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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 1997
Commission file number 1-442
THE BOEING COMPANY
7755 East Marginal Way South
Seattle, Washington 98108
Telephone: (206) 655-2121
State of incorporation: Delaware
IRS identification number: 91-0425694
Securities registered pursuant to Section 12(b) of the Act:
Class of Security: Registered on
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Common Stock, $5 par value New York Stock Exchange
The registrant 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
has been subject to such filing requirements for the past 90 days.
No disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
contained herein and none will be contained, to the best of registrant's
knowledge, in definitive proxy statements or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
As of January 30, 1998, there were 973,467,522 common shares outstanding
held by nonaffiliates of the registrant, and the aggregate market value of the
common shares (based upon the closing price of these shares on the New York
Stock Exchange) was approximately $46.4 billion.
Part I and Part II incorporate information by reference to certain portions
of the Company's 1997 Annual Report to Shareholders. Part III incorporates
information by reference to the registrant's definitive proxy statement, to be
filed with the Securities and Exchange Commission within 120 days after the
close of the fiscal year.
1 Exhibit Index on Page 29
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PART I
Item 1. Business
The Boeing Company, together with its subsidiaries (herein referred to as
the "Company"), is one of the world's major aerospace firms. The Company
operates in two principal industries: commercial aircraft, and information,
space and defense systems. Commercial aircraft operations - conducted through
Boeing Commercial Airplane Group - involve development, production and
marketing of commercial jet aircraft and providing related support services,
principally to the commercial airline industry worldwide. Information, space
and defense systems operations - conducted through Boeing Information, Space
and Defense Systems Group - involve research, development, production,
modification and support of the following products and related systems:
military aircraft, including fighter, transport and attack aircraft;
helicopters; space and missile systems; satellite launching vehicles; rocket
engines; and specialized information services. Although some information, space
and defense systems products are contracted in the commercial environment, the
principal customer is the U.S. Government. No single product line in the
information, space and defense systems segment represented more than 10% of
consolidated revenues, operating profits or identifiable assets. Revenues,
operating profits and other financial data of the Company's industry segments
for the three years ended December 31, 1997, are set forth on page 80 of the
Company's 1997 Annual Report to Shareholders and are incorporated herein by
reference.
Effective August 1, 1997, McDonnell Douglas Corporation merged with a
subsidiary of the Company through a stock-for-stock exchange in which 1.3
shares of Company stock were issued for each share of McDonnell Douglas stock
outstanding, and as a result, McDonnell Douglas became a subsidary of the
Company. The Company issued 277.3 million shares in connection with the merger.
The combined company is operating under the name of The Boeing Company.
The merger is accounted for as a pooling of interests. Accordingly, except
for adjustments to reflect conformed accounting policies, the historical
results of operations of the two companies have been combined, and no
acquisition revaluation or goodwill was recorded. The merger was subject to
approval by the United States Federal Trade Commission and the European
Commission. Future requirements or obligations associated with obtaining these
approvals are not expected to have a material impact on future operations or
liquidity of the Company.
Effective December 6, 1996, the Company acquired Rockwell's aerospace and
defense business by issuing 9.2 million shares of common stock valued at $875
million and assuming debt valued at $2,180 million. This transaction has been
accounted for under the purchase method. The assets and liabilities have been
recorded at fair value with excess purchase price recorded as goodwill.
With respect to the commercial aircraft segment, the Company is a leading
producer of commercial aircraft and offers a family of commercial jetliners
designed to meet a broad spectrum of passenger and cargo requirements of
domestic and foreign airlines. This family of commercial jet aircraft currently
includes the 737, MD-80, MD-90 and 757 standard-body models and the 767, MD-11,
777 and 747 wide-body models.
The worldwide market for commercial jet aircraft is predominantly driven by
long-term trends in airline passenger traffic. The principal factors underlying
long-term traffic growth are sustained economic growth in developed and
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emerging countries and political stability. Demand for the Company's commercial
aircraft is further influenced by airline industry profitability, world trade
policies, government-to-government relations, environmental constraints imposed
upon airplane operations, technological changes, and price and other
competitive factors.
Commercial jet aircraft are normally sold on a firm fixed-price basis with
an indexed price escalation clause. The Company's ability to deliver jet
aircraft on schedule is dependent upon a variety of factors, including
execution of internal performance plans, availability of raw materials,
performance of suppliers and subcontractors, and regulatory certification. The
introduction of new commercial aircraft programs and major derivatives involves
increased risks associated with meeting development, production and
certification schedules.
The Company's commercial aircraft sales are subject to intense competition,
including foreign companies which are nationally owned or subsidized. To meet
competition, the Company maintains a program directed toward continually
enhancing the performance and capability of its products and has a family of
commercial aircraft to meet varied and changing airline requirements. Since the
1970s, the Company has achieved more than a 60% share of the available
commercial jet aircraft market.
The Company continually evaluates opportunities to improve current models,
and assesses the marketplace to ensure that its family of commercial jet
aircraft is well positioned to meet future requirements of the airline
industry. The fundamental strategy is to maintain a broad product line
responsive to changing market conditions by maximizing commonality among the
Boeing family of commercial aircraft. Additionally, the Company is determined
to continue to lead the industry in customer satisfaction by offering products
with the highest standards of quality, safety, technical excellence, economic
performance and in-service support.
The major focus of commercial aircraft development activities over the past
three years has been the 777 wide-body twinjet, the 737-600/700/800 Next-
Generation 737 family of short-to-medium-range jetliners, and the 717-200
(formerly the MD-95) program. The first delivery of the 777 occurred in May
1995. Development of the 777-200ER extended-range version of the 777 commenced
in 1995 and continued in 1996, with certification and first delivery in early
1997. The increased-capacity version 777-300 continues to be under development,
with certification and first delivery scheduled for mid-1998. The certification
and initial deliveries of the 737-700, the first of four new 737 derivative
models, occurred in December 1997. The 737-800, a larger version, is currently
scheduled to be delivered in early 1998. Initial delivery of the smallest
version, the 737-600, is currently scheduled for late 1998. The 737-900, the
longest member of the Next-Generation 737 family, received its initial order in
late 1997 with first delivery scheduled for 2001. The Next-Generation 737
models are also being used by Boeing Business Jets, a collaboration between the
Company and General Electric, to pursue the business travel market.
Certification in the Boeing Business Jet configuration is scheduled for the
fourth quarter of 1998. In 1996 the Company launched a new version of the 757
twinjet. The new 757-300, with approximately 20% more seating, will have about
10% lower seat-mile operating costs than the -200, which already has the lowest
seat-mile operating cost in its market segment. First delivery is scheduled for
1999. In 1997 the Company began offering for sale a new extended-range version
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of the 767. The 767-400ER, which is scheduled to enter commercial service as
early as the year 2000, will be capable of carrying over 300 passengers in a
two-class configuration. The 717 is currently in development with first
delivery scheduled for 1999.
The Company has been working with some of the world's largest airlines to
explore the development of aircraft capable of carrying more than 500
passengers over longer ranges than the current 747 family. However, sufficient
market demand has not developed to justify committing the very substantial
investment levels required to develop either an all new aircraft or
significantly larger versions of the 747. The timing of a decision to proceed
with a 747 derivative aircraft and the development schedule depend on customer
demand and the Company's ability to achieve favorable long-term financial
returns on the substantial development costs that would be required. Other new
products under consideration include larger and longer-range versions of the
777.
The Company's acquisition of the defense and space units of Rockwell and the
merger with McDonnell Douglas have created a large and diversified business
segment in information, space and defense systems. The major trends that shape
the current information, space and defense systems business environment include
significant but relatively flat U.S. Government defense and space budgets;
rapid expansion of information and communication technologies; the need for low
cost, assured access to space; and a convergence of military, civil and
commercial markets.
The U.S. Government, principally through the Department of Defense (DoD) and
NASA, remains the primary customer of this business segment. DoD procurement
funding levels are expected to remain essentially flat on an inflation-adjusted
basis. The Company's DoD programs are subject to uncertain future funding
levels, which can result in the stretchout or termination of some programs.
NASA's budget is also expected to remain relatively flat over the next several
years.
The Company's information, space and defense systems segment is highly
sensitive to changes in national priorities and U.S. Government defense and
space budgets. The principal contributors to 1997 information, space and
defense systems revenues included the C-17, F/A-18 C/D, International Space
Station, F-15, E-3 AWACS (Airborne Warning and Control System) updates and 767
AWACS, F/A-18 E/F, the Delta II space launcher, F-22, and CH-46/47 helicopter
programs. Classified projects for the U.S. Government also continued to
contribute to segment revenues.
Since 1994, a significant percentage of information, space and defense
systems segment business has been in developmental programs under cost-
reimbursement-type contracts, which generally have lower profit margins than
fixed-price-type contracts. The current major developmental programs include
the International Space Station, F/A-18 E/F, F-22 Fighter, Joint Strike
Fighter, V-22 Osprey tiltrotor aircraft, and the RAH-66 Comanche helicopter.
The F/A-18 E/F and V-22 Osprey tiltrotor aircraft programs have entered into
low-rate initial production.
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The information and communication market addressed by this business segment
is projected by industry analysts to double within the next ten years. Much of
this growth is identified with new communications satellite constellations. The
majority of the projected growth in information and communication will be in
the commercial marketplace, and the Government's requirements are expected to
be increasingly met by these commercial systems. The information, space and
defense systems segment principal commercial developmental programs are focused
on space and communication activities, including the Delta family of launch
vehicles.
The segment continues to selectively pursue commercial-type business
opportunities where it can utilize its technical and large-scale integration
capabilities. Such business pursuits, which are outside the traditional U.S.
Government contracting environment, are expected to require increased levels of
Company-sponsored research and development expenditures.
The U.S. Government defense market environment is one in which continued
intense competition among defense contractors can be expected, especially in
light of U.S. Government budget constraints. The Company's ability to
successfully compete for and retain such business is highly dependent on its
technical excellence, demonstrated management proficiency, strategic alliances,
and cost-effective performance.
The acquisition and merger consolidations among U.S. aerospace companies
have resulted in three principal prime contractors for the DoD and NASA,
including the Company. As a result of the extensive consolidation in the
defense and space industry, the Company and its major competitors are also
partners or major suppliers to each other on various programs.
The Company and Lockheed Martin are 50/50 partners in United Space Alliance
(USA), which is responsible for all the ground processing of the Space Shuttle
fleet and for space-related operations with the United States Air Force. USA
also performs the modification, testing and checkout operations required to
ready the Space Shuttle for launch. Although the joint venture operations are
not included in the Company's consolidated statements, the Company's
proportionate share of joint venture earnings are recognized in income.
Research and development expense amounted to $1.9 billion, $1.6 billion and
$1.7 billion in 1997, 1996 and 1995, respectively. Based on current programs
and plans, research and development expense for 1998 is expected to be in the
$2.0 billion range.
The Company's backlog of firm contractual orders (in billions) at December
31 follows:
1997 1996
==== ====
Commercial aircraft $93.8 $86.2
Information, space and defense systems 27.8 28.0
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Total $121.6 $114.2
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Not included in contractual backlog are purchase options and announced
orders for which definitive contracts have not been executed and orders from
customers which have filed for bankruptcy protection. Additionally, U.S.
Government and foreign military firm backlog is limited to amounts obligated to
contracts. Unobligated contract funding not included in backlog at December 31,
1997 and 1996, totaled $26.1 billion and $29.7 billion.
In evaluating the Company's contractual backlog for commercial customers,
certain risk factors should be considered. Approximately 21% of the commercial
aircraft backlog units are scheduled for delivery beyond 2000. Changes in the
economic environment and the financial condition of airlines sometimes result
in customer requests for rescheduling or cancellation of contractual orders.
