most of the Forgings Division and Corporate retirees and full-time
employees are or become eligible for these postretirement health care and life
insurance benefits if they meet minimum age and service requirements. There are
certain retirees for which Company cost and liability are affected by future
increases in health care cost. The liabilities have been developed assuming a
medical trend rate for growth in future health care claim levels from the
assumed 1994 level. For the year ended May 31, 1998, the medical trend rate for
indemnity and Health Maintenance Organization ("HMO") inflationary costs was
6.5% and 4.5%, respectively. The rate for indemnity and HMO for the year ended
May 31, 1999 is 6.0% and 4.0% and are ultimately estimated at 5.0% and 4.0%,
respectively, for the year ended May 31, 2001. The change to the accumulated
postretirement benefit obligation for each 1.0% change in these assumptions is
$3,133,000. The change in the annual SFAS 106 expense for each 1.0% change in
these assumptions is $248,000. The weighted average discount rate used in
determining the amortization of the accumulated postretirement benefit
obligation was 7.0% and 7.5% at May 31, 1998 and May 31, 1997, respectively, and
the average remaining service life was 20 years.
46
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic benefit expense consists of the following components:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
($000'S OMITTED)
<S> <C> <C> <C>
Service cost............................................ $ 160 $ 380 $ 234
Benefit from early retirement package................... -- (1,375) --
Interest on the accumulated benefit obligation.......... 3,372 3,550 4,021
Net amortization and deferral........................... 61 409 (53)
------ ------- ------
Total postretirement benefit expense.......... $3,593 $ 2,964 $4,202
====== ======= ======
</TABLE>
The Company has no plans for funding the liability and will continue to pay
for retiree medical costs as they occur. The components of the accumulated
postretirement benefit obligation are as follows:
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1998 1997
------- -------
(000'S OMITTED)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $40,397 $40,516
Fully eligible active plan participants................... 1,745 3,082
Other active plan participants............................ 4,497 2,845
------- -------
Accumulated postretirement benefit obligation in excess of
plan assets............................................... 46,639 46,443
Unrecognized net gain (loss) from past experience different
from that assumed and from changes in assumptions......... (1,421) 1,055
Prior service cost not yet recognized in net periodic
postretirement benefit cost............................... (673) (733)
Other....................................................... 85 373
------- -------
Accrued postretirement benefit cost......................... $44,630 $47,138
======= =======
</TABLE>
J. FEDERAL, FOREIGN AND STATE INCOME TAXES
The components of the net expense for income taxes for the year ended May
31, 1998 are as follows:
<TABLE>
<CAPTION>
U.S. U.S.
FEDERAL STATE U.K. TOTAL
------- ------ ------ -------
(000'S OMITTED)
<S> <C> <C> <C> <C>
Current tax expense........................... $ 5,778 $1,250 $2,827 $ 9,855
Deferred tax expense.......................... 6,500 -- -- 6,500
------- ------ ------ -------
Net provision for income taxes before
extraordinary loss tax benefit.............. $12,278 $1,250 $2,827 $16,355
======= ====== ====== =======
</TABLE>
In the year ended May 31, 1998, the Company provided $16,355,000 for income
taxes, net of a tax benefit of approximately $1,800,000 relating to the
utilization of NOL carryforwards. In addition, the Company has recorded a
$2,920,000 tax benefit against the extraordinary loss of $8,112,000 associated
with the early extinguishment of the Company's 10 3/4% Senior Notes.
In the year ended May 31, 1997, net tax benefits of $25,680,000 were
recognized including a refund of prior years' income taxes amounting to
$19,680,000 and $6,500,000 related to the expected realization of NOLs in future
years and $10,250,000 related to current NOLs benefit offsetting $10,750,000 of
current income tax expense. The refund relates to the carryback of tax net
operating losses to tax years 1981, 1984 and
47
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1986 under applicable provisions of Internal Revenue Code Section 172(f). The
amount of net operating losses carried back to such years was approximately
$48,500,000.
The benefit (provision) for income taxes before extraordinary item is at a
rate other than the federal statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
-------- ------- -------
(000'S OMITTED)
<S> <C> <C> <C>
Benefit (provision) at the applicable U.S federal
statutory tax rate................................. $(19,403) $(8,442) $(8,832)
Benefit from net permanent tax differences........... 4,059 -- --
Benefit of higher statutory tax rates in applicable
prior years realized in Section 172(f) carryback
claims............................................. -- 2,700 --
State income taxes................................... (1,640) (200) --
(Increase)decrease of deferred tax asset valuation
allowance.......................................... (1,168) 30,626 8,832
Other................................................ 1,797 996 --
-------- ------- -------
Income tax benefit (provision) before extraordinary
loss tax benefit................................... $(16,355) $25,680 $ --
======== ======= =======
</TABLE>
The principal components of deferred tax assets and liabilities were as
follows:
<TABLE>
<CAPTION>
MAY 31, 1998 MAY 31, 1997
------------ ------------
(000'S OMITTED)
<S> <C> <C>
DEFERRED TAX ASSETS
Provision for postretirement benefits.................. $ 18,298 $ 19,232
Net operating loss carryforwards....................... 4,667 17,117
Restructuring provisions............................... 8,406 9,856
Alternative minimum tax carryforward credit............ 5,964 --
Other.................................................. 8,205 10,315
-------- --------
45,540 56,520
Valuation allowance.................................... (32,269) (35,934)
-------- --------
13,271 20,586
-------- --------
DEFERRED TAX LIABILITIES
Accelerated depreciation............................... 12,409 11,256
Other.................................................. 862 2,830
-------- --------
13,271 14,086
-------- --------
Net deferred tax asset (liability)....................... $ -- $ 6,500
======== ========
</TABLE>
The change in the valuation allowance primarily reflects the expiration of
state NOL carryforwards and other adjustments such as alternative minimum tax
credit and utilization of federal NOL carryforwards.
48
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
K. NET INCOME PER SHARE
There were no adjustments required to be made to income before
extraordinary item for purposes of computing basic and diluted net income per
share. A reconciliation of the average number of common shares outstanding used
in the calculation of basic and diluted net income per share is as follows:
<TABLE>
<CAPTION>
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
------------ ------------ ------------
(000'S OMITTED)
<S> <C> <C> <C>
Shares used to compute basic net income per
share...................................... 36,331,305 35,824,576 35,242,630
Dilutive effect of stock options............. 1,025,553 1,202,247 998,782
---------- ---------- ----------
Shares used to compute diluted net income per
share...................................... 37,356,858 37,026,823 36,241,412
</TABLE>
L. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
The Company, through administration by the Compensation Committee of the
Company's Board of Directors (the "Committee"), may grant awards under the
Company's Long-Term Incentive Plans in the form of non-qualified stock options
or incentive stock options to those key employees it selects to purchase in the
aggregate up to 3,400,000 shares of newly issued or treasury common stock.
Options expire after 10 years from the date of grant and generally become
exercisable ratably over a three to seven year period commencing from the date
of grant. The exercise price of non-qualified stock options may not be less than
50% of the fair market value of such shares on the date of grant or, in the case
of incentive stock options, 100% of the fair market value on the date of grant.
Awards of stock appreciation rights ("SAR's") may also be granted, either in
tandem with grants of stock options (and exercisable as an alternative to the
exercise of stock options) or separately.
In addition, the Committee may grant other awards that consist of, are
denominated in or are payable in shares or that are valued by reference to
shares, including, for example, restricted shares, phantom shares, performance
units, performance bonus awards or other awards payable in cash, shares or a
combination thereof at the Committee's discretion.
Information concerning stock options issued to officers and other employees
is presented in the following table.
<TABLE>
<CAPTION>
YEAR WEIGHTED YEAR WEIGHTED YEAR WEIGHTED
ENDED AVERAGE ENDED AVERAGE ENDED AVERAGE
MAY 31, EXERCISE MAY 31, EXERCISE MAY 31, EXERCISE
1998 PRICE 1997 PRICE 1996 PRICE
------- -------- ------- -------- ------- --------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Number of shares under option:
Outstanding at beginning of
year.......................... 2,648 $12.56 2,295 $ 9.46 1,858 $ 5.90
Granted.......................... 356 24.11 817 18.34 861 15.14
Exercised........................ (500) 10.74 (415) 6.60 (390) 4.81
Canceled or expired.............. (42) 18.95 (49) 14.18 (34) 11.90
----- ------ ----- ------ ----- ------
Outstanding at end of year....... 2,462 $14.46 2,648 $12.56 2,295 $ 9.46
===== ====== ===== ====== ===== ======
Exercisable at end of year....... 1,598 1,189 1,104
===== ===== =====
</TABLE>
At May 31, 1998 and 1997, 1,304,207 and 1,616,845 shares were available for
future grants, respectively.
49
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following tables summarize information about stock options outstanding
at May 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------
WTD. AVG. OPTIONS EXERCISABLE
REMAINING --------------------
RANGE OF CONTRACTUAL WTD. AVG. WTD. AVG.
EXERCISE PRICES SHARES LIFE (YRS.) EXER. PRICE SHARES EXER. PRICE
- --------------- ------ ----------- ----------- ------ -----------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$ 3.00 - $ 7.99 743 4.0 $ 5.73 743 $ 5.73
$ 8.00 - $12.99 252 7.2 $12.52 152 $12.56
$13.00 - $17.99 901 7.7 $16.68 600 $16.67
$18.00 - $22.99 154 8.6 $20.10 44 $20.07
$23.00 - $27.99 412 8.9 $24.46 59 $23.00
----- -----
2,462 1,598
===== =====
</TABLE>
In addition to stock options, the Company grants performance shares to key
executive employees. There were no performance shares granted during the year
ended May 31, 1998. During the years ended May 31, 1997 and 1996, awards of
118,000 and 551,000 shares of the Company's common stock were made,
respectively, subject to restrictions based upon continued employment and the
performance of the Company. Compensation expense totalling $3,412,000,
$1,403,000 and $413,000 relating to the awards were recorded during the years
ended May 31, 1998, 1997 and 1996, respectively.
EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 1996, the Company adopted a qualified, noncompensatory
Employee Stock Purchase Plan. This plan enables substantially all employees to
subscribe to purchase shares of the Company's common stock on an annual basis.
Such shares are subscribed at the lower of 85% of their fair market value on the
first day of the plan year, January 1, or 85% of their fair market value on the
last business day of the plan year, usually December 31. Each eligible
employee's participation is limited to 10% of base wages and a maximum of
450,000 shares are authorized for subscription. Employee subscriptions for the
twelve months ended December 31, 1997 were 83,580 shares at $16.68 per share
based on 85% of the fair market value on January 1, 1997 ($19.63).
Accounting for stock-based plans is in accordance with Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense has been recognized for fixed stock option
plans or Employee Stock Purchase Plan.
As required by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has determined the weighted average fair values of stock-based
arrangements granted during the years ended May 31, 1998, 1997 and 1996 to be
$14.94, $11.28 and $9.34, respectively. The fair values of stock-based
compensation awards granted were estimated using the Black-Scholes model with
the following assumptions.
<TABLE>
<CAPTION>
EXPECTED
RISK-FREE ----------------------------------
GRANT OPTION DIVIDEND INTEREST
YEAR ENDED MAY 31, DATE TERM VOLATILITY YIELD RATE
- ------------------ --------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
1998................... 10/15/97 10 years 41% -- 5.57%
1/14/98 9 years 41% -- 5.57%
2/17/98 10 years 41% -- 5.57%
1997................... 7/16/96 9 years 38% -- 6.67%
10/16/96 10 years 38% -- 6.67%
1/15/97 10 years 38% -- 6.67%
3/17/97 9 years 38% -- 6.67%
1996................... 10/18/95 9 years 38% -- 6.67%
4/17/96 10 years 38% -- 6.67%
</TABLE>
50
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Had compensation expense for the Company's stock-based plans and Employee
Stock Purchase Plan been accounted for using the fair value method prescribed by
SFAS No. 123, net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(000'S OMITTED, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C>
Net income as reported................................ $33,890 $50,023 $25,234
Pro forma net income under SFAS No. 123............... 32,062 47,399 24,957
Net income per share as reported:
Basic............................................... $ .93 $ 1.40 $ .72
Diluted............................................. .91 1.35 .70
Proforma net income per share under SFAS No. 123:
Basic............................................... $ .88 $ 1.32 $ .71
Diluted............................................. .86 1.28 .69
</TABLE>
The effects of applying SFAS No. 123 in the above pro forma disclosure are
not indicative of future amounts. SFAS No. 123 does not apply to awards granted
prior to the year ended May 31, 1996.
M. STOCK PURCHASE RIGHTS
On October 19, 1988, the Board of Directors of the Company declared a
dividend distribution of one right (a "Right") for each outstanding Share to
shareholders of record at the close of business on November 30, 1988 pursuant to
a Rights Agreement dated as of October 19, 1988 (the "Original Rights
Agreement"). On January 10, 1994, in connection with the acquisition of Cameron,
the Original Rights Agreement was amended and restated. The description and
terms of the Rights are set forth in an Amended and Restated Rights Agreement
(the "Rights Agreement"), between the Company and State Street Bank & Trust
Company, as Rights Agent. Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, no par value (the "Series A Shares"), of the Company at a price
of $50 per one one-hundredth of a Series A Share (the "Exercise Price"), subject
to adjustment.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power is sold after a person or group has become an Acquiring Person (as defined
below), proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring Company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that any person
or group of affiliated or associated persons becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Shares having
a market value of two times the exercise price of the Right. For purposes of the
Rights Agreement, an "Acquiring Person" generally means a person or group of
affiliated or associated persons who have acquired beneficial ownership of 20%
or more of the outstanding Shares. However, Cooper Industries, Inc. and its
affiliates and associates (together, the "Cooper Group") will not be deemed to
be an Acquiring Person for so long as (A) the Cooper Group beneficially owns at
least 10% or more of the outstanding Shares continuously from and after May 26,
1994 and (B) the Cooper Group does not acquire beneficial ownership of any
Shares in breach of the Investment Agreement dated as of January 10, 1994
between Cooper Industries, Inc. and the Company (other than an inadvertent
breach which is remedied as promptly as practicable by a transfer of the Shares
so acquired to a person which is not a member of the Cooper Group).
The Rights will expire on November 30, 1998 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company.
51
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
N. COMMITMENTS AND CONTINGENCIES
At May 31, 1998, certain lawsuits arising in the normal course of business
were pending. In the opinion of management, the outcome of these legal matters
will not have a material adverse effect on the Company's financial position and
results of operations.
The Company has entered into various foreign exchange contracts to manage
its foreign exchange risks. Through its foreign currency hedging activities, the
Company seeks to minimize the risk that the eventual cash flows resulting from
purchase and sale transactions denominated in other than the functional currency
of the operating unit will be affected by changes in exchange rates. Foreign
currency transaction exposures generally are the responsibility of the Company's
individual operating units to manage as an integral part of their business. The
Company hedges its foreign currency transaction exposures based on judgment,
generally through the use of forward exchange contracts. Gains and losses on the
Company's foreign currency transaction hedges are recognized as an adjustment to
the underlying hedged transactions. Deferred gains and losses on foreign
exchange contracts were not significant at May 31, 1998 and 1997. The Company
had foreign exchange contracts totaling $44,550,000 at May 31, 1998. Such
contracts include forward contracts of $21,482,000 for the purchase of U.K.
pounds and $23,068,000 for the sale of U.K. pounds. These contracts hedge
certain normal operating purchase and sales transactions. The exchange contracts
have no material fair market value, generally mature within six months and
require the Company to exchange U.K. pounds for non-U.K. currencies or non-U.K.
currencies for U.K. pounds. Translation and transaction gains and losses
included in the Consolidated Statements of Net Income for the years ended May
31, 1998, 1997 and 1996 were not significant.
On December 22, 1996, a serious industrial accident occurred at the
Houston, Texas, facility of Wyman-Gordon Forgings, Inc. ("WGFI"), a wholly-owned
subsidiary of the Company, in which eight employees were killed and two others
injured.
OSHA conducted an investigation of the accident. On June 18, 1997, WGFI
reached an agreement with OSHA, settling citations resulting from the accident.
The injured workers and the decedents' families have asserted claims
against the Company and WGFI. WGFI has also received claims from several
employees of a subcontractor claiming to have been injured at the time of the
accident as well as from one current employee.
To date, the Company has settled all claims that could be brought by three
of the decedents' families on terms acceptable to the Company and its insurance
carriers and in addition has reached agreement for the settlement of the claims
of the family of a fourth decedent. The Company has also settled most of the
claims of the subcontractor employees. The Company thus far has been unable to
achieve settlements with the other claimants, and, on October 24, 1997, a
lawsuit was filed in the District Court of Harris County, Texas, on behalf of
three of the decedents' families against the Company, WGFI and Cooper-Cameron
Corporation. One of the injured employees has subsequently filed a motion to be
included in the lawsuit. Trial of the lawsuit is currently set for January,
1999.
In general, under Texas statutory law, an employee's exclusive remedy
against an employer for an on-the-job injury is the benefits of the Texas
Workers' Compensation Act. WGFI, the employer of the deceased employees, has
workers' compensation insurance coverage and the injured employees and
beneficiaries of the deceased employees are receiving workers compensation
payments. Under applicable law, however, statutory beneficiaries of employees
killed in the course and scope of their employment may recover punitive (but not
compensatory) damages in excess of workers compensation benefits. However, to do
so, they must prove that the employer was grossly negligent. The protection of
the workers compensation exclusive remedy provision may not extend to the
Company as parent corporation of WGFI. Therefore, with regard to the October 24,
1997 lawsuit and any future lawsuits brought on behalf of those killed or
injured in the Houston accident or their families against the Company, if (i)
the court finds that the Company had a legal duty to WGFI and its employees,
(ii) the evidence supports a finding that the Company acted negligently in its
duty to WGFI and
52
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
its employees and (iii) such negligence had a causal connection with the
accident, the plaintiffs might be able to recover compensatory damages against
the Company. If it is shown that the Company's conduct amounted to gross
neglect, and that conduct is found to be a cause of the accident, the plaintiffs
may be able to recover punitive damages against the Company.
It is not possible at this time to determine the extent, if any, to which
WGFI or the Company could be held liable in connection with the accident. The
Company maintains general liability and employer's liability insurance for
itself and its subsidiaries under various policies with aggregate coverage
limits of approximately $29 million, a portion of which has been expended in the
settlements to date. While WGFI has tendered the defense of the various claims
to the Company's insurance carriers, there can be no assurance that the full
insurance coverage will be available. Based on the Company's experience in the
settlement negotiations to date, the Company believes that there is a
substantial risk that the pending and threatened claims will not be settled for
an aggregate amount within its insurance coverage limits. The Company
anticipates that, as with the currently pending lawsuit, any additional lawsuits
will include claims for alleged compensatory as well as punitive damages that in
the aggregate could substantially exceed the Company's available insurance
coverage. The Company intends to vigorously defend all lawsuits that have been
or may be filed relating to the accident. However, if one or more such lawsuits
were to be prosecuted successfully by the plaintiffs and a judgment were to be
obtained by one or more plaintiffs in such lawsuits and sustained on appeal,
litigation costs, including the cost of pursuing any appeals, and the cost of
paying such a judgment, to the extent not covered by insurance, could have a
material adverse effect on the Company's financial condition and the results of
operations, particularly if any such judgment includes awards for punitive
damages.
On September 25, 1997, the Company received a subpoena from the United
States Department of Justice informing it that the United States Department of
Defense and other federal agencies had commenced an investigation with respect
to the manufacture and sale of investment castings at the Company's Tilton, New
Hampshire, facility. The focus of the investigation is whether the Company
failed to comply with required quality control procedures for cast aerospace
parts and whether the Company shipped cast components that did not meet
applicable specifications, which could be a violation of federal requirements.
The investigating agencies have directed the Company to furnish various
documents and information relating to the subject of the investigation. The
Company is cooperating fully with the investigation, and in addition, has
substantially completed its own investigation, which was supervised by the
Company's outside attorneys and conducted by quality and process auditors from
another casting facility of the Company and by the Company's internal attorneys.
Such investigation has identified certain departures from Company policies and
procedures which have been addressed. The federal investigation may result in
criminal or civil charges being brought against the Company which could result
in civil damages and penalties and criminal liability if the Company were found
to have violated federal laws. Based on the Company's own investigation to date,
the Company does not believe that the federal investigation is likely to result
in a material adverse impact on the Company's financial condition or results of
operations, although no assurance as to the outcome or impact of that
investigation can be given.
O. SUBSEQUENT EVENTS
On July 31, 1998, the Company completed a transaction with Titanium Metals
Corporation ("TIMET") in which the parties have combined their respective
titanium castings businesses into a jointly-owned venture. The joint venture,
80.1% owned by Wyman-Gordon and 19.9% by TIMET, consists primarily of Wyman-
Gordon's titanium casting business located in Franklin, New Hampshire, and
TIMET's titanium casting business located in Albany, Oregon. The joint venture
will produce investment castings primarily for the aerospace market and will
seek to develop new applications for titanium castings.
In connection with the formation of the joint venture, TIMET has acquired
the operating assets of Wyman-Gordon's Millbury, Massachusetts, vacuum arc
remelting facility which produces titanium ingots for further processing into
finished forgings. In addition, Wyman-Gordon and TIMET have entered into a ten-
53
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year supply agreement pursuant to which TIMET will supply a portion of
Wyman-Gordon's requirements for titanium raw materials for its forging and
casting operations.
P. GEOGRAPHIC AND OTHER INFORMATION
Transfers between U.S. and international operations, principally inventory
transfers, are charged to the receiving organization at prices sufficient to
recover manufacturing costs and provide a reasonable return.
Certain information on a geographic basis follows:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
-------- -------- --------
(000'S OMITTED)
<S> <C> <C> <C>
REVENUES FROM UNAFFILIATED CUSTOMERS:
United States (including direct export sales)...... $676,342 $541,456 $447,515
United Kingdom..................................... 76,571 67,286 52,109
-------- -------- --------
$752,913 $608,742 $499,624
======== ======== ========
INTER AREA TRANSFERS:
United States...................................... $ 1,127 $ 378 $ 14
United Kingdom..................................... 7,062 6,244 4,666
-------- -------- --------
$ 8,189 $ 6,622 $ 4,680
======== ======== ========
EXPORT SALES:
United States direct export sales.................. $118,407 $ 88,888 $ 71,792
======== ======== ========
INCOME (LOSS) FROM OPERATIONS:
United States...................................... $ 58,126 $ 20,578 $ 32,042
United Kingdom..................................... 10,766 9,744 5,657
-------- -------- --------
$ 68,892 $ 30,322 $ 37,699
======== ======== ========
IDENTIFIABLE ASSETS (EXCLUDING INTERCOMPANY):
United States...................................... $479,181 $390,540 $309,868
United Kingdom..................................... 63,759 54,777 44,287
General corporate.................................. 8,670 9,054 21,735
-------- -------- --------
$551,610 $454,371 $375,890
======== ======== ========
</TABLE>
54
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Q. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended May 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(000'S OMITTED, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED MAY 31, 1998
Revenue................................. $180,009 $189,370 $181,764 $201,771
Cost of goods sold...................... 146,764 157,422 159,229 173,852
Other charges (credits)................. (1,900) (3,000) -- --
Income from operations.................. 21,750 21,771 9,577 15,794
Income before extraordinary item........ 11,859 13,336 3,963 9,924
Extraordinary item, net of tax.......... -- -- (5,192) --
Net income (loss)....................... 11,859 13,336 (1,229) 9,924
Basic net income per share:
Income before extraordinary item...... .33 .37 .11 .27
Net income (loss)..................... .33 .37 (.03) .27
Diluted net income per share:
Income before extraordinary item...... .32 .36 .11 .27
Net income (loss)....................... .32 .36 (.03) .27
YEAR ENDED MAY 31, 1997
Revenue................................. $134,235 $138,655 $153,331 $182,521
Cost of goods sold...................... 122,744 115,079 124,716 148,569
Other charges........................... 15,779 -- 2,434 4,870
Income (loss) from operations........... (14,340) 12,527 15,839 16,296
Income before extraordinary item........ 7,815 9,133 13,009 20,066
Extraordinary item, net of tax.......... -- -- -- --
Net income (loss)....................... 7,815 9,133 13,009 20,066
Basic net income per share:
Income before extraordinary item...... .22 .26 .36 .56
Net income............................ .22 .26 .36 .56
Diluted net income per share:
Income before extraordinary item...... .21 .25 .35 .54
Net income............................ .21 .25 .35 .54
</TABLE>
The 1997 and first two quarters of 1998 earnings per share amounts have
been restated to comply with Statement of Financial Accounting Standards No.
128, Earnings Per Share.
55
<PAGE> 57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information called for by Item 10 (Directors and Executive Officers of
the Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership
of Certain Beneficial Owners and Management) and Item 13 (Certain Relationships
and Related Transactions) is incorporated herein by reference to the
registrant's definitive proxy statement to be filed in connection with its 1998
Annual Meeting of Stockholders to be held on October 21, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as a Part of this Report
<TABLE>
<CAPTION>
PAGES
-----
<S> <C> <C>
1. Financial Statements:
Report of Management........................................ 28
Report of Independent Auditors.............................. 29
Consolidated Statements of Income........................... 30
Consolidated Balance Sheets................................. 31
Consolidated Statements of Cash Flows....................... 32
Consolidated Statements of Stockholders' Equity............. 33
Notes to Consolidated Financial Statements.................. 34
</TABLE>
56
<PAGE> 58
2. Exhibits:
Exhibits to the Form 10-K have been included only with the copies of the
Form 10-K filed with the Commission. Upon request to the Company and payment of
a reasonable fee, copies of the individual exhibits will be furnished.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
3.A Restated Articles of Organization of Wyman-Gordon
Company -- incorporated by reference to Exhibit 3A to the
Company's Form 10-K for the year ended June 3, 1995. --
3.B Bylaws of Wyman-Gordon Company, as amended through May 24,
1994 -- incorporated by reference to Exhibit 3B to the
Company's Form 10-K for the year ended June 3, 1995. --
4.A Amended and Restated Rights Agreement, dated as of January
10, 1994 between the Company and State Street Bank & Trust
Company, as Rights Agent -- incorporated by reference to
Exhibit 1 to the Company's Report on Form 8-A/A dated
January 21, 1994. --
4.B Indenture dated as of March 16, 1993 among Wyman-Gordon
Company, its Subsidiaries and State Street Bank and Trust
Company as Trustee with respect to Wyman-Gordon Company's
10 3/4% Senior Notes due 2003 -- incorporated by reference
to Exhibit 4C to the Company's Report on Form 10-K for the
year ended December 31, 1992. --
4.C 10 3/4% Senior Notes due 2003. Supplemental Indenture dated
May 19, 1994 -- incorporated by reference to Exhibit 5 to
the Company's Report on Form 8-K dated May 26, 1994. --
4.D 10 3/4% Senior Notes due 2003. Second Supplemental Indenture
and Guarantee dated May 27, 1994 -- incorporated by
reference to the Company's Report on Form 8-K dated May 26,
1994. --
4.E Instruments defining the rights of holders of long-term debt
are omitted pursuant to paragraph (b)(4)(iii) of Regulation
S-K Item 601. The Company agrees to furnish such instruments
to the Commission upon request. --
4.F 10 3/4% Senior Notes due 2003. Third Supplemental Indenture
dated December 9, 1997. E-1
4.G Indenture dated as of December 15, 1997 among Wyman-Gordon
Company, its Subsidiaries and State Street Bank and Trust
Company as Trustee with respect to Wyman-Gordon Company's 8%
Senior Notes due 2007. E-2
4.H 8% Senior Notes due 2007. Supplemental Indenture dated
December 15, 1997. E-3
10.A J. Stewart Smith, Executive Severance Agreement dated
October 15, 1997. E-4
10.B David P. Gruber, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.B of the
Company's Report on Form 10-K dated May 31, 1996. --
10.C Sanjay N. Shah, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.C of the
Company's Report on Form 10-K dated May 31, 1996. --
10.D J. Douglas Whelan, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.D of the
Company's Report on Form 10-K dated May 31, 1996. --
</TABLE>
57
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.E Wallace F. Whitney, Jr., Executive Severance Agreement dated
April 17, 1996 -- incorporated by reference to Exhibit 10.E
to the Company's Report on Form 10-K dated May 31, 1996. --
10.F Frank J. Zugel, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.F of the
Company's Report on Form 10-K dated May 31, 1996. --
10.G J. Stewart Smith, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated July
16, 1996. E-5
10.H David P. Gruber, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.H
of the Company's Report on Form 10-K dated May 31, 1996. --
10.I Sanjay N. Shah, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.I of the
Company's Report on Form 10-K dated May 31, 1996. --
10.J J. Douglas Whelan, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.J
of the Company's Report on Form 10-K dated May 31, 1996. --
10.K Wallace F. Whitney, Jr., Performance Stock Option Agreement
under the Wyman-Gordon Company Long-term Incentive Plan
dated April 17, 1996 -- incorporated by reference to Exhibit
10.K of the Company's Report on Form 10-K dated May 31,
1996. --
10.L Frank J. Zugel, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.L of the
Company's Report on Form 10-K dated May 31, 1996. --
10.M J. Stewart Smith, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-6
10.N David P. Gruber, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.N of the
Company's Report on Form 10-K dated May 31, 1996. --
10.O Sanjay N. Shah, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.O of the
Company's Report on Form 10-K dated May 31, 1996. --
10.P J. Douglas Whelan, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.P of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Q Wallace F. Whitney, Jr., Performance Share Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.Q
of the Company's Report on Form 10-K dated May 31, 1996. --
10.R Frank J. Zugel, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.R of the
Company's Report on Form 10-K dated May 31, 1996. --
10.S Colin Stead, Executive Severance Agreement dated October 15,
1997. E-7
10.T David P. Gruber, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.T of the
Company's Report on Form 10-K dated May 31, 1996. --
10.U Sanjay N. Shah, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.U of the
Company's Report on Form 10-K dated May 31, 1996. --
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.V J. Douglas Whelan, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.V of the
Company's Report on Form 10-K dated May 31, 1996. --
10.W Wallace F. Whitney, Jr., Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.W of the
Company's Report on Form 10-K dated May 31, 1996. --
10.X Frank J. Zugel, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.X of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Y Amendment to Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated May 24,
1994 between Wyman-Gordon Company and David P.
Gruber -- incorporated by reference to Exhibit 10.Y of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Z Stock Purchase Agreement dated as of January 10, 1994
between Cooper Industries, Inc. and the
Company -- incorporated by reference to Annex A to the
Company's preliminary Proxy Statement filed with the
Securities and Exchange Commission on March 8, 1994. --
10.AA Investment Agreement dated as of January 10, 1994 between
Cooper Industries, Inc. and the Company -- incorporated by
reference to Annex B to the Company's preliminary Proxy
Statement filed with the Securities and Exchange Commission
on March 8, 1994. --
10.AB Amendment dated May 26, 1994 to Investment Agreement dated
as of January 10, 1994, between the Company and
Cooper -- incorporated by reference to the Company's Report
on Form 8-K dated May 26, 1994. --
10.AC Revolving Credit Agreement dated as of May 20, 1994 among
Wyman-Gordon Receivables Corporation, the Financial
Institutions Parties Hereto and Shawmut Bank N.A. as Issuing
Bank, as Facility Agent and as Collateral
Agent -- incorporated by reference to the Company's Report
on Form 8-K dated May 26, 1994. --
10.AD Receivables Purchase and Sale Agreement dated as of May 20,
1994 among Wyman-Gordon Company, Wyman-Gordon Investment
Castings, Inc. and Precision Founders Inc. as the Sellers,
Wyman-Gordon Company as the Servicer and Wyman-Gordon
Receivables Corporation as the Purchaser -- incorporated by
reference to the Company's Report on Form 8-K dated May 26,
1994. --
10.AE Performance Share Agreement under the Wyman-Gordon Company
Long-Term Incentive Plan between the Company and David P.
Gruber dated as of May 24, 1994 -- incorporated by reference
to the Company's Report on Form 8-K dated May 26, 1994. --
10.AF Long-term Incentive Plan dated July 19, 1995 incorporated by
reference to Appendix A of the Company's "Proxy Statement
for Annual Meeting of Stockholders" on October 18, 1995. --
10.AG Wyman-Gordon Company Non-Employee Director Stock Option Plan
dated January 18, 1995 -- incorporated by reference to
Appendix C of the Company's "Proxy Statement for Annual
Meeting of Stockholders" on October 18, 1995. --
10.AH Wyman-Gordon Company Long-Term Incentive Plan dated January
15, 1997 -- incorporated by reference to Appendix A of the
Company's "Proxy Statement for Annual Meeting of
Stockholders" to be held on October 15, 1997 --
10.AI Colin Stead, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-8
</TABLE>
59
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.AJ Colin Stead, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-9
10.AK Edward J. Davis, Executive Severence Agreement dated
February 17, 1998. E-10
21 List of Subsidiaries E-11
23 Consent of Ernst & Young LLP 61
27 Financial Data Schedule E-12
</TABLE>
(b) Reports on Form 8-K
On November 19, 1997, the Company filed a Form 8-K dated November 14, 1997
with the Commission for the following purposes: (1) to report that the Company
has commenced a cash tender offer for certain of its debt securities and is
soliciting to amend the related indenture; (2) to report developments relating
to the previously reported industrial accident at the facility of Wyman-Gordon
Forgings, Inc. in Houston, Texas; and (3) to report the commencement of an
investigation by certain federal agencies involving alleged irregularities at
the Company's Tilton, New Hampshire facility.
On December 9, 1997, the Company filed a Form 8-K with the Commission to
report that the Company had taken the 29,000 ton press at its Houston, Texas
facility out of service for repairs.
On February 9, 1998, the Company filed a Form 8-K with the Commission to
update the statue of the 29,000 ton press and to announce an extraordinary one
time charge relating to the refinancing of its 10 3/4% Senior Notes due 2003.
On August 11, 1998, the Company filed a Form 8-K with the Commission to
report that it and Titanium Metals Corporation completed a transaction in which
the parties have combined their respective titanium castings businesses into a
jointly-owned venture.
60
<PAGE> 62
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8, File Numbers 2-56547, 2-75980, 33-26980, 33-48068 and 33-64503)
pertaining to the Wyman-Gordon Company Executive Long-Term Incentive Program
(1975) -- Amendment No. 6, the Wyman-Gordon Company Stock Purchase Plan, the
Wyman-Gordon Company Savings/Investment Plan, the Wyman-Gordon Company Long-Term
Incentive Plan and the Wyman-Gordon Company Employee Stock Purchase Plan; and
the Registration Statements (Form S-3, File Numbers 33-63459 and 333-32149) of
Wyman-Gordon Company and in the related Prospectuses of our report dated June
25, 1998, with respect to the consolidated financial statements of Wyman-Gordon
Company and subsidiaries included in this Annual Report (Form 10-K) for the year
ended May 31, 1998.
[Ernst & Young Signature]
Boston, Massachusetts
August 27, 1998
61
<PAGE> 63
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.
Wyman-Gordon Company
(REGISTRANT)
By /s/ EDWARD J. DAVIS
------------------------------------
Edward J. Davis
Vice President, Chief Financial
Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ DAVID P. GRUBER Chairman of the Board of August 27, 1998
- --------------------------------------------------- Directors and Chief Executive
David P. Gruber Officer
/s/ J. DOUGLAS WHELAN President and Chief Operating August 27, 1998
- --------------------------------------------------- Officer
J. Douglas Whelan
/s/ EDWARD J. DAVIS Vice President, Chief Financial August 27, 1998
- --------------------------------------------------- Officer and Treasurer and
Edward J. Davis Principal Financial Officer
/s/ JEFFREY B. LAVIN Corporate Controller and August 27, 1998
- --------------------------------------------------- Principal Accounting Officer
Jeffrey B. Lavin
/s/ E. PAUL CASEY Director August 27, 1998
- ---------------------------------------------------
E. Paul Casey
/s/ WARNER S. FLETCHER Director August 27, 1998
- ---------------------------------------------------
Warner S. Fletcher
/s/ ROBERT G. FOSTER Director August 27, 1998
- ---------------------------------------------------
Robert G. Foster
/s/ RUSSELL E. FULLER Director August 27, 1998
- ---------------------------------------------------
Russell E. Fuller
/s/ CHARLES W. GRIGG Director August 27, 1998
- ---------------------------------------------------
Charles W. Grigg
/s/ M HOWARD JACOBSON Director August 27, 1998
- ---------------------------------------------------
M Howard Jacobson
/s/ JUDITH S. KING Director August 27, 1998
- ---------------------------------------------------
Judith S. King
</TABLE>
62
<PAGE> 64
<TABLE>
<C> <S> <C>
/s/ ROBERT L. LEIBENSPERGER Director August 27, 1998
- ---------------------------------------------------
Robert L. Leibensperger
/s/ ANDREW E. LIETZ Director August 27, 1998
- ---------------------------------------------------
Andrew E. Lietz
/s/ H. JOHN RILEY, JR. Director August 27, 1998
- ---------------------------------------------------
H. John Riley, Jr.
/s/ DAVID A. WHITE, JR. Director August 27, 1998
- ---------------------------------------------------
David A. White, Jr.
</TABLE>
63
<PAGE> 65
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
3.A Restated Articles of Organization of Wyman-Gordon
Company -- incorporated by reference to Exhibit 3A to the
Company's Form 10-K for the year ended June 3, 1995. --
3.B Bylaws of Wyman-Gordon Company, as amended through May 24,
1994 -- incorporated by reference to Exhibit 3B to the
Company's Form 10-K for the year ended June 3, 1995. --
4.A Amended and Restated Rights Agreement, dated as of January
10, 1994 between the Company and State Street Bank & Trust
Company, as Rights Agent -- incorporated by reference to
Exhibit 1 to the Company's Report on Form 8-A/A dated
January 21, 1994. --
4.B Indenture dated as of March 16, 1993 among Wyman-Gordon
Company, its Subsidiaries and State Street Bank and Trust
Company as Trustee with respect to Wyman-Gordon Company's
10 3/4% Senior Notes due 2003 -- incorporated by reference
to Exhibit 4C to the Company's Report on Form 10-K for the
year ended December 31, 1992. --
4.C 10 3/4% Senior Notes due 2003. Supplemental Indenture dated
May 19, 1994 -- incorporated by reference to Exhibit 5 to
the Company's Report on Form 8-K dated May 26, 1994. --
4.D 10 3/4% Senior Notes due 2003. Second Supplemental Indenture
and Guarantee dated May 27, 1994 -- incorporated by
reference to the Company's Report on Form 8-K dated May 26,
1994. --
4.E Instruments defining the rights of holders of long-term debt
are omitted pursuant to paragraph (b)(4)(iii) of Regulation
S-K Item 601. The Company agrees to furnish such instruments
to the Commission upon request. --
4.F 10 3/4% Senior Notes due 2003. Third Supplemental Indenture
dated December 9, 1997. E-1
4.G Indenture dated as of December 15, 1997 among Wyman-Gordon
Company, its Subsidiaries and State Street Bank and Trust
Company as Trustee with respect to Wyman-Gordon Company's 8%
Senior Notes due 2007. E-2
4.H 8% Senior Notes due 2007. Supplemental Indenture dated
December 15, 1997. E-3
10.A J. Stewart Smith, Executive Severance Agreement dated
October 15, 1997. E-4
10.B David P. Gruber, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.B of the
Company's Report on Form 10-K dated May 31, 1996. --
10.C Sanjay N. Shah, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.C of the
Company's Report on Form 10-K dated May 31, 1996. --
10.D J. Douglas Whelan, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.D of the
Company's Report on Form 10-K dated May 31, 1996. --
10.E Wallace F. Whitney, Jr., Executive Severance Agreement dated
April 17, 1996 -- incorporated by reference to Exhibit 10.E
to the Company's Report on Form 10-K dated May 31, 1996. --
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.F Frank J. Zugel, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.F of the
Company's Report on Form 10-K dated May 31, 1996. --
10.G J. Stewart Smith, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated July
16, 1996. E-5
10.H David P. Gruber, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.H
of the Company's Report on Form 10-K dated May 31, 1996. --
10.I Sanjay N. Shah, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.I of the
Company's Report on Form 10-K dated May 31, 1996. --
10.J J. Douglas Whelan, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.J
of the Company's Report on Form 10-K dated May 31, 1996. --
10.K Wallace F. Whitney, Jr., Performance Stock Option Agreement
under the Wyman-Gordon Company Long-term Incentive Plan
dated April 17, 1996 -- incorporated by reference to Exhibit
10.K of the Company's Report on Form 10-K dated May 31,
1996. --
10.L Frank J. Zugel, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.L of the
Company's Report on Form 10-K dated May 31, 1996. --
10.M J. Stewart Smith, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-6
10.N David P. Gruber, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.N of the
Company's Report on Form 10-K dated May 31, 1996. --
10.O Sanjay N. Shah, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.O of the
Company's Report on Form 10-K dated May 31, 1996. --
10.P J. Douglas Whelan, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.P of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Q Wallace F. Whitney, Jr., Performance Share Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.Q
of the Company's Report on Form 10-K dated May 31, 1996. --
10.R Frank J. Zugel, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.R of the
Company's Report on Form 10-K dated May 31, 1996. --
10.S Colin Stead, Executive Severance Agreement dated October 15,
1997. E-7
10.T David P. Gruber, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.T of the
Company's Report on Form 10-K dated May 31, 1996. --
10.U Sanjay N. Shah, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.U of the
Company's Report on Form 10-K dated May 31, 1996. --
10.V J. Douglas Whelan, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.V of the
Company's Report on Form 10-K dated May 31, 1996. --
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.W Wallace F. Whitney, Jr., Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.W of the
Company's Report on Form 10-K dated May 31, 1996. --
10.X Frank J. Zugel, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.X of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Y Amendment to Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated May 24,
1994 between Wyman-Gordon Company and David P.
Gruber -- incorporated by reference to Exhibit 10.Y of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Z Stock Purchase Agreement dated as of January 10, 1994
between Cooper Industries, Inc. and the
Company -- incorporated by reference to Annex A to the
Company's preliminary Proxy Statement filed with the
Securities and Exchange Commission on March 8, 1994. --
10.AA Investment Agreement dated as of January 10, 1994 between
Cooper Industries, Inc. and the Company -- incorporated by
reference to Annex B to the Company's preliminary Proxy
Statement filed with the Securities and Exchange Commission
on March 8, 1994. --
10.AB Amendment dated May 26, 1994 to Investment Agreement dated
as of January 10, 1994, between the Company and
Cooper -- incorporated by reference to the Company's Report
on Form 8-K dated May 26, 1994. --
10.AC Revolving Credit Agreement dated as of May 20, 1994 among
Wyman-Gordon Receivables Corporation, the Financial
Institutions Parties Hereto and Shawmut Bank N.A. as Issuing
Bank, as Facility Agent and as Collateral
Agent -- incorporated by reference to the Company's Report
on Form 8-K dated May 26, 1994. --
10.AD Receivables Purchase and Sale Agreement dated as of May 20,
1994 among Wyman-Gordon Company, Wyman-Gordon Investment
Castings, Inc. and Precision Founders Inc. as the Sellers,
Wyman-Gordon Company as the Servicer and Wyman-Gordon
Receivables Corporation as the Purchaser -- incorporated by
reference to the Company's Report on Form 8-K dated May 26,
1994. --
10.AE Performance Share Agreement under the Wyman-Gordon Company
Long-Term Incentive Plan between the Company and David P.
Gruber dated as of May 24, 1994 -- incorporated by reference
to the Company's Report on Form 8-K dated May 26, 1994. --
10.AF Long-term Incentive Plan dated July 19, 1995 incorporated by
reference to Appendix A of the Company's "Proxy Statement
for Annual Meeting of Stockholders" on October 18, 1995. --
10.AG Wyman-Gordon Company Non-Employee Director Stock Option Plan
dated January 18, 1995 -- incorporated by reference to
Appendix C of the Company's "Proxy Statement for Annual
Meeting of Stockholders" on October 18, 1995. --
10.AH Wyman-Gordon Company Long-Term Incentive Plan dated January
15, 1997 -- incorporated by reference to Appendix A of the
Company's "Proxy Statement for Annual Meeting of
Stockholders" to be held on October 15, 1997 --
10.AI Colin Stead, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-8
10.AJ Colin Stead, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-9
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.AK Edward J. Davis, Executive Severence Agreement dated
February 17, 1998. E-10
21 List of Subsidiaries E-11
23 Consent of Ernst & Young LLP 61
27 Financial Data Schedule E-12
</TABLE>
<PAGE> 1
EXHIBIT 4.F
THIRD SUPPLEMENTAL INDENTURE dated as of December 9, 1997, between
WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company") and
STATE STREET BANK AND TRUST COMPANY, as trustee (the "Trustee").
WHEREAS there has heretofore been executed and delivered to the Trustee
an Indenture dated as of March 16, 1993, amended by the Supplemental Indenture
dated as of May 19, 1994 and the Second Supplemental Indenture and Guarantee
dated as of May 27, 1994 (collectively, the "Indenture"), providing for the
issuance of the Company's 10 3/4% Senior Notes Due 2003 (the "Securities");
WHEREAS guaranties of certain subsidiaries of the Company have been
previously released by CIT;
WHEREAS Section 11.03 of the Indenture provides that following repayment
in full of all Indebtedness under the CIT Facility, Subsidiary Guarantors shall
be released from all obligations under Article 11 of the Indenture;
WHEREAS the Company has delivered an officer's certificate to the
Trustee certifying compliance with Section 11.03 of the Indenture and has
requested that the Trustee deliver an appropriate instrument evidencing such
release;
WHEREAS there are now outstanding under the Indenture, Securities in the
aggregate principal amount of $90 million;
WHEREAS Section 9.02 of the Indenture provides that the Company and the
Trustee may amend the Indenture with the written consent of the Holders of not
less than a majority in aggregate principal amount of the Securities then
outstanding;
WHEREAS the Company desires to amend certain provisions of the
Indenture, as set forth in Article One hereof;
WHEREAS the Holders of at least a majority in aggregate principal amount
of the Securities outstanding have consented to the amendments effected by this
Third Supplemental Indenture; and
WHEREAS all things necessary to make this Third Supplemental Indenture a
valid agreement, in accordance with its terms, have been done.