Contracts with the U.S. Government are subject to termination for default or
for convenience by the Government if deemed in its best interests. Contracts
that are terminated for convenience generally provide for payments to a
contractor for its costs and a proportionate share of profit for work
accomplished through the date of termination. Contracts that are terminated for
default generally provide that the Government pays only for the work it has
accepted, can require the contractor to pay the difference between the original
contract price and the cost to reprocure the contract items net of the value of
the work accepted from the original contractor, and can hold a contractor
liable for damages.
The Company is highly dependent on the availability of essential materials,
parts and subassemblies from its suppliers and subcontractors. The most
important raw materials required for the Company's aerospace products are
aluminum (sheet, plate, forgings and extrusions), titanium (sheet, plate,
forgings and extrusions) and composites (including carbon and boron). Although
alternative sources generally exist for these raw materials, qualification of
the sources could take a year or more. Many major components and product
equipment items are procured or subcontracted on a sole-source basis with a
number of domestic and foreign companies. The Company is dependent upon the
ability of its large number of suppliers and subcontractors to meet performance
specifications, quality standards, and delivery schedules at anticipated costs,
and their failure to do so would adversely affect production schedules and
contract profitability, while jeopardizing the ability of the Company to
fulfill commitments to its customers. The Company maintains an extensive
qualification and performance surveillance system to control risk associated
with such reliance on third parties.
Production problems on the commercial aircraft programs reached unexpected
levels late in the third quarter of 1997. The Company has been in the midst of
an unprecedented production rate buildup for the 7-series commercial aircraft
programs, and has experienced a number of challenges, including raw material
shortages, internal and supplier parts shortages, and productivity
inefficiencies associated with adding thousands of new employees. These factors
have resulted in significant out-of-sequence work. The breadth and complexity
of the entire commercial aircraft production process, especially during this
time of substantial production rate increases, have been presenting a situation
where disrupted process flows cause major inefficiencies throughout the entire
process chain. The 747 and 737 production lines were halted for approximately
one month early in the fourth quarter of 1997.
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While the Company owns numerous patents and has licenses under patents owned
by others relating to its products and their manufacture, it does not believe
that its business would be materially affected by the expiration of any patents
or termination of any patent license agreements. The Company has no trademarks,
franchises or concessions that are considered to be of material importance to
the conduct of its business.
The Company is subject to federal, state and local laws and regulations
designed to protect the environment and to regulate the discharge of materials
into the environment. The Company believes its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and the consequent financial liability to the Company. Compliance with
environmental laws and regulations requires continuing management effort and
expenditures by the Company. Compliance with environmental laws and regulations
has not had in the past, and, the Company believes, will not have in the
future, material effects on the capital expenditures, earnings or competitive
position of the Company. (See Item 3, Legal Proceedings, for additional
information regarding environmental regulation.)
The Company is subject to business and cost classification regulations
associated with its U.S. Government defense and space contracts. Violations can
result in civil, criminal or administrative proceedings involving fines,
compensatory and treble damages, restitution, forfeitures, and suspension or
debarment from Government contracts.
Sales outside the United States (principally export sales from domestic
operations) by geographic area are included on page 80 of the Company's 1997
Annual Report to Shareholders and incorporated herein by reference. Less than
1% of total sales were derived from non-U.S. operations of the Company for each
of the three years in the period ended December 31, 1997. Approximately 50% of
the Company's contractual backlog value at December 31, 1997, was with non-U.S.
customers. Sales outside the United States are influenced by U.S. Government
foreign policy, international relationships, and trade policies by governments
worldwide. Relative profitability is not significantly different from that
experienced in the domestic market.
Approximately 25% of combined accounts receivable and customer and
commercial financing consisted of amounts due from customers outside the United
States. Substantially all of these amounts are payable in U.S. dollars, and, in
management's opinion, related risks are adequately covered by allowance for
losses. The Company has not experienced materially adverse financial
consequences as a result of sales and financing activities outside the United
States.
The Company's workforce at January 31, 1998, was approximately 239,000,
including approximately 4,600 in Canada and 1,400 in Australia.
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Item 2. Properties
The locations and floor areas of the Company's principal operating
properties at January 1, 1998, are indicated in the following table.
Floor Area
(thousands of square feet)
Company-
Owned Leased
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United States
Greater Seattle, Washington 44,617 5,026
Greater Southern California 19,039 1,877
Wichita, Kansas 12,025 1,093
Greater St. Louis, Missouri 10,292 1,277
Greater Philadelphia, Pennsylvania 3,466 317
Mesa, Arizona 1,971
Portland, Oregon 1,032
Greater Cape Canaveral, Florida 712 90
Huntsville, Alabama 686 121
Irving - Corinth - Richardson, Texas 496 54
Oakridge, Tennessee 493
Sunnyvale, California 461 357
Spokane, Washington 394 48
Greater Vienna - Arlington, Virginia 330 516
Moses Lake, Washington 253
Salt Lake City, Utah 229 68
Chicago, Illinois 204
Macon, Georgia 196 105
Pueblo, Colorado 188 105
Greater Houston, Texas 178 232
Tulsa, McAlester, Oklahoma 166 1,218
Glasgow, Montana 152
Melbourne, Arkansas 144
Australia
Greater Melbourne, Victoria 803 191
Canada
Toronto, Ontario 1,780
Winnipeg, Manitoba 521
Arnprior, Ontario 162 68
With the exception of the Glasgow Industrial Airport located in Glasgow,
Montana, which is company-owned, runways and taxiways used by the Company are
located on airport properties owned by others and are used by the Company
jointly with others. The Company's rights to use such facilities are provided
for under long-term leases with municipal, county or other government
authorities. In addition, the U.S. Government furnishes the Company certain
office space, installations and equipment at Government bases for use in
connection with various contract activities. Facilities at the major locations
support both principal industry segments. Work related to a given program may
be assigned to various locations, based upon periodic review of shop loads and
production capability.
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Because of the acquisition of the aerospace and defense units of Rockwell
and the merger with McDonnell Douglas, the Company is in the process of re-
evaluating facilities to consolidate redundant activities. Properties and land
that do not meet long-term business requirements will be sold.
The Company's principal properties are well maintained and in good operating
condition. Unused or under-utilized facilities are not considered significant.
A new facility in Decatur, Alabama, is planned for completion during 1999 to
meet the needs of the Evolved Expendable Launch Vehicle program. All other
existing facilities are sufficient to meet the Company's near-term operating
requirements.
Item 3. Legal Proceedings
Various legal proceedings, claims and investigations related to products,
contracts and other matters are pending against the Company. Most significant
legal proceedings are related to matters covered by insurance. Major
contingencies are discussed below.
The Company is subject to federal and state requirements for protection of
the environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Due in part to their complexity and
pervasiveness, such requirements have resulted in the Company being involved
with related legal proceedings, claims and remediation obligations since the
1980s.
The Company routinely assesses, based on in-depth studies, expert analyses
and legal reviews, its contingencies, obligations and commitments for
remediation of contaminated sites, including assessments of ranges and
probabilities of recoveries from other responsible parties who have and have
not agreed to a settlement and of recoveries from insurance carriers. The
Company's policy is to immediately accrue and charge to current expense
identified exposures related to environmental remediation sites based on
conservative estimates of investigation, cleanup and monitoring costs to be
incurred.
The costs incurred and expected to be incurred in connection with such
activities have not had, and are not expected to have, a material impact to the
Company's financial position. With respect to results of operations, related
charges have averaged less than 2% of annual net earnings exclusive of special
charges. Such accruals as of December 31, 1997, without consideration for the
related contingent recoveries from insurance carriers, are less than 2% of
total liabilities.
Because of the regulatory complexities and risk of unidentified contaminated
sites and circumstances, the potential exists for environmental remediation
costs to be materially different from the estimated costs accrued for
identified contaminated sites. However, based on all known facts and expert
analyses, the Company believes it is not reasonably likely that identified
environmental contingencies will result in additional costs that would have a
material adverse impact on the Company's financial position or operating
results and cash flow trends.
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The Company is subject to U.S. Government investigations of its practices
from which civil, criminal or administrative proceedings could result. Such
proceedings could involve claims by the Government for fines, penalties,
compensatory and treble damages, restitution and/or forfeitures. Under
government regulations, a company, or one or more of its operating divisions or
subdivisions, can also be suspended or debarred from government contracts, or
lose its export privileges, based on the results of investigations. The Company
believes, based upon all available information, that the outcome of any such
government disputes and investigations will not have a material adverse effect
on its financial position or continuing operations.
On January 7, 1991, the U.S. Navy notified the Company and General Dynamics
Corporation (the Team) that it was terminating for default the Team's contract
for development and initial production of the A-12 aircraft. The Team filed a
legal action to contest the Navy's default termination, to assert its rights to
convert the termination to one for "the convenience of the Government," and to
obtain payment for work done and costs incurred on the A-12 contract but not
paid to date. At December 31, 1997, inventories included approximately $581
million of recorded costs on the A-12 contract, against which the Company has
established a loss provision of $350 million. The amount of the provision,
which was established in 1990, was based on the Company's belief, supported by
an opinion of outside counsel, that the termination for default would be
converted to a termination for convenience, that the Team would establish a
claim for contract adjustments for a minimum of $250 million, that there was a
range of reasonably possible results on termination for convenience, and that
it was prudent to provide for what the Company then believed was the upper
range of possible loss on termination for convenience, which was $350 million.
On December 19, 1995, the U.S. Court of Federal Claims ordered that the
Government's termination of the A-12 contract for default be converted to a
termination for convenience of the Government. On December 13, 1996, the Court
issued an opinion confirming its prior no-loss adjustment and no-profit
recovery order. On December 5, 1997, the Court issued an opinion confirming its
preliminary holding that plaintiffs were entitled to certain adjustments to the
contract funding, increasing the plaintiffs' possible recovery to $1,200
million, and on February 20, 1998, the Court issued an opinion and order
determining that plaintiffs were entitled to be paid that amount, plus
statutory interest from June 26, 1991, until paid.
Although the Government has appealed the resulting judgment, the Company
believes the judgment will be sustained. Final resolution of the A-12
litigation will depend on such appeals and possible further litigation, or
negotiations, with the Government. If sustained, however, the damages judgment,
including interest, would result in pretax income that would more than offset
the loss provision established in 1990.
On October 31, 1997, a federal securities lawsuit was filed against the
Company in the U.S. District Court for the Western District of Washington, in
Seattle. The lawsuit names as defendants the Company and three of its executive
officers. Additional lawsuits of a similar nature have been filed in the same
court. The plaintiffs in each lawsuit seek to represent a class of purchasers
of Boeing stock between July 21, 1997, and October 22, 1997, (the "Class
Period"), including recipients of Boeing stock in the McDonnell Douglas merger.
July 21, 1997, was the date on which the Company announced its second quarter
results, and October 22, 1997, was the date on which the Company announced
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charges to earnings associated with production problems being experienced on
commercial aircraft programs. The lawsuits generally allege that the defendants
desired to keep the Company's share price as high as possible in order to
ensure that the McDonnell Douglas shareholders would approve the merger and, in
the case of two of the individual defendants, to benefit directly from the sale
of Boeing stock during the Class Period. The plaintiffs seek compensatory
damages and treble damages. The Company believes that the allegations are
without merit and that the outcome of these lawsuits will not have a material
adverse effect on its earnings, cash flow or financial position.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1997.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information required by this item is included on page 74 and the inside back
cover of the Company's 1997 Annual Report to Shareholders and is incorporated
herein by reference.
Item 6. Selected Financial Data
Information required by this item is included on page 72 of the Company's
1997 Annual Report to Shareholders and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Information required by this item is included on pages 31 - 49 of the
Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements and supplementary data,
included in the Company's 1997 Annual Report to Shareholders on the pages
indicated, are incorporated herein by reference:
Consolidated Statements of Operations - years ended December 31, 1997,
1996 and 1995: Page 53.
Consolidated Statements of Financial Position - December 31, 1997 and
1996: Page 54.
Consolidated Statements of Cash Flows - years ended December 31, 1997,
1996 and 1995: Page 55.
Notes to Consolidated Financial Statements: Pages 56 - 80.
Independent Auditors' Report: Page 263.
Supplementary data regarding quarterly results of operations: Page 81.
Information regarding the commercial program method of accounting is
included in Exhibit (99)on page 258.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
Executive Officers
No family relationships exist among any of the executive officers, directors
or director nominees. The executive officers of the Company as of February 23,
1998, are as follows:
Positions and offices held
Name Age and business experience
==============================================================================
Philip M. Condit 56 Chairman of the Board since February 1,
1997. Chief Executive Officer since April
1996. Director since August 1992.
President from August 1992 through
January 1997. Prior thereto, Executive
Vice President and General Manager - 777
Division, Boeing Commercial Airplane
Group, from 1989.
Harry C. Stonecipher 61 President and Chief Operating Officer of
the Company since August 1997. Director
since August 1997. Prior thereto,
President and Chief Executive Officer of
McDonnell Douglas Corporation, from
September 1994. Prior thereto, Chairman of
the Board, President, and Chief
Executive Officer of Sundstrand
Corporation, from 1991.
Henry P. Arnold 47 Executive Vice President of Airplane
Development and Definition, Boeing
Commercial Airplane Group, since January
1997. Prior thereto, Chief Project Engineer
on the Next-Generation 737 programs, from
1993. Prior thereto, Director of Product
Development and Marketing Management,
Renton Division, Boeing Commercial
Airplane Group, from 1992. Prior
thereto, 737 Chief Project Engineer, from
1991.
Nancy J. Bethel 43 Executive Vice President - Customers,
Boeing Commercial Airplane Group, since
March 1997. Prior thereto, Vice President
and General Manager of the Customer
Services Division of Boeing Commercial
Airplane Group, from April 1996. Prior
thereto, Vice President - Marketing, Boeing
Commercial Airplane Group, from September
1994. Prior thereto, Director of
Business and Process Management, Boeing
Commercial Airplane Group, from March
1994. Prior thereto, Manager of Sales,
Boeing Commercial Airplane Group, from
1992.
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Positions and offices held
Name Age and business experience
==============================================================================
Larry A. Bishop 61 Vice President - Communications and
Investor Relations of the Company since
1997. Prior thereto, Vice President -
Investor Relations of the Company since
1992.
Scott E. Carson 51 Executive Vice President - Business
Resources, Boeing Information, Space &
Defense Systems, since November 1997.
Prior thereto, Vice President - Business
Resources, Boeing Information, Space &
Defense Systems, since May 1997. Prior
thereto, Vice President - Finance, Boeing
Defense & Space Group, from June 1996.
Prior thereto, Executive Vice President
of the Boeing Commercial Space Company,
from May 1995. Prior thereto, Deputy
Program Manager of the Space Station
Program, from April 1994. Prior thereto,
Director of Engineering Business Systems,
Boeing Defense & Space Group, from December
1993. Prior thereto, Director of Finance
and Administration, Engineering,
Boeing Defense & Space Group, from 1992.
Lawrence W. Clarkson 59 Senior Vice President of the Company since
April 1994. President of Boeing Enterprises
since February 1, 1997. Prior thereto,
Senior Vice President - Planning &
International Development since April
1994. Prior thereto, Vice President -
Planning & International Development from
1992.
Theodore J. Collins 61 Senior Vice President and General Counsel
of the Company since 1986. Secretary of
the Company since December 1997.
James B. Dagnon 58 Senior Vice President - People since August
1997. Prior thereto, Senior Vice President
- Employee Relations, Burlington Northern
Santa Fe, from 1995. Prior thereto,
Executive Vice President, Burlington
Northern, from 1992.
Robert L. Dryden 64 Executive Vice President of Airplane
Production, Boeing Commercial Airplane
Group since 1990.
14
<PAGE> 15
Positions and offices held
Name Age and business experience
==============================================================================
Stanley Ebner 64 Senior Vice President - Washington, D.C.,
Operations since August 1997. Prior
thereto, Senior Vice President -
Washington, D.C., Operations for
McDonnell Douglas Corporation, from 1994.
Prior thereto, independent consultant
with major clients active in the public
policy arena, from 1990.
James W. Evatt 56 Executive Vice President of Boeing
Information, Space & Defense Systems, and
President of Information and Communications
Systems since August 1997. Prior thereto,
Executive Vice President for Business
Development, Boeing Defense & Space Group,
from December 1996. Prior thereto, Vice
President of Business Development, Boeing
Defense & Space Group, from October 1994.
Prior thereto, Vice President - Marketing
and Strategic Analysis, Boeing Defense &
Space Group, from March 1994. Prior
thereto, Vice President - Strategic and
Advance Development for Boeing Military
Airplanes, Wichita; from March 1993.
Boyd E. Givan 61 Senior Vice President and Chief Financial
Officer since 1990.
W. Daniel Heidt 57 Executive Vice President of Airplane
Components, Boeing Commercial Airplane
Group, since February 1996. Prior thereto,
Vice President and General Manager, Boeing
Commercial Airplane Group, Wichita
Division, from 1992.
Fred R. Howard 55 Executive Vice President of Business
Resources, Boeing Commercial Airplane
Group, since March 1997. Prior thereto,
Senior Vice President of Business
Resources, Boeing Commercial Airplane
Group, from September 1994. Prior
thereto, Director of Finance of the 777
Division, Boeing Commercial Airplane Group,
from 1992.
15
<PAGE> 16
Positions and offices held
Name Age and business experience
==============================================================================
John A. McLuckey 57 President of Space Systems, Boeing
Information, Space & Defense Systems Group,
since August 1997. Prior thereto,
President of Space & Missile Systems,
Boeing Defense & Space Group, from April
1997. Prior thereto, President of Boeing
North American, Inc. and Executive Vice
President of Boeing Defense & Space
Group, from December 1996. Prior
thereto, President and Chief Operating
Officer - Aerospace & Defense, and Senior
Vice President of Rockwell International,
from September 1995. Prior thereto,
Senior Vice President and President of
Defense Systems, Rockwell International,
from June 1993. Prior thereto, President
- Defense Electronics, Rockwell
International, from March 1990.
Fredrick C. Mitchell 59 Executive Vice President of Airplane
Programs, Boeing Commercial Airplane Group,
since December 1997. Prior thereto, Vice
President and General Manager of the
Fabrication Division, Boeing Commercial
Airplane Group, from April 1996. Prior
thereto, Vice President and General
Manager of the Customer Services
Division, Boeing Commercial Airplane
Group, from 1993.
Alan R. Mulally 52 Senior Vice President of the Company since
February 1997, and President of Boeing
Information, Space & Defense Systems
since August 1997. Prior thereto,
President of Boeing Defense & Space Group
from January 1997. Prior thereto, Senior
Vice President of Airplane Development
and Definition, Boeing Commercial
Airplane Group, from 1994. Prior
thereto, Vice President and General
Manager of the 777 Division, from 1992.
James F. Palmer 48 Senior Vice President of the Company, and
President of Boeing Shared Services Group
since August 1997. Prior thereto, Senior
Vice President and Chief Financial
Officer of McDonnell Douglas Corporation,
from July 1995. Prior thereto, Vice
President and Treasurer, McDonnell
Douglas Corporation, from 1993. Prior
thereto, Vice President and General
Manager of Business Management, McDonnell
Douglas Corporation, from 1992.
16
<PAGE> 17
Positions and offices held
Name Age and business experience
==============================================================================
Thomas E. Schick 56 Executive Vice President and Deputy to the
President, Boeing Commercial Airplane
Group, since October 1995. Prior
thereto, Senior Vice President of
Airplane Support, from August 1994.
Prior thereto, Vice President and
Assistant General Manager of the Customer
Services Division, Boeing Commercial
Airplane Group, from 1992.
Michael M. Sears 50 Executive Vice President of Boeing
Information, Space & Defense Systems, and
President of McDonnell Aircraft and Missile
Systems, since August 1997. Prior thereto,
President of McDonnell Douglas Aerospace,
from February 1997. Prior thereto,
President of Douglas Aircraft Company,
from April 1996. Prior thereto, Vice
President and General Manager of the
F/A-18 program, McDonnell Douglas
Aerospace, from 1991.
David O. Swain 55 Executive Vice President of Boeing
Information, Space & Defense Systems and
President of Phantom Works since August
1997. Prior thereto, Vice President and
General Manager of Advanced Systems and
Technology-Phantom Works, McDonnell
Douglas Corporation, from 1994. Prior
thereto, Senior Vice President and
Manager of the C-17 program, McDonnell
Douglas Corporation, from 1991.
John D. Warner 58 Senior Vice President and Chief
Administrative Officer of the Company since
August 1997. Prior thereto, President of
Boeing Information and Support Services,
from April 1995. Prior thereto, President
of Boeing Computer Services, from July
1993. Prior thereto, Vice President of
Computing, Boeing Commercial Airplane
Group, from 1991.
Ronald B. Woodard 54 Senior Vice President of the Company and
President of Boeing Commercial Airplane
Group since December 1993. Prior thereto,
Executive Vice President, Boeing Commercial
Airplane Group, from March 1993. Prior
thereto, Vice President and General Manager
of the Renton Division, Boeing Commercial
Airplane Group, from 1991.
17
<PAGE> 18
Other information required by Item 10 involving the identification and
election of directors is incorporated herein by reference to the registrant's
definitive proxy statement, which will be filed with the Commission within 120
days after the close of the fiscal year.
Item 11. Executive Compensation *
Item 12. Security Ownership of Certain Beneficial Owners and Management *
Item 13. Certain Relationships and Related Transactions *
* Information required by Items 11, 12, and 13 is incorporated herein by
reference to the registrant's definitive proxy statement, which will be
filed with the Commission within 120 days after the close of the fiscal
year.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List of documents filed as part of this report:
1. Financial Statements
All consolidated financial statements of the Company as set forth under
Item 8 of this report on Form l0-K.
2. Financial Statement Schedules
Schedule Description Page
-------- ----------- ----
II Valuation and Qualifying Accounts 27
The auditors' report with respect to the above-listed financial
statement schedule appears on pages 23 and 26 of this report. All other
financial statements and schedules not listed are omitted either because
they are not applicable, not required, or the required information is
included in the consolidated financial statements.
18
<PAGE> 19
3. Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
(i) Agreement and Plan of Merger dated as of July 31, 1996, among
Rockwell International Corporation, The Boeing Company and
Boeing NA, Inc. (Exhibit 2.1 to the Company's Registration
Statement on Form S-4 (File No. 333-15001) filed October 29,
1996 (herein referred to as "Form S-4").)
(ii) Agreement and Plan of Merger, dated as of December 14,
1996, among The Boeing Company, West Acquisition Corp.
and McDonnell Douglas Corporation. (Exhibit (2)(ii) to
the Company's Annual Report on Form 10-K (File No.
1-442) for the year ended December 31, 1996, herein
referred to as "1996 Form 10-K").)
(3) Articles of Incorporation and By-Laws.
(i) Certificate of Amendment of Restated Certificate of
Incorporation, filed with the Secretary of State of Delaware
on May 13, 1997. (Exhibit (3)(i) to the Company's Form 10-Q
for the quarter ended June 30, 1997.)
(ii) Certificate of Elimination, filed with the Secretary of State
of Delaware on August 13, 1997. (Exhibit (3)(ii) to the
Company's Form 10-Q for the quarter ended June 30, 1997.)