NOW THEREFORE, this Third Supplemental Indenture witnesseth that, for
and in consideration of the premises, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE I
AMENDMENTS TO INDENTURE
SECTION 1.01 Waiver of and Amendments to Amendments to Article Four.
(a) The application of Sections 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11 and 4.16 of the Indenture are hereby waived to the
extent that such provisions might otherwise interfere with the ability of the
Company and its Affiliates to enter into agreements contemplated by, and to
consummate, (i) the Offer and Consent Solicitation as set forth in the Offer to
Purchase and Consent Solicitation dated as of November 14, 1997, and any
amendments, modifications or supplements thereto (the "Offer and Consent
Solicitation") and (ii) the offer and sale of one or more new issues of senior
debt securities pursuant to the Registration
<PAGE> 2
Statement on Form S-3 (Registration No. 333-32149) filed with the Securities and
Exchange Commission by the Company and the unconditional guarantee of the
Company's obligations thereunder by its subsidiaries.
(b) Effective upon the date the Company accepts for purchase
and pays for all Securities validly tendered pursuant to the Offer and Consent
Solicitation (the "Payment Date"), unless, prior to that time, the Company, by
written notice to the Trustee, has terminated this Third Supplemental Indenture,
Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.16 of the
Indenture are hereby amended by deleting all such sections and all references
thereto in their entirety, including without limitation all references, direct
or indirect, thereto in Sections 1.01, "Definitions" and 6.01, "Events of
Default Defined; Acceleration of Maturity; Waiver of Default".
SECTION 1.02 Amendment to Article Five. Effective upon the Payment
Date, unless, prior to that time, the Company, by written notice to the Trustee,
has terminated this Third Supplemental Indenture, Section 5.01 of the Indenture
is hereby amended to delete therefrom clauses (ii), (iii) and (iv) and all
references thereto in their entirety.
SECTION 1.03 Amendment to Article Six. Effective upon the Payment Date,
unless, prior to that time, the Company, by written notice to the Trustee, has
terminated this Third Supplemental Indenture, Section 6.01 of the Indenture is
hereby amended to delete clauses (h) and (i), and all references thereto, in
their entirety.
SECTION 1.04 Release of Subsidiary Guarantees. The Trustee hereby
acknowledges the release of Precision Founders, Inc., Reisner Metals, Inc.,
Sealed Composites, Inc., W-G Rome Corporation, Wyman- Gordon Composites, Inc.,
Wyman-Gordon Composite Technologies, Inc., Wyman-Gordon Fisc Limited,
Wyman-Gordon Investment Castings, Inc., and Wyman-Gordon Securities Corporation
as subsidiary guarantors pursuant to Section 11.03 of the Indenture.
ARTICLE II
MISCELLANEOUS
SECTION 2.01 Instruments To Be Read Together. This Third Supplemental
Indenture is an indenture supplemental to and in implementation of the
Indenture, and said Indenture and this Third Supplemental Indenture shall
henceforth be read together.
SECTION 2.02 Confirmation. The Indenture as amended and supplemented
by this Third Supplemental Indenture is in all respects confirmed and preserved.
SECTION 2.03 Terms Defined. Capitalized terms used in this Third
Supplemental Indenture and not otherwise defined herein shall have the
respective meanings set forth in the Indenture.
SECTION 2.04 Headings. The headings of the Articles and Sections of
this Third Supplemental Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof and shall in no way
modify or restrict any of the terms and provisions hereof.
SECTION 2.05 Governing Law. The laws of the State of New York shall
govern this Third Supplemental Indenture.
SECTION 2.06 Counterparts. This Third Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
2
<PAGE> 3
SECTION 2.07 Effectiveness; Termination. The provisions of this Third
Supplemental Indenture will take effect immediately upon its execution and
delivery by the Trustee in accordance with the provisions of Sections 9.02 and
9.05 of the Indenture; provided that the amendments to the Indenture set forth
in Sections 1.01, 1.02 and 1.03 of this Third Supplemental Indenture shall
become operative as specified in Sections 1.01, 1.02 and 1.03 hereof. Prior to
the Payment Date, the Company may terminate this Third Supplemental Indenture
upon written notice to the Trustee (it being understood that the Company may,
subsequent thereto, enter into a substitute third supplemental indenture).
SECTION 2.08 Acceptance by Trustee. The Trustee accepts the amendments
to the Indenture effected by this Third Supplemental Indenture and agrees to
execute the trusts created by the Indenture as hereby amended, but only upon the
terms and conditions set forth in the Indenture.
SECTION 2.09 Responsibility of Trustee. The recitals contained herein
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Third Supplemental Indenture.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed, all as of the date first written
above.
WYMAN-GORDON COMPANY, as Issuer
Attest: By:
-----------------------------------
Name: Wallace F. Whitney, Jr.
Title: Vice President, General
Counsel and Clerk
By:
----------------------------------
Alan J. Glass, Assistant Clerk
WYMAN-GORDON LIMITED, as a Subsidiary
Guarantor
Attest: By:
-----------------------------------
Name: Wallace F. Whitney, Jr.
Title:
By:
----------------------------------
Alan J. Glass, Assistant Clerk
STATE STREET BANK AND TRUST COMPANY, as
Trustee
Attest: By:
-----------------------------------
Name:
Title:
By:
----------------------------------
Name:
4
<PAGE> 1
EXHBIT 4.G
- --------------------------------------------------------------------------------
WYMAN-GORDON COMPANY
TO
STATE STREET BANK AND TRUST COMPANY
Trustee
--------------------
Indenture
Dated as of December 15, 1997
--------------------
Senior Debt Securities
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
RECITALS OF THE COMPANY .......................................................1
ARTICLE ONE - DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION ...................................................1
SECTION 101. Definitions ...................................................1
SECTION 102. Compliance Certificates and Opinions .........................12
SECTION 103. Form of Documents Delivered to Trustee .......................12
SECTION 104. Acts of Holders ..............................................13
SECTION 105. Notices, etc., to Trustee and Company ........................15
SECTION 106. Notice to Holders; Waiver ....................................15
SECTION 107. Counterparts; Effect of Headings and Table of Contents .......16
SECTION 108. Successors and Assigns .......................................16
SECTION 109. Severability Clause ..........................................16
SECTION 110. Benefits of Indenture ........................................16
SECTION 111. Governing Law ................................................17
SECTION 112. Legal Holidays ...............................................17
SECTION 113. Immunity of Stockholders, Directors, Officers and Agents
of the Company ...............................................17
SECTION 114. Conflict with Trust Indenture Act ............................18
ARTICLE TWO - SECURITIES FORMS ...............................................18
SECTION 201. Forms of Securities ..........................................18
SECTION 202. Form of Trustee's Certificate of Authentication ..............18
SECTION 203. Securities Issuable in Global Form ...........................19
ARTICLE THREE - THE SECURITIES ...............................................20
SECTION 301. Amount Unlimited; Issuable in Series .........................20
SECTION 302. Denominations ................................................24
SECTION 303. Execution, Authentication, Delivery and Dating ...............24
SECTION 304. Temporary Securities .........................................26
SECTION 305. Registration, Registration of Transfer and Exchange ..........29
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities .............32
SECTION 307. Payment of Interest; Interest Rights Preserved ...............33
SECTION 308. Persons Deemed Owners ........................................35
SECTION 309. Cancellation .................................................36
SECTION 310. Computation of Interest ......................................37
ARTICLE FOUR - SATISFACTION AND DISCHARGE ....................................37
SECTION 401. Satisfaction and Discharge of Indenture ......................37
SECTION 402. Application of Trust Funds ...................................38
(i)
<PAGE> 3
Page
----
ARTICLE FIVE - REMEDIES ......................................................39
SECTION 501. Events of Default ............................................39
SECTION 502. Acceleration of Maturity; Rescission and Annulment ...........41
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee ......................................................42
SECTION 504. Trustee May File Proofs of Claim .............................43
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities or Coupons ........................................43
SECTION 506. Application of Money Collected ...............................44
SECTION 507. Limitation on Suits ..........................................44
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
or Make-Whole Amount, if any, and Interest ...................45
SECTION 509. Restoration of Rights and Remedies ...........................45
SECTION 510. Rights and Remedies Cumulative ...............................45
SECTION 511. Delay or Omission Not Waiver .................................46
SECTION 512. Control by Holders of Securities .............................46
SECTION 513. Waiver of Defaults ...........................................46
SECTION 514. Waiver of Usury, Stay or Extension Laws ......................47
SECTION 515. Undertaking for Costs ........................................47
ARTICLE SIX - THE TRUSTEE ....................................................47
SECTION 601. Notice of Defaults ...........................................47
SECTION 602. Certain Rights of Trustee ....................................48
SECTION 603. Not Responsible for Recitals or Issuance of Securities .......49
SECTION 604. May Hold Securities ..........................................49
SECTION 605. Money Held in Trust ..........................................50
SECTION 606. Compensation and Reimbursement ...............................50
SECTION 607. Corporate Trustee Required; Eligibility; Conflicting
Interests ....................................................51
SECTION 608. Resignation and Removal; Appointment of Successor ............51
SECTION 609. Acceptance of Appointment by Successor .......................52
SECTION 610. Merger, Conversion, Consolidation or Succession to Business ..54
SECTION 611. Appointment of Authenticating Agent ..........................54
SECTION 612. Certain Duties and Responsibilities of the Trustee. ..........56
ARTICLE SEVEN - HOLDERS' LISTS AND REPORTS BY TRUSTEE AND
COMPANY ......................................................57
SECTION 701. Disclosure of Names and Addresses of Holders .................57
SECTION 702. Reports by Trustee ...........................................58
SECTION 703. Reports by Company ...........................................58
SECTION 704. Company to Furnish Trustee Names and Addresses of Holders ....58
(ii)
<PAGE> 4
Page
----
ARTICLE EIGHT - CONSOLIDATION, MERGER, SALE, LEASE OR
CONVEYANCE ...................................................59
SECTION 801. Consolidations and Mergers of Company and Sales, Leases and
Conveyances Permitted Subject to Certain Conditions ..........59
SECTION 802. Rights and Duties of Successor Corporation ...................59
SECTION 803. Officers' Certificate and Opinion of Counsel .................60
ARTICLE NINE - SUPPLEMENTAL INDENTURES .......................................60
SECTION 901. Supplemental Indentures Without Consent of Holders ...........60
SECTION 902. Supplemental Indentures with Consent of Holders ..............62
SECTION 903. Execution of Supplemental Indentures .........................63
SECTION 904. Effect of Supplemental Indentures ............................63
SECTION 905. Conformity with Trust Indenture Act ..........................63
SECTION 906. Reference in Securities to Supplemental Indentures ...........63
ARTICLE TEN - COVENANTS ......................................................63
SECTION 1001. Payment of Principal, Premium or Make-Whole Amount,
if any; and Interest ........................................63
SECTION 1002. Maintenance of Office or Agency .............................64
SECTION 1003. Money for Securities Payments to Be Held in Trust ...........65
SECTION 1004. Existence ...................................................67
SECTION 1005. Maintenance of Properties ...................................67
SECTION 1006. Insurance ...................................................67
SECTION 1007. Payment of Taxes and Other Claims ...........................67
SECTION 1008. Statement as to Compliance ..................................68
SECTION 1009. Waiver of Certain Covenants .................................68
ARTICLE ELEVEN - REDEMPTION OF SECURITIES ....................................68
SECTION 1101. Applicability of Article ....................................68
SECTION 1102. Election to Redeem; Notice to Trustee .......................68
SECTION 1103. Selection by Trustee of Securities to Be Redeemed ...........68
SECTION 1104. Notice of Redemption ........................................69
SECTION 1105. Deposit of Redemption Price .................................70
SECTION 1106. Securities Payable on Redemption Date .......................71
SECTION 1107. Securities Redeemed in Part .................................72
ARTICLE TWELVE - SINKING FUNDS ...............................................72
SECTION 1201. Applicability of Article ....................................72
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities .......72
SECTION 1203. Redemption of Securities for Sinking Fund ...................73
(iii)
<PAGE> 5
Page
----
ARTICLE THIRTEEN - REPAYMENT AT THE OPTION OF HOLDERS ........................73
SECTION 1301. Applicability of Article ....................................73
SECTION 1302. Repayment of Securities .....................................73
SECTION 1303. Exercise of Option ..........................................74
SECTION 1304. When Securities Presented for Repayment Become Due
and Payable .................................................74
SECTION 1305. Securities Repaid in Part ...................................75
ARTICLE FOURTEEN - DEFEASANCE AND COVENANT DEFEASANCE ........................76
SECTION 1401. Applicability of Article; Company's Option to Effect
Defeasance or Covenant Defeasance ...........................76
SECTION 1402. Defeasance and Discharge ....................................76
SECTION 1403. Covenant Defeasance .........................................76
SECTION 1404. Conditions to Defeasance or Covenant Defeasance .............77
SECTION 1405. Deposited Money and Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions ....................79
ARTICLE FIFTEEN - MEETINGS OF HOLDERS OF SECURITIES ..........................80
SECTION 1501. Purposes for Which Meetings May Be Called ...................80
SECTION 1502. Call, Notice and Place of Meetings ..........................80
SECTION 1503. Persons Entitled to Vote at Meetings ........................80
SECTION 1504. Quorum; Action ..............................................81
SECTION 1505. Determination of Voting Rights; Conduct and Adjournment
of Meetings .................................................82
SECTION 1506. Counting Votes and Recording Action of Meetings .............83
SIGNATURES AND SEALS .........................................................84
ACKNOWLEDGMENT ...............................................................85
EXHIBIT A
FORM OF REDEEMABLE OR NON-REDEEMABLE SENIOR SECURITY ........................A-1
EXHIBIT B
FORMS OF CERTIFICATION ......................................................B-1
(iv)
<PAGE> 6
WYMAN-GORDON COMPANY
Reconciliation and tie between Trust Indenture Act of 1939 (the "Trust
Indenture Act" or "TIA") and Indenture, dated as of December 15, 1997.
Trust Indenture
ACT SECTION INDENTURE SECTION
ss. 310(a)(1)................................... 607
(a)(2)................................... 607
(b)................................... 607, 608
ss. 312(c)................................... 701
ss. 313(a)................................... 702
(c)................................... 702
ss. 314(a)................................... 703
(a)(4)................................... 1009
(c)(1)................................... 102
(c)(2)................................... 102
(e)................................... 102
ss. 315(b)................................... 601
ss. 316(a) (last sentence)................. 101 ("Outstanding")
(a)(1)(A)................................... 502, 512
(a)(1)(B)................................... 513
(b)................................... 508
ss. 317(a)(1)................................... 503
(a)(2)................................... 504
ss. 318(a)................................... 111
(c)................................... 111
- ---------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
Attention should also be directed to TIA Section 318(c), which provides
that the provisions of TIA Sections 310 to and including 317 of the Trust
Indenture Act are a part of and govern every qualified indenture, whether or not
physically contained therein.
(v)
<PAGE> 7
INDENTURE, dated as of December 15, 1997, between WYMAN-GORDON COMPANY, a
corporation organized under the laws of the Commonwealth of Massachusetts
(hereinafter called the "Company"), having its principal office at 244 Worcester
Street, North Grafton, Massachusetts 01536-8001, and State Street Bank and Trust
Company, a trust company organized under the laws of The Commonwealth of
Massachusetts as Trustee hereunder (hereinafter called the "Trustee"), having a
Corporate Trust Office at Two International Place, Boston, MA 02110.
RECITALS OF THE COMPANY
The Company deems it necessary to issue from time to time for its lawful
purposes senior debt securities (hereinafter called the "Securities") evidencing
its unsecured and senior indebtedness, and has duly authorized the execution and
delivery of this Indenture to provide for the issuance from time to time of the
Securities, to be issued in one or more Series as provided in this Indenture.
This Indenture is subject to the provisions of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act" or "TIA"), that are deemed to be
incorporated into this Indenture and shall, to the extent applicable, be
governed by such provisions.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE - DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the TIA, either
directly or by reference therein, have the meanings assigned to them
therein, and the terms "cash transaction" and "self-liquidating paper," as
used in TIA Section 311, shall have the meanings assigned to them in the
rules of the Commission adopted under the TIA;
<PAGE> 8
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein," "hereof "and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"ACT," when used with respect to any Holder, has the meaning specified in
Section 104.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee pursuant
to Section 611 hereof to act on behalf of the Trustee to authenticate
Securities.
"AUTHORIZED NEWSPAPER" means a newspaper, printed in the English language
or in an official language of the country of publication, customarily published
on each Business Day, whether or not published on Saturdays, Sundays or
holidays, and of general circulation in each place in connection with which the
term is used or in the financial community of each such place. Whenever
successive publications are required to be made in Authorized Newspapers, the
successive publications may be made in the same or in different Authorized
Newspapers in the same city meeting the foregoing requirements and in each case
on any Business Day.
"BANKRUPTCY LAW" has the meaning specified in Section 501.
"BEARER SECURITY" means any Security established pursuant to Section 201
which is payable to bearer.
"BOARD OF DIRECTORS" means the board of directors of the Company or any
committee of that board duly authorized to act hereunder.
"BOARD RESOLUTION" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY," when used with respect to any Place of Payment or any other
particular location referred to in this Indenture or in the Securities, means,
unless otherwise specified with respect to any Securities issued pursuant to
Section 301, any day, other than a
2
<PAGE> 9
Saturday or Sunday, that is not a day on which banking institutions in that
Place of Payment or particular location are authorized or required by law,
regulation or executive order to close.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations, rights to purchase, warrants, options or other equivalents
(however designated) of corporate stock or other equity of such Person.
"CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or its
successor.
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties on such date.
"COMMON STOCK" means, with respect to any Person, all shares of capital
stock issued by such Person other than Preferred Stock.
"COMPANY" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"COMPANY REQUEST" and "COMPANY ORDER" mean, respectively, a written request
or order signed in the name of the Company by its Chairman of the Board, the
President or a Vice President, and by its Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company, and delivered to the
Trustee.
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Securities to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Securities. "Independent Investment Banker" means one of
the Reference Treasury Dealers appointed by the Trustee after consultation with
the Company.
"COMPARABLE TREASURY PRICE" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such a redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, the average of
all Reference Treasury Dealer Quotations for such redemption date.
3
<PAGE> 10
"CONSOLIDATED NET ASSETS" means as of any particular time the aggregate
amount of assets (less applicable reserves and other properly deductible items)
after deducting therefrom all current liabilities except for (a) notes and loans
payable, (b) current maturities of long-term debt and (c) current maturities of
obligations under capital leases, all as set forth on the most recent
consolidated balance sheet of the Company and its consolidated Subsidiaries and
computed in accordance with generally accepted accounting principles and
practices as in effect on December 15, 1997.
"CONVERSION EVENT" means the cessation of use of (i) a Foreign Currency
both by the government of the country which issued such currency and for the
settlement of transactions by a central bank or other public institutions of or
within the international banking community, (ii) the ECU both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities or (iii) any currency unit
(or composite currency) other than the ECU for the purposes for which it was
established.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which, at any
particular time, its corporate trust business shall be principally administered,
which office at the date hereof is located at Two International Place, Corporate
Trust Division, Boston, MA 02110.
"CORPORATION" includes corporations, associations, companies and business
trusts.
"COUPON" means any interest coupon appertaining to a Bearer Security.
"CUSTODIAN" has the meaning specified in Section 501.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DOLLAR" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
"ECU" means the European Currency Unit as defined and revised from time to
time by the Council of the European Communities.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office, or its successor as operator of the Euroclear System.
"EUROPEAN COMMUNITIES" means the European Economic Community, the European
Coal and Steel Community and the European Atomic Energy Community.
"EUROPEAN MONETARY SYSTEM" means the European Monetary System established
by the Resolution of December 5, 1978 of the Council of the European
Communities.
4
<PAGE> 11
"EVENT OF DEFAULT" has the meaning specified in Article Five.
"FOREIGN CURRENCY" means any currency, currency unit or composite currency,
including, without limitation, the ECU issued by the government of one or more
countries other than the United States of America or by any recognized
confederation or association of such governments.
"GAAP" means, except as otherwise provided herein, generally accepted
accounting principles, as in effect from time to time, as used in the United
States applied on a consistent basis.
"GLOBAL SECURITY" means a Security evidencing all or a part of a series of
Securities issued to and registered in the name of the depository for such
series, or its nominee, in accordance with Section 305, and bearing the legend
prescribed in Section 203.
"GOVERNMENT OBLIGATIONS" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Securities of a particular series are payable, for the
payment of which its full faith and credit is pledged or (ii) obligations of a
Person controlled or supervised by and acting as an agency or instrumentality of
the United States of America or such government which issued the Foreign
Currency in which the Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, PROVIDED that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
"GUARANTY" by any Person means any Obligation, contingent or otherwise, of
such Person guaranteeing any Indebtedness of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, and including, without
limitation, every Obligation of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such Indebtedness, (ii) to purchase property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; PROVIDED, HOWEVER, that a
Guaranty by any Person shall not include endorsements by such Person for
collection or deposit, in either case in the ordinary course of
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business. The terms "Guaranteed," "Guaranteeing" and "Guarantor" shall have
meanings correlative to the foregoing.
"HOLDER" means, in the case of a Registered Security, the Person in whose
name a Security is registered in the Security Register and, in the case of a
Bearer Security, the bearer thereof and, when used with respect to any coupon,
shall mean the bearer thereof.
"INDEBTEDNESS" means, with respect to any Person, without duplication, (i)
any Obligation of such Person relating to any indebtedness of such Person (A)
for borrowed money (whether or not the recourse of the lender is to the whole of
the assets, of such person or only to a portion thereof), (B) evidenced by
notes, debentures or similar instruments (including purchase money obligations)
given in connection with the acquisition of any property or assets (other than
trade accounts payable for inventory or similar property acquired in the
ordinary course of business), including securities, for the payment of which
such Person is liable, directly or indirectly, or the payment of which is
secured by a lien, charge or encumbrance on property or assets of such Person,
(C) for goods, materials or services purchased in the ordinary course of
business (other than trade accounts payable arising in the ordinary course of
business), (D) with respect to letters of credit or bankers acceptances issued
for the account of such Person or performance, surety or similar bonds, (E) for
the payment of money relating to a Capitalized Lease Obligation or (F) under
interest rate swaps, caps or similar agreements and foreign exchange contracts,
currency swaps or similar agreements; (ii) any liability of others of the kind
described in the preceding clause (i), which such Person has Guaranteed or which
is otherwise its legal liability; and (iii) any and all deferrals, renewals,
extensions and refunding of, or amendments, modifications or supplements to, any
liability of the kind described in any of the preceding clauses (i) or (ii).
"INDENTURE" means this instrument as originally executed or as it may be
supplemented or amended from time to time by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, and shall
include the terms of particular series of Securities established as contemplated
by Section 301; PROVIDED, HOWEVER, that, if at any time more than one Person is
acting as Trustee under this instrument, "Indenture" shall mean, with respect to
any one or more series of Securities for which such Person is Trustee, this
instrument as originally executed or as it may be supplemented or amended from
time to time by one or more indentures supplemental hereto entered into pursuant
to the applicable provisions hereof and shall include the terms of the or those
particular series of Securities for which such Person is Trustee established as
contemplated by Section 301, exclusive, however, of any provisions or terms
which relate solely to other series of Securities for which such Person is
Trustee, regardless of when such terms or provisions were adopted, and exclusive
of any provisions or terms adopted by means of one or more indentures
supplemental hereto executed and delivered after such Person had become such
Trustee but to which such Person, as such Trustee, was not a party.
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"INDEXED SECURITY" means a Security the terms of which provide that the
principal amount thereof payable at Stated Maturity may be more or less than the
principal face amount thereof at original issuance.
"INTEREST," when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, shall mean interest
payable after Maturity.
"INTEREST PAYMENT DATE," when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"MATURITY," when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption, notice of option to elect
repayment or otherwise.
"OBLIGATION" of any Person with respect to any specified Indebtedness means
any obligation of such Person to pay principal, premium, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such Person, whether or not a claim for such
post-petition interest is allowed in such Proceeding), penalties, reimbursement
or indemnification amounts, fees, expenses or other amounts relating to such
Indebtedness.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the
Board of Directors, the President or a Vice President and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel
for the Company or who may be an employee of or other counsel for the Company
and who shall be satisfactory to the Trustee.
"ORIGINAL ISSUE DISCOUNT SECURITY" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"OUTSTANDING," when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, EXCEPT:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption
(including repayment at the option of the Holder) money in the necessary
amount has
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been theretofore deposited with the Trustee or any Paying Agent (other than
the Company) in trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the Holders of such
Securities and any coupons appertaining thereto; PROVIDED, HOWEVER, that,
if such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(iii) Securities, except to the extent provided in Sections 1402 and
1403, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Fourteen; and
(iv) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company.
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders for quorum purposes, and for the purpose of making the
calculations required by TIA Section 313, (i) the principal amount of an
Original Issue Discount Security that may be counted in making such
determination or calculation and that shall be deemed to be Outstanding for such
purpose shall be equal to the amount of principal thereof that would be (or
shall have been declared to be) due and payable, at the time of such
determination, upon a declaration of acceleration of the maturity thereof
pursuant to Section 502, (ii) the principal amount of any Security denominated
in a Foreign Currency that may be counted in making such determination or
calculation and that shall be deemed Outstanding for such purpose shall be equal
to the Dollar equivalent, determined pursuant to Section 301 as of the date such
Security is originally issued by the Company, of the principal amount (or, in
the case of an Original Issue Discount Security, the Dollar equivalent as of
such date of original issuance of the amount determined as provided in clause
(i) above) of such Security, (iii) the principal amount of any Indexed Security
that may be counted in making such determination or calculation and that shall
be deemed outstanding for such purpose shall be equal to the principal face
amount of such Indexed Security at original issuance, unless otherwise provided
with respect to such Security pursuant to Section 301, and (iv) Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities owned as
provided in clause (iv) above which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to
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<PAGE> 15
the satisfaction of the Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any Affiliate of the Company or of such other obligor. In
case of a dispute as to such right, the advice of counsel shall be full
protection in respect of any decision made by the Trustee in accordance with
such advice.
"PAYING AGENT" means any Person authorized by the Company to pay the
principal of (and premium or Make-Whole Amount, if any) or interest on any
Securities or coupons on behalf of the Company.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PLACE OF PAYMENT," when used with respect to the Securities of or within
any series, means the place or places where the principal of (and premium or
Make-Whole Amount, if any) and interest on such Securities are payable as
specified as contemplated by Sections 301 and 1002.
"PREDECESSOR SECURITY" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon appertains shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security or
the Security to which the mutilated, destroyed, lost or stolen coupon
appertains.
"PREFERRED STOCK" means, with respect to any Person, all capital stock
issued by such Person that are entitled to a preference or priority over any
other capital stock issued by such Person with respect to any distribution of
such Person's assets, whether by dividend or upon any voluntary or involuntary
liquidation, dissolution or winding up.
"REDEMPTION DATE," when used with respect to any Security to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"REDEMPTION PRICE," when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"REFERENCE TREASURY DEALER" means each of [_________________], and their
respective successors; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer in New York City (a
"Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer.
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"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
such Treasury Dealer, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
"REGISTERED SECURITY" shall mean any Security which is registered in the
Security Register.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment Date
on the Registered Securities of or within any series means the date specified
for that purpose as contemplated by Section 301, whether or not a Business Day.
"REPAYMENT DATE" means, when used with respect to any Security to be repaid
at the option of the Holder, the date fixed for such repayment by or pursuant to
this Indenture.
"REPAYMENT PRICE" means, when used with respect to any Security to be
repaid at the option of the Holder, the price at which it is to be repaid by or
pursuant to this Indenture.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer in its Corporate Trust Office or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of such
officer's knowledge and familiarity with the particular subject.
"SECURITY" has the meaning stated in the first recital of this Indenture
and, more particularly, means any Security or Securities authenticated and
delivered under this Indenture; PROVIDED, HOWEVER, that, if at any time there is
more than one Person acting as Trustee under this Indenture, "Securities" with
respect to the Indenture as to which such Person is Trustee shall have the
meaning stated in the first recital of this Indenture and shall more
particularly mean Securities authenticated and delivered under this Indenture,
exclusive, however, of Securities of any series as to which such Person is not
Trustee.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings
specified in Section 305.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary which is a "significant
subsidiary" (as defined in Article I, Rule 1-02 of Regulation S-X, promulgated
under the Securities Act of 1933) of the Company.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on the
Registered Securities of or within any series means a date fixed by the Company
pursuant to Section 307.
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"STATED MATURITY," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security or a coupon representing such installment of interest as the
fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.
"SUBSIDIARY" means a corporation a majority of the outstanding voting stock
of which is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries of the Company. For the purposes of this definition, "voting
stock" means stock having voting power for the election of directors, whether at
all times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"TREASURY RATE" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939, as
amended and as in force at the date as of which this Indenture was executed,
except as provided in Section 905.
"TRUSTEE" means the Person named as the "Trustee" in the first paragraph of
this Indenture until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder; PROVIDED, HOWEVER, that if
at any time there is more than one such Person, "Trustee" as used with respect
to the Securities of any series shall mean only the Trustee with respect to
Securities of that series.
"UNITED STATES" means, unless otherwise specified with respect to any
Securities pursuant to Section 301, the United States of America (including the
states and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"UNITED STATES PERSON" means, unless otherwise specified with respect to
any Securities pursuant to Section 301, an individual who is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or an estate or
trust the income of which is subject to United States Federal income taxation
regardless of its source.
"YIELD TO MATURITY" means the yield to maturity, computed at the time of
issuance of a Security (or, if applicable, at the most recent redetermination of
interest on such Security) and as set forth in such Security in accordance with
generally accepted United States bond yield computation principles.
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SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or
request by the Company to the Trustee to take any action under any provision of
this Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (including certificates delivered
pursuant to Section 1008) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such condition or covenant
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon an Opinion of Counsel, or a
certificate or representations by counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the opinion, certificate or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such Opinion of Counsel or certificate or
representations may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information as to such
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<PAGE> 19
factual matters is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders of the Outstanding Securities of all series or one
or more series, as the case may be, may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Holders in person
or by agents duly appointed in writing. If Securities of a series are issuable
as Bearer Securities, any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders of Securities of such series may, alternatively, be embodied in and
evidenced by the record of Holders of Securities of such series voting in favor
thereof, either in person or by proxies duly appointed in writing, at any
meeting of Holders of Securities of such series duly called and held in
accordance with the provisions of Article Fifteen, or a combination of such
instruments and any such record. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments or record
or both are delivered to the Trustee and, where it is hereby expressly required,
to the Company. Such instrument or instruments and any such record (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments or so voting
at any such meeting. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Security, shall
be sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company and any agent of the Trustee or the Company, if made in
the manner provided in this Section. The record of any meeting of Holders of
Securities shall be proved in the manner provided in Section 1506.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other reasonable manner which the Trustee deems sufficient.
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(c) The ownership of Registered Securities shall be proved by the Security
Register. As to any matter relating to beneficial ownership interests in any
Global Security, the appropriate depository's records shall be dispositive for
purposes of this Indenture.
(d) The ownership of Bearer Securities may be proved by the production of
such Bearer Securities or by a certificate executed, as depository, by any trust
company, bank, banker or other depository, wherever situated, if such
certificate shall be deemed by the Trustee to be satisfactory, showing that at
the date therein mentioned such Person had on deposit with such depository, or
exhibited to it, the Bearer Securities therein described; or such facts may be
proved by the certificate or affidavit of the Person holding such Bearer
Securities, if such certificate or affidavit is deemed by the Trustee to be
satisfactory. The Trustee and the Company may assume that such ownership of any
Bearer Security continues until (1) another certificate or affidavit bearing a
later date issued in respect of the same Bearer Security is produced, or (2)
such Bearer Security is produced to the Trustee by some other Person, or (3)
such Bearer Security is surrendered in exchange for a Registered Security, or
(4) such Bearer Security is no longer Outstanding. The ownership of Bearer
Securities may also be proved in any other manner which the Trustee deems
sufficient.
(e) If the Company shall solicit from the Holders of Registered Securities
any request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, in or pursuant to a Board Resolution, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; PROVIDED that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
(f) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee, any Security
Registrar, any Paying Agent, any Authenticating Agent or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
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SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at the address specified in the first paragraph of
this Indenture; or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this Indenture or at any other address previously
furnished in writing to the Trustee by the Company, Attention: Chief
Financial Officer (with a copy to the Company's General Counsel), or
(3) either the Trustee or the Company, by the other party, shall be
sufficient for every purpose hereunder if given by facsimile transmission,
receipt confirmed by telephone followed by an original copy delivered by
guaranteed overnight courier; if to the Trustee at facsimile number
(617) 664-5371; and if to the Company at facsimile number (508) 839-7500.
SECTION 106. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides for
notice of any event to Holders of Registered Securities by the Company or the
Trustee, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each such Holder affected by such event, at his address as it appears in the
Security Register, not later than the latest date, if any, and not earlier than
the earliest date, if any, prescribed for the giving of such notice. In any case
where notice to Holders of Registered Securities is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders of Registered Securities or the sufficiency of any notice to
Holders of Bearer Securities given as provided herein. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice.
If by reason of the suspension of or irregularities in regular mail service
or by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification to Holders of Registered Securities as shall be
made with the approval of the Trustee shall constitute a sufficient notification
to such Holders for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise specified with
respect to any Securities pursuant to Section 301, where this Indenture provides
for notice to Holders of Bearer Securities of any event, such notice shall be
sufficiently given if published in an Authorized Newspaper in The City of New
York and in such other city or cities as may be
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<PAGE> 22
specified in such Securities on a Business Day, such publication to be not later
than the latest date, if any, and not earlier than the earliest date, if any,
prescribed for the giving of such notice. Any such notice shall be deemed to
have been given on the date of such publication or, if published more than once,
on the date of the first such publication.
If by reason of the suspension of publication of any Authorized Newspaper
or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Securities as provided
above, then such notification to Holders of Bearer Securities as shall be given
with the approval of the Trustee shall constitute sufficient notice to such
Holders for every purpose hereunder. Neither the failure to give notice by
publication to any particular Holder of Bearer Securities as provided above, nor
any defect in any notice so published, shall affect the sufficiency of such
notice with respect to other Holders of Bearer Securities or the sufficiency of
any notice to Holders of Registered Securities given as provided herein.
Any request, demand, authorization, direction, notice, consent or waiver
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the country
of publication.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
SECTION 107. COUNTERPARTS; EFFECT OF HEADINGS AND TABLE OF CONTENTS. This
Indenture may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Indenture. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
SECTION 108. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 109. SEVERABILITY CLAUSE. In case any provision in this Indenture
or in any Security or coupon shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 110. BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Securities or coupons, express or implied, shall give to any Person, other than
the parties hereto, any Security Registrar, any Paying Agent, any Authenticating
Agent and their successors hereunder and the Holders any benefit or any legal or
equitable right, remedy or claim under this Indenture.
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SECTION 111. GOVERNING LAW. This Indenture and the Securities and coupons
shall be governed by and construed in accordance with the law of the State of
New York. This Indenture is subject to the provisions of the TIA that are
required to be part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
SECTION 112. LEGAL HOLIDAYS. In any case where any Interest Payment Date,
Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or
Maturity of any Security or the last date on which a Holder has the right to
exchange a Security shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or any Security or coupon
other than a provision in the Securities of any series which specifically states
that such provision shall apply in lieu hereof), payment of interest or
principal (and premium or Make-Whole Amount, if any) or exchange of such
security need not be made at such Place of Payment on such date, but (except as
otherwise provided in the supplemental indenture with respect to such Security)
may be made on the next succeeding Business Day at such Place of Payment with
the same force and effect as if made on the Interest Payment Date, Redemption
Date, Repayment Date or sinking fund payment date, or at the Stated Maturity or
Maturity, or on such last day for exchange, provided that no interest shall
accrue on the amount so payable for the period from and after such Interest
Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated
Maturity or Maturity, as the case may be.
SECTION 113. IMMUNITY OF STOCKHOLDERS, DIRECTORS, OFFICERS AND AGENTS OF
THE COMPANY. No recourse under or upon any obligation, covenant or agreement
contained in this Indenture, or in any Security, or because of any indebtedness
evidenced thereby, shall be had against any past, present or future stockholder,
employee, officer or director, as such, of the Company or of any successor,
either directly or through the Company or any successor, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance of the Securities by the Holders
and as part of the consideration for the issue of the Securities.
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SECTION 114. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
or deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that may
be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.
ARTICLE TWO - SECURITIES FORMS
SECTION 201. FORMS OF SECURITIES. The Registered Securities, if any, of
each series and the Bearer Securities, if any, of each series and related
coupons shall be substantially in the form of EXHIBIT A hereto or in such other
form as shall be established in one or more indentures supplemental hereto or
approved from time to time by or pursuant to a Board Resolution in accordance
with Section 301, shall have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture or any indenture supplemental hereto, and may have such letters,
numbers or other marks of identification or designation and such legends or
endorsements placed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Indenture, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the Securities may be
listed, or to conform to usage.
Unless otherwise specified as contemplated by Section 301, Bearer
Securities shall have interest coupons attached.
The definitive Securities and coupons shall be printed, lithographed or
engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or mechanically reproduced on safety paper or
may be produced in any other manner, all as determined by the officers executing
such Securities or coupons, as evidenced by their execution of such Securities
or coupons.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. Subject to
Section 611, the Trustee's certificate of authentication shall be in
substantially the following form:
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This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY
as Trustee
Dated: ______________ By:
-----------------------------
Authorized Signatory
SECTION 203. SECURITIES ISSUABLE IN GLOBAL FORM. If Securities of or
within a series are issuable in the form of one or more Global Securities, then,
notwithstanding clause (8) of Section 301 and the provisions of Section 302, any
such Global Security or Securities may provide that it or they shall represent
the aggregate amount of all Outstanding Securities of such series (or such
lesser amount as is permitted by the terms thereof) from time to time endorsed
thereon and may also provide that the aggregate amount of Outstanding Securities
of such series represented thereby may from time to time be increased or
decreased to reflect exchanges. Any endorsement of any Global Security to
reflect the amount, or any increase or decrease in the amount, or changes in the
rights of Holders thereof, of Outstanding Securities represented thereby shall
be made by the Trustee in such manner or by such Person or Persons as shall be
specified therein or in the Company Order to be delivered to the Trustee
pursuant to Section 303 or 304. Subject to the provisions of Section 303 and, if
applicable, Section 304, the Trustee shall deliver and redeliver any Global
Security in permanent global form in the manner and upon instructions given by
the Person or Persons specified therein or in the applicable Company Order. If a
Company Order pursuant to Section 303 or 304 has been, or simultaneously is,
delivered, any instructions by the Company with respect to endorsement or
delivery or redelivery of a Global Security shall be in writing but need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 303 shall apply to any
Security represented by a Global Security if such Security was never issued and
sold by the Company and the Company delivers to the Trustee the Global Security
together with written instructions (which need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel) with regard to the reduction
in the principal amount of Securities represented thereby, together with the
written statement contemplated by the last sentence of Section 303.
Notwithstanding the provisions of Section 307, unless otherwise specified
as contemplated by Section 301, payment of principal of and any premium or
Make-Whole Amount, if any, and interest on any Global Security in permanent
global form shall be made to the registered Holder thereof.
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Notwithstanding the provisions of Section 308 and except as provided in the
preceding paragraph, the Company, the Trustee and any agent of the Company and
the Trustee shall treat as the Holder of such principal amount of Outstanding
Securities represented by a permanent Global Security (i) in the case of a
permanent Global Security in registered form, the Holder of such permanent
Global Security in registered form, or (ii) in the case of a permanent Global
Security in bearer form, Euroclear or CEDEL.
Any Global Security authenticated and delivered hereunder shall bear a
legend in substantially the following form:
"This Security is a Global Security within the meaning set forth in
the Indenture hereinafter referred to and is registered in the name of
a Depository or a nominee of a Depository. This Security is
exchangeable for Securities registered in the name of a person other
than the Depository or its nominee only in the limited circumstances
described in the Indenture, and may not be transferred except as a
whole by the Depository to a nominee of the Depository or by a nominee
of the Depository to the Depository or another nominee of the
Depository or by the Depository or its nominee to a successor
Depository or its nominee."
ARTICLE THREE - THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in one or more Board Resolutions or pursuant to authority granted by
one or more Board Resolutions and, subject to Section 303, set forth in an
Officers' Certificate, or established in one or more indentures supplemental
hereto, prior to the issuance of Securities of any series:
(1) The title of the Securities of the series (which shall distinguish
the Securities of such series from all other series of Securities);
(2) Any limit upon the aggregate principal amount of the Securities of
the series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 304, 305, 306, 906, 1107 or 1305);
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(3) The price (expressed as a percentage of the principal amount
thereof) at which such Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) The date or dates, or the method for determining such date or
dates, on which the principal of such Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Securities
will bear interest, if any;
(6) The date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the dates on which any
such interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the persons
to whom such interest shall be payable, and the basis upon which interest
shall be calculated if other than that of a 360-day year of twelve 30-day
months;
(7) The place or places where the principal of (and premium, if any)
and interest, if any, on such Securities will be payable, where such
Securities may be surrendered for registration of transfer or exchange and
where notices or demands to or upon the Company in respect of such
Securities and this Indenture may be served;
(8) The period or periods, if any, within which, the price or prices
at which and the other terms and conditions upon which such Securities may,
pursuant to any optional or mandatory redemption provisions, be redeemed,
as a whole or in part, at the option of the Company;
(9) The obligation, if any, of the Company to redeem, repay or
purchase such Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods
within which, the price or prices at which and the other terms and
conditions upon which such Securities will be redeemed, repaid or
purchased, as a whole or in part, pursuant to such obligation;
(10) If other than Dollars, the currency or currencies in which such
Securities are denominated and payable, which may be a foreign currency or
units of two or more foreign currencies or a composite currency or
currencies, the manner of determining the equivalent thereof in Dollars for
purposes of the definition of "Outstanding" in Section 101, and the terms
and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any, including any amount due upon redemption, if
any) or
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interest, if any, on such Securities may be determined with reference to an
index, formula or other method (which index, formula or method may, but
need not be, based on the yield on or trading price of other securities,
including United States Treasury securities or on a currency, currencies,
currency unit or units, or composite currency or currencies) and the manner
in which such amounts shall be determined;
(12) Whether the principal of (and premium, if any) or interest on the
Securities of the series are to be payable, at the election of the Company
or a holder thereof, in a currency or currencies, currency unit or units or
composite currency or currencies other than that in which such Securities
are denominated or stated to be payable, the period or periods within
which, and the terms and conditions upon which, such election may be made,
and the time and manner of, and identity of the exchange rate agent with
responsibility for, determining the exchange rate between the currency or
currencies, currency unit or units or composite currency or currencies in
which such Securities are denominated or stated to be payable and the
currency or currencies, currency unit or units or composite currency or
currencies in which such Securities are to be so payable;
(13) Provisions, if any, granting special rights to the holders of
Securities of the series upon the occurrence of such events as may be
specified;
(14) Any deletions from, modifications of or additions to the Events
of Default or covenants of the Company with respect to Securities of the
series, whether or not such Events of Default or covenants are consistent
with the Events of Default or covenants set forth herein;
(15) Whether and under what circumstances the Company will pay any
additional amounts on such Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option to
redeem such Securities in lieu of making such payment;
(16) Whether Securities of the series are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both, any
restrictions applicable to the offer, sale or delivery of Bearer Securities
and the terms upon which Bearer Securities of the series may be exchanged
for Registered Securities of the series and vice versa (if permitted by
applicable laws and regulations), whether any Securities of the series are
to be issuable initially in temporary global form and whether any
Securities of the series are to be issuable in permanent global form with
or without coupons and, if so, whether beneficial owners of interests in
any such permanent global Security may exchange such interests for
Securities of such series and of like tenor of any authorized form and
denomination and the circumstances under which any such exchanges may
occur, if other than in the manner provided in the Indenture, and, if
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Registered Securities of the series are to be issuable as a Global
Security, the identity of the depository for such series;
(17) The date as of which any Bearer Securities of the series and any
temporary Global Security representing outstanding Securities of the series
shall be dated if other than the date of original issuance of the first
Security of the series to be issued;
(18) The Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, the manner in
which, or the Person to whom, any interest on any Bearer Security of the
series shall be payable, if otherwise than upon presentation and surrender
of the coupons appertaining thereto as they severally mature, and the
extent to which, or the manner in which, any interest payable on a
temporary Global Security on an Interest Payment Date will be paid if other
than in the manner provided herein;
(19) The applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen hereof to the Securities of the
series;
(20) If the Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary Security
of such series) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, then the form and/or terms
of such certificates, documents or conditions; and
(21) Any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons appertaining to any Bearer
Securities of such series shall be substantially identical except, in the case
of Registered Securities, as to denomination and except as may otherwise be
provided in or pursuant to such Board Resolution (subject to Section 303) and
set forth in such Officers' Certificate or in any such indenture supplemental
hereto. All Securities of any one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the Holders, for issuances of additional Securities of such series.
If any of the terms of the Securities of any series are established by
action taken pursuant to one or more Board Resolutions, a copy of an appropriate
record of such action(s) shall be certified by the Secretary or an Assistant
Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Officers' Certificate setting forth the terms of the Securities
of such series.