(iii) Restated Certificate of Incorporation, filed with the
Secretary of State of Delaware on August 14, 1997. (Exhibit
(3)(iii) to the Company's Form 10-Q for the quarter ended
June 30, 1997.)
(iv) By-Laws, as amended and restated on August 26, 1996. (Exhibit
(3)(i) to the Form S-4.)
(4) Instruments Defining the Rights of Security Holders, Including
Indentures.
(i) Indenture, dated as of August 15, 1991, between the Company
and The Chase Manhattan Bank (National Association), Trustee.
(Exhibit (4) to the Company's Current Report on Form 8-K
(File No. 1-442) dated August 27, 1991.)
(10) Material Contracts.
The Boeing Company Bank Credit Agreements.
(i) U.S. $ One Billion Five Hundred Million 7-Year Bank Credit
Agreement among The Boeing Company, as Borrower, the Banks
party thereto, Citibank, N.A., as Adiminstrative Agent, and
The Chase Manhattan Bank, as Syndication Agent, dated as of
December 8, 1997. Filed herewith.
(ii) U.S. $ One Billion Five Hundred Million 364-Day Bank Credit
Agreement among The Boeing Company, as Borrower, the Banks
party thereto, Citibank, N.A., as Adiminstrative Agent, and
The Chase Manhattan Bank, as Syndication Agent, dated as of
December 8, 1997. Filed herewith.
Management Contracts and Compensatory Plans.
(iii) 1984 Stock Option Plan.
(a) Plan, as amended February 23, 1987, and August 28, 1989.
(Exhibit (10)(iii)(a) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 (herein
referred to as "1995 Form 10-K").)
(b) Forms of stock option agreements. (Exhibit (10)(vi)(b) to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1992 (herein referred to as "1992 Form
10-K").)
19
<PAGE> 20
(iv) 1988 Stock Option Plan.
(a) Plan, as amended on December 14, 1992. (Exhibit
(10)(vii)(a) of the 1992 Form 10-K.)
(b) Form of Notice of Terms of Stock Option Grant.
(Exhibit (10)(vii)(b) of the 1992 Form 10-K.)
(v) 1992 Stock Option Plan for Nonemployee Directors. (a)
Plan. (Exhibit (19) of the Company's Form 10-Q for the quarter
ended March 31, 1992.)
(b) Form of Stock Option Agreement. (Exhibit
(10)(viii)(b) of the 1992 Form 10-K.)
(vi) Supplemental Benefit Plan for Employees of The Boeing Company.
(Exhibit (10)(iii) of the Company's Form 10-Q for the quarter
ended September 30, 1997.)
(vii) Supplemental Retirement Plan for Executives of The Boeing
Company. (Exhibit (10)(ii) of the Company's Form 10-Q for the
quarter ended September 30, 1997.)
(viii) Deferred Compensation Plan for Employees of The Boeing
Company, as amended on October 31, 1994. (Exhibit (10)(iii)
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 (herein referred to as "3rd
Quarter 1994 Form 10-Q").)
(ix) Deferred Compensation Plan for Directors of The Boeing
Company, as amended on October 28, 1996. (Exhibit 10.1 to the
Form S-4.)
(x) 1993 Incentive Stock Plan for Employees.
(a) Plan, as amended on December 13, 1993. (Exhibit
(10)(ix)(a) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993
(herein referred to as "1993 Form 10-K").)
(b) Form of Notice of Stock Option Grant.
(i) Regular Annual Grant. (Exhibit
(10)(ix)(b)(i) to the 1993 Form 10-K.)
(ii) Supplemental Grant. (Exhibit (10)(ix)(b)(ii) to
the 1993 Form 10-K.)
(xi) Incentive Compensation Plan for Officers and Employees of
the Company and Subsidiaries, as amended on April 28, 1997.
(Exhibit (10)(i) to the Company's Form 10-Q for the quarter
ended March 31, 1997.)
(xii) 1997 Incentive Stock Plan for Employees. (Exhibit
99.1 to the Form S-8, Registration No. 333-26878. (File No.
1-442 filed May 12, 1997.))
(xiii) SAR Deferral Arrangements of the Company.
(a) Form of SAR Deferral Agreement.
(Exhibit (10)(xii)(a) to the 1995 Form 10-K.)
(b) Plan for Employees, as amended. (Exhibit (10)(xii)(b)
to the 1995 Form 10-K.)
(c) Form of SAR deferral election notice. (Exhibit (10)
(xiv)(c) to the 1992 Form 10-K.)
(xiv) Employment Agreement with Harry C. Stonecipher dated August
1, 1997. (Exhibit (10)(i) to the Company's Form 10-Q for the
quarter ended June 30, 1997.)
(xv) Boeing Company Executive Layoff Benefits Plan, as amended on
October 27, 1997. (Exhibit (10)(i) to the Company's Form 10-Q
for the quarter ended September 30, 1997.)
20
<PAGE> 21
(xvi) The McDonnell Douglas 1994 Performance and Equity Incentive
Plan. Exhibit 99.1 of Registration Statement No.
333-32567 on Form S-8 filed on July 31, 1997.
(xvii) The McDonnell Douglas Incentive Award Plan as amended and
restated July 20, 1990. Exhibit 99.2 of Registration
Statement No. 333-32567 on Form S-8 filed on July 31, 1997.
(xviii) The Boeing Company ShareValue Program, as amended on
December 20, 1996. (Exhibit (10)(xiii) to the 1996 Form
10-K.
(xix) Stock Purchase and Restriction Agreement dated as of July 1,
1996, between The Boeing Company and Wachovia Bank of North
Carolina, N.A. as Trustee, under the ShareValue Trust
Agreement dated as of July 1, 1996. (Exhibit 10.20 to the
Form S-4.)
(xx) Employment Retention Agreement with John A. McLuckey dated
September 16, 1996. Filed herewith.
(12) Computation of Ratio of Earnings to Fixed Charges. Page 28.
(13) Portions of the 1997 Annual Report to Shareholders incorporated by
reference herein. Filed herewith.
(21) List of Company Subsidiaries. Pages 252-257.
(24) Independent Auditors' Consent and Report on Financial Statement
Schedule for use in connection with filings of Form S-8 under the
Securities Act of 1933. Page 23 and 26.
(99) Additional Exhibits
(i) Commercial Program Method of Accounting. Page 258.
(ii) Post-Merger Combined Statements of Operations and Financial
Position. (Exhibit (99)(i) to the Company's Form 10-Q for the
quarter ended June 30, 1997.)
(b) Reports on Form 8-K filed during quarter ended December 31, 1997:
A report on Form 8-K was filed on October 27, 1997, to report under Item
5 the announcement of third quarter results on October 24, 1997.
21
<PAGE> 22
Signatures
Pursuant to the requirements of Section 13 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, on the date indicated.
THE BOEING COMPANY
(Registrant)
By: /s/ Philip M. Condit By: /s/ Harry C. Stonecipher
---------------------------------- --------------------------------
Philip M. Condit - Chairman of the Harry C. Stonecipher - President,
Board, Chief Executive Officer Chief Operating Officer,
and Director and Director
By: /s/ B. E. Givan By: /s/ Gary W. Beil
----------------------------------- -----------------------------
B. E. Givan - Senior Vice President Gary W. Beil - Vice President
and Chief Financial Officer and Controller
Date: February 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ John H. Biggs /s/ John F. McDonnell
- -------------------------------- --------------------------------
John H. Biggs- Director John F. McDonnell - Director
/s/ John E. Bryson /s/ William J. Perry
- -------------------------------- --------------------------------
John E. Bryson - Director William J. Perry - Director
/s/ Kenneth M. Duberstein /s/ Donald E. Petersen
- -------------------------------- --------------------------------
Kenneth M. Duberstein - Director Donald E. Petersen - Director
/s/ John B. Fery /s/ Charles M. Pigott
- -------------------------------- --------------------------------
John B. Fery - Director Charles M. Pigott - Director
/s/ Paul E. Gray /s/ Rozanne L. Ridgway
- -------------------------------- --------------------------------
Paul E. Gray - Director Rozanne L. Ridgway - Director
/s/ George H. Weyerhaeuser
---------------------------------
George H. Weyerhaeuser - Director
22
<PAGE> 23
INDEPENDENT AUDITORS' CONSENT
AND REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
The Boeing Company
Seattle, Washington
We consent to the incorporation by reference in Registration Statement Nos.
2-48576, 33-25332, 33-31434, 33-43854, 33-58798, 333-03191, 333-16363,
333-26867, 333-32461, 333-32499, 333-32491, and 333-32567 of The Boeing
Company on Form S-8 of our report dated January 27, 1998, appearing in
and incorporated by reference in the Annual Report on Form 10-K of
The Boeing Company for the year ended December 31, 1997.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of The Boeing Company listed in
Item 14(a)2 in this Annual Report on Form 10-K for the year ended December 31,
1997. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such 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.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Seattle, Washington
March 3, 1998
23
<PAGE> 24
Consent of Independent Auditors
We consent to the use of our report dated January 22, 1997, with respect to the
balance sheet of McDonnell Douglas Corporation and consolidated subsidiaries
(MDC) as of December 31, 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years ended December
31, 1996 and 1995, not separately presented herein, in the Form 10-K for the
year ended December 31, 1997, of The Boeing Company, which is incorporated by
reference in Registration Statement Nos. 2-48576, 33-25332, 33-31434, 33-43854,
33-58798, 333-03191, 333-16363, 333-26867, 333-32461, 333-32499, 333-32491, and
333-32567 of The Boeing Company on Form S-8.
We also consent to the inclusion herein of our report dated January 22, 1997,
with respect to the financial statement schedule (Schedule II) of MDC for the
years ended December 31, 1996 and 1995, not separately presented herein, in the
Form 10-K for the year ended December 31, 1997, of The Boeing Company filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
St. Louis, Missouri
March 2, 1998
24
<PAGE> 25
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
McDonnell Douglas Corporation
We have audited the accompanying balance sheet (including the consolidating
data for MDC Aerospace and Financial Services) of McDonnell Douglas Corporation
and consolidated subsidiaries (MDC) as of December 31, 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years ended December 31, 1996 and 1995. These financial statements are the
responsibility of MDC's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McDonnell Douglas Corporation
and consolidated subsidiaries at December 31, 1996, and the consolidated
results of MDC's operations and MDC's cash flows for the years ended December
31, 1996 and 1995, in conformity with generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, in 1995
MDC changed its method of accounting for the MD-11 commercial aircraft program.