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SECTION 302. DENOMINATIONS. The Securities of each series shall be
issuable in such denominations as shall be specified as contemplated by Section
301. With respect to Securities of any series denominated in Dollars, in the
absence of any such provisions with respect to the Securities of any series, the
Securities of such series, other than Global Securities (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The
Securities and any coupons appertaining thereto shall be executed on behalf of
the Company by its Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon, and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities and coupons may be manual or facsimile signatures of
the present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
Securities or coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities or coupons.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series, together with any
coupon appertaining thereto, executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities; PROVIDED, HOWEVER, that,
in connection with its original issuance, no Bearer Security shall be mailed or
otherwise delivered to any location in the United States; and PROVIDED FURTHER
that, unless otherwise specified with respect to any series of Securities
pursuant to Section 301, a Bearer Security may be delivered in connection with
its original issuance only if the Person entitled to receive such Bearer
Security shall have furnished a certificate to Euroclear or CEDEL, as the case
may be, in the form set forth in Exhibit B-1 to this Indenture or such other
certificate as may be specified with respect to any series of Securities
pursuant to Section 301, dated no earlier than 15 days prior to the earlier of
the date on which such Bearer Security is delivered and the date on which any
temporary Security first becomes exchangeable for such Bearer Security in
accordance with the terms of such temporary Security and this Indenture. If any
Security shall be represented by a permanent global Bearer Security, then, for
purposes of this Section and Section 304, the notation of a beneficial owner's
interest therein upon original issuance of such Security or upon exchange of a
portion of a temporary Global Security shall be deemed to be delivery in
connection with its original issuance of such beneficial owner's interest in
such permanent Global Security. Except as permitted by Section 306, the Trustee
shall not authenticate and deliver any Bearer Security unless all appurtenant
coupons for interest then matured have been detached and canceled.
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If all the Securities of any series are not to be issued at one time and if
the Board Resolution or supplemental indenture establishing such series shall so
permit, such Company Order may set forth procedures acceptable to the Trustee
for the issuance of such Securities and determining the terms of particular
Securities of such series, such as interest rate or formula, maturity date, date
of issuance and date from which interest shall accrue. In authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to TIA Section 315(a) through 315(d)) shall be fully protected in
relying upon,
(i) an Opinion of Counsel stating that
(a) the form or forms of such Securities and any coupons have
been established in conformity with the provisions of this Indenture;
(b) the terms of such Securities and any coupons have been
established in conformity with the provisions of this Indenture; and
(c) such Securities, together with any coupons appertaining
thereto, when completed by appropriate insertions and executed and
delivered by the Company to the Trustee for authentication in
accordance with this Indenture, authenticated and delivered by the
Trustee in accordance with this Indenture and issued by the Company in
the manner and subject to any conditions specified in such Opinion of
Counsel, will constitute legal, valid and legally binding obligations
of the Company, enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization
and other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights generally and to
general equitable principles; and
(ii) an Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the issuance of the Securities
have been complied with and that, to the best of the knowledge of the
signers of such certificate, that no Event of Default with respect to any
of the Securities shall have occurred and be continuing.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
obligations or immunities under the Securities and this Indenture or otherwise
in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all the Securities of any series are not to be issued at one time,
it shall not be necessary to deliver an Officers' Certificate otherwise required
pursuant to Section 301 or a Company Order, or an Opinion of Counsel or an
Officers' Certificate otherwise required pursuant to the preceding
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<PAGE> 32
paragraph at the time of issuance of each Security of such series, but such
order, opinion and certificates, with appropriate modifications to cover such
future issuances, shall be delivered at or before the time of issuance of the
first Security of such series.
Each Registered Security shall be dated the date of its authentication and
each Bearer Security shall be dated as of the date specified as contemplated by
Section 301.
No Security or coupon shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Security
or Security to which such coupon appertains a certificate of authentication
substantially in the form provided for herein duly executed by the Trustee by
manual signature of an authorized signatory, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of this Indenture. Notwithstanding the foregoing, if any Security
(including a Global Security) shall have been authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided in Section 309
together with a written statement (which need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel) stating that such Security has
never been issued and sold by the Company, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 304. TEMPORARY SECURITIES.
(a) Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued, in registered form, or, if authorized, in bearer form with one or
more coupons or without coupons, and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as conclusively evidenced by their execution of such
Securities. In the case of Securities of any series, such temporary Securities
may be in global form.
Except in the case of temporary Global Securities (which shall be exchanged
as otherwise provided herein or as otherwise provided in or pursuant to a Board
Resolution), if temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series (accompanied by any non-matured
coupons appertaining thereto), the Company shall
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execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of the same series of authorized
denominations; PROVIDED, HOWEVER, that no definitive Bearer Security shall be
delivered in exchange for a temporary Registered Security; and PROVIDED FURTHER
that a definitive Bearer Security shall be delivered in exchange for a temporary
Bearer Security only in compliance with the conditions set forth in Section 303.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.
(b) Unless otherwise provided in or pursuant to a Board Resolution, the
following provisions of this Section 304(b) shall govern the exchange of
temporary Securities other than through the facilities of The Depository Trust
Company. If any such temporary Security is issued in global form, then such
temporary Global Security shall, unless otherwise provided therein, be delivered
to the London office of a depository or common depository (the "Common
Depository"), for the benefit of Euroclear and CEDEL, for credit to the
respective accounts of the beneficial owners of such Securities (or to such
other accounts as they may direct).
Without unnecessary delay but in any event not later than the date
specified in, or determined pursuant to the terms of, any such temporary Global
Security (the "Exchange Date"), the Company shall deliver to the Trustee
definitive Securities, in aggregate principal amount equal to the principal
amount of such temporary Global Security, executed by the Company. On or after
the Exchange Date, such temporary Global Security shall be surrendered by the
Common Depository to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge, and the Trustee shall authenticate and deliver, in exchange for
each portion of such temporary Global Security, an equal aggregate principal
amount of definitive Securities of the same series of authorized denominations
and of like tenor as the portion of such temporary Global Security to be
exchanged. The definitive Securities to be delivered in exchange for any such
temporary Global Security shall be in bearer form, registered form, permanent
global bearer form or permanent global registered form, or any combination
thereof, as specified as contemplated by Section 301, and, if any combination
thereof is so specified, as requested by the beneficial owner thereof; PROVIDED,
HOWEVER, that, unless otherwise specified in such temporary Global Security,
upon such presentation by the Common Depository, such temporary Global Security
is accompanied by a certificate dated the Exchange Date or a subsequent date and
signed by Euroclear as to the portion of such temporary Global Security held for
its account then to be exchanged and a certificate dated the Exchange Date or a
subsequent date and signed by CEDEL as to the portion of such temporary Global
Security held for its account then to be exchanged in such form as may be
established pursuant to Section 301; and PROVIDED FURTHER that definitive Bearer
Securities shall be delivered in exchange for a portion of a temporary Global
Security only in compliance with the requirements of Section 303.
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Unless otherwise specified in such temporary Global Security, the interest
of a beneficial owner of Securities of a series in a temporary Global Security
shall be exchanged for definitive Securities of the same series and of like
tenor following the Exchange Date when the account holder instructs Euroclear or
CEDEL, as the case may be, to request such exchange on his behalf and delivers
to Euroclear or CEDEL, as the case may be, a certificate in the form set forth
in Exhibit B-1 to this Indenture (or in such other form as may be established
pursuant to Section 301), dated no earlier than 15 days prior to the Exchange
Date, copies of which certificate shall be available from the offices of
Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed for such
series of Securities and each Paying Agent. Unless otherwise specified in such
temporary Global Security, any such exchange shall be made free of charge to the
beneficial owners of such temporary Global Security, except that a Person
receiving definitive Securities must bear the cost of insurance, postage,
transportation and the like unless such Person takes delivery of such definitive
Securities in person at the offices of Euroclear or CEDEL. Definitive Securities
in bearer form to be delivered in exchange for any portion of a temporary Global
Security shall be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary Securities
of any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of the same series and of like tenor
authenticated and delivered hereunder, except that, unless otherwise specified
as contemplated by Section 301, interest payable on a temporary Global Security
on an Interest Payment Date for Securities of such series occurring prior to the
applicable Exchange Date shall be payable to Euroclear and CEDEL on such
Interest Payment Date upon delivery by Euroclear and CEDEL to the Trustee of a
certificate or certificates in the form set forth in Exhibit B-2 to this
Indenture (or in such other forms as may be established pursuant to Section
301), for credit without further interest on or after such Interest Payment Date
to the respective accounts of Persons who are the beneficial owners of such
temporary Global Security on such Interest Payment Date and who have each
delivered to Euroclear or CEDEL, as the case may be, a certificate dated no
earlier than 15 days prior to the Interest Payment Date occurring prior to such
Exchange Date in the form set forth as Exhibit B-1 to this Indenture (or in such
other forms as may be established pursuant to Section 301). Notwithstanding
anything to the contrary herein contained, the certifications made pursuant to
this paragraph shall satisfy the certification requirements of the preceding two
paragraphs of this Section 304(b) and of the third paragraph of Section 303 of
this Indenture and the interests of the Persons who are the beneficial owners of
the temporary Global Security with respect to which such certification was made
will be exchanged for definitive Securities of the same series and of like tenor
on the Exchange Date or the date of certification if such date occurs after the
Exchange Date, without further act or deed by such beneficial owners. Except as
otherwise provided in this paragraph, no payments of principal or interest owing
with respect to a beneficial interest in a temporary Global Security will be
made unless and until such interest in such temporary Global Security shall have
been exchanged for an interest in a definitive Security. Any interest so
received by Euroclear and CEDEL and not paid as herein provided shall be
returned to the Trustee prior to the expiration of two years after such Interest
Payment Date in order to be repaid to the Company.
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SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. The
Company shall cause to be kept at the Corporate Trust Office of the Trustee or
in any office or agency of the Company in a Place of Payment a register for each
series of Securities (the registers maintained in such office or in any such
office or agency of the Company in a Place of Payment being herein sometimes
referred to collectively as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Registered Securities and of transfers of Registered Securities.
The Security Register shall be in written form or any other form capable of
being converted into written form within a reasonable time. The Trustee, at its
Corporate Trust Office, is hereby initially appointed "Security Registrar" for
the purpose of registering Registered Securities and transfers of Registered
Securities on such Security Register as herein provided. In the event that the
Trustee shall cease to be Security Registrar, it shall have the right to examine
the Security Register at all reasonable times.
Subject to the provisions of this Section 305, upon surrender for
registration of transfer of any Registered Security of any series at any office
or agency of the Company in a Place of Payment for that series, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Registered Securities
of the same series, of any authorized denominations and of a like aggregate
principal amount, bearing a number not contemporaneously outstanding, and
containing identical terms and provisions.
Subject to the provisions of this Section 305, at the option of the Holder,
Registered Securities of any series may be exchanged for other Registered
Securities of the same series, of any authorized denomination or denominations
and of a like aggregate principal amount, containing identical terms and
provisions, upon surrender of the Registered Securities to be exchanged at any
such office or agency. Whenever any such Registered Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Registered Securities which the Holder making the
exchange is entitled to receive. Unless otherwise specified with respect to any
series of Securities as contemplated by Section 301, Bearer Securities may not
be issued in exchange for Registered Securities.
If (but only if) permitted by the applicable Board Resolution and (subject
to Section 303) set forth in the applicable Officers' Certificate, or in any
indenture supplemental hereto, delivered as contemplated by Section 301, at the
option of the Holder, Bearer Securities of any series may be exchanged for
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor, upon surrender of the Bearer
Securities to be exchanged at any such office or agency, with all unmatured
coupons and all matured coupons in default thereto appertaining. If the Holder
of a Bearer Security is unable to produce any such unmatured coupon or coupons
or matured coupon or coupons in default, any such permitted exchange may be
effected if the Bearer Securities are accompanied by payment in funds acceptable
to the Company in an amount equal to the face amount of such missing coupon or
coupons, or the surrender of such missing coupon or
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coupons may be waived by the Company and the Trustee if there is furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall surrender
to any Paying Agent any such missing coupon in respect of which such a payment
shall have been made, such Holder shall be entitled to receive the amount of
such payment; PROVIDED, HOWEVER, that, except as otherwise provided in Section
1002, interest represented by coupons shall be payable only upon presentation
and surrender of those coupons at an office or agency located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any series
is surrendered at any such office or agency in a permitted exchange for a
Registered Security of the same series and like tenor after the close of
business at such office or agency on (i) any Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) any Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of Defaulted Interest,
such Bearer Security shall be surrendered without the coupon relating to such
Interest Payment Date or proposed date for payment, as the case may be, and
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon when due in accordance
with the provisions of this Indenture. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any permanent Global Security shall be exchangeable
only as provided in this paragraph. If the depository for any permanent Global
Security is The Depository Trust Company ("DTC"), then, unless the terms of such
Global Security expressly permit such Global Security to be exchanged in whole
or in part for definitive Securities, a Global Security may be transferred, in
whole but not in part, only to a nominee of DTC, or by a nominee of DTC to DTC,
or to a successor to DTC for such Global Security selected or approved by the
Company or to a nominee of such successor to DTC. If at any time DTC notifies
the Company that it is unwilling or unable to continue as depository for the
applicable Global Security or Securities or if at any time DTC ceases to be a
clearing agency registered under the Securities Exchange Act of 1934 if so
required by applicable law or regulation, the Company shall appoint a successor
depository with respect to such Global Security or Securities. If (x) a
successor depository for such Global Security or Securities is not appointed by
the Company within 90 days after the Company receives such notice or becomes
aware of such unwillingness, inability or ineligibility, (y) an Event of Default
has occurred and is continuing and the beneficial owners representing a majority
in principal amount of the applicable series of Securities represented by such
Global Security or Securities advise DTC to cease acting as depository for such
Global Security or Securities or (z) the Company, in its sole discretion,
determines at any time that all Outstanding Securities (but not less than all)
of any series issued or issuable in the form of one or more Global Securities
shall no longer be represented by such Global Security or Securities, then the
Company shall execute, and the Trustee shall
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authenticate and deliver definitive Securities of like series, rank, tenor and
terms in definitive form in an aggregate principal amount equal to the principal
amount of such Global Security or Securities in such names as DTC (or the
successor depository, as the case may be) shall instruct. If any beneficial
owner of an interest in a permanent global Security (as reflected on the books
and record of DTC or such other depository) is otherwise entitled to exchange
such interest for Securities of such series and of like tenor and principal
amount of another authorized form and denomination, as specified as contemplated
by Section 301 and provided that any applicable notice provided in the permanent
Global Security shall have been given, then without unnecessary delay but in any
event not later than the earliest date on which such interest may be so
exchanged, the Company shall execute, and the Trustee shall authenticate and
deliver definitive Securities in aggregate principal amount equal to the
principal amount of such beneficial owner's interest in such permanent Global
Security. On or after the earliest date on which such interests may be so
exchanged, such permanent Global Security shall be surrendered for exchange by
DTC or such other depository as shall be specified in the Company Order with
respect thereto to the Trustee, as the Company's agent for such purpose;
PROVIDED, HOWEVER, that no such exchanges may occur during a period beginning at
the opening of business 15 days before any selection of Securities to be
redeemed and ending on the relevant Redemption Date if the Security for which
exchange is requested may be among those selected for redemption; and PROVIDED
FURTHER that no Bearer Security delivered in exchange for a portion of a
permanent Global Security shall be mailed or otherwise delivered to any location
in the United States. If a Registered Security is issued in exchange for any
portion of a permanent Global Security after the close of business at the office
or agency where such exchange occurs on (i) any Regular Record Date and before
the opening of business at such office or agency on the relevant Interest
Payment Date, or (ii) any Special Record Date and the opening of business at
such office or agency on the related proposed date for payment of Defaulted
Interest, interest or Defaulted Interest, as the case may be, will not be
payable on such Interest Payment Date or proposed date for payment, as the case
may be, in respect of such Registered Security, but will be payable on such
Interest Payment Date or proposed date for payment, as the case may be, only to
the Person to whom interest in respect of such portion of such permanent Global
Security is payable in accordance with the provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange or redemption shall (if so required by the Company or
the Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
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No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer.
The Company or the Trustee, as applicable, shall not be required (i) to
issue, register the transfer of or exchange any Security if such Security may be
among those selected for redemption during a period beginning at the opening of
business 15 days before selection of the Securities to be redeemed under Section
1103 and ending at the close of business on (A) if such Securities are issuable
only as Registered Securities, the day of the mailing of the relevant notice of
redemption and (B) if such Securities are issuable as Bearer Securities, the day
of the first publication of the relevant notice of redemption or, if such
Securities are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption, or (ii) to
register the transfer of or exchange any Registered Security so selected for
redemption in whole or in part, except, in the case of any Registered Security
to be redeemed in part, the portion thereof not to be redeemed, or (iii) to
exchange any Bearer Security so selected for redemption except that such a
Bearer Security may be exchanged for a Registered Security of that series and
like tenor, PROVIDED that such Registered Security shall be simultaneously
surrendered for redemption, or (iv) to issue, register the transfer of or
exchange any Security which has been surrendered for repayment at the option of
the Holder, except the portion, if any, of such Security not to be so repaid.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. If any
mutilated Security or a Security with a mutilated coupon appertaining to it is
surrendered to the Trustee or the Company, together with, in proper cases, such
security or indemnity as may be required by the Company or the Trustee to save
each of them or any agent of either of them harmless, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a new
Security of the same series and principal amount, containing identical terms and
provisions and bearing a number not contemporaneously outstanding, with coupons
corresponding to the coupons, if any, appertaining to the surrendered Security.
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security or
coupon, and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security or coupon has been
acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series and principal
amount, containing identical terms and provisions and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any,
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appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.
Notwithstanding the provisions of the previous two paragraphs, in case any
such mutilated, destroyed, lost or stolen Security or coupon has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Security, with coupons corresponding to the coupons, if any,
appertaining to such destroyed, lost or stolen Security or to the Security to
which such destroyed, lost or stolen coupon appertains, pay such Security or
coupon; PROVIDED, HOWEVER, that payment of principal of (and premium or
Make-Whole Amount, if any), and any interest on, Bearer Securities shall, except
as otherwise provided in Section 1002, be payable only at an office or agency
located outside the United States and, unless otherwise specified as
contemplated by Section 301, any interest on Bearer Securities shall be payable
only upon presentation and surrender of the coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any, issued pursuant
to this Section in lieu of any destroyed, lost or stolen Security, or in
exchange for a Security to which a destroyed, lost or stolen coupon appertains,
shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security and its coupons, if any,
or the destroyed, lost or stolen coupon shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series and their
coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities or coupons.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Except as
otherwise specified with respect to a series of Securities in accordance with
the provisions of Section 301, interest on any Registered Security that is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest at the office or agency of the Company maintained
for such purpose pursuant to Section 1002; PROVIDED, HOWEVER, that each
installment of interest on any Registered Security may at the Company's option
be paid by (i) mailing a check for such interest, payable to or upon the written
order of the Person entitled thereto pursuant to Section 308, to the address of
such Person as it appears on the Security Register or (ii) transfer to an
account maintained by the payee located inside the United States.
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Unless otherwise provided as contemplated by Section 301 with respect to
the Securities of any series, payment of interest may be made, in the case of a
Bearer Security, by transfer to an account maintained by the payee with a bank
located outside the United States.
Unless otherwise provided as contemplated by Section 301, every permanent
global Security will provide that interest, if any, payable on any Interest
Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the case may be,
with respect to that portion of such permanent global Security held for its
account by Cede & Co. or the Common Depository, as the case may be, for the
purpose of permitting such party to credit the interest received by it in
respect of such permanent global Security to the accounts of the beneficial
owners thereof.
In case a Bearer Security of any series is surrendered in exchange for a
Registered Security of such series after the close of business (at an office or
agency in a Place of Payment for such series) on any Regular Record Date and
before the opening of business (at such office or agency) on the next succeeding
Interest Payment Date, such Bearer Security shall be surrendered without the
coupon relating to such Interest Payment Date and interest will not be payable
on such Interest Payment Date in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the provisions of this Indenture.
Except as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 301, any interest on any Registered
Security of any series that is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the registered Holder thereof on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Registered Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Registered Security of such series and the date of the
proposed payment (which shall not be less than 20 days after such notice is
received by the Trustee), and at the same time the Company shall deposit
with the Trustee an amount of money in the currency or currencies, currency
unit or units or composite currency or currencies in which the Securities
of such series are payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series) equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit on or prior
to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided.
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Thereupon the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to each
Holder of Registered Securities of such series at his address as it appears
in the Security Register not less than 10 days prior to such Special Record
Date. The Trustee may, in its discretion, in the name and at the expense of
the Company, cause a similar notice to be published at least once in an
Authorized Newspaper in each Place of Payment, but such publications shall
not be a condition precedent to the establishment of such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the
Registered Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following clause (2).
In case a Bearer Security of any series is surrendered at the office or
agency in a Place of Payment for such series in exchange for a Registered
Security of such series after the close of business at such office or
agency on any Special Record Date and before the opening of business at
such office or agency on the related proposed date for payment of Defaulted
Interest, such Bearer Security shall be surrendered without the coupon
relating to such proposed date of payment and Defaulted Interest will not
be payable on such proposed date of payment in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable
only to the Holder of such coupon when due in accordance with the
provisions of this Indenture.
(2) The Company may make payment of any Defaulted Interest on the
Registered Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which such
Securities may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS. Prior to due presentment of a
Registered Security for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name such
Registered Security is registered as the owner of such Security for the purpose
of receiving payment of principal of (and premium or
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Make-Whole Amount, if any), and (subject to Sections 305 and 307) interest on,
such Registered Security and for all other purposes whatsoever, whether or not
such Registered Security be overdue, and neither the Company, the Trustee nor
any agent of the Company or the Trustee shall be affected by notice to the
contrary. All such payments so made to any such Person, or upon such Person's
order, shall be valid, and, to the extent of the sum or sums so paid, effectual
to satisfy and discharge the liability for money payable upon any such Security.
Title to any Bearer Security and any coupons appertaining thereto shall
pass by delivery. The Company, the Trustee and any agent of the Company or the
Trustee may treat the Holder of any Bearer Security and the Holder of any coupon
as the absolute owner of such Security or coupon for the purpose of receiving
payment thereof or on account thereof and for all other purposes whatsoever,
whether or not such Security or coupon be overdue, and neither the Company, the
Trustee nor any agent of the Company or the Trustee shall be affected by notice
to the contrary.
No Holder of any beneficial interest in any Global Security held on its
behalf by a depository shall have any rights under this Indenture with respect
to such Global Security and such depository shall be treated by the Company, the
Trustee, and any agent of the Company or the Trustee as the owner of such Global
Security for all purposes whatsoever. None of the Company, the Trustee, any
Paying Agent or the Security Registrar will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of a Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Notwithstanding the foregoing, with respect to any Global Security, nothing
herein shall prevent the Company, the Trustee, or any agent of the Company or
the Trustee, from giving effect to any written certification, proxy or other
authorization furnished by any depository, as a Holder, with respect to such
Global Security or impair, as between such depository and owners of beneficial
interests in such Global Security, the operation of customary practices
governing the exercise of the rights of such depository (or its nominee) as
Holder of such Global Security.
SECTION 309. CANCELLATION. All Securities and coupons surrendered for
payment, redemption, repayment at the option of the Holder, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee,
and any such Securities and coupons and Securities and coupons surrendered
directly to the Trustee for any such purpose shall be promptly cancelled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such
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acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. Cancelled
Securities and coupons held by the Trustee shall be destroyed by the Trustee,
unless the Trustee is otherwise directed by a Company Order.
SECTION 310. COMPUTATION OF INTEREST. Except as otherwise specified as
contemplated by Section 301 with respect to Securities of any series, interest
on the Securities of each series shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
ARTICLE FOUR - SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall
upon Company Request cease to be of further effect with respect to any series of
Securities specified in such Company Request (except as to any surviving rights
of registration of transfer or exchange of Securities of such series herein
expressly provided for), and the Trustee, upon receipt of a Company Order, and
at the expense of the Company, shall execute instruments in form and substance
satisfactory to the Trustee and the Company acknowledging satisfaction and
discharge of this Indenture as to such series when
(1) either
(A) all Securities of such series theretofore authenticated and
delivered and all coupons, if any, appertaining thereto (other than
(i) coupons appertaining to Bearer Securities surrendered for exchange
for Registered Securities and maturing after such exchange, whose
surrender is not required or has been waived as provided in Section
305, (ii) Securities and coupons of such series which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 306, (iii) coupons appertaining to Securities
called for redemption and maturing after the relevant Redemption Date,
whose surrender has been waived as provided in Section 1106, and (iv)
Securities and coupons of such series for whose payment money has
theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(B) all Securities of such series and, in the case of (i) or (ii)
below, any coupons appertaining thereto not theretofore delivered to
the Trustee for cancellation
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(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) if redeemable at the option of the Company, are to be
called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount in the currency or currencies, currency
unit or units or composite currency or currencies in which the Securities
of such series are payable, sufficient to pay and discharge the entire
indebtedness on such Securities and such coupons not theretofore delivered
to the Trustee for cancellation, for principal (and premium or Make-Whole
Amount, if any) and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture as to
such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee and any predecessor Trustee under
Section 606, the obligations of the Company to any Authenticating Agent under
Section 611 and, if money shall have been deposited with and held by the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of the
Trustee under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST FUNDS. Subject to the provisions of the
last paragraph of Section 1003, all money deposited with the Trustee pursuant to
Section 401 shall be held in trust and applied by it, in accordance with the
provisions of the Securities, the coupons and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Persons entitled thereto,
of the principal (and premium or Make-Whole Amount, if any), and any interest
for whose payment such money has been deposited with or received by the
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Trustee, but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE - REMEDIES
SECTION 501. EVENTS OF DEFAULT. "Event of Default," wherever used herein
with respect to any particular series of Securities, means any one of the
following events (whatever the reason for such Event of Default and whether or
not it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest on any Security of that
series or of any coupon appertaining thereto, when such interest or coupon
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of (or premium or
Make-Whole Amount, if any, on) any Security of that series when it becomes
due and payable at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of any Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture with respect to any Security of that
series (other than a covenant or warranty a default in whose performance or
whose breach is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities of that series a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
(5) default under any bond, debenture, note, mortgage, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed by the Company (or by any
Subsidiary, the repayment of which the Company has guaranteed or for which
the Company is directly responsible or liable as obligor or guarantor),
having an aggregate principal amount outstanding of at least $25,000,000,
whether such indebtedness now exists or shall hereafter be created, which
default shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have become
due and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period of
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10 days after there shall have been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 10% in principal amount of the Outstanding Securities
of that series a written notice specifying such default and requiring the
Company to cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled and stating that such notice is a
"Notice of Default" hereunder; or
(6) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Company or any of its Subsidiaries
in an aggregate amount (excluding amounts covered by insurance) in excess
of $10,000,000 and such judgments, orders or decrees remain undischarged,
unstayed and unsatisfied in an aggregate amount (excluding amounts covered
by insurance) in excess of $10,000,000 for a period of 30 consecutive days;
or
(7) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
or
(8) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of either of its property,
or
(C) orders the liquidation of the Company or any Significant
Subsidiary, and the order or decree remains unstayed and in effect for
90 days; or
(9) any other Event of Default provided with respect to Securities of that
series.
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As used in this Section 501, the term "Bankruptcy Law" means title 11, U.S. Code
or any similar Federal or state law for the relief of debtors and the term
"Custodian" means any receiver, trustee, assignee, liquidator or other similar
official under any Bankruptcy Law.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if Securities of
that Series are Original Issue Discount Securities or Indexed Securities, such
portion of the principal as may be specified in the terms thereof) of all the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by the Holders), and upon
any such declaration such principal or specified portion thereof shall become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration of acceleration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay in the currency, currency unit or composite currency
in which the Securities of such series are payable (except as
otherwise specified pursuant to Section 301 for the Securities of such
series):
(A) all overdue installments of interest on all Outstanding
Securities of that series and any related coupons,
(B) the principal of (and premium or Make-Whole Amount, if
any, on) any Outstanding Securities of that series which have
become due otherwise than by such declaration of acceleration and
interest thereon at the rate or rates borne by or provided for in
such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate or
rates borne by or provided for in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
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(2) all Events of Default with respect to Securities of that
series, other than the nonpayment of the principal of (or premium or
Make-Whole Amount, if any) or interest on Securities of that series
which have become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. The Company covenants that if:
(1) default is made in the payment of any installment of interest
on any Security of any series and any related coupon when such
interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or
premium or Make-Whole Amount, if any, on) any Security of any series
at its Maturity,
then the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities of such series and coupons, the whole
amount then due and payable on such Securities and coupons for principal (and
premium or Make-Whole Amount, if any) and interest, with interest upon any
overdue principal (and premium or Make-Whole Amount, if any) and, to the extent
that payment of such interest shall be legally enforceable, upon any overdue
installments of interest at the rate or rates borne by or provided for in such
Securities, and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Securities of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon such Securities
of such series, wherever situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series and any
related coupons by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
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SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal of the Securities of any series shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company for the payment of
overdue principal, premium or Make-Whole Amount, if any, or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount, or such lesser
amount as may be provided for in the Securities of such series, of
principal (and premium or Make-Whole Amount, if any) and interest owing and
unpaid in respect of the Securities and to file such other papers or
documents (and take such other action including sitting on a committee of
creditors) as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series and coupons to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel, and any other
amounts due the Trustee or any predecessor Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
or coupon any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or coupons or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder of a
Security or coupon in any such proceeding.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Securities, and it shall not be necessary to make any Holders of the
Securities parties to any such proceedings.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES OR
COUPONS. All rights of action and claims under this Indenture or any of the
Securities or
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coupons may be prosecuted and enforced by the Trustee without the possession of
any of the Securities or coupons or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities and coupons in respect
of which such judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium or Make-Whole Amount, if any) or
interest, upon presentation of the Securities or coupons, or both, as the case
may be, and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities and coupons for principal (and premium or Make-Whole Amount, if
any) and interest, in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any
kind, according to the aggregate amounts due and payable on such Securities
and coupons for principal (and premium or Make-Whole Amount, if any) and
interest, respectively; and
THIRD: To the payment of the remainder, if any, to the Company.
SECTION 507. LIMITATION ON SUITS. No Holder of any Security of any series
or any related coupon shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against the costs, expenses
(including reasonable attorneys' fees) and liabilities to be incurred in
compliance with such request;
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(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
OR MAKE-WHOLE AMOUNT, IF ANY, AND INTEREST. Notwithstanding any other provision
in this Indenture, the Holder of any Security or coupon shall have the right
which is absolute and unconditional to receive payment of the principal of (and
premium or Make-Whole Amount, if any) and (subject to Sections 305 and 307)
interest on such Security or payment of such coupon on the respective due dates
expressed in such Security or coupon (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder of a Security or coupon has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, the Company, the Trustee and the
Holders of Securities and coupons shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Securities or coupons in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders of
Securities or coupons is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder of any Security or coupon to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders of Securities or coupons, as the
case may be.
SECTION 512. CONTROL BY HOLDERS OF SECURITIES. The Holders of not less than
a majority in principal amount of the Outstanding Securities of any series shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the Securities of such series, PROVIDED
that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the Holders of Securities of
such series not joining therein.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction by Holders.
SECTION 513. WAIVER OF DEFAULTS. The Holders of not less than a majority
in principal amount of the Outstanding Securities of any series may on behalf of
the Holders of all the Securities of such series and any related coupons waive
any default hereunder with respect to such series and its consequences, except a
default
(1) in the payment of the principal of (or premium or Make-Whole
Amount, if any) or interest on any Security of such series or any related
coupons, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but
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no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
SECTION 514. WAIVER OF USURY, STAY OR EXTENSION LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 515. UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Security by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities of any series, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium or Make-Whole
Amount, if any) or interest on any Security on or after the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on or
after the Redemption Date).
ARTICLE SIX - THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS. Within 90 days after the occurrence of
any default hereunder with respect to the Securities of any series, the Trustee
shall transmit in the manner and to the extent provided in TIA Section 313(c),
notice of such default hereunder known to a Responsible Officer of the Trustee,
unless such default shall have been cured or waived; PROVIDED, HOWEVER, that,
except in the case of a default in the payment of the principal of (or premium
or Make-Whole Amount, if any) or interest on any Security of such series, or in
the payment of any sinking fund installment with respect to the Securities of
such series, the Trustee shall be protected in withholding such notice if and so
long as Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interests of the Holders of the Securities
and coupons of such series; and PROVIDED FURTHER that in the case of any default
or breach of the character specified in Section 501(4) with respect to the
Securities and coupons of such series, no such notice to Holders shall be given
until at least 60 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event
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which is, or after notice or lapse of time or both would become, an Event of
Default with respect to the Securities of such series.
SECTION 602. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of TIA
Section 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or
parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security, together with any coupons appertaining thereto,
to the Trustee for authentication and delivery pursuant to Section 303
which shall be sufficiently evidenced as provided therein) and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Securities of any series or any related coupons
pursuant to this Indenture, unless such Holders shall have offered to the
Trustee security or indemnity reasonably satisfactory to the Trustee
against the costs, expenses (including reasonable attorneys' fees) and
liabilities which might be incurred by it in compliance with such request
or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document, unless requested
in writing so to do by the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of any
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series; PROVIDED that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such examination shall be paid by the Holders
or, if paid by the Trustee, shall be repaid by the Holders upon demand. The
Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
relevant to the facts or matters that are the subject of its inquiry,
personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and reasonably believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Except during the continuance of an Event of Default, the Trustee
undertakes to perform only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
SECTION 603. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The
recitals contained herein and in the Securities, except the Trustee's
certificate of authentication, and in any coupons shall be taken as the
statements of the Company, and neither the Trustee nor any Authenticating Agent
assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or coupons, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder. Neither the Trustee nor any
Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 604. MAY HOLD SECURITIES. The Trustee, any Paying Agent, Security
Registrar, Authenticating Agent or any other agent of the Company, in its
individual or any
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other capacity, may become the owner or pledgee of Securities and coupons and,
subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Paying Agent, Security
Registrar, Authenticating Agent or such other agent.
SECTION 605. MONEY HELD IN TRUST. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
SECTION 606. COMPENSATION AND REIMBURSEMENT. The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse each
of the Trustee and any predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including the
reasonable compensation and the reasonable expenses and disbursements of
its agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee and
their respective directors, officers and employees, for, and to hold them
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with
the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(7) or Section 501(8), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
As security for the performance of the obligations of the Company under
this Section, the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (or premium or Make-Whole Amount, if
any) or interest on particular Securities or any coupons.
The provisions of this Section shall survive the termination of this
Indenture.
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SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY; CONFLICTING
INTERESTS. There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or the requirements of
Federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article. Neither the Company nor any
Person directly or indirectly controlling, controlled by, or under common
control with the Company shall serve as Trustee.
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any Holder of
a Security who has been a bona fide Holder of a Security for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Company or by any
Holder of a Security who has been a bona fide Holder of a Security for at least
six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed
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or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by or pursuant to a Board
Resolution may remove the Trustee and appoint a successor Trustee with respect
to all Securities, or (ii) subject to TIA Section 315(e), any Holder of a
Security who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Company, by or pursuant to
a Board Resolution, shall promptly appoint a successor Trustee or Trustees with
respect to the Securities of that or those series (it being understood that any
such successor Trustee may be appointed with respect to the Securities of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Securities of any particular series). If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Securities of any series shall
be appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Trustee with respect to the Securities
of such series and to that extent supersede the successor Trustee appointed by
the Company. If no successor Trustee with respect to the Securities of any
series shall have been so appointed by the Company or the Holders of Securities
and accepted appointment in the manner hereinafter provided, any Holder of a
Security who has been a bona fide Holder of a Security of such series for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series in the
manner provided for notices to the Holders of Securities in Section 106. Each
notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the
appointment hereunder of a successor Trustee with respect to all Securities,
every such successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
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duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder, subject nevertheless to its claim, if any, provided for in
Section 606.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto,
pursuant to Article Nine hereof, wherein each successor Trustee shall accept
such appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates, (2) if the retiring Trustee is
not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section 609, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
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SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, PROVIDED such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities or coupons shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities or coupons so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities or coupons. In case any Securities or coupons shall not have been
authenticated by such predecessor Trustee, any such successor Trustee may
authenticate and deliver such Securities or coupons, in either its own name or
that of its predecessor Trustee, with the full force and effect which this
Indenture provides for the certificate of authentication of the Trustee.
SECTION 611. APPOINTMENT OF AUTHENTICATING AGENT. At any time when any of
the Securities remain Outstanding, the Trustee may appoint an Authenticating
Agent or Agents with respect to one or more series of Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities of such
series issued upon exchange, registration of transfer or partial redemption or
repayment thereof, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if authenticated by the Trustee hereunder. Any such appointment shall be
evidenced by an instrument in writing signed by a Responsible Officer of the
Trustee, a copy of which instrument shall be promptly furnished to the Company.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a bank or trust company or corporation organized and doing business and in
good standing under the laws of the United States of America or of any state or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or state authorities. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. In case at any
time an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
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Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time resign
by giving written notice of resignation to the Trustee for such series and to
the Company. The Trustee for any series of Securities may at any time terminate
the agency of an Authenticating Agent by giving written notice of termination to
such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 106. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation including reimbursement of its reasonable expenses for
its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to or in lieu of the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
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This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY
as Trustee
Dated: ____________ By:
----------------------------
as Authenticating Agent
Dated: ____________ By:
----------------------------
Authorized Signatory
SECTION 612. CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE.
(a) With respect to the Securities of any series, except during the
continuance of an Event of Default with respect to the Securities of such
series:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture, but shall not be under any
duty to verify the contents or accuracy thereof.
(b) In case an Event of Default with respect to the Securities of any
series has occurred and is continuing, the Trustee shall, with respect to
Securities of such series, exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
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(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities of any series relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series;
(4) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it; and
(5) The Trustee shall not be charged with notice or knowledge of any
event or matter the occurrence of which would require it to take action or
omit to take action hereunder unless such event or matter is actually known
to a Responsible Officer of the Trustee or unless written notice thereof
(making reference to this Agreement or the Securities) has been received by
the Trustee at its Corporate Trust Office.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
612.
ARTICLE SEVEN - HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS. Every Holder of
Securities or coupons, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any
Authenticating Agent nor any Paying Agent nor any Security Registrar shall be
held accountable by reason of the disclosure of any information as to the names
and addresses of the Holders of Securities in accordance with TIA Section 312,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under TIA Section 312(b).
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SECTION 702. REPORTS BY TRUSTEE. The Trustee shall transmit to Holders such
reports concerning the Trustee and its actions under this Indenture as may be
required by TIA Section 313 at the times and in the manner provided by the TIA,
which shall initially be not less than every twelve months commencing on July
15, 1998. A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange, if any, upon which
any Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 703. REPORTS BY COMPANY. The Company will:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of such Sections, then
it will file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) transmit by mail to the Holders of Securities, within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in TIA Section 313(c), such summaries of any information,
documents and reports required to be filed by the Company pursuant to
paragraphs (1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
SECTION 704. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, not later than 15 days after the Regular Record Date for
interest for each series of Securities, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of Registered
Securities of such series as of
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such Regular Record Date, or if there is no Regular Record Date for interest for
such series of Securities, semiannually, upon such dates as are set forth in the
Board Resolution or indenture supplemental hereto authorizing such series, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished,
PROVIDED, HOWEVER, that, so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
ARTICLE EIGHT - CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. CONSOLIDATIONS AND MERGERS OF COMPANY AND SALES, LEASES AND
CONVEYANCES PERMITTED SUBJECT TO CERTAIN CONDITIONS. The Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other corporation, provided that in any
such case, (1) either the Company shall be the continuing corporation, or the
successor corporation shall be a corporation organized and existing under the
laws of the United States, any state thereof or the District of Columbia and
such person shall expressly assume the due and punctual payment of the principal
of (and premium, if any) and any interest on all of the Securities, according to
their tenor, and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed by the Company by
supplemental indenture, complying with Article Nine hereof, satisfactory to the
Trustee, executed and delivered to the Trustee by such corporation and (2)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Company or any Subsidiary as a
result thereof as having been incurred by the Company or such Subsidiary at the
time of such transaction, no Event of Default, and no event which, after notice
or the lapse of time, or both, would become an Event of Default, shall have
occurred and be continuing.
SECTION 802. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION. In case of
any such consolidation, merger, sale, lease or conveyance and upon any such
assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as the party of the first part, and the predecessor
corporation, except in the event of a lease, shall be relieved of any further
obligation under this Indenture and the Securities. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Company, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation, instead of the
Company, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the officers
of the Company to the Trustee
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for authentication, and any Securities which such successor corporation
thereafter shall cause to be signed and delivered to the Trustee for that
purpose. All the Securities so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance, such
changes in phraseology and form (but not in substance) may be made in the
Securities thereafter to be issued as may be appropriate.
SECTION 803. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL. Any
consolidation, merger, sale, lease or conveyance permitted under Section 801 is
also subject to the condition that the Trustee receive an Officers' Certificate
and an Opinion of Counsel to the effect that any such consolidation, merger,
sale, lease or conveyance, and the assumption by any successor corporation,
complies with the provisions of this Article and that all conditions precedent
herein provided for relating to such transaction have been complied with.
ARTICLE NINE - SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without
the consent of any Holders of Securities or coupons, the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
contained herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such Events of Default
are to be for the benefit of less than all series of Securities, stating
that such Events of Default are expressly being included solely for the
benefit of such series); PROVIDED, HOWEVER, that in respect of any such
additional Events of Default such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for
an immediate
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enforcement upon such default or may limit the remedies available to the
Trustee upon such default or may limit the right of the Holders of a
majority in aggregate principal amount of that or those series of
Securities to which such additional Events of Default apply to waive such
default; or
(4) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of or
premium or Make-Whole Amount, if any, or interest on Bearer Securities, to
permit Bearer Securities to be issued in exchange for Registered
Securities, to permit Bearer Securities to be issued in exchange for Bearer
Securities of other authorized denominations or to permit or facilitate the
issuance of Securities in uncertificated form, PROVIDED that any such
action shall not adversely affect the interests of the Holders of
Securities of any series or any related coupons in any material respect; or
(5) to change or eliminate any of the provisions of this Indenture,
PROVIDED that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series and any
related coupons as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee; or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent with
the provisions of this Indenture, PROVIDED such provisions shall not
adversely affect the interests of the Holders of Securities of any series
or any related coupons in any material respect; or
(10) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Securities pursuant to Sections 401, 1402 and
1403; PROVIDED that any such action shall not adversely affect the
interests of the Holders of Securities of such series and any related
coupons or any other series of Securities in any material respect.
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SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Securities affected by such supplemental indenture, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by or pursuant to a Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities and any related coupons under this Indenture; PROVIDED, HOWEVER, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of (or premium or
Make-Whole Amount, if any, on) or any installment of principal of or
interest on, any Security; or reduce the principal amount thereof or the
rate or amount of interest thereon, or any premium or Make-Whole Amount
payable upon the redemption thereof, or reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502
or the amount thereof provable in bankruptcy pursuant to Section 504, or
adversely affect any right of repayment at the option of the Holder of any
Security, or change any Place of Payment where, or the currency or
currencies, currency unit or units or composite currency or currencies in
which, any Security or any premium or Make-Whole Amount or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption or repayment at the option of the Holder, on
or after the Redemption Date or the Repayment Date, as the case may be), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver with respect to such series (or compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or reduce the requirements of
Section 1504 for quorum or voting, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1009, except to increase the required percentage to effect such
action or to provide that certain other provisions of this Indenture cannot
be modified or waived without the consent of the Holder of each Outstanding
Security affected thereby, PROVIDED, HOWEVER, that this clause shall not be
deemed to require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section 902 and
Section 1009, or the deletion of this proviso, in accordance with the
requirements of Sections 609(b) and 901(11).
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It shall not be necessary for any Act of Holders under this Section 902 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modification thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any
supplemental indenture under this Article, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder and of any coupon appertaining
thereto shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES. Securities
of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall, if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN - COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM OR MAKE-WHOLE AMOUNT, IF ANY;
AND INTEREST. The Company covenants and agrees for the benefit of the Holders of
each series of Securities that it will duly and punctually pay the principal of
(and premium or Make-Whole
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Amount, if any) and interest on the Securities of that series in accordance with
the terms of such series of Securities, any coupons appertaining thereto and
this Indenture. Unless otherwise specified as contemplated by Section 301 with
respect to any series of Securities, any interest due on Bearer Securities on or
before Maturity shall be payable only upon presentation and surrender of the
several coupons for such interest installments as are evidenced thereby as they
severally mature. Unless otherwise specified with respect to Securities of any
series pursuant to Section 301, at the option of the Company, all payments of
principal may be paid by check to the registered Holder of the Registered
Security or other person entitled thereto against surrender of such Security.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. If Securities of a series
are issuable only as Registered Securities, the Company shall maintain in each
Place of Payment for any series of Securities an office or agency where
Securities of that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served. If Securities of a
series are issuable as Bearer Securities, the Company will maintain: (A) in the
Borough of Manhattan, The City of New York, an office or agency where any
Registered Securities of that series may be presented or surrendered for
payment, where any Registered Securities of that series may be surrendered for
registration of transfer, where Securities of that series may be surrendered for
exchange, where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served and where Bearer
Securities of that series and related coupons may be presented or surrendered
for payment in the circumstances described in the following paragraph (and not
otherwise); (B) subject to any laws or regulations applicable thereto, in a
Place of Payment for that series which is located outside the United States, an
office or agency where Securities of that series and related coupons may be
presented and surrendered for payment; PROVIDED, HOWEVER, that if the Securities
of that series are listed on any stock exchange located outside the United
States and such stock exchange shall so require, the Company will maintain a
Paying Agent for the Securities of that series in any required city located
outside the United States, as the case may be, so long as the Securities of that
series are listed on such exchange; and (C) subject to any laws or regulations
applicable thereto, in a Place of Payment for that series located outside the
United States an office or agency where any Registered Securities of that series
may be surrendered for registration of transfer, where Securities of that series
may be surrendered for exchange and where notices and demands to or upon the
Company in respect of the Securities of that series and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of each such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, except that Bearer Securities of that
series and the related coupons may be presented and surrendered for payment at
the offices specified in the Security, in London, England, and the Company
hereby appoints the same as its agent to receive such
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respective presentations, surrenders, notices and demands, and the Company
hereby appoints the Trustee its agent to receive all such presentations,
surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, no payment of principal, premium or Make-Whole Amount or interest
on Bearer Securities shall be made at any office or agency of the Company in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States;
PROVIDED, HOWEVER, that, if the Securities of a series are payable in Dollars,
payment of principal of and any premium or Make-Whole Amount and interest on any
Bearer Security shall be made upon presentment or surrender thereof for payment
at the office of the Company's Paying Agent in the Borough of Manhattan, The
City of New York, if (but only if) payment in Dollars of the full amount of such
principal, premium or Make-Whole Amount, or interest, as the case may be, at all
offices or agencies outside the United States maintained for the purpose by the
Company in accordance with this Indenture, is illegal or effectively precluded
by exchange controls or other similar restrictions.