/s/ Ernst & Young LLP
St. Louis, Missouri
January 22, 1997
25
<PAGE> 26
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
McDonnell Douglas Corporation
We have audited the balance sheet of McDonnell Douglas Corporation and
subsidiaries (MDC) as of December 31, 1996, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
ended December 31, 1996 and 1995. Our audits also included the financial
statement schedules (Schedule II) of MDC for the years ended December 31, 1996
and 1995 (not presented separately herein) which are included in the related
schedules of The Boeing Company in this Form 10-K. These schedules are the
responsibility of MDC's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedules of MDC referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ Ernst & Young LLP
St. Louis, Missouri
January 22, 1997
26
<PAGE> 27
SCHEDULE II - Valuation and Qualifying Accounts
The Boeing Company and Subsidiaries
Allowance for Doubtful Accounts and Customer Financing
(Deducted from assets to which they apply)
(Dollars in millions)
1997 1996 1995
==============================================================================
Balance at January 1 $184 $172 $175
Increase due to acquisition of Rockwell
aerospace and defense business 6
Charged to costs and expenses 53 19 12
Deductions from reserves
(accounts charged off) (4) (13) (15)
Balance at December 31 $233 $184 $172
27
<PAGE> 28
EXHIBIT (12) - Computation of Ratio of Earnings to Fixed Charges
The Boeing Company and Subsidiaries
(Dollars in millions)
Year ended December 31,
----------------------------------------
1997 1996 1995 1994 1993
==== ==== ==== ==== ====
Earnings before
federal taxes on income $(341) $2,480 $(412) $2,110 $2,280
Fixed charges excluding
capitalized interest 552 463 427 437 329
Amortization of previously
capitalized interest 97 80 59 52 32
Less undistributed earnings
of affiliates 4 (1) (5) (3) 1
Plus distributed earnings
of affiliates - - - - -
------ ------ ------ ------ ------
Earnings available for
fixed charges $ 312 $3,022 $ 69 $2,596 $2,642
====== ====== ====== ====== ======
Fixed charges:
Interest expense $ 513 $ 393 $ 376 $ 379 $ 254
Interest capitalized during
the period 61 58 65 87 152
Rentals deemed representative
of an interest factor 39 70 51 59 75
------ ------ ------ ------ ------
Total fixed charges $ 613 $ 521 $ 492 $ 525 $ 481
====== ====== ====== ====== ======
Ratio of earnings to fixed charges .5 5.8 .1 5.0 5.5
====== ====== ====== ====== ======
28
<PAGE> 29
EXHIBITS FILED WITH THIS REPORT ON FORM 10-K
Commission File Number 1-442
THE BOEING COMPANY
Exhibit Index
Annual
Report
to
Share- Form
holders 10-K
Exhibit Description Page Page
- ------------------------------------------------------------------------------
(10) (I) The Boeing Company Bank Credit Agreement,
dated as of December 8, 1997.
[The Seven-year Agreement]. 86
(10) (ii) The Boeing Company Bank Credit Agreement,
dated as of December 8, 1997.
[The 364-Day Agreement]. 165
(10) (xx) Employment Retention Agreement with
John A. McLuckey dated September 16, 1996. 249
(12) Computation of Ratio of Earnings to Fixed
Charges 28
(13) Portions of the 1997 Annual Report to
Shareholders incorporated by reference
in Part I and Part II 30
Market for registrant's Common Equity and
related Stockholder Matters * 84
Management's Discussion and Analysis of
Financial Position and Results of Operations 34 31
Consolidated Statements of Operations 51 53
Consolidated Statements of Financial Position 52 54
Consolidated Statements of Cash Flow 53 55
Notes to Consolidated Financial Statements 54 56
Independent Auditor's Report 70 263
Supplementary Data Regarding Quarterly
Financial Data 71 81
Selected Financial Data
Five-Year Summary 72 82
(21) List of Subsidiaries 252
(24) Independent Auditors; Consent and Report on
Financial Statement Schedule for use in
connection with filings of Form S-8 under
the Securities Act of 1933. 23, 26
(99) (i) Commercial Program Method of Accounting 259
Appendix of graphic and image material
pursuant to Rule 304(a) of regulation S-T 261
* Listed on inside back cover of annual report
29
<PAGE> 30
Exhibit (13)
Portions of the 1997 Annual Report to Shareholders
Incorporated by Reference in Part I and Part II
30
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS, FINANCIAL CONDITION AND BUSINESS ENVIRONMENT
MERGER WITH MCDONNELL DOUGLAS CORPORATION
Effective August 1, 1997, McDonnell Douglas Corporation merged with the Company
through a stock-for-stock exchange in which 1.3 shares of Company stock were
issued for each share of McDonnell Douglas stock outstanding. The merger is
accounted for as a pooling of interests, and the discussion and analysis that
follows reflects the combined results of operations and financial condition of
the merged companies.
RESULTS OF OPERATIONS
- ---------------------
REVENUES
Operating revenues for 1997 were $45.8 billion, compared with $35.5 billion in
1996 and $33.0 billion in 1995. The higher revenues for 1997 reflect the
increased deliveries in both the Commercial Aircraft and the Information, Space
and Defense Systems segments and the inclusion in 1997 of the operations of
the aerospace and defense units acquired from Rockwell International
Corporation in December 1996.
Revenues by industry segment:
[Graphic and image material item Number 1
See appendix on page 261 for description.]
_____________________________________________________________________________
| |
| FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY |
| When used in this Management's Discussion and Analysis of Results of |
| Operations, Financial Condition and Business Environment, the words |
| "estimate," "project," "intend," "expect" and similar expressions are |
| intended to identify forward-looking statements. Readers are cautioned not|
| to place undue reliance on these forward-looking statements, which speak |
| only as of the date of this Annual Report. These statements are subject to|
| risks and uncertainties that could cause actual results to differ |
| materially from those contemplated in such forward-looking statements. |
| Such risks and uncertainties include those identified under the headings |
| "Commercial Aircraft Business Environment and Trends," "Information, Space|
| and Defense Systems Business Environment and Trends," elsewhere throughout|
| this Management's Discussion and Analysis of Results of Operations, |
| Financial Conditions and Business Environment, and in Note 21 to the |
| Consolidated Financial Statements on page 69. Boeing does not undertake |
| any obligation to publicly release any revisions to these forward- looking|
| statements to reflect events or circumstances after the date of this |
| Annual Report or to reflect the occurrence of unanticipated events. |
|_____________________________________________________________________________|
Commercial Aircraft
Commercial Aircraft products and services accounted for 59%, 56% and 53% of
total operating revenues for the years 1997, 1996 and 1995, respectively.
31
<PAGE> 32
Commercial jet aircraft deliveries by model, including deliveries under
operating lease which are identified by parentheses, were as follows:
1997 1996 1995
- -----------------------------------------------
737 135 76 89
747 39 26 25
757 46 42 43
767 41 42 36
777 59 32 13
MD-80 16(7) 12(1) 18(2)
MD-90 26(5) 24(2) 14
MD-11 12(1) 15(2) 18
- -----------------------------------------------
Total 374 269 256
===============================================
A ten-week labor strike in 1995 resulted in the delay of approximately 30 7-
series commercial aircraft deliveries, or approximately $2 billion in sales.
For the first quarter of 1998, the planned production rate for 7-series models
(excluding the 717) is 40 aircraft per month, up from a low of 18 1/2 aircraft
per month in 1996. The production rate is planned to increase to 43 aircraft
per month during the second quarter of 1998. Production will continue to be
adjusted to reflect customer requirements and the Company's capabilities.
The MD-80 and MD-90 aircraft, which are currently being produced at a rate of
four per month, will not be produced after 1999 based on current plans.
Production of the MD-11 will continue at a relatively low rate through 1998,
and future sales prospects are principally limited to the freighter version.
First delivery of the 717 aircraft (formerly the MD-95) is scheduled for 1999.
The Company has restructured the 717 program and is committed to an aggressive
marketing effort to take advantage of the longer-term market opportunities for
a 100-seat aircraft. Announced firm orders to date total 50 aircraft to a
single customer.
Total commercial jet aircraft deliveries for 1998 are currently projected to be
in the range of 550 aircraft, including approximately 225 of 777s and the
newer-model 737s. Commercial transportation sales trends are discussed further
in the Commercial Aircraft Business Environment and Trends section on pages 42-
45.
Commercial sales by geographic region:
[Graphic and image material item Number 2
See appendix on page 261 for description.]
Information, Space and Defense Systems
Information, Space and Defense Systems segment revenues were $18.1 billion in
1997, compared with $14.9 billion in 1996 and $14.8 billion in 1995. The 1997
revenues included a full year of the aerospace and defense operations acquired
from Rockwell effective in December 1996. A 14-week labor strike at the St.
Louis, Missouri, facilities delayed certain deliveries in 1996, principally
involving military aircraft.
The Company's Information, Space and Defense Systems business is broadly
diversified, and no program accounted for more than 15% of total 1995-1997
segment revenues.
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The principal contributors to 1997 Information, Space and Defense Systems
revenues included the C-17, F/A-18 C/D, International Space Station, F-15, E-3
AWACS (Airborne Warning and Control System) updates and 767 AWACS, F/A-18 E/F,
the Delta II space launcher, F-22, and CH-46/47 helicopter programs. Classified
projects for the U.S. Government also continued to contribute to segment
revenues.
Deliveries of selected production units were as follows:
1997 1996 1995
- -------------------------------------------------------
C-17 7 6 6
F/A-18 C/D 46 32 43
F/A-18 C/D Kits 20 9 3
F-15 19 11 5
Delta II 12 11 3
T-45TS 11 9 15
Segment business trends are discussed further in the Information, Space and
Defense Systems Business Environment and Trends section on pages 45-47.
Customer and Commercial Financing, Other
Operating revenues in the Customer and Commercial Financing, Other segment were
$746 million in 1996, compared with $603 million in 1996 and $600 million in
1995. The major revenue components include commercial aircraft financing and
commercial equipment leasing.
Additional information relating to revenues and earnings contributions by
business segment is presented on page 52.
. . . . . . . .
Based on current programs and schedules, the Company projects total 1998
revenues to be in the $55 billion range.
EARNINGS
Net earnings for the three years included significant special charges in
addition to non-operating earnings fluctuations associated with the ShareValue
Trust, as summarized below:
(Dollars in millions) 1997 1996 1995
- ----------------------------------------------------------------------
Net earnings before
special charges and
ShareValue Trust $ 632 $1,905 $1,479
Special charges
principally associated
with Douglas Products
(MD-series aircraft) (876) (1,125)
Special early
retirement program (390)
ShareValue Trust 66 (87)
- ----------------------------------------------------------------------
Net earnings (loss) $(178) $1,818 $ (36)
======================================================================
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In the fourth quarter of 1997, the Company completed an assessment of the
financial impact of its post-merger strategy decisions related to its McDonnell
Douglas Corporation commercial aircraft product lines and recorded a special
pretax charge of $1,400 million, or $876 million after tax, relative to these
decisions. The charge principally represented an inventory valuation adjustment
based on post-merger assessments of the market conditions and related program
decisions. Also included in the charge were valuation adjustments in
connection with customer financing assets and commitments.
The accounting for the MD-11 program was changed to the specific-unit cost
method from the program method of accounting in 1995, resulting in the
revaluation of the MD-11 program inventory. This revaluation resulted in a
1995 non-cash pretax charge to operations of $1,838 million, or $1,125 million
after tax.
A special retirement program was offered during the first half of 1995 to
encourage early retirements, resulting in a pretax charge of $600 million, or
$390 million after tax.
The ShareValue Trust arrangement is discussed in Note 14 to the Consolidated
Financial Statements on page 72.
Comparative net earnings (exclusive of special charges and ShareValue Trust):
[Graphic and image material item Number 3
See appendix on page 261 for description.]
The comparable net earnings for 1997 were $1,273 million lower than
for 1996 primarily due to the commercial aircraft production inefficiencies
associated with significant production rate increases. Additionally, 1997
pretax results included increased research and development spending of $291
million, merger-related expenses of $120 million (not tax deductible), and
increased interest and debt expense of $120 million. Partially offsetting these
factors were the earnings associated with the higher sales levels in 1997 and
increased interest income of $40 million. The 1996 results included $199
million of after-tax income related to the settlement of certain Information,
Space and Defense Systems segment contract issues and recognition of prior
years' tax benefits.
The comparable earnings of $1,905 million for 1996 were $426 million higher
than 1995 primarily due to higher commercial jet aircraft deliveries, increased
interest income and recognition of prior years' tax benefits.
Essentially all of the Company's business is performed under contract;
therefore, operating results trends are not significantly influenced by the
effect of changing prices.
OPERATING PROFIT
Commercial Aircraft
The overall 1997 Commercial Aircraft segment operating profit margin, exclusive
of research and development expense and the Douglas Products Division special
charges, was less than 3% for 1997, compared with more than 10% for each of the
prior two years. Segment revenues and earnings are presented on page 52. The
lower overall Commercial Aircraft operating profit margin was attributable to
production problems discussed in the next paragraph, the model mix of aircraft
deliveries and continued pricing pressure.