The Company may from time to time designate one or more other offices or
agencies where the Securities of one or more series may be presented or
surrendered for any or all of such purposes, and may from time to time rescind
such designations; PROVIDED, HOWEVER, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in accordance with the requirements set forth above for Securities of
any series for such purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency. Unless otherwise specified with respect to
any Securities pursuant to Section 301 with respect to a series of Securities,
the Company hereby designates as its office where each series of Securities may
be presented and surrendered for payment, the office or agency of the Company in
the Borough of Manhattan, The City of New York, and initially appoints State
Street Bank and Trust Company, N.A., 61 Broadway, New York, NY 10006, and
appoints as a Place of Payment as its agent in such city to receive all such
presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, if and so long as the Securities of any series (i) are denominated
in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long
as it is required under any other provision of the Indenture, then the Company
will maintain with respect to each such series of Securities, or as so required,
at least one exchange rate agent.
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST. If the
Company shall at any time act as its own Paying Agent with respect to any series
of any Securities and any related coupons, it will, on or before each due date
of the principal of (and premium or Make-Whole Amount, if any), or interest on
any of the Securities of that series, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum in the currency or currencies,
currency unit or units or composite currency or currencies in which the
Securities of such
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series are payable (except as otherwise specified pursuant to Section 301 for
the Securities of such series) sufficient to pay the principal (and premium or
Make-Whole Amount, if any) or interest so becoming due until such sums shall be
paid to such Persons or otherwise disposed of as herein provided, and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities and any related coupons, it will, on or before each due date of the
principal of (and premium or Make-Whole Amount, if any), or interest on any
Securities of that series, deposit with a Paying Agent a sum (in the currency or
currencies, currency unit or units or composite currency or currencies described
in the preceding paragraph) sufficient to pay the principal (and premium or
Make-Whole Amount, if any) or interest so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such principal, premium or
Make-Whole Amount, if any, or interest and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will
(1) hold all sums held by it for the payment of principal of (and
premium or Make-Whole Amount, if any) or interest on Securities in trust
for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any such payment of
principal (and premium or Make-Whole Amount, if any) or interest on the
Securities of that series; and
(3) at any time during the continuance of any such default upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
Except as otherwise provided in the Securities of any series, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the
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principal of (and premium or Make-Whole Amount, if any) or interest on any
Security of any series and remaining unclaimed for two years after such
principal (and premium or Make-Whole Amount, if any) or interest has become due
and payable shall be paid to the Company upon Company Request or (if then held
by the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment of such principal of (and premium or Make-Whole Amount, if
any) or interest on any Security, without interest thereon, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; PROVIDED,
HOWEVER, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in an Authorized Newspaper, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 1004. EXISTENCE. Subject to Article Eight, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, all material rights (by articles of
incorporation, by-laws and statute) and material franchises; PROVIDED, HOWEVER,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company.
SECTION 1005. MAINTENANCE OF PROPERTIES. The Company will cause all of its
material properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; PROVIDED, HOWEVER, that the Company and its Subsidiaries
shall not be prevented from selling or otherwise disposing of their properties
for value in the ordinary course of business.
SECTION 1006. INSURANCE. The Company will cause each of its and its
Subsidiaries' insurable properties to be insured against loss or damage in an
amount at least equal to their then full insurable value with insurers of
recognized responsibility.
SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of the
Company or any Subsidiary, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any Subsidiary; PROVIDED, HOWEVER, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment,
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charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
SECTION 1008. STATEMENT AS TO COMPLIANCE. The Company will deliver to the
Trustee, within 120 days after the end of each fiscal year, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of the Company's compliance with
all conditions and covenants under this Indenture and, in the event of any
noncompliance, specifying such noncompliance and the nature and status thereof.
For purposes of this Section 1008, such compliance shall be determined without
regard to any period of grace or requirement of notice under this Indenture.
SECTION 1009. WAIVER OF CERTAIN COVENANTS. The Company may omit in any
particular instance to comply with any term, provision or condition set forth in
Sections 1004 to 1009, inclusive, if before or after the time for such
compliance the Holders of at least a majority in principal amount of all
outstanding Securities of such series, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.
ARTICLE ELEVEN - REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE. Securities of any series which are
redeemable before their Stated Maturity shall be redeemable in accordance with
their terms and (except as otherwise specified as contemplated by Section 301
for Securities of any series) in accordance with this Article.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of
the Company to redeem any Securities shall be evidenced by or pursuant to a
Board Resolution. In case of any redemption at the election of the Company of
less than all of the Securities of any series, the Company shall, at least 45
days prior to the giving of the notice of redemption in Section 1104 (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities of such series to be
redeemed. In the case of any redemption of Securities prior to the expiration of
any restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. If less
than all the Securities of any series issued on the same day with the same terms
are to be redeemed, the particular Securities to be redeemed shall be selected
not more than 60 days prior to the
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Redemption Date by the Trustee, from the Outstanding Securities of such series
issued on such date with the same terms not previously called for redemption, by
such method as the Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company and the Security Registrar
(if other than itself) in writing of the Securities selected for redemption and,
in the case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Security redeemed or to be redeemed only in part, to the portion of
the principal amount of such Security which has been or is to be redeemed.
SECTION 1104. NOTICE OF REDEMPTION. Notice of redemption shall be given in
the manner provided in Section 106, not less than 30 days nor more than 60 days
prior to the Redemption Date, unless a shorter period is specified by the terms
of such series established pursuant to Section 301, to each Holder of Securities
to be redeemed, but failure to give such notice in the manner herein provided to
the Holder of any Security designated for redemption as a whole or in part, or
any defect in the notice to any such Holder, shall not affect the validity of
the proceedings for the redemption of any other such Security or portion
thereof.
Any notice that is mailed to the Holders of Registered Securities in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the Holder receives the notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, accrued interest to the Redemption Date
payable as provided in Section 1106, if any,
(3) if less than all Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial
redemption, the principal amount) of the particular Security or
Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the
notice which relates to such Security shall state that on and after
the Redemption Date, upon surrender of such Security, the holder will
receive, without a charge, a new Security or
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Securities of authorized denominations for the principal amount
thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price and accrued
interest to the Redemption Date payable as provided in Section 1106,
if any, will become due and payable upon each such Security, or the
portion thereof, to be redeemed and, if applicable, that interest
thereon shall cease to accrue on and after said date,
(6) the Place or Places of Payment where such Securities,
together in the case of Bearer Securities with all coupons
appertaining thereto, if any, maturing after the Redemption Date, are
to be surrendered for payment of the Redemption Price and accrued
interest, if any,
(7) that the redemption is for a sinking fund, if such is the
case,
(8) that, unless otherwise specified in such notice, Bearer
Securities of any series, if any, surrendered for redemption must be
accompanied by all coupons maturing subsequent to the date fixed for
redemption or the amount of any such missing coupon or coupons will be
deducted from the Redemption Price, unless security or indemnity
satisfactory to the Company, the Trustee for such series and any
Paying Agent is furnished,
(9) if Bearer Securities of any series are to be redeemed and any
Registered Securities of such series are not to be redeemed, and if
such Bearer Securities may be exchanged for Registered Securities not
subject to redemption on this Redemption Date pursuant to Section 305
or otherwise, the last date, as determined by the Company, on which
such exchanges may be made, and
(10) the CUSIP number of such Security, if any.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption
Date, (but no later than 10:00 a.m. New York City time on such date) the Company
shall deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, which it may not do in the case of a sinking
fund payment under Article Twelve, segregate and hold in trust as provided in
Section 1003) an amount of money in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such series
are payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay on the Redemption Date the
Redemption Price of,
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and (except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities or portions thereof which are to be redeemed on
that date.
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE. Notice of redemption
having been given as aforesaid, the Securities so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified in the currency or currencies, currency unit or units or composite
currency or currencies in which the Securities of such series are payable
(except as otherwise specified pursuant to Section 301 for the Securities of
such series) (together with accrued interest, if any, to the Redemption Date),
and from and after such date (unless the Company shall default in the payment of
the Redemption Price and accrued interest) such Securities shall, if the same
were interest-bearing, cease to bear interest and the coupons for such interest
appertaining to any Bearer Securities so to be redeemed, except to the extent
provided below, shall be void. Upon surrender of any such Security for
redemption in accordance with said notice, together with all coupons, if any,
appertaining thereto maturing after the Redemption Date, such Security shall be
paid by the Company at the Redemption Price, together with accrued interest, if
any, to the Redemption Date; PROVIDED, HOWEVER, that installments of interest on
Bearer Securities whose Stated Maturity is on or prior to the Redemption Date
shall be payable only at an office or agency located outside the United States
(except as otherwise provided in Section 1002) and, unless otherwise specified
as contemplated by Section 301, only upon presentation and surrender of coupons
for such interest; and PROVIDED further that installments of interest on
Registered Securities whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant coupons maturing after the Redemption Date, such Security may
be paid after deducting from the Redemption Price an amount equal to the face
amount of all such missing coupons, or the surrender of such missing coupon or
coupons may be waived by the Company and the Trustee if there be furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall surrender
to the Trustee or any Paying Agent any such missing coupon in respect of which a
deduction shall have been made from the Redemption Price, such Holder shall be
entitled to receive the amount so deducted; PROVIDED, HOWEVER, that interest
represented by coupons shall be payable only at an office or agency located
outside the United States (except as otherwise provided in Section 1002) and,
unless otherwise specified as contemplated by Section 301, only upon
presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium or Make-Whole Amount, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Security.
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SECTION 1107. SECURITIES REDEEMED IN PART. Any Registered Security which is
to be redeemed only in part (pursuant to the provisions of this Article or of
Article Twelve) shall be surrendered at a Place of Payment therefor (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing) and
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge a new Security or Securities of
the same series, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered. If a Global Security is so
surrendered, the Company shall execute and the Trustee shall authenticate and
deliver to the depository, without service charge, a new Global Security in a
denomination equal to and in exchange for the unredeemed portion of the
principal of the Global Security so surrendered.
ARTICLE TWELVE - SINKING FUNDS
SECTION 1201. APPLICABILITY OF ARTICLE. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by Section 301 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of such Securities of any series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of any Securities of any
series, the cash amount of any mandatory sinking fund payment may be subject to
reduction as provided in Section 1202. Each sinking fund payment shall be
applied to the redemption of Securities of any series as provided for by the
terms of Securities of such series.
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES. The
Company may, in satisfaction of all or any part of any mandatory sinking fund
payment with respect to the Securities of a series, (1) deliver Outstanding
Securities of such series (other than any previously called for redemption)
together in the case of any Bearer Securities of such series with all unmatured
coupons appertaining thereto and (2) apply as a credit Securities of such series
which have been redeemed either at the election of the Company pursuant to the
terms of such Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such Securities, as provided for
by the terms of such Securities, or which have otherwise been acquired by the
Company; PROVIDED that such Securities so delivered or applied as a credit have
not been previously so credited. Such Securities shall be received and credited
for such purpose by the Trustee at the applicable Redemption Price specified in
such Securities for redemption through operation of the sinking fund and the
amount of such mandatory sinking fund payment shall be reduced accordingly.
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SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND. Not less than 60
days prior to each sinking fund payment date for Securities of any series, the
Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing mandatory sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such series
are payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 1202, and the optional amount, if any, to be added in cash to the next
ensuing mandatory sinking fund payment, and will also deliver to the Trustee any
Securities to be so delivered and credited. If such Officers' Certificate shall
specify an optional amount to be added in cash to the next ensuing mandatory
sinking fund payment, the Company shall thereupon be obligated to pay the amount
therein specified. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN - REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. APPLICABILITY OF ARTICLE. Repayment of Securities of any
series before their Stated Maturity at the option of Holders thereof shall be
made in accordance with the terms of such Securities, if any, and (except as
otherwise specified by the terms of such series established pursuant to Section
301) in accordance with this Article.
SECTION 1302. REPAYMENT OF SECURITIES. Securities of any series subject to
repayment in whole or in part at the option of the Holders thereof will, unless
otherwise provided in the terms of such Securities, be repaid at a price equal
to the principal amount thereof, together with interest, if any, thereon accrued
to the Repayment Date specified in or pursuant to the terms of such Securities.
The Company covenants that on or prior to the Repayment Date it will deposit
with the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money in the currency or currencies, currency unit or units or composite
currency or currencies in which the Securities of such series are payable
(except as otherwise specified pursuant to Section 301 for the Securities of
such series) sufficient to pay the principal (or, if so provided by the terms of
the Securities of any series, a percentage of the principal) of, and (except if
the Repayment Date shall be an Interest Payment Date) accrued interest on, all
the Securities or portions thereof, as the case may be, to be repaid on such
date.
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SECTION 1303. EXERCISE OF OPTION. Securities of any series subject to
repayment at the option of the Holders thereof will contain an "Option to Elect
Repayment" form on the reverse of such Securities. In order for any Security to
be repaid at the option of the Holder, the Trustee must receive at the Place of
Payment therefor specified in the terms of such Security (or at such other place
or places of which the Company shall from time to time notify the Holders of
such Securities) not earlier than 60 days nor later than 30 days prior to the
Repayment Date (1) the Security so providing for such repayment together with
the "Option to Elect Repayment" form on the reverse thereof duly completed by
the Holder (or by the Holder's attorney duly authorized in writing) or (2) a
telegram, telex, facsimile transmission or a letter from a member of a national
securities exchange, or the National Association of Securities Dealers, Inc.
("NASD"), or a commercial bank or trust company in the United States setting
forth the name of the Holder of the Security, the principal amount of the
Security, the principal amount of the Security to be repaid, the CUSIP number,
if any, or a description of the tenor and terms of the Security, a statement
that the option to elect repayment is being exercised thereby and a guarantee
that the Security to be repaid, together with the duly completed form entitled
"Option to Elect Repayment" on the reverse of the Security, will be received by
the Trustee not later than the fifth Business Day after the date of such
telegram, telex, facsimile transmission or letter; PROVIDED, HOWEVER, that such
telegram, telex, facsimile transmission or letter shall only be effective if
such Security and form duly completed are received by the Trustee by such fifth
Business Day. If less than the entire principal amount of such Security is to be
repaid in accordance with the terms of such Security, the principal amount of
such Security to be repaid, in increments of the minimum denomination for
Securities of such series, and the denomination or denominations of the Security
or Securities to be issued to the Holder for the portion of the principal amount
of such Security surrendered that is not to be repaid, must be specified. The
principal amount of any Security providing for repayment at the option of the
Holder thereof may not be repaid in part if, following such repayment, the
unpaid principal amount of such Security would be less than the minimum
authorized denomination of Securities of the series of which such Security to be
repaid is a part. Except as otherwise may be provided by the terms of any
Security providing for repayment at the option of the Holder thereof, exercise
of the repayment option by the Holder shall be irrevocable unless waived by the
Company.
SECTION 1304. WHEN SECURITIES PRESENTED FOR REPAYMENT BECOME DUE AND
PAYABLE. If Securities of any series providing for repayment at the option of
the Holders thereof shall have been surrendered as provided in this Article and
as provided by or pursuant to the terms of such Securities, such Securities or
the portions thereof, as the case may be, to be repaid shall become due and
payable and shall be paid by the Company on the Repayment Date therein
specified, and on and after such Repayment Date (unless the Company shall
default in the payment of such Securities on such Repayment Date) such
Securities shall, if the same were interest-bearing, cease to bear interest and
the coupons for such interest appertaining to any Bearer Securities so to be
repaid, except to the extent provided below, shall be void. Upon surrender of
any such Security for repayment in accordance with such provisions, together
with all coupons, if any, appertaining thereto maturing after the Repayment
Date, the
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principal amount of such Security so to be repaid shall be paid by the Company,
together with accrued interest, if any, to the Repayment Date; PROVIDED,
HOWEVER, that coupons whose Stated Maturity is on or prior to the Repayment Date
shall be payable only at an office or agency located outside the United States
(except as otherwise provided in Section 1002) and, unless otherwise specified
pursuant to Section 301, only upon presentation and surrender of such coupons;
and PROVIDED FURTHER that, in the case of Registered Securities, installments of
interest, if any, whose Stated Maturity is on or prior to the Repayment Date
shall be payable (but without interest thereon, unless the Company shall default
in the payment thereof) to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Bearer Security surrendered for repayment shall not be accompanied
by all appurtenant coupons maturing after the Repayment Date, such Security may
be paid after deducting from the amount payable therefor as provided in Section
1302 an amount equal to the face amount of all such missing coupons, or the
surrender of such missing coupon or coupons may be waived by the Company and the
Trustee if there be furnished to them such security or indemnity as they may
require to save each of them and any Paying Agent harmless. If thereafter the
Holder of such Security shall surrender to the Trustee or any Paying Agent any
such missing coupon in respect of which a deduction shall have been made as
provided in the preceding sentence, such Holder shall be entitled to receive the
amount so deducted; PROVIDED, HOWEVER, that interest represented by coupons
shall be payable only at an office or agency located outside the United States
(except as otherwise provided in Section 1002) and, unless otherwise specified
as contemplated by Section 301, only upon presentation and surrender of those
coupons.
If the principal amount of any Security surrendered for repayment shall not
be so repaid upon surrender thereof, such principal amount (together with
interest, if any, thereon accrued to such Repayment Date) shall, until paid,
bear interest from the Repayment Date at the rate of interest or Yield to
Maturity (in the case of Original Issue Discount Securities) set forth in such
Security.
SECTION 1305. SECURITIES REPAID IN PART. Upon surrender of any Registered
Security which is to be repaid in part only, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security, without
service charge and at the expense of the Company, a new Registered Security or
Securities of the same series, of any authorized denomination specified by the
Holder, in an aggregate principal amount equal to and in exchange for the
portion of the principal of such Security so surrendered which is not to be
repaid.
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ARTICLE FOURTEEN - DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. APPLICABILITY OF ARTICLE; COMPANY'S OPTION TO EFFECT
DEFEASANCE OR COVENANT DEFEASANCE. If, pursuant to Section 301, provision is
made for either or both of (a) defeasance of the Securities of or within a
series under Section 1402 or (b) covenant defeasance of the Securities of or
within a series under Section 1403, then the provisions of such Section or
Sections, as the case may be, together with the other provisions of this Article
(with such modifications thereto as may be specified pursuant to Section 301
with respect to any Securities), shall be applicable to such Securities and any
coupons appertaining thereto, and the Company may at its option by Board
Resolution, at any time, with respect to such Securities and any coupons
appertaining thereto, elect to have Section 1402 (if applicable) or Section 1403
(if applicable) be applied to such Outstanding Securities and any coupons
appertaining thereto upon compliance with the conditions set forth below in this
Article.
SECTION 1402. DEFEASANCE AND DISCHARGE. Upon the Company's exercise of the
above option applicable to this Section with respect to any Securities of or
within a series, the Company shall be deemed to have been discharged from its
obligations with respect to such Outstanding Securities and any coupons
appertaining thereto on the date the conditions set forth in Section 1404 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Outstanding Securities and any coupons
appertaining thereto, which shall thereafter be deemed to be "Outstanding" only
for the purposes of Section 1405 and the other Sections of this Indenture
referred to in clauses (A) and (B) below, and to have satisfied all of its other
obligations under such Securities and any coupons appertaining thereto and this
Indenture insofar as such Securities and any coupons appertaining thereto are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of such Outstanding Securities and any coupons appertaining thereto to
receive, solely from the trust fund described in Section 1404 and as more fully
set forth in such Section, payments in respect of the principal of (and premium
or Make-Whole Amount, if any) and interest, if any, on such Securities and any
coupons appertaining thereto when such payments are due, (B) the Company's
obligations with respect to such Securities under Sections 305, 306, 1002 and
1003, (C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (D) this Article. Subject to compliance with this Article
Fourteen, the Company may exercise its option under this Section notwithstanding
the prior exercise of its option under Section 1403 with respect to such
Securities and any coupons appertaining thereto.
SECTION 1403. COVENANT DEFEASANCE. Upon the Company's exercise of the above
option applicable to this Section with respect to any Securities of or within a
series, the Company shall be released from its obligations under Sections 1004
to 1009, inclusive, and, if specified pursuant to Section 301, its obligations
under any other covenant contained herein or in any indenture supplemental
hereto, with respect to such Outstanding Securities and any
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<PAGE> 83
coupons appertaining thereto on and after the date the conditions set forth in
Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such
Securities and any coupons appertaining thereto shall thereafter be deemed to be
not "Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with Sections 1004 to 1009, inclusive, or such other covenant, but
shall continue to be deemed "Outstanding" for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to such
Outstanding Securities and any coupons appertaining thereto, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section or such other covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or such other covenant or by reason of reference in any such
Section or such other covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a default or an Event
of Default under Section 501(4) or 501(8) or otherwise, as the case may be, but,
except as specified above, the remainder of this Indenture and such Securities
and any coupons appertaining thereto shall be unaffected thereby.
SECTION 1404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The
following shall be the conditions to application of Section 1402 or Section 1403
to any Outstanding Securities of or within a series and any coupons appertaining
thereto:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 607 who shall agree to comply with the provisions of this Article
Fourteen applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities and any coupons appertaining
thereto, (1) an amount in such currency, currencies or currency unit in which
such Securities and any coupons appertaining thereto are then specified as
payable at Stated Maturity, or (2) Government Obligations applicable to such
Securities and coupons appertaining thereto (determined on the basis of the
currency, currencies or currency unit in which such Securities and coupons
appertaining thereto are then specified as payable at Stated Maturity) which
through the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than the due date of any
payment of principal of (and premium or Make-Whole Amount, if any) and interest,
if any, on such Securities and any coupons appertaining thereto, money in an
amount, or (3) a combination thereof, in any case, in an amount, sufficient,
without consideration of any reinvestment of such principal and interest, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge, and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge, (i) the principal of (and premium or Make-Whole
Amount, if any) and interest, if any, on such Outstanding Securities and any
coupons appertaining thereto on the Stated Maturity of such principal or
installment of principal or interest and (ii) any mandatory sinking fund
payments or analogous payments applicable to such Outstanding Securities and any
coupons appertaining
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<PAGE> 84
thereto on the day on which such payments are due and payable in accordance with
the terms of this Indenture and of such Securities and any coupons appertaining
thereto.
(b) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company is a party or by
which it is bound.
(c) No Event of Default or event which with notice or lapse of time or
both would become an Event of Default with respect to such Securities and any
coupons appertaining thereto shall have occurred and be continuing on the date
of such deposit or, insofar as Sections 501(7) and 501(8) are concerned, at any
time during the period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied until the
expiration of such period).
(d) In the case of an election under Section 1402, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue Service
a ruling, or (ii) since the date of execution of this Indenture, there has been
a change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of such
Outstanding Securities and any coupons appertaining thereto will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
had not occurred.
(e) In the case of an election under Section 1403, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of such Outstanding Securities and any coupons appertaining thereto will
not recognize income, gain or loss for Federal income tax purposes as a result
of such covenant defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred.
(f) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 1402 or the covenant defeasance under
Section 1403 (as the case may be) have been complied with and an Opinion of
Counsel to the effect that either (i) as a result of a deposit pursuant to
subsection (a) above and the related exercise of the Company's option under
Section 1402 or Section 1403 (as the case may be), registration is not required
under the Investment Company Act of 1940, as amended, by the Company, with
respect to the trust funds representing such deposit or by the Trustee for such
trust funds or (ii) all necessary registrations under said Act have been
effected.
(g) Notwithstanding any other provisions of this Section, such
defeasance or covenant defeasance shall be effected in compliance with any
additional or substitute terms,
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conditions or limitations which may be imposed on the Company in connection
therewith pursuant to Section 301.
SECTION 1405. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last
paragraph of Section 1003, all money and Government Obligations (or other
property as may be provided pursuant to Section 301) (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in
respect of any Outstanding Securities of any series and any coupons appertaining
thereto shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and any coupons appertaining thereto and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities and any coupons appertaining
thereto of all sums due and to become due thereon in respect of principal (and
premium or Make-Whole Amount, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
Unless otherwise specified with respect to any Security pursuant to Section
301, if, after a deposit referred to in Section 1404(a) has been made, (a) the
Holder of a Security in respect of which such deposit was made is entitled to,
and does, elect pursuant to Section 301 or the terms of such Security to receive
payment in a currency or currency unit other than that in which the deposit
pursuant to Section 1404(a) has been made in respect of such Security, or (b) a
Conversion Event occurs in respect of the currency or currency unit in which the
deposit pursuant to Section 1404(a) has been made, the indebtedness represented
by such Security and any coupons appertaining thereto shall be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium or Make-Whole Amount, if any), and interest, if any,
on such Security as the same becomes due out of the proceeds yielded by
converting (from time to time as specified below in the case of any such
election) the amount or other property deposited in respect of such Security
into the currency or currency unit in which such Security becomes payable as a
result of such election or Conversion Event based on the applicable market
exchange rate for such currency or currency unit in effect on the second
Business Day prior to each payment date, except, with respect to a Conversion
Event, for such currency or currency unit in effect (as nearly as feasible) at
the time of the Conversion Event.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Government Obligations deposited
pursuant to Section 1404 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of such Outstanding Securities and any coupons
appertaining thereto.
Anything in this Article to the contrary notwithstanding, subject to
Section 606, the Trustee shall deliver or pay to the Company from time to time
upon Company Request any
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<PAGE> 86
money or Government Obligations (or other property and any proceeds therefrom)
held by it as provided in Section 1404 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect a defeasance or
covenant defeasance, as applicable, in accordance with this Article.
ARTICLE FIFTEEN - MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of
Holders of Securities of any series may be called at any time and from time to
time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series.
SECTION 1502. CALL, NOTICE AND PLACE OF MEETINGS. (a) The Trustee may at
any time call a meeting of Holders of Securities of any series for any purpose
specified in Section 1501, to be held at such time and at such place as the
Trustee shall determine. Notice of every meeting of Holders of Securities of any
series, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be given, in the
manner provided in Section 106, not less than 20 nor more than 180 days prior to
the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution,
or the Holders of at least 25% in principal amount of the Outstanding Securities
of any series shall have requested the Trustee to call a meeting of the Holders
of Securities of such series for any purpose specified in Section 1501, by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have made the first publication
of the notice of such meeting within 20 days after receipt of such request or
shall not thereafter proceed to cause the meeting to be held as provided herein,
then the Company or the Holders of Securities of such series in the amount above
specified, as the case may be, may determine the time and the place for such
meeting and may call such meeting for such purposes by giving notice thereof as
provided in subsection (a) of this Section.
SECTION 1503. PERSONS ENTITLED TO VOTE AT MEETINGS. To be entitled to vote
at any meeting of Holders of Securities of any series, a Person shall be (1) a
Holder of one or more Outstanding Securities of such series, or (2) a Person
appointed by an instrument in writing as proxy for a Holder or Holders of one or
more Outstanding Securities of such series by such Holder or Holders. The only
Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any series shall be the Persons entitled to vote at
such meeting and their counsel, any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
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SECTION 1504. QUORUM; ACTION. The Persons entitled to vote a majority in
principal amount of the Outstanding Securities of a series shall constitute a
quorum for a meeting of Holders of Securities of such series; PROVIDED, HOWEVER,
that if any action is to be taken at such meeting with respect to a consent or
waiver which this Indenture expressly provides may be given by the Holders of
not less than a specified percentage in principal amount of the Outstanding
Securities of a series, the Persons entitled to vote such specified percentage
in principal amount of the Outstanding Securities of such series shall
constitute a quorum. In the absence of a quorum within 30 minutes after the time
appointed for any such meeting, the meeting shall, if convened at the request of
Holders of Securities of such series, be dissolved. In any other case the
meeting may be adjourned for a period of not less than 10 days as determined by
the chairman of the meeting prior to the adjournment of such meeting. In the
absence of a quorum at the reconvening of any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10
days; at the reconvening of any meeting adjourned or further adjourned for lack
of a quorum, the persons entitled to vote 25% in aggregate principal amount of
the then Outstanding Securities shall constitute a quorum for the taking of any
action set forth in the notice of the original meeting. Notice of the
reconvening of any adjourned meeting shall be given as provided in Section
1502(a), except that such notice need be given only once not less than five days
prior to the date on which the meeting is scheduled to be reconvened.
Except as limited by the proviso to Section 902, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the persons entitled to
vote a majority in aggregate principal amount of the Outstanding Securities
represented at such meeting; PROVIDED, HOWEVER, that, except as limited by the
proviso to Section 902, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which this
Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of the
Outstanding Securities of a series may be adopted at a meeting or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related coupons,
whether or not present or represented at the meeting.
Notwithstanding the foregoing provisions of this Section 1504, if any
action is to be taken at a meeting of Holders of Securities of any series with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that this Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Securities affected thereby, or of the Holders of such series and
one or more additional series:
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(i) there shall be no minimum quorum requirement for such
meeting; and
(ii) the principal amount of the Outstanding Securities of such
series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into
account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made,
given or taken under this Indenture.
SECTION 1505. DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF
MEETINGS. (a) Notwithstanding any provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Holders of Securities of a series in regard to proof of the holding of
Securities of such series and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem appropriate.
Except as otherwise permitted or required by any such regulations, the holding
of Securities shall be proved in the manner specified in Section 104 and the
appointment of any proxy shall be proved in the manner specified in Section 104
or by having the signature of the Person executing the proxy witnessed or
guaranteed by any trust company, bank or banker authorized by Section 104 to
certify to the holding of Bearer Securities. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be presumed
valid and genuine without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Securities as provided in Section 1502(b), in which
case the Company or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of the
Outstanding Securities of such series held or represented by him; PROVIDED,
HOWEVER, that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the meeting
to be not Outstanding. The chairman of the meeting shall have no right to vote,
except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1502 at which a quorum is present may be adjourned from time
to time by Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series
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represented at the meeting, and the meeting may be held as so adjourned without
further notice.
SECTION 1506. COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The vote
upon any resolution submitted to any meeting of Holders of Securities of any
series shall be by written ballots on which shall be subscribed the signatures
of the Holders of Securities of such series or of their representatives by proxy
and the principal amounts and serial numbers of the Outstanding Securities of
such series held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record, at least in duplicate, of the proceedings
of each meeting of Holders of Securities of any Series shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the fact, setting forth a
copy of the notice of the meeting and showing that said notice was given as
provided in Section 1502 and, if applicable, Section 1504. Each copy shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one such copy shall be delivered to the Company and another to
the Trustee to be preserved by the Trustee, the latter to have attached thereto
the ballots voted at the meeting. Any record so signed and verified shall be
conclusive evidence of the matters therein stated.
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SIGNATURES AND SEALS
IN WITNESS WHEREOF, the Company and the Trustee have caused this Indenture
to be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WYMAN-GORDON COMPANY,
By:
----------------------------------------
Name: David P. Gruber
Title: Chairman and Chief Executive Officer
By:
----------------------------------------
Name: Andrew C. Genor
Title: Vice President, Chief Financial Officer
and Treasurer
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
----------------------------------------
Name:
Title:
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<PAGE> 91
ACKNOWLEDGMENT
COMMONWEALTH OF MASSACHUSETTS)
) ss:
COUNTY OF SUFFOLK)
On the [_______________________] 1997, before me personally came
[_________________], to me known, who, being by me duly sworn, did depose and
say that he is the [__________________] of WYMAN-GORDON COMPANY, one of the
parties described in and which executed the foregoing instrument, and that he
signed his name thereto by authority of the Board of Directors.
[Notarial Seal]
- --------------------------------
Notary Public
Commission Expires
COMMONWEALTH OF MASSACHUSETTS)
) ss:
COUNTY OF SUFFOLK)
On the [____________________________] 1997, before me personally came
[_________________], to me known, who, being by me duly sworn, did depose and
say that he/she is a [______________] of STATE STREET BANK AND TRUST COMPANY,
one of the parties described in and which executed the foregoing instrument, and
that he/she signed his/her name thereto by authority of the Board of Directors.
[Notarial Seal]
- --------------------------------
Notary Public
Commission Expires
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<PAGE> 92
EXHIBIT A
FORM OF REDEEMABLE OR NON-REDEEMABLE SENIOR SECURITY
[Face of Security]
[If the Holder of this Security (as indicated below) is The Depository Trust
Company ("DTC") or a nominee of DTC, this Security is a Global Security and the
following two legends apply:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC"), 55 WATER STREET, NEW YORK, NEW YORK TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS SECURITY IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF
DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH
SUCCESSOR.]
[IF THIS SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT -- FOR PURPOSES
OF SECTION 1273 and 1275 OF THE UNITED STATES INTERNAL REVENUE CODE, THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT ON THIS SECURITY IS % OF ITS PRINCIPAL AMOUNT, THE
ISSUE DATE IS , 19 [AND] THE YIELD TO MATURITY IS %. [THE METHOD
USED TO DETERMINE THE AMOUNT OF ORIGINAL ISSUE DISCOUNT APPLICABLE TO THE SHORT
ACCRUAL PERIOD OF , 19 TO , 19 , IS % OF THE PRINCIPAL
AMOUNT OF THIS SECURITY.]
WYMAN-GORDON COMPANY
[Designation of Series]
No. _______ $__________________________________
WYMAN-GORDON COMPANY, a Massachusetts corporation (herein referred to as the
"Company," which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received, hereby promises to pay
to ______________________________ or registered assigns the principal sum of
_______ Dollars on _____________________ (the "Stated Maturity Date") [or INSERT
DATE FIXED FOR
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<PAGE> 93
EARLIER REDEMPTION (the "Redemption Date," and together with the
Stated Maturity Date with respect to principal repayable on such date, the
"Maturity Date.")]
[IF THE SECURITY IS TO BEAR INTEREST PRIOR TO MATURITY, INSERT -- and to pay
interest thereon from ______________ or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually on
__________ and _________ in each year (each, an "Interest Payment Date"),
commencing __________, at the rate of __% per annum, until the principal hereof
is paid or duly provided for. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Holder in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the ________ or ______ (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date [at the office or agency of the Company maintained for such purpose;
PROVIDED, HOWEVER, that such interest may be paid, at the Company's option, by
mailing a check to such Holder at its registered address or by transfer of funds
to an account maintained by such Holder within the United States]. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date, and may be paid to the Holder
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.]
[IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT -- The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at the
[Stated] Maturity Date and in such case the overdue principal of this Security
shall bear interest at the rate of % per annum (to the extent that the payment
of such interest shall be legally enforceable), which shall accrue from the date
of such default in payment to the date payment of such principal has been made
or duly provided for. Interest on any overdue principal shall be payable on
demand. Any such interest on any overdue principal that is not so paid on demand
shall bear interest at the rate of % per annum (to the extent that the payment
of such interest shall be legally enforceable), which shall accrue from the date
of such demand for payment to the date payment of such interest has been made or
duly provided for, and such interest shall also be payable on demand.]
The principal of this Security payable on the Stated Maturity Date [or the
principal of, premium or Make-Whole Amount, if any, and, if the Redemption Date
is not an Interest Payment Date, interest on this Security payable on the
Redemption Date] will be paid against presentation of this Security at the
office or agency of the Company maintained for that
A-2
<PAGE> 94
purpose in ___________________, in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
Interest payable on this Security on any Interest Payment Date and on the
[Stated] Maturity Date [or Redemption Date, as the case may be,] will include
interest accrued from and including the next preceding Interest Payment Date in
respect of which interest has been paid or duly provided for (or from and
including ____________, if no interest has been paid on this Security) to but
excluding such Interest Payment Date or the [Stated] Maturity Date [or
Redemption Date, as the case may be.] If any Interest Payment Date or the
[Stated] Maturity Date or [Redemption Date] falls on a day that is not a
Business Day, as defined below, principal, premium or Make-Whole Amount, if any,
and/or interest payable with respect to such Interest Payment Date or [Stated]
Maturity Date [or Redemption Date, as the case may be,] will be paid on the next
succeeding Business Day with the same force and effect as if it were paid on the
date such payment was due, and no interest shall accrue on the amount so payable
for the period from and after such Interest Payment Date or [Stated] Maturity
Date [or Redemption Date, as the case may be.] "Business Day" means any day,
other than a Saturday or Sunday, on which banks in __________________ are not
required or authorized by law or executive order to close.
[IF THIS SECURITY IS A GLOBAL SECURITY, INSERT -- All payments of principal,
premium or Make-Whole Amount, if any, and interest in respect of this Security
will be made by the Company in immediately available funds.]
Reference is hereby made to the further provisions of this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the Certificate of Authentication hereon has been executed by the Trustee
by manual signature of one of its authorized signatories, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
under its facsimile corporate seal.
Dated: WYMAN-GORDON COMPANY
--------------
By:
---------------------------
Attest:
- --------------------
Secretary
A-3
<PAGE> 95
This is one of the Securities of the series designated therein referred to in
the within- mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
Dated: By:
------------------------------
Name:
Title:
A-4
<PAGE> 96
[Reverse of Security]
WYMAN-GORDON COMPANY
This Security is one of a duly authorized issue of securities of the Company
(herein called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of _____________, 199_ (herein called the
"Indenture") between the Company and _________________, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture with respect to the series of which this Security is a part), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the duly authorized series of Securities
designated on the face hereof (collectively, the "Securities"), [IF APPLICABLE,
INSERT -- and the aggregate principal amount of the Securities to be issued
under such series is limited to $______ (except for Securities authenticated and
delivered upon transfer of, or in exchange for, or in lieu of other
Securities).] All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
If an Event of Default, as defined in the Indenture, shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.
[IF APPLICABLE, INSERT -- The Securities may not be redeemed prior to the Stated
Maturity Date.]
[IF APPLICABLE, INSERT -- The Securities are subject to redemption [ (l) (IF
APPLICABLE, INSERT -- on _________ in any year commencing with the year ____ and
ending with the year ____ through operation of the sinking fund for this series
at a Redemption Price equal to 100% of the principal amount, and (2) ] [IF
APPLICABLE, INSERT -- at any time [on or after ___________], as a whole or in
part, at the election of the Company, at the following Redemption Prices
(expressed as percentages of the principal amount):
If redeemed on or before _______, __% and if redeemed during the 12-month
period beginning _______ of the years indicated at the Redemption Prices
indicated below.
YEAR REDEMPTION PRICE YEAR REDEMPTION PRICE
---- ---------------- ---- ----------------
A-5
<PAGE> 97
and thereafter at a Redemption Price equal to __% of the principal amount,
together in the case of any such redemption [IF APPLICABLE, INSERT -- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date; PROVIDED, HOWEVER, that installments of interest on this
Security whose Stated Maturity is on or prior to such Redemption Date will be
payable to the Holder of this Security, or one or more Predecessor Securities,
of record at the close of business on the relevant Record Dates referred to on
the face hereof, all as provided in the Indenture.]
[IF APPLICABLE, INSERT -- The Securities are subject to redemption
(1) on _______ in any year commencing with the year ____ and ending with the
year ____ through operation of the sinking fund for this series at the
Redemption Prices for redemption through operation of the sinking fund
(expressed as percentages of the principal amount) set forth in the table below,
and (2) at any time [on or after _______], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period
beginning ________ of the years indicated,
REDEMPTION PRICE FOR REDEMPTION PRICE FOR
REDEMPTION THROUGH REDEMPTION OTHERWISE
OPERATION OF THE THAN THROUGH OPERATION
YEAR SINKING FUND OF THE SINKING FUND
---- -------------------- ----------------------
and thereafter at a Redemption Price equal to ____% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date;
PROVIDED, HOWEVER, that installments of interest on this Security whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holder of
this Security, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.]
[IF APPLICABLE, INSERT -- Notwithstanding the foregoing, the Company
may not, prior to _______, redeem any Securities as contemplated by [Clause (2)
of] the preceding paragraph as a part of, or in anticipation of, any refunding
operation by the application, directly or indirectly, of moneys borrowed having
an interest cost to the Company (calculated in accordance with generally
accepted financial practice) of less than __% per annum.]
[IF APPLICABLE, INSERT -- The sinking fund for the Securities
provides for the redemption on _______ in each year, beginning with the year
____ and ending with the year ____, of [not less than] $_______] [("mandatory
sinking fund") and not more than $_______] aggregate principal amount of the
Securities. [The Securities acquired or redeemed by the Company otherwise than
through [mandatory] sinking fund payments may be credited against subsequent
A-6
<PAGE> 98
[mandatory] sinking fund payments otherwise required to be made in the [DESCRIBE
ORDER] order in which they become due.]]
Notice of redemption will be given by mail to Holders of Securities,
not less than 30 nor more than 60 days prior to the Redemption Date, all as
provided in the Indenture.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than a majority of the aggregate principal amount of all Securities issued
under the Indenture at the time Outstanding and affected thereby. The Indenture
also contains provisions permitting the Holders of not less than a majority of
the aggregate principal amount of the Outstanding Securities, on behalf of the
Holders of all such Securities, to waive compliance by the Company with certain
provisions of the Indenture. Furthermore, provisions in the Indenture permit the
Holders of not less than a majority of the aggregate principal amount, in
certain instances, of the Outstanding Securities of any series to waive, on
behalf of all of the Holders of Securities of such series, certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and other Securities issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium or Make-Whole Amount, if any) and interest on this Security at the
times, places and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein [and herein] set forth, the transfer of this Security is registrable in
the Security Register of the Company upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of (and premium or Make-Whole Amount, if any) and interest
on this Security are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or by his attorney duly authorized
in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
A-7
<PAGE> 99
As provided in the Indenture and subject to certain limitations
therein [and herein] set forth, this Security is exchangeable for a like
aggregate principal amount of Securities of different authorized denominations
but otherwise having the same terms and conditions, as requested by the Holder
hereof surrendering the same.
The Securities of this series are issuable only in registered form
[without coupons] in denominations of $_______ and any integral multiple
thereof.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
No recourse shall be had for the payment of the principal of or
premium or Make-Whole Amount, if any, or the interest on this Security, or for
any claim based hereon, or otherwise in respect hereof, or based on or in
respect of the Indenture or any indenture supplemental thereto, against any
past, present or future stockholder, employee, officer or director, as such, of
the Company or of any successor, either directly or through the Company or any
successor, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
The Indenture and the Securities shall be governed by and construed
in accordance with the laws of [the State of New York] applicable to agreements
made and to be performed entirely in such State.
A-8
<PAGE> 100
EXHIBIT B
FORMS OF CERTIFICATION
EXHIBIT B-1
FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, as of the date hereof, and except as set forth
below, the above-captioned Securities held by you for our account (i) are owned
by person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that are
(a) foreign branches of United States financial institutions (financial
institutions, as defined in United States Treasury Regulations Section
2.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing
for their own account or for resale, or (b) United States person(s) who acquired
the Securities through foreign branches of United States financial institutions
and who hold the Securities through such United States financial institutions on
the date hereof (and in either case (a) or (b), each such United States
financial institution hereby agrees, on its own behalf or through its agent,
that you may advise Wyman-Gordon Company or its agent that such financial
institution will comply with the requirements of Section 165(j)(3)(A), (B) or
(C) of the United States Internal Revenue Code of 1986, as amended, and the
regulations thereunder), or (iii) are owned by United States or foreign
financial institution(s) for purposes of resale during the restricted period (as
defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)),
and, in addition, if the owner is a United States or foreign financial
institution described in clause (iii) above (whether or not also described in
clause (i) or (ii)), this is to further certify that such financial institution
has not acquired the Securities for purposes of resale directly or indirectly to
a United States person or to a person within the United States or its
possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
B-1
<PAGE> 101
We undertake to advise you promptly by tested telex on or prior to the date
on which you intend to submit your certification relating to the above-captioned
Securities held by you for our account in accordance with your Operating
Procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
This certificate excepts and does not relate to [U.S.$] of such interest in
the above-captioned Securities in respect of which we are not able to certify
and as to which we understand an exchange for an interest in a permanent Global
Security or an exchange for and delivery of definitive Securities (or, if
relevant, collection of any interest) cannot be made until we do so certify.
We understand that this certificate may be required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: ________, ____
[To be dated no earlier than the 15th day prior to (i) the Exchange Date or (ii)
the relevant Interest Payment Date occurring prior to the Exchange Date, as
applicable]
[Name of Person Making Certification]
------------------------------------
(Authorized Signature)
Name:
Title:
B-2
<PAGE> 102
EXHIBIT B-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR
AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE OF
A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO
OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, based solely on written certifications that we
have received in writing, by tested telex or by electronic transmission from
each of the persons appearing in our records as persons entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
in the form attached hereto, as of the date hereof, [U.S.$] principal amount of
the above-captioned Securities (i) is owned by person(s) that are not citizens
or residents of the United States, domestic partnerships, domestic corporations
or any estate or trust the income of which is subject to United States Federal
income taxation regardless of its source ("United States person(s)"), (ii) is
owned by United States person(s) that are (a) foreign branches of United States
financial institutions (financial institutions, as defined in U.S. Treasury
Regulations Section 1.165-12(c)(1)(v) are herein referred to as "financial
institutions") purchasing for their own account or for resale, or (b) United
States person(s) who acquired the Securities through foreign branches of United
States financial institutions and who hold the Securities through such United
States financial institutions on the date hereof (and in either case (a) or (b),
each such financial institution has agreed, on its own behalf or through its
agent, that we may advise Wyman-Gordon Company or its agent that such financial
institution will comply with the requirements of Section 165(j)(3)(A), (B) or
(C) of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder), or (iii) is owned by United States or foreign financial
institution(s) for purposes of resale during the restricted period (as defined
in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, to
the further effect, that financial institutions described in clause (iii) above
(whether or not also described in clause (i) or (ii)) have certified that they
have not acquired the Securities for purposes of resale directly or indirectly
to a United States person or to a person within the United States or its
possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "Possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
We further certify that (i) we are not making available herewith for
exchange (or, if relevant, collection of any interest) any portion of the
temporary Global Security representing the above-captioned Securities excepted
in the above-referenced certificates of Member
B-3
<PAGE> 103
Organizations and (ii) as of the date hereof we have not received any
notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any portion of the
part submitted herewith for exchange (or, if relevant, collection of any
interest) are no longer true and cannot be relied upon as of the date hereof.
We understand that this certification is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: _______ ____
[To be dated no earlier than the Exchange Date or the relevant Interest Payment
Date occurring prior to the Exchange Date, as applicable]
[Morgan Guaranty Trust Company of New York,
Brussels Office,] as Operator of the Euroclear
System [CEDEL S.A.]
By:
-----------------------------------------
B-4
<PAGE> 1
EXHIBIT 4.H
Execution Copy
================================================================================
FIRST SUPPLEMENTAL INDENTURE
dated as of
December 15, 1997
between
WYMAN-GORDON COMPANY,
and
STATE STREET BANK AND TRUST COMPANY
as Trustee
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of
December 15, 1997 (the "Supplement"), between
WYMAN-GORDON COMPANY, a Massachusetts corporation
(the "Company"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts banking corporation (the
"Trustee"), as Trustee under an Indenture, dated as
of December 15, 1997 (the "Indenture").
RECITALS OF THE COMPANY
The Company has previously executed and delivered the
Indenture to the Trustee. The provisions of Article Nine and Section 301 of the
Indenture provide, among other things, that the Company, when authorized by its
Board of Directors, and the Trustee may at any time and from time to time enter
into an indenture supplemental to the Indenture for the purpose of authorizing a
series of Securities and specifying the terms and form of each series of
Securities. The Board of Directors of the Company has duly authorized the
creation, issuance, execution and delivery of a series of Securities consisting
of the 8% Senior Notes Due 2007 (the "8% Notes") in the aggregate principal
amount of $150,000,000. The Company and the Trustee are executing and delivering
this Supplement in order to provide for the 8% Notes.
All things necessary to make this Supplement a valid and
legally binding agreement of the Company have been done.
I. ADDITIONAL PROVISIONS RELATING TO THE 8% NOTES
The additional terms provided for herein apply only to the 8%
Notes and do not apply to any other series of Securities previously issued or to
be issued under the Indenture. Except as otherwise set forth herein, all
provisions of the Indenture apply to the 8% Notes.
1. PROVISIONS SUPPLEMENTAL TO ARTICLE I OF THE INDENTURE.
A. TERMS DEFINED IN THE INDENTURE.
All capitalized terms used in this Supplement that are defined
in the Indenture have the meanings assigned to them in the Indenture, except to
the extent that such terms are otherwise defined in this Supplement. To the
extent that a term is defined both in the Indenture and this Supplement, the
definition appearing in this Supplement shall govern with respect to the 8%
Notes.
B. ADDITIONAL DEFINITIONS.
Section 101 of the Indenture is hereby supplemented for
purposes of the 8% Notes to provide additional definitions in the appropriate
alphabetical sequence, as follows:
"ADDITIONAL ASSETS" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
<PAGE> 3
2
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and controlled" have meanings correlative to the foregoing.
"ASSET DISPOSITION" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary outside of
the ordinary course of business of the Company or such Restricted Subsidiary
(other than, in the case of (i), (ii) and (iii) above and (y) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary and (z) for purposes of Section 1014
only, a disposition that constitutes a Permitted Investment or a Restricted
Payment permitted by Section 1012.
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the actual
rate of interest implicit in such transaction, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"AVERAGE LIFE" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL LEASE OBLIGATIONS" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"CAPITAL STOCK" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"CHANGE OF CONTROL" means the occurrence of any of the following
events:
(i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
such person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power of
the Voting Stock of the Company;
<PAGE> 4
3
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders
of the Company was approved by a vote of a majority of the directors of
the Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Company with or
into another Person or the merger of another Person with or into the
Company, or the sale of all or substantially all the assets of the
Company to another Person, and, in the case of any such merger or
consolidation, the Voting Stock of the Company that is outstanding
immediately prior to such transaction is changed into or exchanged for
cash, securities or property, unless pursuant to such transaction such
Voting Stock is changed into or exchanged for, in addition to any other
consideration, Voting Stock of the surviving corporation that
represents immediately after such transaction, at least a majority of
the aggregate voting power of the Voting Stock of the surviving
corporation.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
for which consolidated financial statements of the Company shall have been filed
with the SEC or provided to the Noteholders pursuant to the Indenture to (ii)
Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER,
that (1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period, (2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (3) if since the beginning of
such period the Company or any Restricted Subsidiary (by merger or otherwise)
shall have made an Investment in any Restricted Subsidiary (or any person which
becomes a Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (4) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(2) or (3) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated
<PAGE> 5
4
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition occurred
on the first day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income,
earnings or expense relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be prepared in accordance with Article 11 of
Regulation S-X promulgated by the SEC as determined in good faith by a
responsible financial or accounting Officer of the Company. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest of such Indebtedness shall be calculated as if the rate in effect on
the date of determination had been the applicable rate for the entire period
(taking into account any Interest Rate Agreement applicable to such Indebtedness
if such Interest Rate Agreement has a remaining term in excess of 12 months).
"CONSOLIDATED CURRENT LIABILITIES" as of the date of determination
means the aggregate amount of liabilities of the Company and its consolidated
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated), on a consolidated basis, after
eliminating (i) all intercompany items between the Company and any Restricted
Subsidiary and (ii) all current maturities of long-term Indebtedness, all as
determined in accordance with GAAP consistently applied.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus (a) to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, (i) interest
expense attributable to capital leases, (ii) amortization of debt discount and
debt issuance cost, (iii) capitalized interest, (iv) non-cash interest expenses,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs associated
with Hedging Obligations (including amortization of fees), (vii) the amount of
all dividends in respect of all Disqualified Stock of the Company and the amount
of all dividends in respect of Preferred Stock of Subsidiaries of the Company,
in each case held by Persons other than the Company or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person that is Guaranteed by the Company or any Restricted Subsidiary to the
extent such interest is actually paid (directly or indirectly) by the Company or
any Restricted Subsidiary; PROVIDED, HOWEVER, that if a default entitling the
holders of such Indebtedness to accelerate the maturity thereof has occurred and
is continuing, all interest accruing on such Indebtedness shall be included in
Consolidated Interest Expense, whether or not actually paid by the Company or
any Restricted Subsidiary and (x) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust, minus
(b) total interest income of the Company and its consolidated Restricted
Subsidiaries.
"CONSOLIDATED NET INCOME" means, for any period, the net income of the
Company and its consolidated Subsidiaries, plus the amount of any LIFO charge
applicable to the Company and its Restricted Subsidiaries, minus the amount of
any LIFO credit applicable to the Company and its Restricted Subsidiaries;
PROVIDED, HOWEVER, that there shall not be included in such Consolidated Net
Income: (i) any net income of any Person if such Person is not a Restricted
Subsidiary, except that (A) subject to the exclusion contained in clause (iv)
below, the Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any such Person for such period shall be included in determining
such Consolidated Net Income up to the aggregate amount of cash contributed or
required to be contributed by the Company or a Restricted Subsidiary to such
Person in respect of such net loss during such period; (ii) any net income (or
loss) of any Person acquired by the Company or a Subsidiary in
<PAGE> 6
5
a pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the Company's
equity in a net loss of any such Restricted Subsidiary for such period shall be
included in determining such Consolidated Net Income; (iv) any gain (or loss)
realized upon the sale or other disposition of any assets of the Company or its
consolidated Subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (or loss) realized upon the sale or other disposition
of any Capital Stock of any Person; (v) extraordinary gains or losses; and (vi)
the cumulative effect of a change in accounting principles. Notwithstanding the
foregoing, for the purposes of Section 1012 only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such Section pursuant
to clause (a)(3)(D) thereof.
"CONSOLIDATED NET TANGIBLE ASSETS" as of any date of determination,
means the total amount of assets (less accumulated depreciation and
amortization, allowances for doubtful receivables, other applicable reserves and
other properly deductible items) which would appear on a consolidated balance
sheet of the Company and its consolidated Restricted Subsidiaries, determined on
a consolidated basis in accordance with GAAP, and after giving effect to
purchase accounting and after deducting therefrom Consolidated Current
Liabilities and, to the extent otherwise included, the amounts of: (i) minority
interests in consolidated Subsidiaries held by Persons other than the Company or
a Restricted Subsidiary; (ii) excess of cost over fair value of assets of
businesses acquired, as determined in good faith by the Board of Directors;
(iii) any revaluation or other write-up in book value of assets subsequent to
the Issue Date as a result of a change in the method of valuation in accordance
with GAAP consistently applied; (iv) unamortized debt discount and expenses and
other unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, licenses, organization or developmental expenses
and other intangible items; (v) treasury stock; (vi) cash set apart and held in
a sinking or other analogous fund established for the purpose of redemption or
other retirement of Capital Stock to the extent such obligation is not reflected
in Consolidated Current Liabilities; and (vii) Investments in and assets of
Unrestricted Subsidiaries.
"CONSOLIDATED NET WORTH" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company (for which consolidated financial statements of
the Company shall have been filed with the SEC or provided to the Noteholders
pursuant to the Indenture) prior to the taking of any action for the purpose of
which the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid-in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"CURRENCY AGREEMENT" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"DEFAULT" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
<PAGE> 7
6
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the 8% Notes; PROVIDED, HOWEVER, that any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the first anniversary of the Stated Maturity of the 8% Notes
shall not constitute Disqualified Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are not more favorable to
the holders of such Capital Stock than the provisions of Sections 1014 and 1601.
"DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the
Company that is organized under the laws of the United States of America or any
State thereof or the District of Columbia.
"EBITDA" for any period means Consolidated Net Income, plus
Consolidated Interest Expense plus, without duplication, the following to the
extent deducted in calculating such Consolidated Net Income: (a) all income tax
expense of the Company, (b) depreciation expense, (c) amortization expense and
(d) all other non-cash items reducing Consolidated Net Income (other than items
that will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items increasing Consolidated
Net Income, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of the Company shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Subsidiary was included in calculating Consolidated Net
Income.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants (ii) statements and
pronouncements of the Financial Accounting Standards Board (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GUARANTEE" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any Person and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
"HEDGING OBLIGATIONS" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
<PAGE> 8
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"HOLDER" or "NOTEHOLDER" means the Person in whose name a 8% Note is
registered on the Registrar's books.
"INCUR" means issue, assume, Guarantee, incur or otherwise become
liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. In the case of a discount security,
neither the accrual of interest nor the accretion of original issue discount
shall be considered an incurrence of Indebtedness, but the entire face amount of
such security shall be deemed incurred upon the issuance of such security.
"INDEBTEDNESS" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the tenth Business
Day following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) the amount of all obligations of such
Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such Person, any
Preferred Stock (but excluding, in each case, any accrued dividends); (vi)
Guarantees of Indebtedness of other Persons; (vii) all obligations of the type
referred to in clauses (i) through (vi) of other Persons secured by any Lien on
any property or asset of such Person (whether or not such obligation is assumed
by such Person), the amount of such obligation being deemed to be the lesser of
the value of such property or assets or the amount of the obligation so secured
and (viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
to protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"INVESTMENT" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property
(excluding Capital Stock (other than Disqualified Stock) issued by the acquiring
Person) to others or any payment for property or services for the account or use
of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person. For purposes of the definition
of "Unrestricted Subsidiary", the definition of "Restricted Payment" and Section
1012, (i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal
<PAGE> 9
8
to an amount (if positive) equal to (x) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion (proportionate
to the Company's equity interest in such Subsidiary) of the fair market value of
the net assets of such Subsidiary at the time of such redesignation; and (ii)
any property transferred to or from an Unrestricted Subsidiary or Joint
Venture shall be valued at its fair market value at the time of such transfer,
in each case as determined in good faith by the Board of Directors; provided,
however, that for purposes of this clause (ii), "property" shall not include the
right to use any patents, copyrights or trademarks owned by the Company or any
Restricted Subsidiary in the territory in which such Unrestricted Subsidiary or
Joint Venture operates or proposes to operate.
"ISSUE DATE" means the date on which the 8% Notes are originally
issued.
"JOINT VENTURE" means a Person in which a Joint Venture Investment has
been made by the Company or any Restricted Subsidiary.
"JOINT VENTURE INVESTMENT" means any Investment by the Company or a
Restricted Subsidiary in any Person primarily engaged or preparing to engage in
a Related Business if, immediately after giving effect to such Investment, the
Company or a Restricted Subsidiary will own at least 20% of the outstanding
Capital Stock (including at least 20% of the outstanding Voting Stock) of such
Person and will have the right (whether through the ownership of voting
securities, by contract or otherwise) to exercise substantial control over the
management and policies of such Person (as determined in good faith by the Board
of Directors).
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"NET AVAILABLE CASH" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be, repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed in such Asset Disposition and retained by the
Company or any Restricted Subsidiary after such Asset Disposition.
"NET CASH PROCEEDS", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"PERMITTED INVESTMENT" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon
the making of such Investment,
<PAGE> 10
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become a Restricted Subsidiary; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; (iii) Temporary Cash Investments; (iv) receivables owing
to the Company or any Restricted Subsidiary if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; PROVIDED, HOWEVER, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances; (v) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vi) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (viii) any
Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted under Section 1014;
and (ix) Joint Venture Investments and Investments in Unrestricted Subsidiaries
primarily engaged in a Related Business; PROVIDED, HOWEVER, that, in the case of
this clause (ix), (A) the aggregate amount of all such Investments (in each case
net of all dividends, repayments of loans or advances or other transfers of
assets by such Joint Venture or Unrestricted Subsidiary to the Company, provided
that the foregoing amounts shall not exceed, for any Investment, the amount of
Investments previously made in such Joint Venture or Unrestricted Subsidiary
shall not exceed $60 million at the time of (and after giving effect to) any
such Investment and (B) such Investments shall not be included in the
calculation of the amount of Restricted Payments. The amount referred to in
clause (ix)(A) above shall be increased by 50% of the fair market value (as
determined in good faith by the Board of Directors) of any Additional Assets
acquired by the Company or any Restricted Subsidiary subsequent to the Issue
Date in exchange for Capital Stock of the Company (other than Disqualified
Stock); provided, however, that the amount referred to in clause (ix)(A) above
shall not be increased pursuant to this sentence by the fair market value of any
Additional Assets that constitute Net Cash Proceeds that increase the amount of
Restricted Payments permitted under Section 1012 pursuant to clause (a)(3)(B)
thereof.
"PERMITTED LIENS" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case Incurred in the ordinary course of business; (b) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due or being contested in good faith by appropriate proceedings or other
Liens arising out of judgments or awards against such Person with respect to
which such Person shall then be proceeding with an appeal or other proceedings
for review; (c) Liens for property taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings; (d) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; PROVIDED, HOWEVER, that such letters of credit
do not constitute Indebtedness; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights of way,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real property or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (f) Liens securing Indebtedness Incurred to finance the
construction, purchase or lease of, or repairs, improvements or additions to,
property of such Person; PROVIDED, HOWEVER, that (i) the Lien may not extend to
any other property owned by such Person or any of its Subsidiaries at the time
the Lien is Incurred and (ii) the Indebtedness secured by the Lien may not be
Incurred more than 180 days
<PAGE> 11
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after the later of the acquisition, completion of construction, repair,
improvement, addition or commencement of full operation of the property subject
to the Lien; PROVIDED FURTHER, HOWEVER, THAT, notwithstanding subclause (f)(ii)
above, "Permitted Liens" shall include a Lien created in connection with a
Sale/Leaseback Transaction with respect to the 20,000 ton hydraulic forging
press installed at the Company's Houston, Texas facility so long as such Lien
satisfies subclause (f)(i) above and is entered into on or prior to May 31,
1999; (g) Liens on cash, cash equivalents, accounts receivable, inventory,
general intangibles (to the extent necessary to realize on such accounts
receivable and inventory) and bank accounts of the Company or any Restricted
Subsidiary, and proceeds of the foregoing, to secure Indebtedness permitted
under the provisions described in clause (b)(1) of Section 1010 or clause (a) of
Section 1011; (h) Liens on any assets of the U.K. Subsidiary to secure
Indebtedness permitted under the provisions described in clause (b) of Section
1011; (i) Liens existing on the Issue Date (other than Liens described in clause
(h)); (j) Liens on property or shares of Capital Stock of another Person at the
time such other Person becomes a Subsidiary of such Person; PROVIDED, HOWEVER,
that such Liens are not created, incurred or assumed in connection with, or in
contemplation of, such other Person becoming such a Subsidiary; PROVIDED
FURTHER, HOWEVER, that such Lien may not extend to any other property owned by
such Person or any of its Subsidiaries; (k) Liens on property at the time such
Person or any of its Subsidiaries acquires the property, including any
acquisition by means of a merger or consolidation with or into such Person or a
Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such
acquisition; PROVIDED FURTHER, however, that the Liens may not extend to any
other property owned by such Person or any of its Subsidiaries; (l) Liens
securing Indebtedness or other obligations of a Subsidiary of such Person owing
to such Person or a wholly owned Subsidiary of such Person; (m) Liens securing
Hedging Obligations so long as such Hedging Obligations relate to Indebtedness
that is, and is permitted to be under the Indenture, secured by a Lien on the
same property securing such Hedging Obligations; and (n) Liens to secure any
Refinancing (or successive Refinancings) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (f), (i),
(j) and (k); PROVIDED, HOWEVER, that (x) such new Lien shall be limited to all
or part of the same property that secured the original Lien (plus improvements
to or on such property) and (y) the Indebtedness secured by such Lien at such
time is not increased to any amount greater than the sum of (A) the outstanding
principal amount or, if greater, committed amount of the Indebtedness described
under clauses (f), (i), (j) or (k) at the time the original Lien became a
Permitted Lien and (B) an amount necessary to pay any fees and expenses,
including premiums, related to such refinancing, refunding, extension, renewal
or replacement. Notwithstanding the foregoing, "Permitted Liens" will not
include any Lien described in clauses (f), (j) or (k) above to the extent such
Lien applies to any Additional Assets acquired directly or indirectly from Net
Available Cash pursuant to Section 1014.
"PERMITTED RECEIVABLES FINANCING" means (a) the Receivables Facility
and (b) any subsequent financing secured substantially by accounts receivables
(and related assets) originated by the Company and any Restricted Subsidiary;
PROVIDED, HOWEVER, that (i) such subsequent receivables financing has a later or
equal final maturity and a longer or equal weighted average life than the
Receivables Facility, (ii) all sales of receivables to or by the Receivables
Subsidiary shall be made at fair market value (as determined in good faith by
the Board of Directors) and the interest rate, covenants, events of default and
other provisions applicable to such financing shall be customary for such
transactions and shall be on market terms (as determined in good faith by the
Board of Directors), and (iii) such financing shall be non-recourse to the
Company and its Subsidiaries (other than the Receivables Subsidiary) except to a
limited extent customary for such transactions.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PREFERRED STOCK", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or
<PAGE> 12
11
as to the distribution of assets upon any voluntary or involuntary liquidation
or dissolution of such corporation, over shares of Capital Stock of any other
class of such corporation.
"PRINCIPAL" of a 8% Note means the principal of the 8% Note plus the
premium, if any, payable on the 8% Note which is due or overdue or is to become
due at the relevant time.
"PURCHASE MONEY INDEBTEDNESS" mean Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligations
under any title retention agreement, other purchase money obligations and
obligations in respect of industrial revenue bonds or similar Indebtedness, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; PROVIDED, HOWEVER, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached; and
PROVIDED FURTHER, HOWEVER, that such Indebtedness is Incurred within 180 days
after such acquisition of such asset by the Company or Restricted Subsidiary.
"RECEIVABLES CREDIT AGREEMENT" means the Revolving Credit Agreement
dated as of May 20, 1994, among Wyman-Gordon Receivables Corporation, the
lenders party thereto and Fleet Bank, N.A., as Issuing Bank, Facility Agent and
Collateral Agent.
"RECEIVABLES FACILITY" means the receivables facility made available
pursuant to the Receivables Credit Agreement and the Receivables Purchase and
Sale Agreement.
"RECEIVABLES PURCHASE AND SALE AGREEMENT" means the Receivables
Purchase and Sale Agreement dated as of May 20, 1994, among Wyman-Gordon
Receivables Corporation, as Purchaser, the Company and certain Subsidiaries, as
Sellers, and the Company, as Servicer.
"RECEIVABLES SUBSIDIARY" means Wyman-Gordon Receivables Corporation or
any other bankruptcy-remote, special-purpose Wholly Owned Subsidiary formed in
connection with a Permitted Receivables Financing.
"REFINANCE" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture; PROVIDED, HOWEVER, that (i)
such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced, (iii) such Refinancing Indebtedness has an aggregate principal
amount (or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if Incurred
with original issue discount, the aggregate accreted value) then outstanding or
committed (plus fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced; PROVIDED FURTHER, HOWEVER, that
Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that
Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.
"RELATED BUSINESS" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
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"RESTRICTED PAYMENT" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock)) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person (other than a Permitted Investment).
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not
an Unrestricted Subsidiary.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"SUBORDINATED OBLIGATION" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the 8% Notes pursuant to a written
agreement to that effect.
"SUBSIDIARY" means, in respect of any Person, any corporation,
association, partnership or other business entity (a) of which more than 50% of
the Voting Stock is at the time owned or controlled, directly or indirectly, by
such Person and/or one or more Subsidiaries of such Person or (b) of which (x)
at least 50% of the Capital Stock and (y) the power to elect or direct the
election of a majority of the board of directors, managers or trustees (or other
similar governing body) is at the time owned or controlled, directly or
indirectly, by such Person and/or one or more Subsidiaries of such Person.
"SUBSIDIARY GUARANTOR" means each Subsidiary that has issued a
Subsidiary Guaranty.
"SUBSIDIARY GUARANTY" means the Guarantee by a Subsidiary Guarantor of
the Company's obligations with respect to the 8% Notes.
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"TEMPORARY CASH INVESTMENTS" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50,000,000 (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "a"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by an registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) investments in commercial paper, maturing not more than
270 days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "a-1" (or
higher) according to Standard and Poor's Ratings Group, and (v) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "a" by Standard & Poor's Ratings Group or "a" by Moody's
Investors Service, Inc.
"U.K. CREDIT FACILITY" means the credit facility made available
pursuant to the Credit Agreement dated as of November 28, 1994, among the U.K.
Subsidiary and the lenders party thereto, as the same may be amended, waived,
modified, Refinanced or replaced from time to time (except to the extent that
any such amendment, waiver, modification, replacement or Refinancing would be
prohibited by the terms of the Indenture).
"U.K. SUBSIDIARY" means Wyman-Gordon Limited, a corporation organized
under the laws of England and Wales.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness of, or holds any Lien on any property of,
the Company or any other Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 1012. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of Section 1010 and (y) no Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be by the Company to the Trustee by promptly filing with the
Trustee a copy of the board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
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"VOTING STOCK" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries.
2. TERMS OF THE 8% NOTES.
A. DESIGNATION.
The 8% Notes are hereby created and shall be issuable in one
series and shall be designated as the "8% Senior Notes Due 2007".
B. DATING OF THE 8% NOTES.
All 8% Notes shall be dated the date of authentication.
C. MAXIMUM AGGREGATE OUTSTANDING AMOUNT.
The maximum aggregate principal amount of the 8% Notes that
may be authenticated and delivered under this Supplement is limited to
$150,000,000, except for (i) 8% Notes authenticated and delivered upon transfer
of, or in exchange for, or in lieu of, other 8% Notes pursuant to Sections 304,
305, 306, 307, 1107 or 1305 of the Indenture.
D. STATED MATURITY.
The principal amount of the 8% Notes shall be due and payable
on December 15, 2007.
E. DENOMINATION OF 8% NOTES.
The 8% Notes shall initially be represented by one or more
global securities (the "Global Securities") deposited with The Depositary Trust
Company ("DTC"), as depositary, and registered in the name of a nominee of DTC.
Except as set forth in the Indenture, the 8% Notes will be available for
purchase in denominations of $1,000 and integral multiples thereof in book-entry
form only. The term "Depository" refers to DTC or any successor depository, as
depository.
F. PAYMENTS OF PRINCIPAL AND INTEREST, RECORD DATES
Each 8% Note shall bear interest on its outstanding principal
balance from December 15, 1997 at 8% per annum until payment of the principal
thereof has been made or duly provided for. Interest on the 8% Notes shall be
paid semi-annually on June 15 and December 15, commencing on June 15, 1998 (each
an "Interest Payment Date"). Interest on the 8% Notes shall be computed on the
basis of a 360-day year of twelve 30-day months, from the later of: (1) December
15, 1997 or (2) the most recent Interest Payment Date to which interest has been
paid or duly provided for to the end of the next Interest Payment Date. Interest
on the 8% Notes shall be payable in lawful money of the United States of
America.
The principal of each 8% Note shall be payable on the date due
as set forth in the form of Notes upon delivery and surrender of such 8% Note to
the Trustee at the principal office of the Trustee in lawful money of the United
States of America by check or by wire transfer of immediately available funds.
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The record date ("Record Date") for each Interest Payment Date
shall be the close of business on June 1 and December 1 next preceding each
Interest Payment Date, whether or not such date shall be a Business day.
G. FORM OF 8% NOTES.
The 8 % Notes shall all be issued in global form. The form of
the 8% Notes and the Trustee's certificate of authentication are attached hereto
as Exhibit A, which is hereby incorporated in and expressly made a part of the
Indenture. Each of the 8% Notes shall be numbered consecutively from R-1 upward.
The 8% Notes shall bear a CUSIP number, but any failure to indicate or any error
in such CUSIP number shall not in any way affect the validity of the 8% Notes.
The terms of the 8% Notes set forth in Exhibit A are part of the terms of this
Indenture.
H. RANKING.
The 8% Notes shall constitute unsecured and unsubordinated
indebtedness of the Company and shall rank PARI PASSU with any other unsecured
and unsubordinated indebtedness of the Company.
I. SINKING FUND.
There will be no mandatory sinking fund payments for the 8%
Notes.
3. PROVISIONS SUPPLEMENTAL TO ARTICLE THREE OF INDENTURE.
A. For purposes of the 8% Notes only, the word "deliver" in the
first sentence of Subsection (a) of Section 304 of the Indenture is hereby
superseded in its entirety and replaced by the phrase "make available".
B. For purposes of the 8% Notes only, the phrase "authenticate
and deliver" in the second sentence of the second paragraph of Subsection (b) of
Section 304 of the Indenture is hereby superseded in its entirety and replaced
by the phrase "authenticate and make available for delivery".
C. For purposes of the 8% Notes only, the phrase "authenticate
and deliver" in the first sentence of the paragraph of Section 305 of the
Indenture is hereby superseded in its entirety and replaced by the phrase
"authenticate and make available for delivery".
D. For purposes of the 8% Notes only, the phrase "authenticate
and deliver" in the second sentence of the third paragraph of Section 305 of the
Indenture is hereby superseded in its entirety and replaced by the phrase
"authenticate and make available for delivery".
E. For purposes of the 8% Notes only, the phrase "authenticate
and deliver" in the last sentence of the fourth paragraph of Section 305 of the
Indenture is hereby superseded in its entirety and replaced by the phrase
"authenticate and make available for delivery".
F. For purposes of the 8% Notes only, the phrase "authenticate
and deliver" in the fourth sentence of the fifth paragraph of Section 305 of the
Indenture is hereby superseded in its entirety and replaced by the phrase
"authenticate and make available for delivery".
G. For purposes of the 8% Notes only, the phrase "authenticate
and deliver" in the first paragraph of Section 306 of the Indenture is hereby
superseded in its entirety and replaced by the phrase "authenticate and make
available for delivery".
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H. For purposes of the 8% Notes only, the phrase "authenticate
and deliver" in the second paragraph of Section 306 of the Indenture is hereby
superseded in its entirety and replaced by the phrase "authenticate and make
available for delivery".
I. For purposes of the 8% Notes only, the final sentence of
Section 309 of the Indenture is hereby superseded in its entirety and replaced
by the following:
Unless otherwise directed in writing by a Company Order, the
Trustee shall return all canceled Notes to the Company.
J. Article Three of the Indenture is hereby supplemented with
respect to the 8% Notes by inserting, following the final sentence of the second
paragraph of Section 305, the following:
The 8% Notes shall be issued in registered form and shall be
transferable only upon the surrender of a 8% Note for registration of
transfer. When a 8% Note is presented to the Security Registrar or a
co-registrar with a request to register a transfer, the Security
Registrar shall register the transfer as requested if the requirements
of Section 8-401(1) of the Uniform Commercial Code are met. When 8%
Notes are presented to the Security Registrar or a co-registrar with a
request to exchange them for an equal principal amount of 8% Notes of
other denominations, the Security Registrar shall make the exchange as
requested if the same requirements are met. To permit registration of
transfers and exchanges, the Company shall execute and the Trustee
shall authenticate 8% Notes at the Security Registrar's or
co-registrar's request.
K. Article Three of the Indenture is hereby supplemented with
respect to the 8% Notes by inserting, following the phrase "them harmless" in
the first sentence of Section 306, the phrase "and if such parties are satisfied
that the requirements of Section 8-405 of the Uniform Commercial Code have been
met".
L. Article Three of the Indenture is hereby supplemented with
respect to the 8% Notes by inserting, following the last sentence of Section
309, the following:
The Company may not issue new 8% Notes to replace 8% Notes it
has redeemed, paid or delivered to the Trustee for cancelation.
M. Article Three of the Indenture is hereby supplemented with
respect to the 8% Notes by inserting, following the final sentence of Section
310, the following:
SECTION 311. REGISTRAR AND PAYING AGENT.
The Company shall enter into an appropriate agency
agreement with any Security Registrar, Paying Agent or co-registrar not
a party to this Indenture, which shall incorporate the terms of the
TIA. The agreement shall implement the provisions of this Indenture
that relate to such agent. The Company shall notify the Trustee of the
name and address of any such agent. If the Company fails to maintain a
Security Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to
Section 606. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Security Registrar,
co-registrar or transfer agent.
The Company initially appoints the Trustee as
Security Registrar and Paying Agent in connection with the 8% Notes.
SECTION 312. NOTEHOLDER LISTS. The Trustee shall
preserve in as current a form as is reasonably practicable the most
recent list available to it of the names and addresses of Noteholders.
If the Trustee is not the Security Registrar, the Company
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shall furnish to the Trustee, in writing at least five Business days
before each Interest Payment Date and at such other times as the
Trustee may request in writing, a list in such form and as of such date
as the Trustee may reasonably require of the names and addresses of
Noteholders.
SECTION 313. OUTSTANDING 8% NOTES. 8% Notes
outstanding at any time are all 8% Notes authenticated by the Trustee
except for those canceled by it, those paid pursuant to Section 306,
those delivered to it for cancelation and those described in this
Section as not outstanding. A 8% Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the 8% Note.
If a 8% Note is replaced pursuant to Section 306, it
ceases to be outstanding unless the Trustee and the Company receive
proof satisfactory to them that the replaced 8% Note is held by a bona
fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date
money sufficient to pay all principal and interest payable on that date
with respect to the 8% Notes (or portions thereof) to be redeemed or
maturing, as the case may be, then on and after that date such 8% Notes
(or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
SECTION 314. CUSIP NUMBERS. The Company in issuing
the 8% Notes may use "CUSIP" numbers (if then generally in use), and,
if so, the Trustee shall use "CUSIP" numbers in notices of redemption
as a convenience to Noteholders; PROVIDED that any such notice may
state that no representation is made as to the correctness of such
numbers either as printed on the 8% Notes or as contained in any notice
of a redemption and that reliance may be placed only on the other
identification numbers printed on the 8% Notes, and any such redemption
shall not be affected by any defect in or omission of such numbers. The
Company will promptly notify the Trustee of any change in the CUSIP
numbers.
4. PROVISIONS SUPPLEMENTAL TO ARTICLE FIVE OF THE INDENTURE.
A. For purposes of the 8% Notes only, Section 501 of the
Indenture is hereby superseded in its entirety and replaced by the following:
SECTION 501 EVENTS OF DEFAULT. An "Event of Default"
occurs if:
(1) the Company fails to make any payment of
interest on any 8% Note when the same becomes due and payable,
and such failure continues for a period of 30 days;
(2) the Company (i) fails to make the payment of
the principal of any 8% Note when the same becomes due and
payable at its Stated Maturity, upon redemption, upon
declaration, or otherwise, or (ii) fails to redeem or purchase
8% Notes when required pursuant to this Indenture or the 8%
Notes;
(3) the Company fails to comply with Section
801;
(4) the Company fails to comply with any
covenant or obligation set forth in Section 1601 or 1602 or
Article X (other than a failure to purchase 8% Notes when
required under 1014 or Section 1601) and such failure
continues for 30 days;
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(5) the Company fails to comply with any of its
agreements in the 8% Notes or this Indenture (other than those
referred to in (1), (2), (3) or (4) above) and such failure
continues for 60 days;
(6) the Company or a Restricted Subsidiary fails
to pay when due within any applicable grace period principal,
interest or premium or the Indebtedness in an aggregate
principal amount outstanding in excess of $10 million or the
acceleration of any Indebtedness in an aggregate principal
amount outstanding in excess of $10 million by the holders
thereof;
(7) the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order
for relief against it in an involuntary case;
(C) consents to the appointment of a
Custodian of it or for any substantial part of its
property; or
(D) makes a general assignment for the
benefit of is creditors;
or takes any comparable action under any foreign laws relating
to insolvency;
(8) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against the Company
or any Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company
or any Significant Subsidiary or for any substantial
part of its property; or
(C) orders the winding up or
liquidation of the Company or any Significant
Subsidiary;
or any similar relief is granted under any foreign laws, and
any order or decree described in this Section 501(8) remains
unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of
money in excess of $10,000,000 or its Dollar Equivalent at the
time is entered against the Company or any Restricted
Subsidiary and is not discharged and either (A) an enforcement
proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 consecutive
days during which a stay of enforcement shall not be in effect
following the entry of such judgment or decree during which,
in the case of (A) or (B), such enforcement proceeding,
judgment or decree is not discharged, waived or the execution
thereof stayed and such default continues for 10 days after
the notice specified below; or
(10) a Subsidiary Guaranty ceases to be in full
force and effect (other than in accordance with the terms of
such Subsidiary Guaranty) or a Subsidiary Guarantor denies or
disaffirms its obligations under its Subsidiary Guaranty.
The foregoing will constitute Events of Default
whatever the reason for any such Event of Default and whether it is
voluntary or involuntary or is effected by
<PAGE> 20
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operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, UNITED
STATES CODE, or any similar Federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
A Default under clause (4) or (5) is not an Event of
Default until the Trustee or the Holders of at least 25% in principal
amount of the 8% Notes notify the Company of the Default and the
Company does not cure such Default within the time specified after
receipt of such notice. Such notice must specify the Default, demand
that it be remedied and state that such notice is a "Notice of
Default".
The Company shall deliver to the Trustee, within 30
days after the occurrence thereof, written notice in the form of an
Officers' Certificate of (a) any event which with the giving of notice
and the lapse of time would become an Event of Default under clause (4)
or (5) or (b) any other Event of Default or Default, and, in either
case, its status and what action the Company is taking or proposes to
take with respect thereto.
B. For purposes of the 8% Notes only, the first paragraph of
Section 502 of the Indenture is hereby superseded in its entirety and replaced
by the following:
If an Event of Default (other than an Event of
Default specified in Section 501(7) or (8) with respect to the Company)
occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding 8% Notes
by notice to the Company and the Trustee, may declare the principal of
and accrued but unpaid interest on all the 8% Notes to be due and
payable. Upon such a declaration, such principal and interest shall be
due and payable immediately. If an Event of Default specified in
Section 501(7) or (8) with respect to the Company occurs, the principal
of and interest on all the 8% Notes shall become and be immediately due
and payable without any declaration or other action the part of the
Trustee or any Noteholders. The Holders of a majority in principal
amount of the 8% outstanding Notes by notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of acceleration. No such
rescission shall affect any subsequent Default or impair any right
consequent thereto.
5. PROVISIONS SUPPLEMENTAL TO ARTICLE SIX OF THE INDENTURE.
A. Article Six is hereby amended so as to delete the second
proviso from the first sentence of Section 601 in its entirety.
B. For purposes of the 8% Notes only, the following sections are
to be inserted immediately following Section 612 of the Indenture.
SECTION 613. COMMUNICATION BY HOLDERS WITH OTHER
HOLDERS. Noteholders may communicate pursuant to TIA ss. 312(b) with
other Noteholders with respect to their rights under this Indenture or
the 8% Notes. The Company, the Trustee, the Security Registrar and
anyone else shall have the protection of TIA ss. 312(c).
SECTION 614. RULES BY TRUSTEE, PAYING AGENT AND
REGISTRAR. The Trustee may make reasonable rules for action by or a
meeting of Noteholders. The Security Registrar and the Paying Agent may
make reasonable rules for their functions.
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6. PROVISIONS SUPPLEMENTAL TO ARTICLE EIGHT OF THE INDENTURE.
A. For purposes of the 8% Notes only, Sections 801 and 802 of the
Indenture are hereby superseded in their entirety and replaced by the following
SECTION 801. MERGER AND CONSOLIDATION. The Company
shall not consolidate with or merge with or into, or convey, transfer
or lease, in one transaction or a series of related transactions, all
or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any State thereof or the District
of Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing;
(iii) except in the case of a merger the sole purpose of
which is to change the Company's jurisdiction of incorporation,
immediately after giving effect to such transaction, the Successor
Company would be able to Incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) of Section 1010;
(iv) immediately after giving effect to such transaction,
the Successor Company shall have Consolidated Net Worth in an amount
which is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and
(iv), any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company or
another Wholly Owned Subsidiary.
SECTION 802. RIGHTS AND DUTIES OF SUCCESSOR
CORPORATION. The Successor Company shall be the successor to the
Company and shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease
shall not be released from the obligation to pay the principal of and
interest on the Securities.
7. PROVISIONS SUPPLEMENTAL TO ARTICLE TEN OF THE INDENTURE.
A. For purposes of the 8% Notes only, Section 901 of the
Indenture is hereby superseded in its entirety and replaced by the following
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company
and the Trustee may amend this Indenture or the 8% Notes
without notice to or consent of any Noteholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
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(2) to comply with Article 5;
(3) to provide for uncertificated 8% Notes in
addition to or in place of certificated 8% Notes; PROVIDED,
HOWEVER, that the uncertificated 8% Notes are issued in
registered form for purposes of Section 163(f) of the Code or
in a manner such that the uncertificated 8% Notes are
described in Section 163(f)(2)(B) of the Code;
(4) to add further Guarantees with respect to
the 8% Notes or to release Subsidiary Guarantors when
permitted by the terms hereof, or to secure the 8% Notes;
(5) to add to the covenants of the Company for
the benefit of the Holders or to surrender any right or power
herein conferred upon the Company;
(6) to comply with any requirements of the SEC
in connection with qualifying, or maintaining the
qualification of, this Indenture under the TIA; or
(7) to make any change that does not adversely
affect the rights of any Noteholder.
An amendment under this Section may not make any
change that adversely affects the rights under Article 10 or Article 12
of any holder of Senior Indebtedness of the Company or any Subsidiary
Guarantor then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give
a consent) consent to such change.
After an amendment under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly
describing such amendment. The failure to give such notice to all
Noteholders, or any defect therein, shall not impair or affect the
validity of an amendment under this Section.
B. For purposes of the 8% Notes only, Section 902 of the
Indenture is hereby superseded in its entirety and replaced by the following
SECTION 902. MODIFICATION OF INDENTURE WITH CONSENT
OF HOLDERS. The Company and the Trustee may amend this Indenture or the
8% Notes without notice to any Noteholders but with the written consent
of the Holders of at least a majority in principal amount of the 8%
Notes; PROVIDED, HOWEVER, without the consent of each Noteholder
affected, an amendment may not:
(1) reduce the amount of 8% Notes whose Holders
must consent to an amendment;
(2) reduce the rate of or extend the time for
payment of interest on any 8% Note;
(3) reduce the principal of or extend the Stated
Maturity of any 8% Note;
(4) reduce the premium payable upon the
redemption of any 8% Note or change the time at which any 8%
Note may be redeemed in accordance with Article V;
(5) make any 8% Note payable in money other than
that stated in the 8% Note;
<PAGE> 23
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(6) subordinate in right of payment, or
otherwise subordinate, the 8% Notes to any other obligation of
the Company;
(7) make any change in Section 507, 5.08, 5.12,
5.13 or the second sentence of this Section.
(8) make any change in any Subsidiary Guaranty
that would adversely affect the Noteholders.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent approves
the substance thereof.
After an amendment under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly
describing such amendment. The failure to give such notice to all
Noteholders, or any defect therein, shall not impair or affect the
validity of an amendment under this Section.
8. PROVISIONS SUPPLEMENTAL TO ARTICLE TEN OF THE INDENTURE.
A. For purposes of the 8% Notes, Article Ten of the Indenture is
hereby supplemented by inserting, following the final sentence of Section 1009,
the following:
SECTION 1010. LIMITATION ON INDEBTEDNESS. LIMITATION
ON INDEBTEDNESS OF THE COMPANY. (a) The Company shall not Incur,
directly or indirectly, any Indebtedness unless, on the date of such
Incurrence, the Consolidated Coverage Ratio exceeds 2.0 to 1.
(b) Notwithstanding the foregoing paragraph (a), the
Company may Incur any or all of the following Indebtedness: (1)
Indebtedness Incurred pursuant to any bank credit facility; PROVIDED,
HOWEVER, that, after giving effect to any such Incurrence, the
aggregate principal amount of such Indebtedness then outstanding,
together with the aggregate amount of all Indebtedness then outstanding
pursuant to clauses (a) and (b) of Section 1011, does not exceed the
greater of (i) $100 million and (ii) the sum of (A) 60% of the book
value of the inventory of the Company and its Restricted Subsidiaries
and (B) 90% of the book value of the accounts receivables of the
Company and its Restricted Subsidiaries, in each case determined in
accordance with GAAP; (2) Indebtedness owed to and held by a Wholly
Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Indebtedness (other than to another Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the Incurrence
of such Indebtedness by the Company; (3) the 8% Notes; (4) Indebtedness
outstanding on the Issue Date (other than Indebtedness described in
clause (1), (2) or (3) of this paragraph); (5) Refinancing Indebtedness
in respect of Indebtedness Incurred pursuant to paragraph (a) or
pursuant to clause (3) or (4) or this clause (5); (6) Hedging
Obligations consisting of Interest Rate Agreements and Currency
Agreements entered into in the ordinary course of business and not for
the purpose of speculation; PROVIDED, HOWEVER, that such Currency
Agreements and Interest Rate Agreements do not increase the
Indebtedness of the Company outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder; (7) Purchase Money Indebtedness and Capital Lease
Obligations Incurred to finance the acquisition by the Company or a
Restricted Subsidiary of any assets in the ordinary course of business
and which do not, together with the aggregate amount of all
Indebtedness then outstanding pursuant to clause (h) of Section 1011,
exceed $10 million in the aggregate at any time outstanding; and (8)
Indebtedness in an aggregate principal amount which, together with
<PAGE> 24
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all other Indebtedness of the Company outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through
(7) above or paragraph (a)) and all Indebtedness then outstanding
pursuant to clause (i) of Section 1011, does not exceed $10 million.
(c) Notwithstanding the foregoing, the Company shall not
Incur any Indebtedness pursuant to the foregoing paragraph (b) if the
proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated
to the 8% Notes to at least the same extent as such Subordinated
Obligations.
(d) For purposes of determining compliance with this
Section, (i) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described above,
the Company, in its sole discretion, will classify such item of
Indebtedness and only be required to include the amount and type of
such Indebtedness in one of the above clauses and (ii) an item of
Indebtedness may be divided and classified in more than one of the
types of Indebtedness described above.
SECTION 1011. LIMITATION ON INDEBTEDNESS AND
PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company shall not
permit any Restricted Subsidiary to Incur, directly or indirectly, any
Indebtedness or Preferred Stock except:
(a) Indebtedness Incurred by the Receivables
Subsidiary pursuant to the Receivables Facility or by any
Restricted Subsidiary pursuant to any other bank credit
arrangement; PROVIDED, HOWEVER, that, after giving effect to
any such Incurrence, the aggregate principal amount of such
Indebtedness then outstanding, together with the aggregate
amount of all Indebtedness then outstanding pursuant to clause
(b) of this provision and clause (1) of Section 1010, does not
exceed the greater of (i) $100 million and (ii) sum of (A) 60%
of the book value of the inventory of the Company and its
Restricted Subsidiaries and (B) 90% of the book value of the
accounts receivables of the Company and its Restricted
Subsidiaries, in each case determined in accordance with GAAP;
(b) Indebtedness Incurred pursuant to the U.K.