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<PAGE> 35
Production problems being experienced on the commercial aircraft programs
reached unexpected levels late in the third quarter of 1997. The Company is in
the midst of an unprecedented production rate build-up for the 7-series
commercial aircraft programs, and has experienced a number of challenges,
including raw material shortages, internal and supplier parts shortages, and
productivity inefficiencies associated with adding thousands of new employees.
These factors have resulted in significant out-of-sequence work. The breadth
and complexity of the entire commercial aircraft production process, especially
during this time of substantial production rate increases, present a situation
where disrupted process flows are causing major inefficiencies throughout the
entire process chain. The 747 and 737 production lines were halted for
approximately one month early in the fourth quarter of 1997. Process
inefficiencies and work-arounds will continue until the entire process is
substantially back in balance, which is expected to occur in 1998.
With regard to model mix, there were 27 more 777 aircraft delivered in 1997
than in 1996, and three 737-700s, the first of the Next-Generation 737 models
(737-600/700/800/900), delivered in 1997. New commercial jet aircraft programs
normally have lower operating profit margins due to initial tooling
amortization and higher unit production costs in the early years of a program
averaged over the initial production quantity (400 aircraft each for the 777
and the Next-Generation 737). Additionally, a pretax forward loss of $700
million was recognized in the third quarter of 1997 for the Next-Generation 737
program. Consequently, there will be no gross profit for this program until the
program- commitment accounting quantity is extended beyond the initial 400
units. The timing of extending the program- commitment accounting quantity will
be dependent on the successful execution of production recovery plans and
further production rate increases in 1998. Increased deliveries of the 777 and
the Next-Generation 737 will constitute a much larger proportion of commercial
aircraft sales in 1998 than in 1997.
The commercial jet aircraft market and the airline industry remain extremely
competitive. Competitive pressures as well as increased lower-fare personal
travel have combined to cause a long-term downward trend in passenger revenue
yields on a worldwide basis (measured in real terms). Over the past two years,
airplane capacity increases in the United States have lagged air travel growth,
resulting in stable or increasing passenger yields. In Asia, slowing economies,
reduced business travel, and currency devaluations are contributing to sharply
lower yields. These factors result in continued price pressure on the Company's
products, and major productivity gains are essential to ensuring a favorable
market position at acceptable profit margins.
Information, Space and Defense Systems
Information, Space and Defense Systems segment operating profits for 1997 and
1996 presented on page 52 included the impact of losses from joint venture
development costs expensed as incurred. These joint venture charges amounted to
$102 million in 1997 and $53 million in 1996, and were primarily associated
with the Sea Launch program, (a commercial satellite launch venture with
Norwegian, Russian and Ukrainian partners) and the Civil Tiltrotor program (a
collaboration with Bell Helicopter Textron, Inc., to build a commercial
tiltrotor).
Segment operating profits for 1996 included $114 million of pretax earnings
related to the settlement of various contract matters.
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<PAGE> 36
Excluding these items, the Information, Space and Defense Systems segment
operating margin before research and development was approximately 12% for each
of the past three years.
Since 1994, a significant percentage of Information, Space and Defense Systems
segment business has been in developmental programs under cost-reimbursement-
type contracts, which generally have lower profit margins than fixed-price-type
contracts. The current major developmental programs include the International
Space Station, F/A-18 E/F, F-22 Fighter, Joint Strike Fighter, V-22 Osprey
tiltrotor aircraft, and the RAH-66 Comanche helicopter. The F/A-18 E/F and
V-22 Osprey tiltrotor aircraft programs have entered into low-rate initial
production.
The Company and Lockheed Martin are 50/50 partners in United Space Alliance
(USA), which is responsible for all ground processing of the Space Shuttle
fleet and for space-related operations with the United States Air Force. USA
also performs the modification, testing and checkout operations required to
ready the Space Shuttle for launch. Although the joint venture operations are
not included in the Company's consolidated statements, the Company's
proportionate share of joint venture earnings is recognized in income.
Write-offs of joint venture developmental expenditures will continue in 1998,
principally from development and administrative costs on the Sea Launch
program.
RESEARCH AND DEVELOPMENT
Research and development expenditures charged directly to earnings include
design, developmental and related test activities for new and derivative
commercial jet aircraft, other company-sponsored product development, and basic
research and development.
Research and development expense:
[Graphic and image material item Number 4
See appendix on page 262 for description.]
The 1997 increase in research and development expense of $291 million was
primarily attributable to the inclusion of the aerospace and defense units
acquired from Rockwell in December 1996, and spending in commercial space and
communications activities. Commercial Aircraft research and development expense
was approximately the same as in 1996. Research and development by segment is
identified on page 52.
Commercial Aircraft
The principal Commercial Aircraft developmental programs during the 1995-1997
period were the 777 wide-body twinjet, the Next- Generation 737 family, and
the 717 program. The first delivery of the 777 occurred in May 1995.
Development of the 777-200ER extended-range version of the 777 commenced in
1995 and continued in 1996, with certification and first delivery in early
1997. The increased-capacity version 777-300 continues to be under
development, with certification and first delivery scheduled for mid- 1998.
The certification and initial deliveries of the 737-700, the first of four new
737 derivative models, occurred in December 1997. Certification and first
delivery of the 737-800 and 737-600 will occur in 1998. The 737-900, the
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<PAGE> 37
longest member of the Next-Generation 737 family, received its initial order in
late 1997, with first delivery scheduled for 2001. The 757-300, a stretched
derivative of the 757-200, is scheduled for initial delivery in early 1999; and
the 767-400ER, a stretched version of the 767-300ER, is scheduled for initial
delivery in the year 2000. The 717 is currently in development, with first
delivery scheduled for 1999.
The following chart summarizes the time horizon between go-ahead and
certification/initial delivery for major commercial airplane derivatives and
programs.
[Graphic and image material item Number 5
See appendix on page 262 for description.]
Information, Space and Defense Systems
The Information, Space and Defense Systems segment's principal commercial
developmental programs are focused on space and communication activities,
including the Delta family of launch vehicles.
The segment continues to selectively pursue commercial-type business
opportunities where it can utilize its technical and large-scale integration
capabilities. Such business pursuits, which are outside the traditional U.S.
Government contracting environment, are expected to require increased levels of
research and development expenditures over the next few years.
. . . . . . .
Total Company research and development expenditures for 1998 will be influenced
by the timing of commercial aircraft derivative programs and commercial space
and communication activities. Based on current programs and plans, research and
development expense for 1998 is expected to be in the $2.0 billion range.
Research and development activities are discussed further in the Strategic
Investments for Long-Term Value section on pages 48 and 49.
INCOME TAXES
The income tax provision for 1997 is a tax credit resulting from application of
the tax rate to a pretax loss. The relatively high effective income tax rate of
47.8% reflects additional credits for benefits, principally Foreign Sales
Corporation tax benefits of $79 million. These benefits were partially offset
by the nondeductibility of goodwill and merger costs. The 1996 effective income
tax rate of 26.7% reflects the recognition of tax benefits of $125 million
related to prior years as well as Foreign Sales Corporation tax benefits of
$110 million. The income tax provision for 1995, like the 1997 provision, is
applied to a pretax loss and results in a tax benefit. The effective income tax
rate for 1995 was 91.3% after inclusion of a research and experimentation tax
benefit of $90 million and a Foreign Sales Corporation tax benefit of $85
million.
Additional information relating to income taxes is found in Note 9 to the
Consolidated Financial Statements on page 64.
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<PAGE> 38
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The primary factors that affect the Company's investment requirements and
liquidity position, other than operating results associated with current sales
activity, include the timing of new and derivative commercial jet aircraft
programs requiring both high developmental expenditures and initial inventory
buildup; cyclical growth and expansion requirements; customer financing
assistance; and the timing of federal income tax payments.
CASH FLOW SUMMARY
Following is a summary of cash flow based on changes in cash and short-term
investments. This cash flow summary is not intended to replace the Consolidated
Statements of Cash Flows on page 55 that are prepared in accordance with
generally accepted accounting principles, but is intended to highlight and
facilitate understanding of the principal cash flow elements.
(Dollars in billions) 1997 1996 1995
- --------------------------------------------------------------------
Net earnings (loss) $(0.2) $ 1.8 $ -
Non-cash charges to earnings (a) 2.8 1.5 3.9
- --------------------------------------------------------------------
Net earnings adjusted for
non-cash items 2.6 3.3 3.9
Change in gross inventory (b) (4.9) (1.9) (1.9)
Change in customer advances (c) 3.9 2.2 0.5
Net changes in receivables,
liabilities and deferred
income taxes (d) 0.7 1.1 (0.7)
Facilities and equipment
expenditures (1.4) (1.0) (0.7)
Change in customer and
commercial financing (e) (0.9) 0.3 1.1
Pension funding in excess of
expense (0.3) (0.2) (0.3)
- --------------------------------------------------------------------
Cash flows from operating
and investing activities (0.3) 3.8 1.9
Change in debt (f) (0.6) (0.1) 0.2
Net shares issued (acquired) 0.3 (0.5) (0.2)
ShareValue Trust shares acquired (g) (0.9)
Cash dividends (0.6) (0.5) (0.4)
- --------------------------------------------------------------------
Increase (decrease) in cash
and short-term investments $(1.2) $ 1.8 $ 1.5
====================================================================
Cash and short-term
investments at end of year $ 5.1 $ 6.3 $ 4.5
====================================================================
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<PAGE> 39
(a) Non-cash charges to earnings consisted of depreciation, amortization,
retiree health care accruals, ShareValue Trust appreciation
fluctuations, the special charges for Douglas Products Division
programs in 1997 and 1995, and the early retirement program special
charge in 1995. The Company has not funded retiree health care
accruals and, at this time, has no plan to fund these accruals in the
future. The ShareValue Trust charge to earnings relates to potential
distributions from an irrevocable trust established by the Company in
1996. The obligation to make these distributions is solely that of
the Trust, and current and future ShareValue Trust charges and credits
reflected in earnings will not impact the Company's current or future
cash flow. The special charges associated with the Douglas Products
programs principally involved inventory balance valuation adjustments.
Funding for the special retirement program charge occurs over a minimum
of ten years, to the extent that any incremental funding is required.
Pension plan funding in excess of pension plan expense is separately
indicated.
(b) Inventory associated with the 777 program increased substantially
throughout the 1995-1997 time period due to initial tooling and
production inventory buildup. Inventory balances on the 737, 747, 757
and 767 commercial jet programs increased in 1995 due to the ten-week
labor strike, and increased in 1996 due to increased production rates.
Additionally, the new 737- 600/700/800 program resulted in increased
production and tooling inventory in 1996 and 1997.
(c) The increase in commercial customer advances during 1995 was
principally associated with the 777 program, while the increase
during 1996 and 1997 was broadly distributed among the commercial jet
programs. With regard to information, space and defense systems
activity, the ratio of progress billings to gross inventory did not
significantly change during this period.
(d) Over the three-year period 1995-1997, changes in accounts receivable,
accounts payable, other liabilities and deferred taxes resulted in a
net increase in cash of $1.1 billion. This was largely attributable to
increases in accounts payable and other liabilities of $2.3 billion,
mostly as a result of increased business activity, partially offset by
income taxes payable and deferred of $1.2 billion. Federal income tax
payments over the next two years are projected to substantially exceed
income tax expense due to anticipated completion of contracts executed
under prior tax regulations.
(e) The changes in customer financing balances have been largely driven by
commercial aircraft market conditions and the ability of the Company
to sell customer financing assets. Over the three-year period
1995-1997, the Company generated $5.1 billion of cash from principal
repayments and by selling customer financing receivables and operating
lease assets. Over the same period, additions to customer financing
amounted to $4.6 billion. As of December 31, 1997, the Company had
outstanding commitments of approximately $6.0 billion to arrange or
provide financing related to aircraft on order or under option for
deliveries scheduled through the year 2006. However, not all these
commitments are likely to be utilized. The Company will continue to
sell financing assets from time to time when capital markets are
favorable in order to maintain maximum capital resource flexibility.