Credit Facility; PROVIDED, HOWEVER, that, after giving effect
to any such Incurrence, the aggregate principal amount of such
Indebtedness then outstanding does not exceed $8 million;
(c) Indebtedness or Preferred Stock issued to
and held by the Company or a Wholly Owned Subsidiary;
PROVIDED, HOWEVER, that any subsequent issuance or transfer of
any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Indebtedness or Preferred Stock
(other than to the Company or a Wholly Owned Subsidiary) shall
be deemed, in each case, to constitute the issuance of such
Indebtedness or Preferred Stock by the issuer thereof;
(d) Indebtedness or Preferred Stock of a
Subsidiary Incurred and outstanding on or prior to the date on
which such Subsidiary was acquired by the Company or a
Restricted Subsidiary (other than Indebtedness or Preferred
Stock Incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate,
the transaction or series of related transactions pursuant to
which such Subsidiary became a Subsidiary or was acquired by
the Company or a Restricted Subsidiary); PROVIDED, HOWEVER,
that on the date of such acquisition and after giving effect
thereto, the Company would have been able to Incur at least
$1.00 of additional Indebtedness pursuant to clause (a) of
Section 1010;
<PAGE> 25
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(e) Indebtedness or Preferred Stock outstanding
on the Issue Date (other than Indebtedness described in clause
(a), (b), (c) or (d) of this paragraph);
(f) Refinancing Indebtedness Incurred in respect
of Indebtedness or Preferred Stock referred to in clause (d)
or (e) of this paragraph or this clause (f); PROVIDED,
HOWEVER, that to the extent such Refinancing Indebtedness
directly or indirectly Refinances Indebtedness or Preferred
Stock of a Subsidiary described in clause (d), such
Refinancing Indebtedness shall be Incurred only by such
Subsidiary;
(g) the Subsidiary Guaranties, if any;
(h) Purchase Money Indebtedness and Capital
Lease Obligations Incurred to finance the acquisition by such
Restricted Subsidiary of any assets in the ordinary course of
business and which do not, together with the aggregate amount
of all Indebtedness then outstanding pursuant to clause (7) of
Section 1010, exceed $10 million in the aggregate at any time
outstanding; and
(i) Indebtedness in an aggregate principal
amount which, together with all other Indebtedness of
Restricted Subsidiaries outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (a)
through (h) above) and all Indebtedness then outstanding
pursuant to clause (8) of Section 1010, does not exceed $10
million.
SECTION 1012. LIMITATION ON RESTRICTED PAYMENTS. (a)
The Company shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the
Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom); (2) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of Section 1010; or (3) the
aggregate amount of such Restricted Payment and all other Restricted
Payments since the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued during the period (treated as one
accounting period) from the beginning of the fiscal quarter ended
August 31, 1997 to the end of the most recent fiscal quarter prior to
the date of such Restricted Payment for which consolidated financial
statements of the Company shall have been filed with the SEC or
provided to the Noteholders pursuant to the Indenture (or, in case such
Consolidated Net Income accrued during such period (treated as one
accounting period) shall be a deficit, minus 100% of such deficit); (B)
the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an
employee stock ownership plan or to a trust established by the Company
or any of its Subsidiaries for the benefit of their employees); (C) the
amount by which Indebtedness of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date, of any
Indebtedness of the Company convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company (less the amount
of any cash, or the fair value of any other property, distributed by
the Company upon such conversion or exchange); (D) an amount equal to
the sum of (i) the net reduction in Investments in Unrestricted
Subsidiaries resulting from dividends, repayments of loans or advances
or other transfers of assets by any Unrestricted Subsidiary to the
Company or any Restricted Subsidiary, or the receipt of proceeds by the
Company or any Restricted Subsidiary from the sale or other disposition
of any portion of the Capital Stock of any Unrestricted Subsidiary, in
each case occurring subsequent to the Issue Date, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of an Unrestricted Subsidiary
at the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; PROVIDED,
<PAGE> 26
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HOWEVER, that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and
treated as a Restricted Payment) by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary; and (E) $40 million.
(b) The provisions of the foregoing paragraph (a) shall
not prohibit: (i) any purchase or redemption of Capital Stock or
Subordinated Obligations of the Company made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Capital Stock of
the Company (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees); PROVIDED, HOWEVER,
that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of
amounts under clause (3)(B) of paragraph (a) above; (ii) any purchase,
repurchase, redemption, defeasance or other acquisition or retirement
for value of Subordinated Obligations made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Indebtedness of
the Company which is permitted to be Incurred pursuant to Section 1010;
PROVIDED, HOWEVER, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments; (iii)
dividends paid within 60 days after the date of declaration thereof if
at such date of declaration such dividend would have complied with
paragraph (a) of this Section; PROVIDED, HOWEVER, that at the time of
payment of such dividend, no Default shall have occurred and be
continuing (or result therefrom); PROVIDED FURTHER, HOWEVER, that such
dividend shall be included in the calculation of the amount of
Restricted Payments; or (iv) the repurchase of shares of, or options to
purchase shares of, common stock of the Company or any of its
Subsidiaries from employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by the
Board of Directors under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such common stock;
PROVIDED, HOWEVER, that the aggregate amount of such repurchases shall
not exceed $5 million; PROVIDED FURTHER, HOWEVER, that such repurchases
shall be excluded in the calculation of the amount of Restricted
Payments.
SECTION 1013. LIMITATION ON RESTRICTIONS ON
DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES. The Company shall not, and
shall not permit any Restricted Subsidiary to, create or otherwise
cause or permit to exist or become effective any consensual encumbrance
or restriction on the ability of any Restricted Subsidiary (a) to pay
dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the
Company, (b) to make any loans or advances to the Company or (c)
transfer any of its property or assets to the Company, except: (i) any
encumbrance or restriction pursuant to an agreement in effect at or
entered into on the Issue Date; (ii) any encumbrance or restriction
with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary on
or prior to the date on which such Restricted Subsidiary was acquired
by the Company or a Restricted Subsidiary (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Company or a Restricted Subsidiary) and outstanding on such date; (iii)
any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred
to in clause (i) or (ii) of this Section or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or
(ii) of this Section or this clause (iii); PROVIDED, HOWEVER, that the
encumbrances and restrictions with respect to such
<PAGE> 27
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Restricted Subsidiary contained in any such refinancing agreement or
amendment are no more restrictive in any material respect than the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such agreements; (iv) any such encumbrance or
restriction consisting of customary non assignment provisions in leases
governing leasehold interests to the extent such provisions restrict
the transfer of the lease or the property leased thereunder; (v) in the
case of clause (c) above, restrictions contained in security agreements
or mortgages securing Indebtedness of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject
to such security agreements or mortgages; (vi) any restriction with
respect to a Restricted Subsidiary imposed pursuant to an agreement
entered into for the sale or disposition of all or substantially all
the Capital Stock or assets of such Restricted Subsidiary pending the
closing of such sale or disposition; and (vii) any encumbrance or
restriction with respect to any Receivables Subsidiary pursuant to any
agreement entered into in connection with a Permitted Receivables
Financing or pursuant to the organizational documents of the
Receivables Subsidiary.
SECTION 1014. LIMITATION ON SALES OF ASSETS AND
SUBSIDIARY STOCK. (a) The Company shall not, and shall not permit any
Restricted Subsidiary to consummate any Asset Disposition unless the
Company or such Restricted Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the fair market value
(including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares and
assets subject to such Asset Disposition and at least 75% (or 100% in
the case of lease payments received by the Company or such Restricted
Subsidiary) of the consideration thereof received by the Company or
such Restricted Subsidiary is in the form of cash or cash equivalents.
In the event and to the extent that the Net Available Cash received by
the Company or any Restricted Subsidiary from one or more Asset
Dispositions occurring on or after the Issue Date exceeds $10 million,
then the Company or such Restricted Subsidiary shall (i) within 360
days after the date such Net Available Cash so received exceeds $10
million and to the extent the Company or such Restricted Subsidiary
elects (or is required by the terms of any Indebtedness) to (A) apply
an amount equal to such excess Net Available Cash to prepay, repay or
purchase Indebtedness of the Company or such Restricted Subsidiary
(other than Indebtedness which is subordinated or junior in any respect
(other than as a result of the Indebtedness being unsecured) to any
other Indebtedness of the Company or such Restricted Subsidiary), in
each case owing to a Person other than the Company or any Affiliate of
the Company or (B) invest an equal amount, or the amount not so applied
pursuant to clause (A), in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by the Company or another Restricted
Subsidiary) and (ii) apply such excess Net Available Cash (to the
extent not applied pursuant to clause (i)) as provided in the following
paragraphs of this Section; PROVIDED, HOWEVER, that in connection with
any prepayment, repayment or purchase of Indebtedness pursuant to
clause (A) above, the Company or such Restricted Subsidiary shall
retire such Indebtedness and shall cause the related loan commitment
(if any) to be permanently reduced in an amount equal to the principal
amount so prepaid, repaid or purchased. The amount of such excess Net
Available Cash required to be applied pursuant to clause (ii) above and
not theretofore so applied shall constitute "Excess Proceeds". Pending
application of Net Available Cash pursuant to this provision, such Net
Available Cash shall be invested in Temporary Cash Investments.
If at any time the aggregate amount of Excess
Proceeds not theretofore subject to an Excess Proceeds Offer (as
defined below) totals at least $10 million, the Company shall, not
later than 30 days after the end of the period during which the Company
is required to apply such Excess Proceeds pursuant to clause (i) of the
immediately preceding paragraph (or, if the Company so elects, at any
time within such period), make an offer (an "Excess Proceeds Offer") to
purchase from the Holders on a pro rata basis an aggregate principal
amount of Senior Notes equal to the Excess Proceeds
<PAGE> 28
27
(rounded down to the nearest multiple of $1,000) on such date, at a
purchase price equal to 100% of the principal amount of such Senior
Notes, plus, in each case, accrued interest (if any) to the date of
purchase (the "Excess Proceeds Payment"). Upon completion of an Excess
Proceeds Offer, the amount of Excess Proceeds remaining after
application pursuant to such Excess Proceeds Offer (including payment
of the purchase price for Senior Notes duly tendered) may be used by
the Company for any corporate purpose (to the extent not otherwise
prohibited by the Indenture).
For the purposes of this Section, the following are
deemed to be cash: (x) the assumption of Indebtedness of the Company or
any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Disposition and (y) securities received by
the Company or any Restricted Subsidiary from the transferee that are
promptly converted by the Company or such Restricted Subsidiary into
cash.
(b) If the Company is obligated to make a Excess
Proceeds Offer, the Company shall send a written notice, by first-class
mail, to the Holders of the 8% Notes and the Trustee (the "Excess
Proceeds Offer Notice"), accompanied by such information regarding the
Company and its Subsidiaries as the Company in good faith believes will
enable such holders of the 8% Notes to make an informed decision with
respect to the Excess Proceeds Offer. The Excess Proceeds Offer Notice
will state, among other things, (i) that the Company is offering to
purchase 8% Notes pursuant to the provisions of this Section 1014, (ii)
that any 8% Note (or any portion thereof) accepted for payment (and
duly paid on the Purchase Date) pursuant to the Excess Proceeds Offer
shall cease to accrue interest after the Purchase Date, (iii) the
purchase price and purchase date, which shall be, subject to any
contrary requirements of applicable law, no less than 30 days nor more
than 60 days from the date the Excess Proceeds Offer Notice is mailed
(the "Purchase Date"), (iv) the aggregate principal amount of 8% Notes
(or portions thereof) to be purchased and (v) a description of the
procedure which holders of 8% Notes must follow in order to tender
their 8% Notes (or portions thereof) and the procedures that holders of
8% Notes must follow in order to withdraw an election to tender their
8% Notes (or portions thereof) for payment.
(c) The Company shall comply, to the extent
applicable, with the requirements of Section 14(e) of the Exchange Act
and any other securities laws or regulations thereunder in the event
that such Excess Proceeds are received by the Company under this
Section and the Company is required to repurchase Senior Notes as
described above. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this Section, the
Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations
under this Section by virtue thereof.
SECTION 1015. LIMITATION ON AFFILIATE TRANSACTIONS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into or permit to exist any transaction or series
of related transactions (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") unless the terms thereof (1) are no less
favorable, taken as a whole, to the Company or such Restricted
Subsidiary than those that could be obtained at the time of such
transaction or transactions in arm's-length dealings with a Person who
is not such an Affiliate, (2) if such Affiliate Transaction involves an
amount in excess of $1 million, (i) are set forth in writing, (ii)
comply with clause (1) and (iii) have been approved by a majority of
the members of the Board of Directors having no personal stake in such
Affiliate Transaction and (3) if such Affiliate Transaction involves an
amount in excess of $25 million, (i) comply with clause (2) and (ii)
have been determined by a nationally recognized
<PAGE> 29
28
investment banking firm to be fair, from a financial standpoint, to the
Company and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph
(a) shall not prohibit (i) any Restricted Payment permitted to be paid
pursuant to Section 1012, (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) the grant of
stock options or similar rights to employees and directors of the
Company pursuant to plans approved by the Board of Directors, (iv)
loans or advances to employees in the ordinary course of business in
accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $2 million in the
aggregate outstanding at any one time, (v) the payment of reasonable
fees to directors of the Company and its Restricted Subsidiaries who
are not employees of the Company or its Restricted Subsidiaries, (vi)
any Affiliate Transaction between the Company and any Restricted
Subsidiary or between Restricted Subsidiaries in the ordinary course of
business (so long as the stockholders of any participating Restricted
Subsidiary which is not a Wholly Owned Subsidiary are not themselves
Affiliates of the Company) and (vii) transactions between the Company
or any Restricted Subsidiary and a Receivables Subsidiary pursuant to
any Permitted Receivables Financing.
SECTION 1016. LIMITATION ON THE SALE OR ISSUANCE OF
CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company shall not sell or
otherwise dispose of any shares of Capital Stock of a Restricted
Subsidiary, and shall not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell or otherwise dispose of any shares of its
Capital Stock except (i) to the Company or a Wholly Owned Subsidiary or
(ii) if, immediately after giving effect to such issuance, sale or
other disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary.
SECTION 1017. LIMITATION ON LIENS. The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, Incur or permit to exist any Lien of any nature whatsoever
on any of its properties (including Capital Stock of a Restricted
Subsidiary), whether owned at the Issue Date or thereafter acquired,
other than Permitted Liens, without effectively providing that the 8%
Notes shall be secured equally and ratably with (or prior to) the
obligations so secured for so long as such obligations are so secured;
PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary may
Incur other Liens to secure Indebtedness as long as the amount of
outstanding Indebtedness secured by Liens Incurred pursuant to this
proviso does not exceed 5% of Consolidated Net Tangible Assets, as
determined based on the consolidated balance sheet of the Company as of
the end of the most recent fiscal quarter prior thereto for which
consolidated financial statements of the Company shall have been filed
with the SEC or provided to the Noteholders pursuant to the Indenture.
SECTION 1018. LIMITATION ON SALE/LEASEBACK
TRANSACTIONS. The Company shall not, and shall not permit any
Restricted Subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless (i) the Company or such Subsidiary
would be entitled to (A) Incur Indebtedness in an amount equal to the
Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to Section 1010 and (B) create a Lien on such property
securing such Attributable Debt without equally and ratably securing
the 8% Notes pursuant to Section 1017, (ii) the net proceeds received
by the Company or any Restricted Subsidiary in connection with such
Sale/Leaseback Transaction are at least equal to the fair value (as
determined by the Board of Directors) of such property and (iii) the
Company applies the proceeds of such transaction in compliance with
Section 1014.
SECTION 1019. FUTURE GUARANTORS. On or after the
Issue Date, the
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29
Company will cause each Domestic Restricted Subsidiary (other than the
Receivables Subsidiary) that Incurs Indebtedness pursuant to clause (a)
of Section 1011 to execute and deliver to the Trustee a supplemental
indenture pursuant to which such Domestic Restricted Subsidiary will
irrevocably and unconditionally Guarantee, as primary obligor and not
merely as a surety, on an unsecured senior basis, the performance and
punctual payment when due, whether at Stated Maturity, by acceleration
or otherwise, of all obligations of the Company under the Indenture and
the 8% Notes, whether for payment of principal of or interest on the 8%
Notes, expenses, indemnification or otherwise (all such guaranteed
obligations being herein called the "Guaranteed Obligations"). The
Subsidiary Guarantors will agree to pay, in addition to the amount
stated above, any and all expenses (including reasonable counsel fees
and expenses) incurred by the Trustee or the Holders in enforcing any
rights under the Subsidiary Guaranties. Each Subsidiary Guaranty will
be limited in amount to an amount not to exceed the maximum amount that
can be Guaranteed by the applicable Subsidiary Guarantor without
rendering such Subsidiary Guaranty voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar
laws affecting the rights of creditors generally. Initially there will
be no Restricted Subsidiary that will be required to issue a Subsidiary
Guaranty of the 8% Notes.
Each Subsidiary Guaranty will be a continuing
guarantee and shall (a) remain in full force and effect until payment
in full of all the Guaranteed Obligations, (b) be binding upon each
Subsidiary Guarantor and (c) enure to the benefit of and be enforceable
by the Trustee, the Holders and their successors, transferees and
assigns.
A Subsidiary Guaranty will be released upon the sale
of all the capital stock, or all or substantially all of the assets, of
the applicable Subsidiary Guarantor if such sale is made in compliance
with the Indenture.
SECTION 1020. SEC REPORTS. Notwithstanding that the
Company may not be required to remain subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC and provide the Trustee and Noteholders and,
upon request, prospective Noteholders and securities analysts with such
annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable
to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times
specified for the filing of such information, documents and reports
under such Sections.
9. PROVISIONS SUPPLEMENTAL TO ARTICLE ELEVEN OF THE INDENTURE.
A. Article Eleven of the Indenture is hereby supplemented with
respect to the 8% Notes by inserting, following the first sentence of the second
paragraph of Section 1103, the following:
; PROVIDED, HOWEVER, that no Note of $1,000 in original
principal amount or less shall be redeemed in part.
10. PROVISIONS SUPPLEMENTAL TO ARTICLE FOURTEEN OF THE INDENTURE:
A. The 8% Notes shall be subject to all of the provisions of
Section 1402 of the Indenture and 1403 of the Indenture, as amended in paragraph
B. below.
B. For purposes of the 8% Notes only, Section 1403 of the
Indenture is hereby superseded in its entirety and replaced by the following:
<PAGE> 31
30
SECTION 1403. COVENANT DEFEASANCE. Upon the Company's
exercise of the above option applicable to this Section with respect to
the 8% Notes, the Company shall be released from its obligations under
Sections 1004 to 1020 (other than Section 1006), inclusive, and Article
XVI, and the operation of Sections 501(5), 501(6), 501(7), 501(8) and
501(9) (but, in the case of Sections 501(7) and 501(8), with respect
only to Significant Subsidiaries) or contained in Sections 801(iii) and
801(iv) with respect to the 8% Notes (hereinafter, "covenant
defeasance"), and the [ ]% Notes shall thereafter be deemed to be not
"Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with such Sections, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. If the Company
exercises its defeasance option, payment of the Securities may not be
accelerated because of an Event of Default. If the Company exercises
its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Sections
501(5), 501(6), 501(7), 501(8) and 501(9) (but, in the case of Sections
501(7) and 501(8), with respect only to Significant Subsidiaries) or
because of the failure of the Company to comply with Section 801(iii)
or (iv). If the Company exercises its legal defeasance option or its
covenant defeasance option, each Subsidiary Guarantor, if any, shall be
released from all its obligations under its Subsidiary Guaranty.
Upon satisfaction of the conditions set forth herein
and in Section 1404 and upon request of the Company, the Trustee shall
acknowledge in writing the discharge of those obligations that the
Company terminates.
C. Article Fourteen of the Indenture is hereby supplemented by
inserting, following Section 1405, the following Section 1406:
SECTION 1406. REINSTATEMENT. If the Trustee or Paying
Agent is unable to apply any money or U.S. Government Obligations in
accordance with this Article Fourteen by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the 8%
Notes shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Fourteen until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article Fourteen.
11. PROVISIONS SUPPLEMENTAL TO THE INDENTURE: ARTICLE SIXTEEN.
The Indenture is hereby supplemented by adding, following
Article Fifteen, the following Article Sixteen:
ARTICLE SIXTEEN
RIGHT TO REQUIRE REPURCHASE
SECTION 1601. PURCHASE OF THE OPTION OF HOLDERS UPON
A CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control,
each Holder shall have the right to require that the Company repurchase
such Holder's 8% Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to
the date of purchase (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant Interest
Payment Date) (the "Purchase Price").
(b) Within 30 days following any Change of
Control, the Company shall mail a notice to each Holder with a copy to
the Trustee stating:
<PAGE> 32
31
(1) that a Change of Control has
occurred and that such Holder has the right to
require the Company to purchase such Holder's 8%
Notes at the Purchase Price;
(2) the circumstances and relevant
facts regarding such Change of Control (including
information with respect to pro forma historical
income, cash flow and capitalization after giving
effect to such Change of Control);
(3) the purchase date (which shall be
no earlier than 30 days nor later than 60 days from
the date such notice is mailed) (the "Purchase
Date"); and
(4) the instructions determined by the
Company, consistent with this Section, that a Holder
must follow in order to have its Senior Notes
purchased.
(c) Not later than the date upon which written
notice required by Section 1601(b) is delivered to the Trustee, the
Company shall irrevocably deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own paying agent, segregate
and hold in trust) in Temporary Cash Investments an amount equal to the
Purchase Price, if any, to the Holders entitled thereto, to be held for
payment in accordance with the provisions of this Section. Holders
electing to have a 8% Note pur chased will be required to surrender the
8% Note, with an appropriate form duly completed, to the Company at the
address specified in the notice at least five Business days prior to
the Purchase Date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than three Business
Days prior to the Purchase Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the 8%
Note which was delivered for purchase by the Holder, the certificate
number of such 8% Note and a statement that such Holder is withdrawing
his election to have such 8% Note purchased.
(d) On the Purchase Date, the Company shall
deliver to the Trustee the 8% Notes or portions thereof which have been
properly tendered to and are to be accepted by the Company. The Trustee
shall, on the Purchase Date, mail or deliver payment of the purchase
price to each tendering Holder. In the event that the aggregate
purchase price of the 8% Notes delivered by the Company to the Trustee
is less than the amount deposited with the Trustee, the Trustee shall
deliver the excess to the Company immediately after the end of the
Payment Date.
SECTION 1602. COVENANT TO COMPLY WITH SECURITIES LAWS
UPON PURCHASE OF 8% NOTES. In connection with any purchase of 8% Notes
under Section 1601 by the Company, the Company shall, to the extent
then applicable and required by law, (i) comply with Rule 14e-1 (which
term, as used herein, includes any successor provisions thereto) under
the Exchange Act and (ii) otherwise comply with all Federal and state
securities laws so as to permit the rights and obligations under
Section 1601 to be exercised in the time and in the manner specified in
such Sections. To the extent that the provisions of any such securities
laws or regulations conflict with the provisions of Section 1601, the
Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations
described in such Section 1601 by virtue thereof.
<PAGE> 33
32
II. GENERAL PROVISIONS OF THIS SUPPLEMENT
A. GOVERNING LAW
THIS SUPPLEMENT AND EACH 8% NOTE ISSUED HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
BUT WITHOUT GIVING EFFECT TO APPLICABLE CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
B. COUNTERPARTS
This Supplement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but both of which
shall together constitute but one and the same instrument.
C. MISCELLANEOUS
(a) Except as expressly supplemented by this Supplement,
the Indenture shall remain unchanged and in full force and effect.
(b) This Supplement shall be construed as supplemental to
the Indenture and shall form a part thereof with respect to the 8% Notes.
(c) All references in the Indenture to any Section of the
Indenture shall be deemed, for purposes of the 8% Notes, to refer to such
Section of the Indenture as supplemented by the relevant provisions of this
Supplement.
<PAGE> 34
33
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
WYMAN-GORDON COMPANY,
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
by
---------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.A
EXECUTIVE SEVERANCE AGREEMENT.
This AGREEMENT ("Agreement") dated October 15, 1997 by and between
Wyman-Gordon Company, a Massachusetts corporation (the "Company"), and J.
Stewart Smith (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to have the services of the Executive as
its President, Manufacturing; and
WHEREAS, the Executive is willing to serve the Company as its
President, Manufacturing, but desires assurance that he will not be materially
disadvantaged by a change in control of the company;
NOW, THEREFORE, in consideration of the Executive's service to the
Company and the mutual agreements herein contained, the Company and the
Executive hereby agree, as follows:
<PAGE> 2
ARTICLE I
ELIGIBILITY FOR BENEFITS
SECTION 1.1. QUALIFYING TERMINATION. The Company shall not be required to
provide any benefits to the Executive pursuant to this Agreement unless a
Qualifying Termination occurs before the Agreement expires in accordance with
Section 6.1 hereof. For purposes of this Agreement, a Qualifying Termination
shall occur only if
(a) a Change in Control occurs, and
(b) within three years after the Change in Control,
(i) the Company terminates the Executive's employment other than
for Cause; or
(ii) the Executive terminates his employment with
the Company for Good Reason; provided, that a Qualifying
Termination shall not occur if the Executive's employment with the Company
terminates by reason of the Executive's Disability, death, or retirement. For
the purposes hereof "retirement" shall mean any termination of employment which
occurs at or after age 65.
SECTION 1.2. CHANGE IN CONTROL. Except as provided below, a Change in
Control shall be deemed to occur when and only when the first of the following
events occurs:
(a) the acquisition (including by purchase, exchange, merger or other
business combination, or any
2
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combination of the foregoing) by any individuals, firms,
corporations or other entities, acting in concert ("Person"),
together with all Affiliates and Associates of such Person, of
beneficial ownership of securities of the Company representing 20
percent or more of the combined voting power of the Company's
then outstanding voting securities, or
(b) members of the Incumbent Board cease to constitute a majority of
the Board of Directors.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
pursuant to paragraph (a), above, (i) solely because 20 percent or more of the
combined voting power of the Company's outstanding securities is acquired by one
or more employee benefit plans maintained by the Company, or (ii) if the
Executive is included among the individuals, firms, corporations or other
entities that, acting in concert, acquire the Company's securities. For purposes
of this Section 1.2, the terms "Affiliates" and "Associates" shall have the
meanings set forth in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"); the
terms "beneficial ownership" and "beneficially owned" shall have the meaning set
forth in section 13(d) of the Exchange Act, as amended, and in Rule 13d-3
promulgated thereunder, the term "Board of Directors" shall mean the Board of
Directors of the
3
<PAGE> 4
Company and the term "Incumbent Board" shall mean (i) the members of the Board
of Directors on the date hereof, to the extent that they continue to serve as
members of the Board of Directors, and (ii) any individual who becomes a member
of the Board of Directors after the date hereof, if his election or nomination
for election as a director was approved by a vote of at least three quarters of
the then Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors.
SECTION 1.3. TERMINATION FOR CAUSE. The Company shall have Cause to
terminate the Executive's employment with the Company for purposes of Section
1.1 hereof only if the Executive (a) engages in unlawful acts intended to result
in the substantial personal enrichment of the Executive at the Company's
expense, or (b) engages (except (i) by reason of incapacity due to illness or
injury or (ii) in connection with an actual or anticipated termination of
employment by the Executive for Good Reason) in a material violation of his
responsibilities to the Company that results in a material injury to the
Company.
SECTION 1.4. TERMINATION FOR GOOD REASON. The Executive shall have a Good
Reason for terminating employment with the
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<PAGE> 5
Company only if one or more of the following occurs after a Change in Control:
(a) a change in the Executive's status or position (including for
this purpose a change in the principal place of the Executive's
employment on a basis that does not conform with the Company's
present policies for executive relocation, but excluding required
travel on the Company's business to an extent substantially
consistent with the Executive's present business travel
obligations) with the Company that, in the Executive's reasonable
judgment, represents an adverse change from the Executive's
status or position in effect immediately before the Change in
Control;
(b) the assignment to the Executive of any duties or responsibilities
that, in the Executive's reasonable judgment, are inconsistent
with the Executive's status or position in effect immediately
before the Change in Control;
(c) layoff or involuntary termination of the Executive's employment,
except in connection with the termination of the Executive's
employment for Cause or as a result of the Executive's
Disability, death or retirement;
5
<PAGE> 6
(d) a reduction by the Company in the Executive's total compensation
as in effect at the time of the Change in Control (which shall be
deemed, for this purpose, to be equal to his base salary plus the
most recent award that he has earned under the Company's
Incentive Compensation Plan, as amended from time to time, or any
successor thereto (the "ICP")) or as the same may be increased
from time to time;
(e) the failure by the Company to continue in effect any Plan in
which the Executive is participating at the time of the Change in
Control (or plans or arrangements providing the Executive with
substantially equivalent benefits) other than as a result of the
normal expiration of any such Plan in accordance with its terms
as in effect at the time of the Change in Control;
(f) any action or inaction by the Company that would adversely affect
the Executive's continued participation in any Plan on at least
as favorable a basis as was the case at the time of the Change in
Control, or that would materially reduce the Executive's benefits
in the future under the Plan or deprive him if any material
benefits that he
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enjoyed at the time of the Change in Control, except to the
extent that such action or inaction by the Company is required by
the terms of the Plan as in effect immediately before the Change
in Control, or is necessary to comply with applicable law or to
preserve the qualification of the Plan under section 401(a) of
the Internal Revenue Code (the "Code"), and except to the extent
that the Company provides the Executive with substantially
equivalent benefits;
(g) the Company's failure to obtain the express assumption of this
Agreement by any successor to the Company as provided by Section
6.3 hereof;
(h) any material violation by the Company of any agreement (including
this Agreement) between it and the Executive; or
(i) the failure by the Company, without the Executive's consent, to
pay to him any portion of his current compensation, or to pay to
the Executive any portion of any deferred compensation, within 30
days of the date the Executive notifies the Company that any such
compensation payment is past due.
Notwithstanding the foregoing, no action by the Company shall give rise to a
Good Reason if it results from the Executive's
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<PAGE> 8
termination for Cause, death or retirement, and no action by the Company
specified in paragraphs (a) through (d) of the preceding sentence shall give
rise to a Good Reason if it results from the Executive's Disability. A Good
Reason shall not be deemed to be waived by reason of the Executive's continued
employment as long as the termination of the Executive's employment occurs
within the time prescribed by Section 1.1(b) hereof. For purposes of this
Section 1.4, "Plan" means any compensation plan, such as an incentive or stock
option plan, or any employee benefit plan, such as a thrift, pension,
profit-sharing, stock bonus, long-term performance award, medical, disability,
accident, or life insurance plan, or any other plan, program or policy of the
Company that is intended to benefit employees.
SECTION 1.5. DISABILITY. For purposes of this Agreement, "Disability" shall
mean illness or injury that prevents the Executive from performing his duties
(as they existed immediately before the illness or injury) on a full-time basis
for six consecutive months.
SECTION 1.6. NOTICE. If a Change in Control occurs, the Company shall
notify the Executive of the occurrence of the Change in Control within two weeks
after the Change in Control.
8
<PAGE> 9
ARTICLE II
BENEFITS AFTER A QUALIFYING TERMINATION
SECTION 2.1. BASIC SEVERANCE PAYMENT. If the Executive incurs a Qualifying
Termination following a Change in Control that occurs on or before termination
of this Agreement as provided in Section 6.1 hereof, the Company shall pay
within 30 days after the date of the Qualifying Termination to the Executive a
single lump sum cash amount equal to his Total Annual Compensation multiplied by
the lesser of (a) 2.50 or (b) .0833 multiplied by the number of full months
remaining between termination and his attaining age 65. "Total Annual
Compensation" shall mean the sum of annual base salary in effect immediately
preceding termination or the Change of Control, whichever is higher, and annual
incentive compensation earned under the "ICP" (annualized in the case of less
than a full year's service) in the last full fiscal year immediately preceding
termination or the Change in Control, whichever is higher.
SECTION 2.2. INSURANCE. If the Executive incurs a Qualifying Termination
following a Change in Control that occurs on or before termination of this
Agreement as provided in Section 6.1 hereof, the Company shall provide the
Executive, at the Company's expense, for a period beginning on the date of the
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<PAGE> 10
Qualifying Termination, the same medical, accident, disability, life and any
other insurance coverage as was provided to him by the Company immediately
before the Change in Control (or, if greater, as in effect immediately before
the Qualifying Termination occurs); such coverage shall end upon the earlier of
(a) the expiration of 24 months after the Qualifying Termination or (b) with
respect to each coverage, the date on which the Executive first becomes eligible
for insurance coverage of a similar nature provided by a firm that employs him
following the Qualifying Termination.
SECTION 2.3. EXECUTIVE LONG-TERM INCENTIVE PROGRAM. If the Executive incurs
a Qualifying Termination following a Change in Control that occurs on or before
termination of this Agreement as provided in Section 6.1 hereof, all of the
options to purchase common stock of the Company (and the alternative common
stock appreciation rights) granted to the Executive prior to termination of this
Agreement as provided in Section 6.1 hereof, under the Executive Long-Term
Incentive Program shall become exercisable in accordance with the terms set
forth in the applicable Agreement.
SECTION 2.4. NONDUPLICATION. Nothing in this Agreement shall require the
Company to make any payment or to provide any benefit or service credit that the
Company is otherwise required to provide under any other contract, agreement,
policy, plan or arrangement.
10
<PAGE> 11
ARTICLE III
EFFECT ON SEVERANCE POLICY
SECTION 3.1. EFFECT ON SEVERANCE POLICY. If the Executive becomes entitled to
receive benefits hereunder, the Executive shall not be entitled to any benefits
under any other Company severance policy.
ARTICLE IV
TAX MATTERS
SECTION 4.1. WITHHOLDING. The Company may withhold from any amount payable
to the Executive hereunder all federal, state or other taxes that the Company
may reasonably determine are required to be withheld pursuant to any applicable
law or regulation.
SECTION 4.2 SPECIAL LIMITATION.
(a) If part or all of the payments or benefits payable to the Executive,
when added to other payments payable to the Executive as a result of a
Change in Control, constitute Parachute Payments, the following
limitation shall apply. If the Parachute Payments, net of the sum of
the Excise Tax and the Federal income and employment taxes, state and
local income taxes on the amount of the Parachute Payments in excess
of the Threshold
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<PAGE> 12
Amount, are greater than the Threshold Amount, the Executive shall be
entitled to the full payments and benefits payable under this
Agreement. If the Threshold Amount is greater than the Parachute
Payments, net of the sum of the Excise Tax, and the Federal income and
employment taxes, state and local income taxes on the amount of the
Parachute Payments in excess of the Threshold Amount, then the payments
and benefits under this Agreement shall be reduced to the extent
necessary so that the maximum Parachute Payments shall not exceed the
Threshold Amount. In the event a reduction is required, it shall be the
Executive's choice as to which payments or benefits shall be so
reduced. The Employer shall select a firm of independent certified
public accountants to determine which of the foregoing alternative
provisions shall apply. For purposes of determining the amount of the
Federal income and employment taxes, and state and local income taxes
on the amount of the Parachute Payments in excess of the Threshold
Amount, the Executive shall be deemed to pay Federal income taxes at
the highest marginal rate of Federal income taxation applicable to
individuals for the calendar year in which the payments and benefits
under this Agreement are payable and state and local income taxes at
the
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<PAGE> 13
highest marginal rates of individual taxation in the state and
locality of the Executive's residence for the calendar year in which
the payments and benefits under this Agreement are payable, net of the
maximum reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes.
(b) ADDITIONAL DEFINITIONS
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Parachute Payments" shall mean any payment or provision by the
Employer of any amount or benefit to and for the benefit of the
Executive, whether paid or payable or provided or to be provided under
the terms of this Agreement or otherwise, that would be considered
"parachute payments" within the meaning of Section 280G(B)(2)(A) of
the Code and the regulations promulgated thereunder.
"Threshold Amount" shall mean three times the Executive's "base
amount" within the meaning of Section 280G(b)(3) of the Code and the
regulations promulgated thereunder, less one dollar.
"Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code.
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ARTICLE V
COLLATERAL MATTERS
SECTION 5.1. NATURE OF PAYMENTS. All payments to the Executive under this
Agreement shall be considered either payments in consideration of his continued
service to the Company or severance payments in consideration of his past
services thereto.
SECTION 5.2. LEGAL EXPENSES. The Company shall pay all legal fees and
expenses that the Executive may incur as a result of the Company's contesting
the validity, the enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
SECTION 5.3. MITIGATION. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement either by seeking other
employment or otherwise. The amount of any payment provided for herein shall not
be reduced by an remuneration that the Executive may earn from employment with
another employer or otherwise following his Qualifying Termination.
SECTION 5.4. AUTHORITY. The execution of this Agreement has been authorized
by the Board of Directors of the Company.
14
<PAGE> 15
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1. TERM OF AGREEMENT. This Agreement shall become effective on
the date hereof and shall continue in effect until the earliest of (a)October
31, 1999, if no Change in Control has occurred before that date; provided,
however, that commencing on November 1, 1999 and each November 1 thereafter, the
term of this Agreement shall automatically be extended for an additional year
unless, not later than January 30 of the same year, the Company shall have given
notice that it does not wish to extend this Agreement; (b) the termination of
the Executive's employment with the Company for any reason prior to a Change in
Control; (c) the Company's termination of the Executive's employment for Cause,
or the Executive's resignation for other than Good Reason, following a Change in
Control and the Company's and the Executive's fulfillment of all of their
obligations hereunder; and (d) the expiration following a Change in Control of
three years and the fulfillment by the Company and the Executive of all of their
obligations hereunder. Furthermore, nothing in this Article VI shall cause this
Agreement to terminate before both the Company and the Executive have fulfilled
all of their obligations hereunder.
15
<PAGE> 16
SECTION 6.2. GOVERNING LAW. Except as otherwise expressly provided herein,
this Agreement and the rights and obligations hereunder shall be construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
SECTION 6.3. SUCCESSOR TO THE COMPANY. This Agreement shall inure to the
benefit of and shall be binding upon and enforceable by the Company and any
successor thereto, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or substantially all of the
business or assets of the Company, whether by merger, consolidation, sale or
otherwise, but shall not otherwise be assignable by the Company. Without
limitation of the foregoing sentence, the Company shall require any successor
(whether direct or indirect, by merger, consolidation, sale or otherwise) to all
of substantially all of the business or assets of the Company, by agreement in
form satisfactory to the Executive, expressly, absolutely and unconditionally to
assume and to agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as heretofore defined and any successor to all or substantially all of
its business or assets that executes and delivers the agreement provided for in
this Section 6.3 or that becomes bound by this Agreement either pursuant to this
Agreement or by operation of law.
16
<PAGE> 17
SECTION 6.4. SUCCESSOR TO THE EXECUTIVE. This Agreement shall inure to the
benefit of and shall be binding upon and enforceable by the Executive and his
personal and legal representatives, executors, administrators, heirs,
distributees, legatees and, subject to the Section 6.5 hereof, his designees
("Successors"). If the Executive should die while amounts are or may be payable
to him under this Agreement, references hereunder to the "Executive" shall,
where appropriate, be deemed to refer to his Successors; provided that nothing
in this Section 6.5 shall supersede the terms of any plan or arrangement (other
than this Agreement) that is affected by this Agreement.
SECTION 6.5. NONALIENABILITY. No right of or amount payable to the
Executive under this Agreement shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, hypothecation, encumbrance,
charge, execution, attachment, levy or similar process or to setoff against any
obligations or to assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the immediately preceding
sentence shall be void. However, this Section 6.5 shall not prohibit the
Executive from designating one or more persons, on a form satisfactory to the
Company, to receive amounts payable to him under this Agreement in the event
that he should die before receiving them.
SECTION 6.6. NOTICES. All notices provided for in this Agreement shall be
in writing. Notices to the Company shall be
17
<PAGE> 18
deemed given when personally delivered or sent by certified or registered mail
or overnight delivery service to Wyman-Gordon Company, 244 Worcester Street,
North Grafton, Massachusetts 01536, Attention: Vice President, General Counsel
and Clerk. Notices to the Executive shall be deemed given when personally
delivered or sent by certified or registered mail or overnight delivery service
to the last address for the Executive shown on the records of the Company.
Either the Company or the Executive may, by notice to the other, designate an
address other than the foregoing for the receipt of subsequent notices.
SECTION 6.7. AMENDMENT. No amendment to this Agreement shall be effective
unless in writing and signed by both the Company and the Executive.
SECTION 6.8. WAIVERS. No waiver of any provision of this Agreement shall be
valid unless approved in writing by the party giving such waiver. No waiver of a
breach under any provision of this Agreement shall be deemed to be a waiver of
such provision or any other provision of this Agreement or any subsequent
breach. No failure on the part of either the Company or the Executive to
exercise, and no delay in exercising, any right or remedy conferred by law or
this Agreement shall operate as waiver of such right or remedy, and no exercise
or waiver, in whole or in part, or any right or remedy conferred by law or
herein shall operate as a waiver of any other right or remedy.
18
<PAGE> 19
SECTION 6.9. SEVERABILITY. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall not affect any other provision of this Agreement or part
thereof, each of which shall remain in full force and effect.
SECTION 6.10. CAPTIONS. The captions to this respective articles and
section of this Agreement are intended for convenience of reference only and
have no substantive significance.
SECTION 6.11. COUNTERPARTS. This Agreement may be executed in a number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute a single instrument.
SECTION 6.12. ENTIRE AGREEMENT. This Agreement contains a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof, superseding all
previous oral statements and other writings (including the Prior Agreement) with
respect thereto.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ATTEST: WYMAN-GORDON COMPANY
/s/ Shirley A. Peco By: /s/ David P. Gruber
- ------------------------------ --------------------------------
David P. Gruber, President
Chief Executive Officer
ATTEST:
/s/ J. Stewart Smith 11/3/97
- ------------------------------ --------------------------------
J. Stewart Smith
20
<PAGE> 1
EXHIBIT 10.G
PERFORMANCE STOCK OPTION AGREEMENT
UNDER THE WYMAN-GORDON COMPANY LONG-TERM INCENTIVE PLAN
WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company"),
hereby grants to Colin Stead (the "Grantee"), who is now employed by the Company
or by a Subsidiary of the Company, a Non-qualified Stock Option (the "Option")
to purchase prior to July 16, 2006 (the "Expiration Date") an aggregate of
37,375 shares of Common Stock of the Company ("Shares") at a price of $16.75 per
Share pursuant to the terms and conditions set forth in the Wyman-Gordon Company
Long-Term Incentive Plan as approved by the stockholders of the Company on
October 18, 1995, as it may be amended from time to time in accordance with its
terms (the "Plan") and this Stock Option Agreement, as it may be amended from
time to time in accordance with its terms (the "Award Agreement"). By execution
of this Award Agreement, the Grantee acknowledges receipt of a copy of the Plan
and further agrees to be bound thereby and by the actions, pursuant to the Plan,
of the Committee referred to in the Plan (the "Committee") and of the
Wyman-Gordon Company Board of Directors.
(1) The Option is in all respects governed by the terms of the
Plan. All of the terms and provisions of the Plan are hereby incorporated into
this Award Agreement by reference and are made a part of this Award Agreement.
For the convenience of the Grantee, certain but not all of the provisions of the
Plan are also summarized or elaborated upon in this Award Agreement. Each and
every provision of this Award Agreement shall be administered, interpreted, and
construed so that the
<PAGE> 2
Option shall conform to the provisions of the Plan. Any provisions of this Award
Agreement that cannot be so administered, interpreted, or construed shall be
disregarded, and, accordingly, in the event of any conflict between the Award
Agreement and the Plan, the latter will govern. Any capitalized terms used
herein and not defined herein have the respective meanings ascribed to them in
the Plan. Whenever the word "Grantee" is used herein in a context where the
provision should logically be construed to apply to the Grantee's Beneficiary,
the word "Grantee" shall be deemed to include such Beneficiary.
(2) The date of grant of the Option is July 16, 1996.
(3) The Option is a Non-qualified Stock Option and is not an
Incentive Stock Option.
(4) Subject to the terms of this Award Agreement, the Option shall
be exercisable from and after July 16, 2003; provided, however, that the option
may be exercised by the Grantee at any time after January 16, 1997 with respect
to the number of shares set forth below if the average closing price during a
period of 30 consecutive business days of the Common Stock of the Company, par
value $1.00 per share, on the NASDAQ National Market System, or on any successor
market or exchange in which the Common Stock is publicly traded, as quoted in
the WALL STREET JOURNAL reaches the indicated price levels.
2
<PAGE> 3
CUMULATIVE
NO. OF
STOCK PRICE OPTIONS VESTED
----------- --------------
Below $21.00 0
21.00 1,869
22.00 3,738
23.00 7,475
24.00 13,081
25.00 18,688
26.00 24,294
27.00 29,900
28.00 33,368
29.00 35,506
30.00 or above 37,375
(5) Grantee may exercise the Option only in the following manner: From
time to time prior to the Expiration Date and subject to the provisions of
Paragraph 4 above, the Grantee may give written notice to the Treasurer of the
Company of his election to purchase some or all of the Shares purchasable at the
time of such notice. Said notice shall specify the number of Shares to be
purchased and shall be accompanied by payment therefor (a) in U.S. dollars by
personal check, bank draft, or money order payable to the order of the Company;
(b) in Shares that have been held by the Grantee for at least six (6) months and
that have a Fair Market Value equal to the purchase price; (c) to the extent not
limited or prohibited by the Committee, by payment made by the Grantee's broker,
in U.S. dollars by personal check, bank draft, or money order payable to the
order of the Company, pursuant to the Grantee's instructions; or (d) by a
combination thereof; and by any agreement, statement, or other evidence that the
Committee may require in order to satisfy itself that the issuance of the Shares
being purchased pursuant to such exercise and any subsequent resale thereof will
be in compliance with applicable laws and regulations relating to the issuance
and sale of securities, including the provisions of the Securities Act of 1933
and regulations promulgated thereunder.
3
<PAGE> 4
(6) The exercise of the Option shall be deemed to occur (a) on the date
that the notice of exercise and the personal check, bank draft, money order or
Shares are received by the Company, or (b) if such notice of exercise and
payment are mailed in the United States, and the United States Postal Service
has stamped its postmark thereon, then on the date of such postmark. As soon as
practicable after each exercise of the Option and compliance by the Grantee with
all applicable conditions, including any payments to the Company that may be
required pursuant to Paragraphs 5 and 7 hereof, the Company shall mail or
deliver or cause to be mailed or delivered to the Grantee a stock certificate or
certificates for the number of Shares that the Grantee shall be entitled to
receive upon such exercise under the provisions of this Award Agreement.
(7) In each case where the Grantee shall exercise the Option, in whole or
in part, the Company will notify the Grantee of the amount of withholding tax,
if any, that must be paid under Federal and, where applicable, state and local
law, by reason of such exercise. It shall be a condition to any delivery of
Shares or payment to be made to the Grantee hereunder that provision
satisfactory to the Company shall have been made for payment of any taxes the
Company determines, in its reasonable opinion, are required to be paid or
withheld pursuant to any applicable law or regulation. The Grantee may
irrevocably elect to have any withholding tax obligation satisfied by either of
the methods described in clause (a) or (c) of Paragraph 5, above, or a
combination thereof, whether or not the same method is used to pay the purchase
price of the Option. As an alternative to such an election with respect to all
or any part of the withholding tax obligation, the Company and its Subsidiaries
also shall, to the extent permitted by law, have the right to deduct from any
payment or transfer of any kind (whether of cash, Shares, or other property, and
whether or not related to the Plan) otherwise due to the Grantee any such taxes
required to be withheld.
4
<PAGE> 5
(8) This Award Agreement and the Grantee's right to exercise the
Option shall terminate, as to any portion of the Option not theretofore
exercised, whenever the Grantee is for any reason no longer employed by the
Company or a Subsidiary; subject, however, to the following provisions:
(a) If the Company or a Subsidiary terminates the Grantee's
employment for reasons other than fraud, dishonesty, willful misconduct,
retirement, or disability, or if the Grantee resigns from the Company and the
Subsidiaries (as applicable), the Grantee shall have a period of 90 days
immediately after such termination in which to exercise the Option to the extent
then exercisable. The Option shall not become exercisable with respect to any
Shares with respect to which it was not exercisable on the date of such
termination of employment.
(b) If the termination of Grantee's employment results from the
Grantee's death, retirement or disability, the Grantee (or his Beneficiary in
the case of his death) shall have a period of three years following such
termination to exercise in whole or in part the Option with respect to Shares
subject to the Option, to the extent then exercisable. The Option shall not
become exercisable with respect to any Shares with respect to which it was not
exercisable on the date of such termination of employment.
(c) If the Grantee dies during the three-year period following
retirement or disability referred to in Subsection (b) above, the Option may be
exercised in whole or in part by his Beneficiary before the expiration of one
year after the date of his death or the expiration of the three-year period
following retirement or disability referred to in Subsection (b) above,
whichever occurs later.
For purposes of this Paragraph 8, the term "retirement" shall mean
termination of employment after the Grantee has become eligible for an early,
normal or late
5
<PAGE> 6
retirement benefit (but not a terminated vested or deferred vested benefit)
under the tax-qualified deferred benefit pension plan maintained by the Company
and/or its Subsidiaries that covers the Grantee, and the term "disability" shall
have the meaning ascribed to it in the Wyman-Gordon Company Savings/Investment
Plan.
(9) The Option is nontransferable other than by will or by the laws of
descent and distribution, and the Option may be exercised during the lifetime of
the Grantee only by him.
(10) In the event that there is any change in the Shares through merger,
consolidation, reorganization, recapitalization, or otherwise; or if there shall
be any dividend on the Shares, payable in Shares, or an extraordinary cash
dividend or other extraordinary distribution; or if there shall be a stock
split, reverse stock split, combination of Shares, exercisability of stock
purchase rights received under the Company's Stockholder Rights Plan, or other
similar corporate transaction or event that affects the Shares, such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the rights of the Grantee or of the potential
benefits intended to be made available under the Plan, the number and kind of
Shares subject to the Option, the purchase price, and the other relevant
provisions of this Award Agreement shall be appropriately adjusted as provided
in Section 12 of the Plan.
(11) As provided in Section 25 of the Plan in the event of a Triggering
Event, as hereinafter defined, the Option, to the extent it has not theretofore
been exercised, shall be fully exercisable without regard to the schedule in
Paragraph 4 above, but the Option shall thereupon become a Limited Right, as
hereinafter defined, and the terms thereof shall be modified as described in the
remaining provisions of this Paragraph 11. In the event of a Triggering Event,
the Grantee shall have the right (the "Limited Right") to have the Company, at
the election of the Grantee (which election for each Triggering
6
<PAGE> 7
Event, as hereinafter defined, may be made only during the period beginning on
the effective date of such Triggering Event, as hereinafter defined, and ending
on the 45th day following such date), purchase all or any Shares subject to the
Option (to the extent not theretofore exercised) for an amount (payable entirely
in cash) equal to the number of Shares with respect to which the Limited Right
is exercised, multiplied by the excess of the higher of (a) the highest Fair
Market Value of a Share during the period commencing on the ninetieth (90th) day
preceding the exercise of the Limited Right and ending on the date of exercise
and (b) either (i) if an event described in clause (b) of the definition of
"Triggering Event," below, has occurred, the highest price per Share paid for
any Share as shown on Schedule 13D (or an amendment thereto) filed pursuant to
Section 13(d) of the 1934 Act by any person or group (as defined in that
definition) whose acquisition caused the Triggering Event to occur, or (ii) if
an event described in clause (a) of the definition of "Triggering Event," below,
has occurred, the fixed or formula price specified in the reorganization (as
defined in that definition) if such price is determinable as of the date of
exercise of the Limited Right OVER the purchase price of the Option. Such
purchase pursuant to the exercise of a Limited Right shall be deemed to be an
exercise of the Option. Notwithstanding any other provision of this Award
Agreement, no Limited Right may be exercised after the Expiration Date, but a
Limited Right may be exercised within six months of the date hereof. For
purposes of this Paragraph 11, a Triggering Event shall be deemed to occur when
and if any of the following events occurs: (a) stockholder approval of a merger
or consolidation involving the Company or a sale of all or substantially all of
the assets of the Company (each a "reorganization"), in each case except for a
transaction in which the Company's shareholders receive at least 50% of the
stock of the surviving, resulting or acquiring corporation; (b) any "person"
(other than the Company or an employee benefit plan of the Company or a
corporation controlled by an employee benefit plan of the Company or a
corporation controlled by the Company's shareholders) becomes the "beneficial
owner" of shares of capital stock of the Company representing a majority of the
votes entitled to be cast on matters submitted
7
<PAGE> 8
to the shareholders of the Company; or (c) persons who, as of July 16, 1996
constituted the Company's Board (the "Incumbent Board") cease for any reason,
including without limitation as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to July
16, 1996 whose election was approved by at least a majority of the directors
then comprising the Incumbent Board shall, for purposes of this Agreement, be
considered a member of the Incumbent Board. For purposes of this paragraph, the
term "person" shall have the meaning used in Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and "beneficial
ownership" shall have the meaning set forth in Rule 13d-3 of the 1934 Act.
(12) Notices hereunder shall be mailed or delivered to the Treasurer of
the Company at its principal place of business at Grafton, Massachusetts, and
shall be mailed or delivered to Grantee at his address set forth below or at
such other address as he may subsequently furnish the Treasurer of the Company
in writing.
(13) The Grantee shall not have any rights of a shareholder by virtue of
the Option except with respect to Shares actually issued to him, and the
issuance of Shares shall confer no retroactive right to dividends.
(14) The Committee may not, without the written consent of the Grantee,
cause this Award Agreement to be revoked, and may not without such written
consent make or change any determination or change any term, condition or
provision affecting the Option if the determination or change would reduce or
adversely affect the Option or the Grantee's rights thereto.
(15) Notwithstanding anything herein to the contrary, on or after the
occurrence of a Triggering Event, as defined above, the Committee may not under
any
8
<PAGE> 9
circumstances make or change any determination or change any term, condition, or
provision affecting the Option if the determination or change would reduce or
adversely affect the Option or the Grantee's rights thereto.
(16) The Grantee shall designate a Beneficiary in writing and in such
manner as is acceptable to the Company. If the Grantee fails so to designate a
Beneficiary, or if no such designated Beneficiary survives the Grantee, the
Grantee's beneficiary shall be the Grantee's estate.
(17) The exercise of the Option shall be subject to the condition that if
at any time the Company shall determine (in accordance with the provisions of
the following sentence) that it is necessary as a condition of, or in connection
with, such exercise (a) to satisfy withholding tax or other withholding
liabilities, (b) to effect the listing, registration, or qualification on any
securities exchange or under any state or Federal law of any Shares otherwise
deliverable in connection with such exercise, or (c) to obtain the consent or
approval of any regulatory body, then in any such event such exercise shall not
be effective unless such withholding, listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company in its reasonable and good faith judgment. Any
such determination (described in the preceding sentence) by the Company must be
reasonable, must be made in good faith, and must be made without any intent to
postpone or limit such exercise, grant or distribution beyond the minimum extent
necessary and without any intent otherwise to deny or frustrate the Grantee's
rights in respect of the Option. In seeking to effect or obtain any such
withholding, listing, registration, qualification, consent or approval, the
Company shall act with all reasonable diligence. Any such postponement or
limitation affecting the right to exercise the Option shall not extend the time
within which the Option may be exercised, unless the Company and the Grantee
choose to amend the terms of this Award Agreement to provide for such an
extension; and neither the Company nor its directors
9
<PAGE> 10
or officers shall have any obligation or liability to the Grantee with respect
to any Shares with respect to which the Option shall lapse, because of a
postponement or limitation that conforms to the provisions of this Paragraph 17.
(18) No fractional Shares shall be issued pursuant to this Award
Agreement. The Committee shall determine whether cash, other securities, or
other property shall be paid or transferred in lieu of fractional Shares, or
whether fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(19) Nothing in this Award Agreement shall confer upon the Grantee the
right to continue in the employment or service of the Company or any Subsidiary
or affect any right that the Company or any Subsidiary may have to terminate the
employment or service of (or to demote or to exclude from future Awards under
the Plan) the Grantee at any time for any reason. The grant of the Option shall
not give the Grantee any right to similar grants in future years.
(20) So long as this Award Agreement shall remain in effect, the Company
shall furnish to the Grantee, as and when available, a copy of any Prospectus
issued with respect to the Shares covered hereby, and also a copy of all
material hereinafter distributed by the Company to its stockholders generally.
(21) This Award Agreement and the provisions thereof shall be binding
upon, and inure to the benefit of, any successor or successors of the Company
and the person or entity to whom the Option may have been transferred by will,
the laws of descent and distribution, or beneficiary designation hereunder.
(22) The Award Agreement shall be governed and its provisions construed,
enforced and administered in accordance with the laws of the Commonwealth of
10
<PAGE> 11
Massachusetts except to the extent that such laws may be superseded by any
Federal law. It may not be modified orally.
WYMAN-GORDON COMPANY
By: /s/ David P. Gruber
------------------------------
David P. Gruber, President
and Chief Executive Officer
The foregoing Award Agreement is hereby accepted and the terms
thereof hereby agreed to.
GRANTEE
/s/ J.S. Smith
- ----------------------------------
Grantee's Signature
Grantee's Address:
- ---------------------------------------
11611 KNOBCREST DRIVE
- ---------------------------------------
HOUSTON, TEXAS 77070
- ---------------------------------------
Social Security Number: ###-##-####
---------------
11
<PAGE> 1
EXHIBIT 10.M
PERFORMANCE SHARE AGREEMENT
UNDER THE WYMAN-GORDON LONG-TERM INCENTIVE PLAN
This Agreement is made as of the 16th day of July 1996 between
WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company") and J. Stewart
Smith, 11611 Knobcrest Drive, Houston, Texas 77070 (the "Grantee") relating to
9,100 shares (the "Shares") of the Company's common stock, par value $1.00 per
share (the "Common Stock") to be issued by the Company to the Grantee pursuant
to the terms and conditions set forth in the Wyman-Gordon Company Long-Term
Incentive Plan, as it may be amended from time to time in accordance with its
terms (the "Plan") and this Performance Share Agreement, as it may be amended
from time to time in accordance with its terms (the "Agreement") in
consideration of services heretofore rendered and to be rendered by Grantee to
the Company during the term of this Agreement. By execution of this Agreement,
the Grantee acknowledges receipt of a copy of the Plan and further agrees to be
bound thereby and by the actions, pursuant to the Plan, of the Committee
referred to in the Plan (the "Committee") and of the Company's Board of
Directors.
1. On the date hereof the Company shall issue the Shares to the Grantee
which shall be subject to risk of loss and forfeiture during a period
beginning on the date hereof and ending July 16, 2001 (the "Term of this
Agreement"). During the Term of this Agreement, the Committee shall
determine the average closing price of the Common Stock on the NASDAQ
National Market System, or on any successor market or exchange in which
the Common Stock is publicly traded, as quoted in the WALL STREET JOURNAL
during each period of 30 consecutive business days during the Term of
this Agreement, each such period being referred to herein as a
"Measurement Period" and the average prices being referred to herein as
the "Target Price." Restrictions on all or a portion of the Shares will
lapse only if the Target Price during a Measurement Period has reached
the amounts set forth below:
<PAGE> 2
CUMULATIVE NUMBER OF
SHARES ON WHICH
TARGET PRICE RESTRICTIONS WILL LAPSE
------------ -----------------------
Below $21.00 0
21.00 455
22.00 910
23.00 1,820
24.00 3,185
25.00 4,550
26.00 5,915
27.00 7,280
28.00 8,190
29.00 8,645
30.00 and above 9,100
Upon achieving a Target Price for a Measurement Period as set forth
above, the restrictions set forth above and in Section 3 below shall
lapse with respect to the number of Shares indicated in the table as to
which restrictions have not previously lapsed. At the end of the Term of
this Agreement, Grantee shall forfeit all right, title and interest in
the Shares to the extent that the Target Price with respect to such
Shares has not been attained.
2. The Grantee acknowledges receipt of a stock certificate registered in his
name for the Shares and bearing a legend setting forth the restrictions
set forth in Section 1 of this Agreement. The Grantee agrees,
concurrently with the execution of this Agreement, to deposit such stock
certificate with the Company together with a stock power relating thereto
endorsed in blank.
3. The Grantee acknowledges that the Shares may not be sold, assigned,
transferred, conveyed, pledged or otherwise encumbered during the Term of
this Agreement except in accordance with the provisions of this
Agreement. If the Grantee ceases to be employed by the Company prior to
the end of the Term of this Agreement, his rights to the Shares to the
extent restrictions have not
2
<PAGE> 3
previously lapsed as provided above in Section 1 will thereupon be
forfeited and revert to the Company.
4. Upon the attainment of the Target Price as provided above in Section 1
and the satisfaction of all other conditions contained in this Agreement,
the restrictions applicable to the designated number of Shares shall
lapse and a stock certificate for the number of Shares with respect to
which the restrictions have lapsed shall be delivered to the Grantee,
free of all such restrictions except any that may be imposed by law. Any
Shares as to which the restrictions shall not have lapsed at the end of
the Term of this Agreement shall be transferred to the Company without
any further action of the Grantee.
5. If an event of a Change of Control, as defined below, shall occur, the
Committee in its sole discretion may, but need not, determine that the
restrictions not previously lapsed and terminated shall be deemed lapsed
and terminated with respect to some or all of the Shares and such Shares,
if any as determined by the Committee, shall not be forfeited and shall
vest in the Grantee upon such terms and conditions as the Committee may
determine. "Change of Control" means any one of the following events: (1)
stockholder approval of a merger or consolidation involving the Company
or a sale of all or substantially all of the assets of the Company, in
each case except for a transaction in which the Company's shareholders
receive at least 50% of the stock of the surviving, resulting or
acquiring corporation; (2) any "person" (other than the Company or an
employee benefit plan of the Company or a corporation controlled by the
Company's employee benefit plan of the Company or a corporation
controlled by the Company's shareholders) becomes the "beneficial owner"
of shares of capital stock of the Company representing a majority of the
votes entitled to be cast on matters submitted to the shareholders of the
Company; or (3) persons who, as of July 16, 1996, constituted the
Company's Board (the "Incumbent Board") cease for any reason, including
without limitation as a result of a tender offer, proxy contest, merger
or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company
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subsequent to July 16, 1996 whose election was approved by at least a
majority of the directors then comprising the Incumbent Board shall for
purposes of this Agreement, be considered a member of the Incumbent
Board. For purposes of this paragraph, the term "person" shall have the
meaning used in Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934 as amended (the "1934 Act"), and "beneficial ownership" shall
have the meaning set forth in Rule 13d-3 of the 1934 Act.
6. The Grantee shall have all voting and dividend rights with respect to the
Shares, provided that non-cash dividends shall be deposited with the
Company together with a stock power or other appropriate instrument of
transfer endorsed in blank and shall be subject to the same restrictions
as the Shares.
7. If Grantee properly elects, within 30 days of the date of this Agreement,
to include in gross income for federal income tax purposes an amount
equal to the aggregate value of the Shares subject to the Award based on
the closing price of the Stock on the date of this Agreement, Grantee
shall make arrangements satisfactory to the Committee to pay to the
Company any federal, state or local taxes required to be withheld with
respect to such Shares. If the Grantee shall fail to make such tax
payments as are required, the Company, shall, to the extent permitted by
law, have the right to deduct from any payment of any kind otherwise due
to the Grantee any federal, state or local taxes of any kind required by
law to be withheld with respect to the Shares.
If the Grantee does not make the election described above in this
Section 7, Grantee shall, no later than the date as of which the
restrictions referred to in Section 1 and such other restrictions as may
have been imposed under this Agreement, shall lapse, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of
any federal, state or local taxes of any kind required by law to be
withheld with respect to the Shares, and the Company shall, to the extent
permitted by law, have the right to deduct from any payment of any kind
otherwise due to the Grantee any federal, state or local
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taxes of any kind required by law to be withheld with respect to the
Shares, and the Company shall, to the extent permitted by law, have the
right to deduct from any payment of any kind otherwise due to the Grantee
any federal, state or local taxes of any kind required by law to be
withheld with respect to the Shares. Any tax withholding may be
satisfied, at the discretion of the Committee, by the Company's
withholding Shares, otherwise deliverable to Grantee hereunder with a
Fair Market Value (as defined in the Plan) equal to all or a portion of
the amount to be withheld.
At the sole discretion of the Committee, the Company may make a
loan to Grantee in such amount as may be required to discharge his
federal income tax liability on account of the lapsing of restrictions
under Section 1 above assuming the resulting income is taxable at the
maximum applicable individual federal income tax rate. Such loan shall
have such maturity and other terms and conditions as the Committee shall
determine in its sole discretion, and shall bear interest at the
applicable federal rate under Section 1274(d) of the Internal Revenue
Code of any successor provision thereto.
8. The issuance of the Shares to Grantee shall be subject to the condition
that if at any time the Company shall determine (in accordance with the
provisions of the following sentence) that it is necessary as a condition
of, or in connection with, such exercise (a) to satisfy withholding tax
or other withholding liabilities, (b) to effect the listing,
registration, or qualification on any securities exchange or under any
state or Federal law of any Shares otherwise deliverable in connection
with such exercise, or (c) to obtain the consent or approval of any
regulatory body, then in any such event such exercise shall not be
effective unless such withholding, listing, registration, qualification,
consent or approval shall have been effected or obtained free of any
conditions not acceptable to the company in its reasonable and good faith
judgment.
9. This Agreement is in all respects governed by the terms of the Plan. All
of the terms and provisions of the Plan are hereby incorporated into this
Agreement by reference and are made a part of this Agreement. Each and
every provision of this Agreement shall be administered, interpreted and
construed so that this Agreement shall conform to the provisions of the
Plan. Any provisions of this
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Agreement that cannot be so administered, interpreted, or construed shall
be disregarded, and, accordingly, in the event of any conflict between
this Agreement and the Plan, the latter will govern. Any capitalized
terms used herein and not defined herein have the respective meanings
ascribed to them in the Plan. Whenever the word "Grantee" is used herein
in a context where the provision should logically be construed to apply
to the Grantee's beneficiary, the word "Grantee" shall be deemed to
include such Beneficiary.
10. In the event that there is any change in the Company Common Stock through
merger, consolidation, reorganization, recapitalization, or otherwise; or
if there shall be any dividend on the Shares, payable in Shares, or an
extraordinary cash dividend or other extraordinary distribution; or if
there shall be a stock split, reverse stock split, combination of Shares,
exercisability of stock purchase rights received under the Company's
Stockholder Rights Plan, or other similar corporate transaction or event
that affects the Shares, such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement
of the rights of the Grantee or of the potential benefits intended to be
made available under this Agreement, the number and kind of Shares and
the other relevant provisions of this Agreement shall be appropriately
adjusted as provided in Section 12 of the Plan.
11. Notices hereunder shall be mailed or delivered to the Treasurer of the
Company at its principal place of business at Grafton, Massachusetts, and
shall be mailed or delivered to Grantee at his address set forth above or
at such other address as he may subsequently furnish the Treasurer of the
Company in writing.
12. The Committee may not, without the written consent of the Grantee, cause
this Agreement to be revoked, and may not without such written consent
make or change any determination or change any term, condition or
provision hereunder if the determination or change would reduce or
adversely affect the Grantee's rights hereunder.
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13. Notwithstanding anything herein to the contrary, on or after the
occurrence of a Change in Control, as defined above, the Committee may
not under any circumstances make or change any determination or change
any term, condition, or provision affecting this Agreement if the
determination or change would reduce or adversely affect the Grantee's
rights hereunder.
14. The Grantee shall designate a Beneficiary in writing and in such manner
as is acceptable to the Company. If the Grantee fails so to designate a
Beneficiary, or if no such designated Beneficiary survives the Grantee,
the Grantee's beneficiary shall be the Grantee's estate.
15. Nothing in this Agreement shall confer upon the Grantee the right to
continue in the employment or service of the Company or affect any right
that the Company may have to terminate the employment or service of (or
to demote or to exclude from future Awards under the Plan) the Grantee at
any time for any reason.
16. So long as this Agreement shall remain in effect, the Company shall
furnish to the Grantee, as and when available, a copy of any Prospectus
issued with respect to the Shares covered hereby, and also a copy of all
material hereinafter distributed by the Company to its stockholders
generally.
17. This Agreement is nontransferable by Grantee other than by will or by the
laws of descent and distribution. This Agreement and the provisions
thereof shall be binding upon, and inure to the benefit of, any successor
or successors of the Company and the person or entity to whom his rights
hereunder may have been transferred by will, the laws of descent and
distribution, or beneficiary designation hereunder.
18. This Agreement shall be governed and its provisions construed, enforced
and administered in accordance with the laws of the Commonwealth of
Massachusetts except to the extend that such laws may be superseded by
any Federal law. It may not be modified orally.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WYMAN-GORDON COMPANY
By: /s/ David P. Gruber
-----------------------------------
David P. Gruber, President
and Chief Executive Officer
/s/ J. Stewart Smith
-----------------------------------
J. Stewart Smith
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EXHIBIT 10.S
EXECUTIVE SEVERANCE AGREEMENT
This AGREEMENT ("Agreement") dated October 15, 1997 by and between
Wyman-Gordon Company, a Massachusetts corporation (the "Company"), and Colin
Stead (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to have the services of the Executive as
its Senior Vice President, Quality and Technology; and
WHEREAS, the Executive is willing to serve the Company as its Senior
Vice President, Quality and Technology, but desires assurance that he will not
be materially disadvantaged by a change in control of the Company;
NOW, THEREFORE, in consideration of the Executive's service to the
Company and the mutual agreements herein contained, the Company and the
Executive hereby agree, as follows:
<PAGE> 2
ARTICLE I
ELIGIBILITY FOR BENEFITS
SECTION 1.1. QUALIFYING TERMINATION. The Company shall not be required to
provide any benefits to the Executive pursuant to this Agreement unless a
Qualifying Termination occurs before the Agreement expires in accordance with
Section 6.1 hereof. For purposes of this Agreement, a Qualifying Termination
shall occur only if
(a) a Change in Control occurs, and
(b) within three years after the Change in Control,
(i) the Company terminates the Executive's employment other than
for Cause; or
(ii) the Executive terminates his employment with
the Company for Good Reason;
provided, that a Qualifying Termination shall not occur if the Executive's
employment with the Company terminates by reason of the Executive's Disability,
death, or retirement. For the purposes hereof "retirement" shall mean any
termination of employment which occurs at or after age 65.
SECTION 1.2. CHANGE IN CONTROL. Except as provided below, a Change in
Control shall be deemed to occur when and only when the first of the following
events occurs:
(a) the acquisition (including by purchase, exchange, merger or other
business combination, or any
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combination of the foregoing) by any individuals, firms,
corporations or other entities, acting in concert ("Person"),
together with all Affiliates and Associates of such Person, of
beneficial ownership of securities of the Company representing 20
percent or more of the combined voting power of the Company's
then outstanding voting securities, or
(b) members of the Incumbent Board cease to constitute a majority of
the Board of Directors.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
pursuant to paragraph (a), above, (i) solely because 20 percent or more of the
combined voting power of the Company's outstanding securities is acquired by one
or more employee benefit plans maintained by the Company, or (ii) if the
Executive is included among the individuals, firms, corporations or other
entities that, acting in concert, acquire the Company's securities. For purposes
of this Section 1.2, the terms "Affiliates" and "Associates" shall have the
meanings set forth in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"); the
terms "beneficial ownership" and "beneficially owned" shall have the meaning set
forth in section 13(d) of the Exchange Act, as amended, and in Rule 13d-3
promulgated thereunder, the term "Board of Directors" shall mean the Board of
Directors of the
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Company and the term "Incumbent Board" shall mean (i) the members of the Board
of Directors on the date hereof, to the extent that they continue to serve as
members of the Board of Directors, and (ii) any individual who becomes a member
of the Board of Directors after the date hereof, if his election or nomination
for election as a director was approved by a vote of at least three quarters of
the then Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors.
SECTION 1.3. TERMINATION FOR CAUSE. The Company shall have Cause to
terminate the Executive's employment with the Company for purposes of Section
1.1 hereof only if the Executive (a) engages in unlawful acts intended to result
in the substantial personal enrichment of the Executive at the Company's
expense, or (b) engages (except (i) by reason of incapacity due to illness or
injury or (ii) in connection with an actual or anticipated termination of
employment by the Executive for Good Reason) in a material violation of his
responsibilities to the Company that results in a material injury to the
Company.
SECTION 1.4. TERMINATION FOR GOOD REASON. The Executive shall have a Good
Reason for terminating employment with the
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Company only if one or more of the following occurs after a Change in Control:
(a) a change in the Executive's status or position (including for
this purpose a change in the principal place of the Executive's
employment on a basis that does not conform with the Company's
present policies for executive relocation, but excluding required
travel on the Company's business to an extent substantially
consistent with the Executive's present business travel
obligations) with the Company that, in the Executive's reasonable
judgment, represents an adverse change from the Executive's
status or position in effect immediately before the Change in
Control;
(b) the assignment to the Executive of any duties or responsibilities
that, in the Executive's reasonable judgment, are inconsistent
with the Executive's status or position in effect immediately
before the Change in Control;
(c) layoff or involuntary termination of the Executive's employment,
except in connection with the termination of the Executive's
employment for Cause or as a result of the Executive's
Disability, death or retirement;
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(d) a reduction by the Company in the Executive's total compensation
as in effect at the time of the Change in Control (which shall be
deemed, for this purpose, to be equal to his base salary plus the
most recent award that he has earned under the Company's
Incentive Compensation Plan, as amended from time to time, or any
successor thereto (the "ICP")) or as the same may be increased
from time to time;
(e) the failure by the Company to continue in effect any Plan in
which the Executive is participating at the time of the Change in
Control (or plans or arrangements providing the Executive with
substantially equivalent benefits) other than as a result of the
normal expiration of any such Plan in accordance with its terms
as in effect at the time of the Change in Control;
(f) any action or inaction by the Company that would adversely affect
the Executive's continued participation in any Plan on at least
as favorable a basis as was the case at the time of the Change in
Control, or that would materially reduce the Executive's benefits
in the future under the Plan or deprive him if any material
benefits that he
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enjoyed at the time of the Change in Control, except to the
extent that such action or inaction by the Company is required by
the terms of the Plan as in effect immediately before the Change
in Control, or is necessary to comply with applicable law or to
preserve the qualification of the Plan under section 401(a) of
the Internal Revenue Code (the "Code"), and except to the extent
that the Company provides the Executive with substantially
equivalent benefits;
(g) the Company's failure to obtain the express assumption of this
Agreement by any successor to the Company as provided by Section
6.3 hereof;
(h) any material violation by the Company of any agreement (including
this Agreement) between it and the Executive; or
(i) the failure by the Company, without the Executive's consent, to
pay to him any portion of his current compensation, or to pay to
the Executive any portion of any deferred compensation, within 30
days of the date the Executive notifies the Company that any such
compensation payment is past due.
Notwithstanding the foregoing, no action by the Company shall give rise to a
Good Reason if it results from the Executive's
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termination for Cause, death or retirement, and no action by the Company
specified in paragraphs (a) through (d) of the preceding sentence shall give
rise to a Good Reason if it results from the Executive's Disability. A Good
Reason shall not be deemed to be waived by reason of the Executive's continued
employment as long as the termination of the Executive's employment occurs
within the time prescribed by Section 1.1(b) hereof. For purposes of this
Section 1.4, "Plan" means any compensation plan, such as an incentive or stock
option plan, or any employee benefit plan, such as a thrift, pension,
profit-sharing, stock bonus, long-term performance award, medical, disability,
accident, or life insurance plan, or any other plan, program or policy of the
Company that is intended to benefit employees.
SECTION 1.5. DISABILITY. For purposes of this Agreement, "Disability" shall
mean illness or injury that prevents the Executive from performing his duties
(as they existed immediately before the illness or injury) on a full-time basis
for six consecutive months.
SECTION 1.6. NOTICE. If a Change in Control occurs, the Company shall
notify the Executive of the occurrence of the Change in Control within two weeks
after the Change in Control.
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ARTICLE II
BENEFITS AFTER A QUALIFYING TERMINATION
SECTION 2.1. BASIC SEVERANCE PAYMENT. If the Executive incurs a Qualifying
Termination following a Change in Control that occurs on or before termination
of this Agreement as provided in Section 6.1 hereof, the Company shall pay
within 30 days after the date of the Qualifying Termination to the Executive a
single lump sum cash amount equal to his Total Annual Compensation multiplied by
the lesser of (a) 2.50 or (b) .0833 multiplied by the number of full months
remaining between termination and his attaining age 65. "Total Annual
Compensation" shall mean the sum of annual base salary in effect immediately
preceding termination or the Change of Control, whichever is higher, and annual
incentive compensation earned under the "ICP" (annualized in the case of less
than a full year's service) in the last full fiscal year immediately preceding
termination or the Change in Control, whichever is higher.
SECTION 2.2. INSURANCE. If the Executive incurs a Qualifying Termination
following a Change in Control that occurs on or before termination of this
Agreement as provided in Section 6.1 hereof, the Company shall provide the
Executive, at the Company's expense, for a period beginning on the date of the
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<PAGE> 10
Qualifying Termination, the same medical, accident, disability, life and any
other insurance coverage as was provided to him by the Company immediately
before the Change in Control (or, if greater, as in effect immediately before
the Qualifying Termination occurs); such coverage shall end upon the earlier of
(a) the expiration of 24 months after the Qualifying Termination or (b) with
respect to each coverage, the date on which the Executive first becomes eligible
for insurance coverage of a similar nature provided by a firm that employs him
following the Qualifying Termination.
SECTION 2.3. EXECUTIVE LONG-TERM INCENTIVE PROGRAM. If the Executive incurs
a Qualifying Termination following a Change in Control that occurs on or before
termination of this Agreement as provided in Section 6.1 hereof, all of the
options to purchase common stock of the Company (and the alternative common
stock appreciation rights) granted to the Executive prior to termination of this
Agreement as provided in Section 6.1 hereof, under the Executive Long-Term
Incentive Program shall become exercisable in accordance with the terms set
forth in the applicable Agreement.
SECTION 2.4. NONDUPLICATION. Nothing in this Agreement shall require the
Company to make any payment or to provide any benefit or service credit that the
Company is otherwise required to provide under any other contract, agreement,
policy, plan or arrangement.
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ARTICLE III
EFFECT ON SEVERANCE POLICY
SECTION 3.1. EFFECT ON SEVERANCE POLICY. If the Executive becomes entitled to
receive benefits hereunder, the Executive shall not be entitled to any benefits
under any other Company severance policy.
ARTICLE IV
TAX MATTERS
SECTION 4.1. WITHHOLDING. The Company may withhold from any amount payable
to the Executive hereunder all federal, state or other taxes that the Company
may reasonably determine are required to be withheld pursuant to any applicable
law or regulation.
SECTION 4.2 SPECIAL LIMITATION.
(a) If part or all of the payments or benefits payable to the
Executive, when added to other payments payable to the Executive
as a result of a Change in Control, constitute Parachute
Payments, the following limitation shall apply. If the Parachute
Payments, net of the sum of the Excise Tax and the Federal income
and employment taxes, state and local income taxes on the amount
of the Parachute Payments in excess of the Threshold
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<PAGE> 12
Amount, are greater than the Threshold Amount, the Executive
shall be entitled to the full payments and benefits payable under
this Agreement. If the Threshold Amount is greater than the
Parachute Payments, net of the sum of the Excise Tax, and the
Federal income and employment taxes, state and local income taxes
on the amount of the Parachute Payments in excess of the
Threshold Amount, then the payments and benefits under this
Agreement shall be reduced to the extent necessary so that the
maximum Parachute Payments shall not exceed the Threshold Amount.
In the event a reduction is required, it shall be the Executive's
choice as to which payments or benefits shall be so reduced. The
Employer shall select a firm of independent certified public
accountants to determine which of the foregoing alternative
provisions shall apply. For purposes of determining the amount of
the Federal income and employment taxes, and state and local
income taxes on the amount of the Parachute Payments in excess of
the Threshold Amount, the Executive shall be deemed to pay
Federal income taxes at the
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highest marginal rate of Federal income taxation applicable to
individuals for the calendar year in which the payments and
benefits under this Agreement are payable and state and local
income taxes at the highest marginal rates of individual taxation
in the state and locality of the Executive's residence for the
calendar year in which the payments and benefits under this
Agreement are payable, net of the maximum reduction in Federal
income taxes which could be obtained from deduction of such state
and local taxes.
(b) ADDITIONAL DEFINITIONS
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Parachute Payments" shall mean any payment or provision by the
Employer of any amount or benefit to and for the benefit of the
Executive, whether paid or payable or provided or to be provided under
the terms of this Agreement or otherwise, that would be considered
"parachute payments" within the meaning of Section 280G(B)(2)(A) of
the Code and the regulations promulgated thereunder.
"Threshold Amount" shall mean three times the Executive's "base
amount" within the meaning of Section 280G(b)(3) of the Code and the
regulations promulgated thereunder, less one dollar.
"Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code.
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<PAGE> 14
ARTICLE V
COLLATERAL MATTERS
SECTION 5.1. NATURE OF PAYMENTS. All payments to the Executive under this
Agreement shall be considered either payments in consideration of his continued
service to the Company or severance payments in consideration of his past
services thereto.
SECTION 5.2. LEGAL EXPENSES. The Company shall pay all legal fees and
expenses that the Executive may incur as a result of the Company's contesting
the validity, the enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
SECTION 5.3. MITIGATION. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement either by seeking other
employment or otherwise. The amount of any payment provided for herein shall not
be reduced by an remuneration that the Executive may earn from employment with
another employer or otherwise following his Qualifying Termination.
SECTION 5.4. AUTHORITY. The execution of this Agreement has been authorized
by the Board of Directors of the Company.
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ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1. TERM OF AGREEMENT. This Agreement shall become effective on
the date hereof and shall continue in effect until the earliest of (a) October
31, 1999, if no Change in Control has occurred before that date; provided,
however, that commencing on November 1, 1999 and each November 1 thereafter, the
term of this Agreement shall automatically be extended for an additional year
unless, not later than January 30 of the same year, the Company shall have given
notice that it does not wish to extend this Agreement; (b) the termination of
the Executive's employment with the Company for any reason prior to a Change in
Control; (c) the Company's termination of the Executive's employment for Cause,
or the Executive's resignation for other than Good Reason, following a Change in
Control and the Company's and the Executive's fulfillment of all of their
obligations hereunder; and (d) the expiration following a Change in Control of
three years and the fulfillment by the Company and the Executive of all of their
obligations hereunder. Furthermore, nothing in this Article VI shall cause this
Agreement to terminate before both the Company and the Executive have fulfilled
all of their obligations hereunder.
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SECTION 6.2. GOVERNING LAW. Except as otherwise expressly provided herein,
this Agreement and the rights and obligations hereunder shall be construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
SECTION 6.3. SUCCESSOR TO THE COMPANY. This Agreement shall inure to the
benefit of and shall be binding upon and enforceable by the Company and any
successor thereto, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or substantially all of the
business or assets of the Company, whether by merger, consolidation, sale or
otherwise, but shall not otherwise be assignable by the Company. Without
limitation of the foregoing sentence, the Company shall require any successor
(whether direct or indirect, by merger, consolidation, sale or otherwise) to all
of substantially all of the business or assets of the Company, by agreement in
form satisfactory to the Executive, expressly, absolutely and unconditionally to
assume and to agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as heretofore defined and any successor to all or substantially all of
its business or assets that executes and delivers the agreement provided for in
this Section 6.3 or that becomes bound by this Agreement either pursuant to this
Agreement or by operation of law.
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SECTION 6.4. SUCCESSOR TO THE EXECUTIVE. This Agreement shall inure to the
benefit of and shall be binding upon and enforceable by the Executive and his
personal and legal representatives, executors, administrators, heirs,
distributees, legatees and, subject to the Section 6.5 hereof, his designees
("Successors"). If the Executive should die while amounts are or may be payable
to him under this Agreement, references hereunder to the "Executive" shall,
where appropriate, be deemed to refer to his Successors; provided that nothing
in this Section 6.5 shall supersede the terms of any plan or arrangement (other
than this Agreement) that is affected by this Agreement.
SECTION 6.5. NONALIENABILITY. No right of or amount payable to the
Executive under this Agreement shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, hypothecation, encumbrance,
charge, execution, attachment, levy or similar process or to setoff against any
obligations or to assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the immediately preceding
sentence shall be void. However, this Section 6.5 shall not prohibit the
Executive from designating one or more persons, on a form satisfactory to the
Company, to receive amounts payable to him under this Agreement in the event
that he should die before receiving them.
SECTION 6.6. NOTICES. All notices provided for in this Agreement shall be
in writing. Notices to the Company shall be
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deemed given when personally delivered or sent by certified or registered mail
or overnight delivery service to Wyman-Gordon Company, 244 Worcester Street,
North Grafton, Massachusetts 01536, Attention: Vice President, General Counsel
and Clerk. Notices to the Executive shall be deemed given when personally
delivered or sent by certified or registered mail or overnight delivery service
to the last address for the Executive shown on the records of the Company.
Either the Company or the Executive may, by notice to the other, designate an
address other than the foregoing for the receipt of subsequent notices.
SECTION 6.7. AMENDMENT. No amendment to this Agreement shall be effective
unless in writing and signed by both the Company and the Executive.
SECTION 6.8. WAIVERS. No waiver of any provision of this Agreement shall be
valid unless approved in writing by the party giving such waiver. No waiver of a
breach under any provision of this Agreement shall be deemed to be a waiver of
such provision or any other provision of this Agreement or any subsequent
breach. No failure on the part of either the Company or the Executive to
exercise, and no delay in exercising, any right or remedy conferred by law or
this Agreement shall operate as waiver of such right or remedy, and no exercise
or waiver, in whole or in part, or any right or remedy conferred by law or
herein shall operate as a waiver of any other right or remedy.
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SECTION 6.9. SEVERABILITY. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall not affect any other provision of this Agreement or part
thereof, each of which shall remain in full force and effect.
SECTION 6.10. CAPTIONS. The captions to this respective articles and
section of this Agreement are intended for convenience of reference only and
have no substantive significance.
SECTION 6.11. COUNTERPARTS. This Agreement may be executed in a number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute a single instrument.
SECTION 6.12. ENTIRE AGREEMENT. This Agreement contains a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof, superseding all
previous oral statements and other writings (including the Prior Agreement) with
respect thereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ATTEST: WYMAN-GORDON COMPANY
/s/ Shirley A. Peco By: /s/ David P. Gruber
- ------------------------------ ------------------------------
David P. Gruber, President
Chief Executive Officer
ATTEST:
/s/ Awanda Fontenat /s/ Colin Stead
- ------------------------------ ------------------------------
Colin Stead
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EXHIBIT 10.AI
PERFORMANCE STOCK OPTION AGREEMENT
UNDER THE WYMAN-GORDON COMPANY LONG-TERM INCENTIVE PLAN
WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company"),
hereby grants to Colin Stead (the "Grantee"), who is now employed by the Company
or by a Subsidiary of the Company, a Non-qualified Stock Option (the "Option")
to purchase prior to July 16, 2006 (the "Expiration Date") an aggregate of
37,375 shares of Common Stock of the Company ("Shares") at a price of $16.75 per
Share pursuant to the terms and conditions set forth in the Wyman-Gordon Company
Long-Term Incentive Plan as approved by the stockholders of the Company on
October 18, 1995, as it may be amended from time to time in accordance with its
terms (the "Plan") and this Stock Option Agreement, as it may be amended from
time to time in accordance with its terms (the "Award Agreement"). By execution
of this Award Agreement, the Grantee acknowledges receipt of a copy of the Plan
and further agrees to be bound thereby and by the actions, pursuant to the Plan,
of the Committee referred to in the Plan (the "Committee") and of the
Wyman-Gordon Company Board of Directors.
(1) The Option is in all respects governed by the terms of the
Plan. All of the terms and provisions of the Plan are hereby incorporated into
this Award Agreement by reference and are made a part of this Award Agreement.
For the convenience of the Grantee, certain but not all of the provisions of the
Plan are also summarized or elaborated upon in this Award Agreement. Each and
every provision of this Award Agreement shall be administered, interpreted, and
construed so that the
<PAGE> 2
Option shall conform to the provisions of the Plan. Any provisions of this Award
Agreement that cannot be so administered, interpreted, or construed shall be
disregarded, and, accordingly, in the event of any conflict between the Award
Agreement and the Plan, the latter will govern. Any capitalized terms used
herein and not defined herein have the respective meanings ascribed to them in
the Plan. Whenever the word "Grantee" is used herein in a context where the
provision should logically be construed to apply to the Grantee's Beneficiary,
the word "Grantee" shall be deemed to include such Beneficiary.
(2) The date of grant of the Option is July 16, 1996.
(3) The Option is a Non-qualified Stock Option and is not an
Incentive Stock Option.
(4) Subject to the terms of this Award Agreement, the Option shall
be exercisable from and after July 16, 2003; provided, however, that the option
may be exercised by the Grantee at any time after January 16, 1997 with respect
to the number of shares set forth below if the average closing price during a
period of 30 consecutive business days of the Common Stock of the Company, par
value $1.00 per share, on the NASDAQ National Market System, or on any successor
market or exchange in which the Common Stock is publicly traded, as quoted in
the WALL STREET JOURNAL reaches the indicated price levels.
2
<PAGE> 3
CUMULATIVE
NO. OF
STOCK PRICE OPTIONS VESTED
----------- --------------
Below $21.00 0
21.00 1,869
22.00 3,738
23.00 7,475
24.00 13,081
25.00 18,688
26.00 24,294
27.00 29,900
28.00 33,368
29.00 35,506
30.00 or above 37,375
(5) Grantee may exercise the Option only in the following manner: From
time to time prior to the Expiration Date and subject to the provisions of
Paragraph 4 above, the Grantee may give written notice to the Treasurer of the
Company of his election to purchase some or all of the Shares purchasable at the
time of such notice. Said notice shall specify the number of Shares to be
purchased and shall be accompanied by payment therefor (a) in U.S. dollars by
personal check, bank draft, or money order payable to the order of the Company;
(b) in Shares that have been held by the Grantee for at least six (6) months and
that have a Fair Market Value equal to the purchase price; (c) to the extent not
limited or prohibited by the Committee, by payment made by the Grantee's broker,
in U.S. dollars by personal check, bank draft, or money order payable to the
order of the Company, pursuant to the Grantee's instructions; or (d) by a
combination thereof; and by any agreement, statement, or other evidence that the
Committee may require in order to satisfy itself that the issuance of the Shares
being purchased pursuant to such exercise and any subsequent resale thereof will
be in compliance with applicable laws and regulations relating to the issuance
and sale of securities, including the provisions of the Securities Act of 1933
and regulations promulgated thereunder.
3
<PAGE> 4
(6) The exercise of the Option shall be deemed to occur (a) on the date
that the notice of exercise and the personal check, bank draft, money order or
Shares are received by the Company, or (b) if such notice of exercise and
payment are mailed in the United States, and the United States Postal Service
has stamped its postmark thereon, then on the date of such postmark. As soon as
practicable after each exercise of the Option and compliance by the Grantee with
all applicable conditions, including any payments to the Company that may be
required pursuant to Paragraphs 5 and 7 hereof, the Company shall mail or
deliver or cause to be mailed or delivered to the Grantee a stock certificate or
certificates for the number of Shares that the Grantee shall be entitled to
receive upon such exercise under the provisions of this Award Agreement.