Outstanding loans and commitments are primarily secured by the
underlying aircraft.
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<PAGE> 40
(f) Debt amounting to $637 million matured in 1997. The Company also
retired $230 million of debt through a tender offer for the 9.25%
notes due April 1, 2002. Additionally, Boeing Capital Corporation, a
corporation wholly owned by the Company, issued $225 million of debt
in 1997.
(g) Total funding of the ShareValue Trust was $1.15 billion; however, a
portion of the funding was accomplished through the transfer of
treasury shares and the issuance of new shares.
CAPITAL RESOURCES
The Company has long-term debt obligations of $6.1 billion, which are
unsecured. Approximately $600 million matures in each of 1998 and 1999, and the
balance has an average maturity of 15 years. Total long-term debt as of year-
end 1997 amounted to 32% of total capital (shareholders' equity plus
borrowings). The Company has substantial additional long-term borrowing
capability. Revolving credit line agreements with a group of major banks,
totaling $3.24 billion, remain available but unused.
The Company believes its internally generated liquidity, together with access
to external capital resources, will be sufficient to satisfy existing
commitments and plans, and to provide adequate financial flexibility to take
advantage of potential strategic business opportunities should they arise.
CONTINGENT ITEMS
The Company is subject to federal and state requirements for protection of the
environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Based on in-depth studies, expert analyses
and legal reviews, the Company routinely assesses its contingencies,
obligations and commitments to clean up sites, including assessments of the
probability of recoveries from other responsible parties who have and have not
agreed to a settlement and recoveries from insurance carriers. The Company's
policy is to immediately recognize identified exposures related to
environmental cleanup sites based on conservative estimates of investigation,
cleanup and monitoring costs to be incurred. The costs incurred in connection
with such activities have not had a material impact on the Company's financial
position. Based on all known facts and expert analyses, the Company believes it
is not reasonably likely that identified environmental contingencies will
result in a materially adverse impact on the Company's future financial
position or operating results and cash flow trends.
Accidents involving aircraft manufactured by the Company often result in legal
proceedings and in extensive investigations regarding design and production
issues. The Company maintains an ongoing comprehensive process for conducting
safety-related studies and investigations, both internally and in conjunction
with regulatory authorities. Provisions are made for all warranty and related
commitments of the Company, and most significant legal proceedings are related
to matters covered by insurance.
In 1991 the U.S. Navy notified the Company and General Dynamics Corporation
(the Team) that it was terminating for default the Team's contract for
development and initial production of the A-12 aircraft. The Team filed a legal
action to contest the Navy's default termination, to assert its rights to
40
<PAGE> 41
convert the termination to one for "the convenience of the Government," and to
obtain payment for work done and costs incurred on the A-12 contract but not
paid to date. At December 31, 1997, inventories included approximately $581
million of recorded costs on the A-12 contract, against which the Company has
established a loss provision of $350 million. The amount of the provision,
which was established in 1990, was based on the Company's belief, supported by
an opinion of outside counsel, that the termination for default would be
converted to a termination for convenience, that the Team would establish a
claim for contract adjustments for a minimum of $250 million, that there was a
range of reasonably possible results on termination for convenience, and that
it was prudent to provide for what the Company then believed was the upper
range of possible loss on termination for convenience, which was $350 million.
On December 19, 1995, the U.S. Court of Federal Claims ordered that the
Government's termination of the A-12 contract for default be converted to a
termination for convenience of the Government. On December 13, 1996, the court
issued an opinion confirming its prior no-loss adjustment and no-profit
recovery order. On December 5, 1997, the Court issued an opinion confirming its
preliminary holding that plaintiffs were entitled to certain adjustments to the
contract funding, increasing the plaintiffs' possible recovery to $1,200
million, and on February 20, 1998, the Court issued an opinion and order
determining that plaintiffs were entitled to be paid that amount, plus
statutory interest from June 26, 1991, until paid.
Although the Government has appealed the resulting judgment, the Company
believes the judgment will be sustained. Final resolution of the A-12
litigation will depend on such appeals and possible further litigation, or
negotiations, with the Government. If sustained, however, the damages judgment,
including interest, would result in pretax income that would more than offset
the loss provision established in 1990.
On October 31, 1997, a federal securities lawsuit was filed against the Company
in the U.S. District Court for the Western District of Washington, in Seattle.
The lawsuit names as defendants the Company and three of its executive
officers. Additional lawsuits of a similar nature have been filed. The
plaintiffs in each lawsuit seek to represent a class of purchasers of Boeing
stock between July 21, 1997, and October 22, 1997, (the "Class Period"),
including recipients of Boeing stock in the McDonnell Douglas merger. July 21,
1997, was the date on which the Company announced its second quarter results,
and October 22, 1997, was the date on which the Company announced charges to
earnings associated with production problems being experienced on commercial
aircraft programs. The lawsuits generally allege that the defendants desired to
keep the Company's share price as high as possible in order to ensure that the
McDonnell Douglas shareholders would approve the merger and, in the case of two
of the individual defendants, to benefit directly from the sale of Boeing stock
during the Class Period. The plaintiffs seek compensatory damages and treble
damages. The Company believes that the allegations are without merit and that
the outcome of these lawsuits will not have a material adverse effect on its
earnings, cash flow or financial position.
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<PAGE> 42
YEAR 2000 DATE CONVERSION
The Year 2000 issue exists because many computer systems and applications use
two-digit date fields to designate a year. As the century date change occurs,
date-sensitive systems may recognize the year 2000 as 1900, or not at all. This
inability to recognize or properly treat the year 2000 may cause systems to
process financial and operational information incorrectly.
The Company recognized this challenge early, and major business units started
work in 1993. The Company's Year 2000 strategy includes a common companywide
focus on policies, methods and correction tools, and coordination with
customers and suppliers. Each operating unit has responsibility for its own
conversion, in line with overall guidance and oversight provided by a
corporate-level steering committee. Most of the conversion activities are
occurring in conjunction with normal sustaining activities.
Conversions are planned to be completed by the end of 1998, and extensive
testing will continue into 1999. The Company does not anticipate that internal
Year 2000 conversion issues will materially impact operations or operating
results.
MARKET RISK EXPOSURE
The Company has financial instruments that are subject to interest rate risk,
principally short-term investments, fixed-rate notes receivable attributable to
customer financing, and debt obligations issued at a fixed rate. Historically,
the Company has not experienced material gains or losses due to interest rate
changes when selling short-term investments or fixed-rate notes receivable.
Additionally, the Company uses interest rate swaps to manage exposure to
interest rate changes. Based on the current holdings of short-term investments,
fixed-rate notes, as well as underlying swaps, the exposure to interest rate
risk is not considered to be material. Fixed-rate debt obligations issued by
the Company are generally not callable until maturity.
The Company is subject to foreign currency exchange rate risk relating to
receipts from customers and payments to suppliers in foreign currencies. As a
general policy, the Company substantially hedges foreign currency commitments
of future payments and receipts by purchasing foreign currency-forward
contracts. As of December 31, 1997, the notional value of such derivatives was
$535 million, with a net unrealized gain of $5 million. Less than one percent
of receipts and expenditures are contracted in foreign currencies, and the
Company does not consider the market risk exposure relating to currency
exchange to be material.
COMMERCIAL AIRCRAFT BUSINESS ENVIRONMENT AND TRENDS
- ---------------------------------------------------
The worldwide market for commercial jet aircraft is predominantly driven by
long-term trends in airline passenger traffic. The principal factors underlying
long-term traffic growth are sustained economic growth, both in developed and
emerging countries, and political stability. Demand for the Company's
commercial aircraft is further influenced by airline industry profitability,
world trade policies, government-to-government relations, environmental
constraints imposed upon aircraft operations, technological changes, and price
and other competitive factors.
42
<PAGE> 43
GLOBAL ECONOMIC AND PASSENGER TRAFFIC TRENDS
As the world economy has improved in this decade, airline passenger traffic has
been increasing. For the five-year period 1993-1997, the average annual growth
rate for worldwide passenger traffic was approximately 5.7%. The Company's 20-
year forecast of the average long-term growth rate in passenger traffic is
approximately 5.0% annually for the first half of the 20-year forecast period,
and 4.9% annually for the balance, based on projected average worldwide annual
economic real growth of 3.0% over the period.
Based on global economic growth projections over the long term, and taking into
consideration increasing utilization levels of the worldwide aircraft fleet and
requirements to replace older aircraft, the Company projects the total
commercial jet aircraft market over the next 20 years at more than $1,000
billion in 1997 dollars.
ASIA-PACIFIC ECONOMIES
Results in 1997 for Asia-Pacific airlines were mixed. Air travel was lower in a
number of regional markets. Passenger load factors declined and some airlines
reported net losses. Uncertainty increased during the latter half of 1997 as
currency devaluations and continuing turmoil in Asia's financial markets dimmed
the region's near-term prospects for growth. The International Monetary Fund
has intervened and funded rescue plans for those nations at greatest risk of
financial failure. With prospects for air travel growth in the region lower
than most forecasts, airlines are currently evaluating the number and timing of
capacity additions contracted to deliver during the next several years.
AIRLINE PROFITABILITY
Through a combination of passenger traffic growth, improved revenue, lower fuel
costs and aggressive cost control measures, the airline industry as a whole
showed significant improvement in operating profitability and net earnings over
the past few years. The industry realized a substantial positive level of
earnings in 1995 and 1996 and an even greater level in 1997. The outlook for
passenger traffic growth in 1998 is generally positive especially in the United
States, Europe, Latin America and over the Atlantic. Continued profit
improvement depends on sustained economic growth, limited wage increases, and
capacity additions in line with traffic increases.
AIRLINE DEREGULATION
Worldwide, the airline industry has experienced progressive deregulation of
domestic markets and increasing liberalization of international markets. Twenty
years ago virtually all air travel took place within a framework of domestic
and international regulatory oversight. Since then, several countries, most
notably the United States, Australia and the countries in Western Europe, have
eliminated restrictive regulations for domestic airline markets and promoted a
more open-market climate for international services. Currently, about one-half
of all air travel takes place within an open-market environment. These trends
are expected to continue, but at varying rates in different parts of the world.
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<PAGE> 44
Liberalization of government regulations together with increased aircraft range
capabilities is giving airlines greater freedom to pursue optimal fleet-mix
strategies. This increased flexibility allows the airlines to accommodate
traffic growth by selecting the best mix of flight frequencies and aircraft
size and capabilities for their route systems. In intercontinental markets,
more liberal bilateral air service agreements provide an important stimulus
to opening new city-pair markets. In this environment, intercontinental market
demand is better served by increasing flight frequency than by deploying
aircraft with larger capacity. In parallel with regulatory liberalization,
developments in improving aircraft range performance will continue to allow
airlines to expand the number of direct city-to-city routes, thus reducing
the reliance on indirect routes through central hubs that require larger
capacity aircraft.
INDUSTRY COMPETITIVENESS AND WORLD TRADE POLICIES
Since the 1970s, the Company has achieved more than a 60% share of the
available commercial jet aircraft market. The Company has an aggressive
competitor seeking to increase market share. This market environment has
resulted in intense pressures on pricing and other competitive factors. The
Company's focus on improving processes and other cost reduction efforts is
intended to enhance its ability to pursue pricing strategies that enable the
Company to maintain market share at satisfactory margins.
The Company's extensive customer support services network for airlines
throughout the world also plays a key role in maintaining high customer
satisfaction. On-line access is available to all airline customers for
engineering drawings, parts lists, service bulletins and maintenance manuals.