(7) In each case where the Grantee shall exercise the Option, in whole or
in part, the Company will notify the Grantee of the amount of withholding tax,
if any, that must be paid under Federal and, where applicable, state and local
law, by reason of such exercise. It shall be a condition to any delivery of
Shares or payment to be made to the Grantee hereunder that provision
satisfactory to the Company shall have been made for payment of any taxes the
Company determines, in its reasonable opinion, are required to be paid or
withheld pursuant to any applicable law or regulation. The Grantee may
irrevocably elect to have any withholding tax obligation satisfied by either of
the methods described in clause (a) or (c) of Paragraph 5, above, or a
combination thereof, whether or not the same method is used to pay the purchase
price of the Option. As an alternative to such an election with respect to all
or any part of the withholding tax obligation, the Company and its Subsidiaries
also shall, to the extent permitted by law, have the right to deduct from any
payment or transfer of any kind (whether of cash, Shares, or other property, and
whether or not related to the Plan) otherwise due to the Grantee any such taxes
required to be withheld.
4
<PAGE> 5
(8) This Award Agreement and the Grantee's right to exercise the
Option shall terminate, as to any portion of the Option not theretofore
exercised, whenever the Grantee is for any reason no longer employed by the
Company or a Subsidiary; subject, however, to the following provisions:
(a) If the Company or a Subsidiary terminates the Grantee's
employment for reasons other than fraud, dishonesty, willful misconduct,
retirement, or disability, or if the Grantee resigns from the Company and the
Subsidiaries (as applicable), the Grantee shall have a period of 90 days
immediately after such termination in which to exercise the Option to the extent
then exercisable. The Option shall not become exercisable with respect to any
Shares with respect to which it was not exercisable on the date of such
termination of employment.
(b) If the termination of Grantee's employment results from the
Grantee's death, retirement or disability, the Grantee (or his Beneficiary in
the case of his death) shall have a period of three years following such
termination to exercise in whole or in part the Option with respect to Shares
subject to the Option, to the extent then exercisable. The Option shall not
become exercisable with respect to any Shares with respect to which it was not
exercisable on the date of such termination of employment.
(c) If the Grantee dies during the three-year period following
retirement or disability referred to in Subsection (b) above, the Option may be
exercised in whole or in part by his Beneficiary before the expiration of one
year after the date of his death or the expiration of the three-year period
following retirement or disability referred to in Subsection (b) above,
whichever occurs later.
For purposes of this Paragraph 8, the term "retirement" shall mean
termination of employment after the Grantee has become eligible for an early,
normal or late
5
<PAGE> 6
retirement benefit (but not a terminated vested or deferred vested benefit)
under the tax-qualified deferred benefit pension plan maintained by the Company
and/or its Subsidiaries that covers the Grantee, and the term "disability" shall
have the meaning ascribed to it in the Wyman-Gordon Company Savings/Investment
Plan.
(9) The Option is nontransferable other than by will or by the laws of
descent and distribution, and the Option may be exercised during the lifetime of
the Grantee only by him.
(10) In the event that there is any change in the Shares through merger,
consolidation, reorganization, recapitalization, or otherwise; or if there shall
be any dividend on the Shares, payable in Shares, or an extraordinary cash
dividend or other extraordinary distribution; or if there shall be a stock
split, reverse stock split, combination of Shares, exercisability of stock
purchase rights received under the Company's Stockholder Rights Plan, or other
similar corporate transaction or event that affects the Shares, such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the rights of the Grantee or of the potential
benefits intended to be made available under the Plan, the number and kind of
Shares subject to the Option, the purchase price, and the other relevant
provisions of this Award Agreement shall be appropriately adjusted as provided
in Section 12 of the Plan.
(11) As provided in Section 25 of the Plan in the event of a Triggering
Event, as hereinafter defined, the Option, to the extent it has not theretofore
been exercised, shall be fully exercisable without regard to the schedule in
Paragraph 4 above, but the Option shall thereupon become a Limited Right, as
hereinafter defined, and the terms thereof shall be modified as described in the
remaining provisions of this Paragraph 11. In the event of a Triggering Event,
the Grantee shall have the right (the "Limited Right") to have the Company, at
the election of the Grantee (which election for each Triggering
6
<PAGE> 7
Event, as hereinafter defined, may be made only during the period beginning on
the effective date of such Triggering Event, as hereinafter defined, and ending
on the 45th day following such date), purchase all or any Shares subject to the
Option (to the extent not theretofore exercised) for an amount (payable entirely
in cash) equal to the number of Shares with respect to which the Limited Right
is exercised, multiplied by the excess of the higher of (a) the highest Fair
Market Value of a Share during the period commencing on the ninetieth (90th) day
preceding the exercise of the Limited Right and ending on the date of exercise
and (b) either (i) if an event described in clause (b) of the definition of
"Triggering Event," below, has occurred, the highest price per Share paid for
any Share as shown on Schedule 13D (or an amendment thereto) filed pursuant to
Section 13(d) of the 1934 Act by any person or group (as defined in that
definition) whose acquisition caused the Triggering Event to occur, or (ii) if
an event described in clause (a) of the definition of "Triggering Event," below,
has occurred, the fixed or formula price specified in the reorganization (as
defined in that definition) if such price is determinable as of the date of
exercise of the Limited Right OVER the purchase price of the Option. Such
purchase pursuant to the exercise of a Limited Right shall be deemed to be an
exercise of the Option. Notwithstanding any other provision of this Award
Agreement, no Limited Right may be exercised after the Expiration Date, but a
Limited Right may be exercised within six months of the date hereof. For
purposes of this Paragraph 11, a Triggering Event shall be deemed to occur when
and if any of the following events occurs: (a) stockholder approval of a merger
or consolidation involving the Company or a sale of all or substantially all of
the assets of the Company (each a "reorganization"), in each case except for a
transaction in which the Company's shareholders receive at least 50% of the
stock of the surviving, resulting or acquiring corporation; (b) any "person"
(other than the Company or an employee benefit plan of the Company or a
corporation controlled by an employee benefit plan of the Company or a
corporation controlled by the Company's shareholders) becomes the "beneficial
owner" of shares of capital stock of the Company representing a majority of the
votes entitled to be cast on matters submitted
7
<PAGE> 8
to the shareholders of the Company; or (c) persons who, as of July 16, 1996
constituted the Company's Board (the "Incumbent Board") cease for any reason,
including without limitation as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to July
16, 1996 whose election was approved by at least a majority of the directors
then comprising the Incumbent Board shall, for purposes of this Agreement, be
considered a member of the Incumbent Board. For purposes of this paragraph, the
term "person" shall have the meaning used in Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and "beneficial
ownership" shall have the meaning set forth in Rule 13d-3 of the 1934 Act.
(12) Notices hereunder shall be mailed or delivered to the Treasurer of
the Company at its principal place of business at Grafton, Massachusetts, and
shall be mailed or delivered to Grantee at his address set forth below or at
such other address as he may subsequently furnish the Treasurer of the Company
in writing.
(13) The Grantee shall not have any rights of a shareholder by virtue of
the Option except with respect to Shares actually issued to him, and the
issuance of Shares shall confer no retroactive right to dividends.
(14) The Committee may not, without the written consent of the Grantee,
cause this Award Agreement to be revoked, and may not without such written
consent make or change any determination or change any term, condition or
provision affecting the Option if the determination or change would reduce or
adversely affect the Option or the Grantee's rights thereto.
(15) Notwithstanding anything herein to the contrary, on or after the
occurrence of a Triggering Event, as defined above, the Committee may not under
any
8
<PAGE> 9
circumstances make or change any determination or change any term, condition, or
provision affecting the Option if the determination or change would reduce or
adversely affect the Option or the Grantee's rights thereto.
(16) The Grantee shall designate a Beneficiary in writing and in such
manner as is acceptable to the Company. If the Grantee fails so to designate a
Beneficiary, or if no such designated Beneficiary survives the Grantee, the
Grantee's beneficiary shall be the Grantee's estate.
(17) The exercise of the Option shall be subject to the condition that if
at any time the Company shall determine (in accordance with the provisions of
the following sentence) that it is necessary as a condition of, or in connection
with, such exercise (a) to satisfy withholding tax or other withholding
liabilities, (b) to effect the listing, registration, or qualification on any
securities exchange or under any state or Federal law of any Shares otherwise
deliverable in connection with such exercise, or (c) to obtain the consent or
approval of any regulatory body, then in any such event such exercise shall not
be effective unless such withholding, listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company in its reasonable and good faith judgment. Any
such determination (described in the preceding sentence) by the Company must be
reasonable, must be made in good faith, and must be made without any intent to
postpone or limit such exercise, grant or distribution beyond the minimum extent
necessary and without any intent otherwise to deny or frustrate the Grantee's
rights in respect of the Option. In seeking to effect or obtain any such
withholding, listing, registration, qualification, consent or approval, the
Company shall act with all reasonable diligence. Any such postponement or
limitation affecting the right to exercise the Option shall not extend the time
within which the Option may be exercised, unless the Company and the Grantee
choose to amend the terms of this Award Agreement to provide for such an
extension; and neither the Company nor its directors
9
<PAGE> 10
or officers shall have any obligation or liability to the Grantee with respect
to any Shares with respect to which the Option shall lapse, because of a
postponement or limitation that conforms to the provisions of this Paragraph 17.
(18) No fractional Shares shall be issued pursuant to this Award
Agreement. The Committee shall determine whether cash, other securities, or
other property shall be paid or transferred in lieu of fractional Shares, or
whether fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(19) Nothing in this Award Agreement shall confer upon the Grantee the
right to continue in the employment or service of the Company or any Subsidiary
or affect any right that the Company or any Subsidiary may have to terminate the
employment or service of (or to demote or to exclude from future Awards under
the Plan) the Grantee at any time for any reason. The grant of the Option shall
not give the Grantee any right to similar grants in future years.
(20) So long as this Award Agreement shall remain in effect, the Company
shall furnish to the Grantee, as and when available, a copy of any Prospectus
issued with respect to the Shares covered hereby, and also a copy of all
material hereinafter distributed by the Company to its stockholders generally.
(21) This Award Agreement and the provisions thereof shall be binding
upon, and inure to the benefit of, any successor or successors of the Company
and the person or entity to whom the Option may have been transferred by will,
the laws of descent and distribution, or beneficiary designation hereunder.
(22) The Award Agreement shall be governed and its provisions construed,
enforced and administered in accordance with the laws of the Commonwealth of
10
<PAGE> 11
Massachusetts except to the extent that such laws may be superseded by any
Federal law. It may not be modified orally.
WYMAN-GORDON COMPANY
By: /s/ David P. Gruber
------------------------------
David P. Gruber, President
and Chief Executive Officer
The foregoing Award Agreement is hereby accepted and the terms
thereof hereby agreed to.
GRANTEE
/s/
- ----------------------------------
Grantee's Signature
Grantee's Address:
Colin Stead
17030 Country Bridge Rd
Houston, Texas 77098
Social Security Number: ###-##-####
11
<PAGE> 1
EXHIBIT 10.AJ
PERFORMANCE SHARE AGREEMENT
UNDER THE WYMAN-GORDON LONG-TERM INCENTIVE PLAN
This Agreement is made as of the 16th day of July 1996 between
WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company") and Colin
Stead, 17030 Country Bridge Road, Houston, Texas 77095 (the "Grantee"), relating
to 9,100 shares (the "Shares") of the Company's common stock, par value $1.00
per share (the "Common Stock") to be issued by the Company to the Grantee
pursuant to the terms and conditions set forth in the Wyman-Gordon Company
Long-Term Incentive Plan, as it may be amended from time to time in accordance
with its terms (the "Plan") and this Performance Share Agreement, as it may be
amended from time to time in accordance with its terms (the "Agreement") in
consideration of services heretofore rendered and to be rendered by Grantee to
the Company during the term of this Agreement. By execution of this Agreement,
the Grantee acknowledges receipt of a copy of the Plan and further agrees to be
bound thereby and by the actions, pursuant to the Plan, of the Committee
referred to in the Plan (the "Committee") and of the Company's Board of
Directors.
1. On the date hereof the Company shall issue the Shares to the Grantee
which shall be subject to risk of loss and forfeiture during a period
beginning on the date hereof and ending July 16, 2001 (the "Term of this
Agreement"). During the Term of this Agreement, the Committee shall
determine the average closing price of the Common Stock on the NASDAQ
National Market System, or on any successor market or exchange in which
the Common Stock is publicly traded, as quoted in the WALL STREET JOURNAL
during each period of 30 consecutive business days during the Term of
this Agreement, each such period being referred to herein as a
"Measurement Period" and the average prices being referred to herein as
the "Target Price." Restrictions on all or a portion of the Shares will
lapse only if the Target Price during a Measurement Period has reached
the amounts set forth below:
<PAGE> 2
CUMULATIVE NUMBER OF
SHARES ON WHICH
TARGET PRICE RESTRICTIONS WILL LAPSE
------------ -----------------------
Below $21.00 0
21.00 455
22.00 910
23.00 1,820
24.00 3,185
25.00 4,550
26.00 5,915
27.00 7,280
28.00 8,190
29.00 8,645
30.00 and above 9,100
Upon achieving a Target Price for a Measurement Period as set forth
above, the restrictions set forth above and in Section 3 below shall
lapse with respect to the number of Shares indicated in the table as to
which restrictions have not previously lapsed. At the end of the Term of
this Agreement, Grantee shall forfeit all right, title and interest in
the Shares to the extent that the Target Price with respect to such
Shares has not been attained.
2. The Grantee acknowledges receipt of a stock certificate registered in his
name for the Shares and bearing a legend setting forth the restrictions
set forth in Section 1 of this Agreement. The Grantee agrees,
concurrently with the execution of this Agreement, to deposit such stock
certificate with the Company together with a stock power relating thereto
endorsed in blank.
3. The Grantee acknowledges that the Shares may not be sold, assigned,
transferred, conveyed, pledged or otherwise encumbered during the Term of
this Agreement except in accordance with the provisions of this
Agreement. If the Grantee ceases to be employed by the Company prior to
the end of the Term of this Agreement, his rights to the Shares to the
extent restrictions have not
2
<PAGE> 3
previously lapsed as provided above in Section 1 will thereupon be
forfeited and revert to the Company.
4. Upon the attainment of the Target Price as provided above in Section 1
and the satisfaction of all other conditions contained in this Agreement,
the restrictions applicable to the designated number of Shares shall
lapse and a stock certificate for the number of Shares with respect to
which the restrictions have lapsed shall be delivered to the Grantee,
free of all such restrictions except any that may be imposed by law. Any
Shares as to which the restrictions shall not have lapsed at the end of
the Term of this Agreement shall be transferred to the Company without
any further action of the Grantee.
5. If an event of a Change of Control, as defined below, shall occur, the
Committee in its sole discretion may, but need not, determine that the
restrictions not previously lapsed and terminated shall be deemed lapsed
and terminated with respect to some or all of the Shares and such Shares,
if any as determined by the Committee, shall not be forfeited and shall
vest in the Grantee upon such terms and conditions as the Committee may
determine. "Change of Control" means any one of the following events: (1)
stockholder approval of a merger or consolidation involving the Company
or a sale of all or substantially all of the assets of the Company, in
each case except for a transaction in which the Company's shareholders
receive at least 50% of the stock of the surviving, resulting or
acquiring corporation; (2) any "person" (other than the Company or an
employee benefit plan of the Company or a corporation controlled by the
Company's employee benefit plan of the Company or a corporation
controlled by the Company's shareholders) becomes the "beneficial owner"
of shares of capital stock of the Company representing a majority of the
votes entitled to be cast on matters submitted to the shareholders of the
Company; or (3) persons who, as of July 16, 1996, constituted the
Company's Board (the "Incumbent Board") cease for any reason, including
without limitation as a result of a tender offer, proxy contest, merger
or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company
3
<PAGE> 4
subsequent to July 16, 1996 whose election was approved by at least a
majority of the directors then comprising the Incumbent Board shall for
purposes of this Agreement, be considered a member of the Incumbent
Board. For purposes of this paragraph, the term "person" shall have the
meaning used in Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934 as amended (the "1934 Act"), and "beneficial ownership" shall
have the meaning set forth in Rule 13d-3 of the 1934 Act.
6. The Grantee shall have all voting and dividend rights with respect to the
Shares, provided that non-cash dividends shall be deposited with the
Company together with a stock power or other appropriate instrument of
transfer endorsed in blank and shall be subject to the same restrictions
as the Shares.
7. If Grantee properly elects, within 30 days of the date of this Agreement,
to include in gross income for federal income tax purposes an amount
equal to the aggregate value of the Shares subject to the Award based on
the closing price of the Stock on the date of this Agreement, Grantee
shall make arrangements satisfactory to the Committee to pay to the
Company any federal, state or local taxes required to be withheld with
respect to such Shares. If the Grantee shall fail to make such tax
payments as are required, the Company, shall, to the extent permitted by
law, have the right to deduct from any payment of any kind otherwise due
to the Grantee any federal, state or local taxes of any kind required by
law to be withheld with respect to the Shares.
If the Grantee does not make the election described above in this
Section 7, Grantee shall, no later than the date as of which the
restrictions referred to in Section 1 and such other restrictions as may
have been imposed under this Agreement, shall lapse, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of
any federal, state or local taxes of any kind required by law to be
withheld with respect to the Shares, and the Company shall, to the extent
permitted by law, have the right to deduct from any payment of any kind
otherwise due to the Grantee any federal, state or local
4
<PAGE> 5
taxes of any kind required by law to be withheld with respect to the
Shares. Any tax withholding may be satisfied, at the discretion of the
Committee, by the Company's withholding Shares, otherwise deliverable to
Grantee hereunder with a Fair Market Value (as defined in the Plan) equal
to all or a portion of the amount to be withheld.
At the sole discretion of the Committee, the Company may make a
loan to Grantee in such amount as may be required to discharge his
federal income tax liability on account of the lapsing of restrictions
under Section 1 above assuming the resulting income is taxable at the
maximum applicable individual federal income tax rate. Such loan shall
have such maturity and other terms and conditions as the Committee shall
determine in its sole discretion, and shall bear interest at the
applicable federal rate under Section 1274(d) of the Internal Revenue
Code of any successor provision thereto.
8. The issuance of the Shares to Grantee shall be subject to the condition
that if at any time the Company shall determine (in accordance with the
provisions of the following sentence) that it is necessary as a condition
of, or in connection with, such exercise (a) to satisfy withholding tax
or other withholding liabilities, (b) to effect the listing,
registration, or qualification on any securities exchange or under any
state or Federal law of any Shares otherwise deliverable in connection
with such exercise, or (c) to obtain the consent or approval of any
regulatory body, then in any such event such exercise shall not be
effective unless such withholding, listing, registration, qualification,
consent or approval shall have been effected or obtained free of any
conditions not acceptable to the company in its reasonable and good faith
judgment.
9. This Agreement is in all respects governed by the terms of the Plan. All
of the terms and provisions of the Plan are hereby incorporated into this
Agreement by reference and are made a part of this Agreement. Each and
every provision of this Agreement shall be administered, interpreted and
construed so that this Agreement shall conform to the provisions of the
Plan. Any provisions of this
5
<PAGE> 6
Agreement that cannot be so administered, interpreted, or construed shall
be disregarded, and, accordingly, in the event of any conflict between
this Agreement and the Plan, the latter will govern. Any capitalized
terms used herein and not defined herein have the respective meanings
ascribed to them in the Plan. Whenever the word "Grantee" is used herein
in a context where the provision should logically be construed to apply
to the Grantee's beneficiary, the word "Grantee" shall be deemed to
include such Beneficiary.
10. In the event that there is any change in the Company Common Stock through
merger, consolidation, reorganization, recapitalization, or otherwise; or
if there shall be any dividend on the Shares, payable in Shares, or an
extraordinary cash dividend or other extraordinary distribution; or if
there shall be a stock split, reverse stock split, combination of Shares,
exercisability of stock purchase rights received under the Company's
Stockholder Rights Plan, or other similar corporate transaction or event
that affects the Shares, such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement
of the rights of the Grantee or of the potential benefits intended to be
made available under this Agreement, the number and kind of Shares and
the other relevant provisions of this Agreement shall be appropriately
adjusted as provided in Section 12 of the Plan.
11. Notices hereunder shall be mailed or delivered to the Treasurer of the
Company at its principal place of business at Grafton, Massachusetts, and
shall be mailed or delivered to Grantee at his address set forth above or
at such other address as he may subsequently furnish the Treasurer of the
Company in writing.
12. The Committee may not, without the written consent of the Grantee, cause
this Agreement to be revoked, and may not without such written consent
make or change any determination or change any term, condition or
provision hereunder if the determination or change would reduce or
adversely affect the Grantee's rights hereunder.
6
<PAGE> 7
13. Notwithstanding anything herein to the contrary, on or after the
occurrence of a Change in Control, as defined above, the Committee may
not under any circumstances make or change any determination or change
any term, condition, or provision affecting this Agreement if the
determination or change would reduce or adversely affect the Grantee's
rights hereunder.
14. The Grantee shall designate a Beneficiary in writing and in such manner
as is acceptable to the Company. If the Grantee fails so to designate a
Beneficiary, or if no such designated Beneficiary survives the Grantee,
the Grantee's beneficiary shall be the Grantee's estate.
15. Nothing in this Agreement shall confer upon the Grantee the right to
continue in the employment or service of the Company or affect any right
that the Company may have to terminate the employment or service of (or
to demote or to exclude from future Awards under the Plan) the Grantee at
any time for any reason.
16. So long as this Agreement shall remain in effect, the Company shall
furnish to the Grantee, as and when available, a copy of any Prospectus
issued with respect to the Shares covered hereby, and also a copy of all
material hereinafter distributed by the Company to its stockholders
generally.
17. This Agreement is nontransferable by Grantee other than by will or by the
laws of descent and distribution. This Agreement and the provisions
thereof shall be binding upon, and inure to the benefit of, any successor
or successors of the Company and the person or entity to whom his rights
hereunder may have been transferred by will, the laws of descent and
distribution, or beneficiary designation hereunder.
18. This Agreement shall be governed and its provisions construed, enforced
and administered in accordance with the laws of the Commonwealth of
Massachusetts except to the extend that such laws may be superseded by
any Federal law. It may not be modified orally.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WYMAN-GORDON COMPANY
By: /s/ David P. Gruber
-----------------------------
David P. Gruber, President
and Chief Executive Officer
/s/ Colin Stead
-----------------------------
Colin Stead
8
<PAGE> 1
EXHIBIT 10.AK
EXECUTIVE SEVERANCE AGREEMENT.
This AGREEMENT ("Agreement") dated February 17, 1998 by and between
Wyman-Gordon Company, a Massachusetts corporation (the "Company"), and Edward J.
Davis (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to have the services of the Executive as its
Vice President, Chief Financial Officer and Treasurer; and
WHEREAS, the Executive is willing to serve the Company as its Vice
President, Chief Financial Officer and Treasurer, but desires assurance that he
will not be materially disadvantaged by a change in control of the Company;
NOW, THEREFORE, in consideration of the Executive's service to the Company
and the mutual agreements herein contained, the Company and the Executive hereby
agree, as follows:
<PAGE> 2
ARTICLE I
ELIGIBILITY FOR BENEFITS
SECTION 1.1. QUALIFYING TERMINATION. The Company shall not be required to
provide any benefits to the Executive pursuant to this Agreement unless a
Qualifying Termination occurs before the Agreement expires in accordance with
Section 6.1 hereof. For purposes of this Agreement, a Qualifying Termination
shall occur only if
(a) a Change in Control occurs, and
(b) within three years after the Change in Control,
(i) the Company terminates the Executive's employment other than
for Cause; or
(ii) the Executive terminates his employment with
the Company for Good Reason;
provided, that a Qualifying Termination shall not occur if the Executive's
employment with the Company terminates by reason of the Executive's Disability,
death, or retirement. For the purposes hereof "retirement" shall mean any
termination of employment which occurs at or after age 65.
SECTION 1.2. CHANGE IN CONTROL. Except as provided below, a Change in
Control shall be deemed to occur when and only when the first of the following
events occurs:
(a) the acquisition (including by purchase, exchange, merger or other
business combination, or any
2
<PAGE> 3
combination of the foregoing) by any individuals, firms,
corporations or other entities, acting in concert ("Person"),
together with all Affiliates and Associates of such Person, of
beneficial ownership of securities of the Company representing 20
percent or more of the combined voting power of the Company's
then outstanding voting securities, or
(b) members of the Incumbent Board cease to constitute a majority of
the Board of Directors.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
pursuant to paragraph (a), above, (i) solely because 20 percent or more of the
combined voting power of the Company's outstanding securities is acquired by one
or more employee benefit plans maintained by the Company, or (ii) if the
Executive is included among the individuals, firms, corporations or other
entities that, acting in concert, acquire the Company's securities. For purposes
of this Section 1.2, the terms "Affiliates" and "Associates" shall have the
meanings set forth in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"); the
terms "beneficial ownership" and "beneficially owned" shall have the meaning set
forth in section 13(d) of the Exchange Act, as amended, and in Rule 13d-3
promulgated thereunder, the term "Board of Directors" shall mean the Board of
Directors of the
3
<PAGE> 4
Company and the term "Incumbent Board" shall mean (i) the members of the Board
of Directors on the date hereof, to the extent that they continue to serve as
members of the Board of Directors, and (ii) any individual who becomes a member
of the Board of Directors after the date hereof, if his election or nomination
for election as a director was approved by a vote of at least three quarters of
the then Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors.
SECTION 1.3. TERMINATION FOR CAUSE. The Company shall have Cause to
terminate the Executive's employment with the Company for purposes of Section
1.1 hereof only if the Executive (a) engages in unlawful acts intended to result
in the substantial personal enrichment of the Executive at the Company's
expense, or (b) engages (except (i) by reason of incapacity due to illness or
injury or (ii) in connection with an actual or anticipated termination of
employment by the Executive for Good Reason) in a material violation of his
responsibilities to the Company that results in a material injury to the
Company.
SECTION 1.4. TERMINATION FOR GOOD REASON. The Executive shall have a Good
Reason for terminating employment with the
4
<PAGE> 5
Company only if one or more of the following occurs after a Change in Control:
(a) a change in the Executive's status or position (including for
this purpose a change in the principal place of the Executive's
employment on a basis that does not conform with the Company's
present policies for executive relocation, but excluding required
travel on the Company's business to an extent substantially
consistent with the Executive's present business travel
obligations) with the Company that, in the Executive's reasonable
judgment, represents an adverse change from the Executive's
status or position in effect immediately before the Change in
Control;
(b) the assignment to the Executive of any duties or responsibilities
that, in the Executive's reasonable judgment, are inconsistent
with the Executive's status or position in effect immediately
before the Change in Control;
(c) layoff or involuntary termination of the Executive's employment,
except in connection with the termination of the Executive's
employment for Cause or as a result of the Executive's
Disability, death or retirement;
5
<PAGE> 6
(d) a reduction by the Company in the Executive's total compensation
as in effect at the time of the Change in Control (which shall be
deemed, for this purpose, to be equal to his base salary plus the
most recent award that he has earned under the Company's
Management Incentive Plan, as amended from time to time, or any
successor thereto (the "MIP")) or as the same may be increased
from time to time;
(e) the failure by the Company to continue in effect any Plan in
which the Executive is participating at the time of the Change in
Control (or plans or arrangements providing the Executive with
substantially equivalent benefits) other than as a result of the
normal expiration of any such Plan in accordance with its terms
as in effect at the time of the Change in Control;
(f) any action or inaction by the Company that would adversely affect
the Executive's continued participation in any Plan on at least
as favorable a basis as was the case at the time of the Change in
Control, or that would materially reduce the Executive's benefits
in the future under the Plan or deprive him if any material
benefits that he
6
<PAGE> 7
enjoyed at the time of the Change in Control, except to the
extent that such action or inaction by the Company is required by
the terms of the Plan as in effect immediately before the Change
in Control, or is necessary to comply with applicable law or to
preserve the qualification of the Plan under section 401(a) of
the Internal Revenue Code (the "Code"), and except to the extent
that the Company provides the Executive with substantially
equivalent benefits;
(g) the Company's failure to obtain the express assumption of this
Agreement by any successor to the Company as provided by Section
6.3 hereof;
(h) any material violation by the Company of any agreement (including
this Agreement) between it and the Executive; or
(i) the failure by the Company, without the Executive's consent, to
pay to him any portion of his current compensation, or to pay to
the Executive any portion of any deferred compensation, within 30
days of the date the Executive notifies the Company that any such
compensation payment is past due.
Notwithstanding the foregoing, no action by the Company shall give rise to a
Good Reason if it results from the Executive's
7
<PAGE> 8
termination for Cause, death or retirement, and no action by the Company
specified in paragraphs (a) through (d) of the preceding sentence shall give
rise to a Good Reason if it results from the Executive's Disability. A Good
Reason shall not be deemed to be waived by reason of the Executive's continued
employment as long as the termination of the Executive's employment occurs
within the time prescribed by Section 1.1(b) hereof. For purposes of this
Section 1.4, "Plan" means any compensation plan, such as an incentive or stock
option plan, or any employee benefit plan, such as a thrift, pension,
profit-sharing, stock bonus, long-term performance award, medical, disability,
accident, or life insurance plan, or any other plan, program or policy of the
Company that is intended to benefit employees.
SECTION 1.5. DISABILITY. For purposes of this Agreement, "Disability" shall
mean illness or injury that prevents the Executive from performing his duties
(as they existed immediately before the illness or injury) on a full-time basis
for six consecutive months.
SECTION 1.6. NOTICE. If a Change in Control occurs, the Company shall
notify the Executive of the occurrence of the Change in Control within two weeks
after the Change in Control.
8
<PAGE> 9
ARTICLE II
BENEFITS AFTER A QUALIFYING TERMINATION
SECTION 2.1. BASIC SEVERANCE PAYMENT. If the Executive incurs a Qualifying
Termination following a Change in Control that occurs on or before termination
of this Agreement as provided in Section 6.1 hereof, the Company shall pay
within 30 days after the date of the Qualifying Termination to the Executive a
single lump sum cash amount equal to his Total Annual Compensation multiplied by
the lesser of (a) 2.50 or (b) .0833 multiplied by the number of full months
remaining between termination and his attaining age 65. "Total Annual
Compensation" shall mean the sum of annual base salary in effect immediately
preceding termination or the Change of Control, whichever is higher, and annual
incentive compensation earned under the "MIP" (annualized in the case of less
than a full year's service) in the last full fiscal year immediately preceding
termination or the Change in Control, whichever is higher.
SECTION 2.2. INSURANCE. If the Executive incurs a Qualifying Termination
following a Change in Control that occurs on or before termination of this
Agreement as provided in Section 6.1 hereof, the Company shall provide the
Executive, at the Company's expense, for a period beginning on the date of the
9
<PAGE> 10
Qualifying Termination, the same medical, accident, disability, life and any
other insurance coverage as was provided to him by the Company immediately
before the Change in Control (or, if greater, as in effect immediately before
the Qualifying Termination occurs); such coverage shall end upon the earlier of
(a) the expiration of 24 months after the Qualifying Termination or (b) with
respect to each coverage, the date on which the Executive first becomes eligible
for insurance coverage of a similar nature provided by a firm that employs him
following the Qualifying Termination.
SECTION 2.3. EXECUTIVE LONG-TERM INCENTIVE PROGRAM. If the Executive incurs
a Qualifying Termination following a Change in Control that occurs on or before
termination of this Agreement as provided in Section 6.1 hereof, all of the
options to purchase common stock of the Company (and the alternative common
stock appreciation rights) granted to the Executive prior to termination of this
Agreement as provided in Section 6.1 hereof, under the Executive Long-Term
Incentive Program shall become exercisable in accordance with the terms set
forth in the applicable Agreement.
SECTION 2.4. NONDUPLICATION. Nothing in this Agreement shall require the
Company to make any payment or to provide any benefit or service credit that the
Company is otherwise required to provide under any other contract, agreement,
policy, plan or arrangement.
10
<PAGE> 11
ARTICLE III
EFFECT ON SEVERANCE POLICY
SECTION 3.1. EFFECT ON SEVERANCE POLICY. If the Executive becomes entitled to
receive benefits hereunder, the Executive shall not be entitled to any benefits
under any other Company severance policy.
ARTICLE IV
TAX MATTERS
SECTION 4.1. WITHHOLDING. The Company may withhold from any amount payable
to the Executive hereunder all federal, state or other taxes that the Company
may reasonably determine are required to be withheld pursuant to any applicable
law or regulation.
SECTION 4.2 SPECIAL LIMITATION.
(a) If part or all of the payments or benefits payable to the
Executive, when added to other payments payable to the Executive
as a result of a Change in Control, constitute Parachute
Payments, the following limitation shall apply. If the Parachute
Payments, net of the sum of the Excise Tax and the Federal income
and employment taxes, state and local income taxes on the amount
of the Parachute Payments in excess of the Threshold
11
<PAGE> 12
Amount, are greater than the Threshold Amount, the Executive
shall be entitled to the full payments and benefits payable under
this Agreement. If the Threshold Amount is greater than the
Parachute Payments, net of the sum of the Excise Tax, and the
Federal income and employment taxes, state and local income taxes
on the amount of the Parachute Payments in excess of the
Threshold Amount, then the payments and benefits under this
Agreement shall be reduced to the extent necessary so that the
maximum Parachute Payments shall not exceed the Threshold Amount.
In the event a reduction is required, it shall be the Executive's
choice as to which payments or benefits shall be so reduced. The
Company shall select a firm of independent certified public
accountants to determine which of the foregoing alternative
provisions shall apply. For purposes of determining the amount of
the Federal income and employment taxes, and state and local
income taxes on the amount of the Parachute Payments in excess of
the Threshold Amount, the Executive shall be deemed to pay
Federal income taxes at the highest marginal rate of Federal
income taxation applicable to individuals for the calendar year
in which the payments and benefits under this Agreement are
payable and state and local income taxes at the
12
<PAGE> 13
highest marginal rates of individual taxation in the state and
locality of the Executive's residence for the calendar year in
which the payments and benefits under this Agreement are payable,
net of the maximum reduction in Federal income taxes which could
be obtained from deduction of such state and local taxes.
(b) ADDITIONAL DEFINITIONS
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Parachute Payments" shall mean any payment or provision by the
Employer of any amount or benefit to and for the benefit of the
Executive, whether paid or payable or provided or to be provided under
the terms of this Agreement or otherwise, that would be considered
"parachute payments" within the meaning of Section 280G(B)(2)(A) of
the Code and the regulations promulgated thereunder.
"Threshold Amount" shall mean three times the Executive's "base
amount" within the meaning of Section 280G(b)(3) of the Code and the
regulations promulgated thereunder, less one dollar.
"Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code.
13
<PAGE> 14
ARTICLE V
COLLATERAL MATTERS
SECTION 5.1. NATURE OF PAYMENTS. All payments to the Executive under this
Agreement shall be considered either payments in consideration of his continued
service to the Company or severance payments in consideration of his past
services thereto.
SECTION 5.2. LEGAL EXPENSES. The Company shall pay all legal fees and
expenses that the Executive may incur as a result of the Company's contesting
the validity, the enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
SECTION 5.3. MITIGATION. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement either by seeking other
employment or otherwise. The amount of any payment provided for herein shall not
be reduced by an remuneration that the Executive may earn from employment with
another employer or otherwise following his Qualifying Termination.
SECTION 5.4. AUTHORITY. The execution of this Agreement has been authorized
by the Board of Directors of the Company.
14
<PAGE> 15
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1. TERM OF AGREEMENT. This Agreement shall become effective on
the date hereof and shall continue in effect until the earliest of (a) October
31, 1999, if no Change in Control has occurred before that date; provided,
however, that commencing on November 1, 1999 and each November 1 thereafter, the
term of this Agreement shall automatically be extended for an additional year
unless, not later than January 30 of the same year, the Company shall have given
notice that it does not wish to extend this Agreement; (b) the termination of
the Executive's employment with the Company for any reason prior to a Change in
Control; (c) the Company's termination of the Executive's employment for Cause,
or the Executive's resignation for other than Good Reason, following a Change in
Control and the Company's and the Executive's fulfillment of all of their
obligations hereunder; and (d) the expiration following a Change in Control of
three years and the fulfillment by the Company and the Executive of all of their
obligations hereunder. Furthermore, nothing in this Article VI shall cause this
Agreement to terminate before both the Company and the Executive have fulfilled
all of their obligations hereunder.
15
<PAGE> 16
SECTION 6.2. GOVERNING LAW. Except as otherwise expressly provided herein,
this Agreement and the rights and obligations hereunder shall be construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
SECTION 6.3. SUCCESSOR TO THE COMPANY. This Agreement shall inure to the
benefit of and shall be binding upon and enforceable by the Company and any
successor thereto, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or substantially all of the
business or assets of the Company, whether by merger, consolidation, sale or
otherwise, but shall not otherwise be assignable by the Company. Without
limitation of the foregoing sentence, the Company shall require any successor
(whether direct or indirect, by merger, consolidation, sale or otherwise) to all
of substantially all of the business or assets of the Company, by agreement in
form satisfactory to the Executive, expressly, absolutely and unconditionally to
assume and to agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as heretofore defined and any successor to all or substantially all of
its business or assets that executes and delivers the agreement provided for in
this Section 6.3 or that becomes bound by this Agreement either pursuant to this
Agreement or by operation of law.
16
<PAGE> 17
SECTION 6.4. SUCCESSOR TO THE EXECUTIVE. This Agreement shall inure to the
benefit of and shall be binding upon and enforceable by the Executive and his
personal and legal representatives, executors, administrators, heirs,
distributees, legatees and, subject to the Section 6.5 hereof, his designees
("Successors"). If the Executive should die while amounts are or may be payable
to him under this Agreement, references hereunder to the "Executive" shall,
where appropriate, be deemed to refer to his Successors; provided that nothing
in this Section 6.5 shall supersede the terms of any plan or arrangement (other
than this Agreement) that is affected by this Agreement.
SECTION 6.5. NONALIENABILITY. No right of or amount payable to the
Executive under this Agreement shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, hypothecation, encumbrance,
charge, execution, attachment, levy or similar process or to setoff against any
obligations or to assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the immediately preceding
sentence shall be void. However, this Section 6.5 shall not prohibit the
Executive from designating one or more persons, on a form satisfactory to the
Company, to receive amounts payable to him under this Agreement in the event
that he should die before receiving them.
SECTION 6.6. NOTICES. All notices provided for in this Agreement shall be
in writing. Notices to the Company shall be
17
<PAGE> 18
deemed given when personally delivered or sent by certified or registered mail
or overnight delivery service to Wyman-Gordon Company, 244 Worcester Street,
North Grafton, Massachusetts 01536, Attention: Vice President, General Counsel
and Clerk. Notices to the Executive shall be deemed given when personally
delivered or sent by certified or registered mail or overnight delivery service
to the last address for the Executive shown on the records of the Company.
Either the Company or the Executive may, by notice to the other, designate an
address other than the foregoing for the receipt of subsequent notices.
SECTION 6.7. AMENDMENT. No amendment to this Agreement shall be effective
unless in writing and signed by both the Company and the Executive.
SECTION 6.8. WAIVERS. No waiver of any provision of this Agreement shall be
valid unless approved in writing by the party giving such waiver. No waiver of a
breach under any provision of this Agreement shall be deemed to be a waiver of
such provision or any other provision of this Agreement or any subsequent
breach. No failure on the part of either the Company or the Executive to
exercise, and no delay in exercising, any right or remedy conferred by law or
this Agreement shall operate as waiver of such right or remedy, and no exercise
or waiver, in whole or in part, or any right or remedy conferred by law or
herein shall operate as a waiver of any other right or remedy.
18
<PAGE> 19
SECTION 6.9. SEVERABILITY. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall not affect any other provision of this Agreement or part
thereof, each of which shall remain in full force and effect.
SECTION 6.10. CAPTIONS. The captions to this respective articles and
section of this Agreement are intended for convenience of reference only and
have no substantive significance.
SECTION 6.11. COUNTERPARTS. This Agreement may be executed in a number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute a single instrument.
SECTION 6.12. ENTIRE AGREEMENT. This Agreement contains a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof, superseding all
previous oral statements and other writings (including the Prior Agreement) with
respect thereto.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ATTEST: WYMAN-GORDON COMPANY
/s/ [illegible] By: /s/ David P. Gruber
- ------------------------------ -----------------------------------
David P. Gruber, Chairman
Chief Executive Officer
ATTEST:
/s/ [illegible] /s/ Edward J. Davis
- ------------------------------ -----------------------------------
Edward J. Davis
20
<PAGE> 1
EXHIBIT 21
WYMAN-GORDON COMPANY
FISCAL 1998 FORM 10-K
WYMAN-GORDON COMPANY AND SUBSIDIARIES
The following is a list of Wyman-Gordon's subsidiaries as of May 31,
1998:
PLACE OF
INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
------------------ ---------------
Cameron Forged Products Limited United Kingdom
Cypress Extrusion Press Corporation Delaware
ForCast FSC, Ltd. Virgin Islands
International Extruded Products, LLC New York
Precision Founders, Inc. California
Reisner Metals, Inc. California
Scaled Composites, Inc. California
Scaled Manufacturing, Inc. Delaware
Wyman-Gordon Composites, Inc. Delaware
Wyman-Gordon Composite Technologies, Inc. California
Wyman-Gordon Forgings, Inc. Delaware
Wyman-Gordon Investment Castings, Inc. Delaware
Wyman-Gordon Limited United Kingdom/
Delaware
Wyman-Gordon Receivables Corporation Delaware
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.AJ Colin Stead, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-9
10.AK Edward J. Davis, Executive Severence Agreement dated
February 17, 1998. E-10
21 List of Subsidiaries E-11
23 Consent of Ernst & Young LLP 61
27 Financial Data Schedule E-12
</TABLE>
(b) Reports on Form 8-K
On November 19, 1997, the Company filed a Form 8-K dated November 14, 1997
with the Commission for the following purposes: (1) to report that the Company
has commenced a cash tender offer for certain of its debt securities and is
soliciting to amend the related indenture; (2) to report developments relating
to the previously reported industrial accident at the facility of Wyman-Gordon
Forgings, Inc. in Houston, Texas; and (3) to report the commencement of an
investigation by certain federal agencies involving alleged irregularities at
the Company's Tilton, New Hampshire facility.
On December 9, 1997, the Company filed a Form 8-K with the Commission to
report that the Company had taken the 29,000 ton press at its Houston, Texas
facility out of service for repairs.
On February 9, 1998, the Company filed a Form 8-K with the Commission to
update the statue of the 29,000 ton press and to announce an extraordinary one
time charge relating to the refinancing of its 10 3/4% Senior Notes due 2003.
On August 11, 1998, the Company filed a Form 8-K with the Commission to
report that it and Titanium Metals Corporation completed a transaction in which
the parties have combined their respective titanium castings businesses into a
jointly-owned venture.
60
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<PERIOD-END> MAY-31-1998
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<CASH> 64,561
<SECURITIES> 7
<RECEIVABLES> 124,838
<ALLOWANCES> 0
<INVENTORY> 133,134
<CURRENT-ASSETS> 329,064
<PP&E> 489,303
<DEPRECIATION> 293,440
<TOTAL-ASSETS> 551,610
<CURRENT-LIABILITIES> 105,300
<BONDS> 162,573
0
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<COMMON> 37,053
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<TOTAL-COSTS> 421,492 122,744 237,823 362,540
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<INTEREST-EXPENSE> 11,272 2,722 5,382 8,053
<INCOME-PRETAX> 25,234 (11,865) (2,732) 10,278
<INCOME-TAX> 0 (19,680) (19,860) (19,680)
<INCOME-CONTINUING> 25,234 7,815 16,948 29,958
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<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 25,234 7,815 16,948 29,958
<EPS-PRIMARY> 0.72 0.22 0.47 0.84
<EPS-DILUTED> 0.70 0.21 0.46 0.81
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<FISCAL-YEAR-END> MAY-31-1997 MAY-31-1998 MAY-31-1998 MAY-31-1998
<PERIOD-START> JUN-01-1996 JUN-01-1997 JUN-01-1997 JUN-01-1997
<PERIOD-END> MAY-31-1997 AUG-31-1997 NOV-30-1997 FEB-28-1998
<EXCHANGE-RATE> 1 1 1 1
<CASH> 51,971 26,584 26,247 59,261
<SECURITIES> 7 7 7 7
<RECEIVABLES> 115,569 125,355 125,581 128,272
<ALLOWANCES> 0 0 0 0
<INVENTORY> 92,332 113,244 116,667 140,341
<CURRENT-ASSETS> 277,751 277,948 279,904 335,610
<PP&E> 422,388 439,096 447,781 456,393
<DEPRECIATION> 268,651 277,019 282,648 287,679
<TOTAL-ASSETS> 454,371 462,691 467,201 528,737
<CURRENT-LIABILITIES> 111,546 108,155 99,728 98,386
<BONDS> 96,154 96,154 96,154 161,429
0 0 0 0
0 0 0 0
<COMMON> 37,053 37,053 37,053 37,053
<OTHER-SE> 127,345 143,588 157,781 156,766
<TOTAL-LIABILITY-AND-EQUITY> 454,371 462,691 467,201 528,737
<SALES> 605,049 179,016 366,621 547,497
<TOTAL-REVENUES> 608,742 180,009 369,378 551,142
<CGS> 511,108 146,764 304,185 463,415
<TOTAL-COSTS> 511,108 146,764 304,185 463,415
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 10,822 2,890 5,682 8,999
<INCOME-PRETAX> 24,343 18,529 37,117 43,309
<INCOME-TAX> (25,680) 6,670 11,922 14,151
<INCOME-CONTINUING> 50,023 11,859 25,195 29,158
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 (5,192)
<CHANGES> 0 0 0 0
<NET-INCOME> 50,023 11,859 25,195 23,966
<EPS-PRIMARY> 1.40 0.33 0.70 0.66
<EPS-DILUTED> 1.35 0.32 0.67 0.64
</TABLE>