Over the past five years, sales outside the United States have accounted for
approximately 64% of the Company's total Commercial Aircraft sales;
approximately 55% of the Commercial Aircraft contractual backlog at year-end
1997 was with customers based outside the United States. Continued access to
global markets is extremely important to the Company's future ability to fully
realize its sales potential and projected long-term investment returns.
Governments and companies in Asia and the former Soviet Union are seeking to
develop or expand aircraft design and manufacturing capabilities by teaming
arrangements with each other or current manufacturers. The Company continues to
explore ways to expand its global presence in this environment.
In 1992 the U.S. Government and the European Community announced agreement on
interpreting the commercial aircraft code of the General Agreement on Tariffs
and Trade (GATT). The 1992 agreement bans government production subsidies and
limits development support in the form of loans to 33% of development costs.
The Company prefers a ban on all government subsidies for commercial airplane
programs, but the controls embodied in the 1992 agreement are considered
important in limiting future government subsidies to Airbus Industrie, the
Company's primary competitor. The recent steps taken by the four Airbus
partners to transform the Airbus consortium into a commercial company may
remove Airbus operations from government control and influence and increase
financial transparency.
The World Trade Organization (WTO), based in Geneva, was inaugurated in 1995.
The WTO promotes open and nondiscriminatory trade among its members and
administers an improved subsidies code, applicable to all members, that
provides important protections against injurious subsidies by governments, as
44
<PAGE> 45
well as improved dispute settlement procedures to resolve disagreements among
nations. The 1992 bilateral United States - European Union agreement and the
WTO subsidies code constitute the basic limits on government support of
development costs.
In spite of the current Asian economic difficulties, Company forecasts indicate
that the airlines of China represent a significant potential for commercial jet
aircraft orders over the next 20 years. However, China is not currently a
member of the WTO, and the Company believes the accession of China to the WTO
and the granting of permanent Most-Favored-Nation trading status by the U.S.
Government would help ensure an open market. If government and trade relations
between the United States and China deteriorate significantly, the Company's
ability to sell commercial aircraft to airlines in China could be severely
constrained.
Airlines of Russia and other states of the former Soviet Union operate a
limited but increasing number of western-built aircraft. Because of high
customs duties, a shortage of foreign exchange, and legal and financing
constraints, new aircraft orders have not been reaching their potential. In
January 1996, the U.S. Government reached a trade agreement with the Russian
Federation that provides for future aircraft tariff reductions. The Company
expects that the airlines and aircraft manufacturing industry of this region
will eventually be integrated into the international economy.
SUMMARY
Although near-term market uncertainties remain, particularly with respect to
the economic situation in certain Asian countries and open market access, the
long-term market outlook appears favorable. The Company is well positioned in
all segments of the commercial jet aircraft market, and intends to remain the
airline industry's preferred supplier through emphasis on product offerings
and customer service that provide the best overall value in the industry.
INFORMATION, SPACE AND DEFENSE SYSTEMS BUSINESS ENVIRONMENT AND TRENDS
- ----------------------------------------------------------------------
The Company's acquisition of the defense and space units of Rockwell and the
merger with McDonnell Douglas have created a large and diversified business
segment in Information, Space and Defense Systems. Boeing is the world's
largest producer of military aircraft, the principal contractor for NASA, and
the second largest U.S. Department of Defense (DoD) supplier. The Company's
programs are well balanced between current production and upgrade activities
and major development programs with large potential production quantities.
Procurement budget - DoD and NASA:
[Graphic and image material item Number 6
See appendix on page 262 for description.]
GENERAL ENVIRONMENT
The major trends that continue to shape the current Information, Space and
Defense Systems business environment include significant but relatively flat
defense and NASA budgets; rapid expansion of information and communication
technologies; the need for low cost, assured access to space; and a convergence
between military, civil and commercial markets.
45
<PAGE> 46
The DoD remains the principal customer of this business segment, and DoD
procurement funding levels are expected to remain essentially flat on an
inflation-adjusted basis. The Company's DoD programs are subject to uncertain
future funding levels which can result in the stretchout or termination of some
programs. Congressional adoption of proposed DoD procurement reforms is
believed to be important to the future funding levels available for the
Company's defense products.
NASA's budget is also expected to remain relatively flat over the next several
years. To generate additional procurement funds, NASA is likely to continue to
outsource many of its operational functions.
The information and communication market addressed by this business segment is
projected by industry analysts to double within the next ten years. Much
of this growth is identified with new communications satellite constellations.
During this period, industry forecasts indicate up to 2,000 satellites will
need to be launched into space. This will increase the need for low-cost launch
capabilities. The majority of the projected growth in information and
communication will be in the commercial marketplace, and the Government's
requirements are expected to be increasingly met by these commercial systems.
A modest decline is forecast for the defense and space budgets of other
countries. Current economic problems in certain Asian countries have resulted
in the deferral of some modernization investments in defense. Sales of defense
systems to allies in the Persian Gulf region will continue to be paced by
regional tensions and oil revenues. In Europe, defense and space budgets are
projected to decline gradually.
Overall the Company faces strong competition in all of its market segments. The
acquisition and merger consolidations among U.S. aerospace companies have
resulted in three principal prime contractors for the DoD and NASA, including
the Company. While there may be some further niche acquisitions at the prime
contractor level, the major area for further consolidation is likely to be
among subcontractors to the primes. Lockheed Martin and Raytheon are the
Company's primary U.S. competitors for this business segment, although in
certain commercial markets Motorola and Hughes Space and Communications are
also principal competitors. As a result of the extensive consolidation in the
defense and space industry, the Company and its major competitors are also
partners or major suppliers to each other on various programs.
The consolidation and rationalization of the European defense and space
companies has been proceeding for several years, mainly within individual
nations. Cross-border mergers in the form of joint ventures have been largely
confined to individual market segments, such as satellites or missiles.
Encouragement by the governments of France, Germany and the United Kingdom may
result in broader mergers to create larger European companies. Internationally,
the largest European companies compete in many of the same market segments with
the Company's products and services. At the same time, these companies are also
potential teaming partners.
46
<PAGE> 47
BUSINESS UNIT PRODUCT LINES
The Aircraft and Missiles business unit has major products in tactical
fighters, trainers, helicopters, military transports, tankers, strike missiles
and special purpose airplanes, for both the U.S. and foreign governments. The
basic strategy is to provide a competitive product in every selected market
segment. This business unit has several programs that are now in production
for the DoD, such as the C-17 Transport, F/A-18 E/F fighter, T-45 Trainer and
V-22 Tiltrotor. Other programs include those that are still in development,
such as the F-22 Fighter and RAH- 66 helicopter, or in competitive
development, such as the Joint Strike Fighter and Joint Air-to-Surface
Standoff Missile (JASSM). Despite expected modest declines in global defense
budgets, international demand for military aircraft and missiles remains
generally positive. Foreign sales approved by the U.S. Government are
extending some product lines, such as the F/A-18 C/D and F-15 fighters,
Harpoon missiles and the AH-64 and CH-47 helicopters. Based on these trends,
moderate growth in this business unit is expected.
The Space Systems business unit's principal focuses are space transportation
systems, the International Space Station (ISS), and missile defense programs.
There is significant growth potential in space transportation and in missile
defense programs. The basic strategy is to provide a full family of space
launch services, to continue as the prime contractor for ISS throughout its
lifetime in orbit, and to gain a large role in missile defense programs. The
most significant market force affecting our Space Systems business unit is the
projected growth in the commercial launch services market. This business unit
is well positioned with the Sea Launch and the Delta family of commercial
launch vehicles, and is the prime contractor for NASA's Space Shuttle. The
business segment's future in missile defense is dependent on programs such as
National Missile Defense, Ground Based Interceptor, Space Based Infrared
System, and Patriot III missile upgrades.
The Information and Communications Systems business unit is a participant in
both government and commercial markets. Global information and communications
industry revenues totaled $1.8 trillion in 1996 and are forecast to grow to
$2.7 trillion by 2001. Satellite-based wireless services for business and
residential users are expected to grow at a compound annual rate of 7 percent
between 1997 and 2012. Over the same time period, corporate network use is
forecast at a compound annual growth rate of 8 percent. The strategy for this
business unit is to make significant penetration of these commercial markets,
which will also provide opportunities for future business with the U.S.
Government. Potential near-term business opportunities include being the prime
contractor for Teledesic, a privately funded company whose mission is to build
a broadband "Internet-in-the-Sky" using a constellation of several hundred
low-Earth-orbit satellites; and providing Aviation Information Services to
commercial airlines for passenger entertainment and other services. Government
programs of the Information and Communications business unit include
information systems such as AWACS, Nimrod 2000, command and control systems,
and global positioning satellite systems such as GPS II.
Three general product trends shape the environment of the Company's
Information, Space and Defense Systems business segment: low-cost affordable
systems, more rapid product development, and integration of traditional
products into higher-level system networks. The Company's Phantom Works unit
serves the pivotal role of developing innovative processes and technologies to
address these challenges. It also has the responsibility to identify and win
technology contracts in high-leverage areas and to pursue new government
programs in the early stages of concept development and demonstration.
47
<PAGE> 48
STRATEGIC INVESTMENTS FOR LONG-TERM VALUE
- -----------------------------------------
Over the past several years, the Company has made significant internal
investments to meet future airline product requirements, to aggressively
pursue new Information, Space and Defense Systems business opportunities, and
to achieve production efficiencies. Although constraining earnings and
requiring substantial resources in the near term, these investments are
building long- term value by streamlining operations and positioning the
Company to maintain its leadership position.
NEW PRODUCT DEVELOPMENT
The Company continually evaluates opportunities to improve current aircraft
models, and assesses the marketplace to ensure that its family of commercial
jet aircraft is well positioned to meet future requirements of the airline
industry. The fundamental strategy is to maintain a broad product line
responsive to changing market conditions by maximizing commonality among the
Boeing family of commercial aircraft. Additionally, the Company is determined
to continue to lead the industry in customer satisfaction by offering products
with the highest standards of quality, safety, technical excellence, economic
performance and in-service support.
While product development activities are principally oriented toward
maintaining and enhancing the competitiveness of the Boeing subsonic fleet
through a variety of derivatives, the Company is also involved in studying the
technological and economic issues associated with development of commercial
supersonic aircraft and other basic aerodynamic and materials technology
research.
Opportunities for major new U.S. Government Information, Space and Defense
Systems programs in the near term are relatively limited; however, the Company
is aggressively seeking ways to capitalize on its expanded program base and
its competitive strength with regard to military, space, and information
technologies.
New business opportunities being pursued or studied include both military and
commercial applications. On the military side, the Company continues to assess
potential applications using the Company's commercial aircraft, particularly
the 767 and 737. In the commercial space arena, the Company is leading the Sea
Launch team to offer highly automated commercial satellite launching from a
seagoing launch platform. First launch is currently scheduled for late 1998.
In communication activities, the Company is studying several potential
business opportunities including developing and marketing a phased-array
communications antenna for a variety of mobile commercial and military system
applications. Initial application of this product would be for reception of
Direct Broadcast Satellite (DBS) television on in-flight commercial aircraft.
The Company is studying methods to provide a two-way voice and data wholesale
communications service to "in-country" distributors via a space-based
switching network of low-Earth-orbit satellites.
48
<PAGE> 49
MAJOR PROCESS IMPROVEMENTS
The Company remains strongly committed to becoming a world-class leader in all
aspects of its business and to maintaining a strong focus on customer needs,
including product capabilities, technology, in-service economics and product
support. Major long-term productivity gains are being aggressively pursued,
with substantial resources invested in education and training, restructuring
of processes, new technology, and organizational realignment.
The 777, the Next-Generation 737, the Joint Strike Fighter, and other recent
commercial and government developmental programs included early commitment of
resources for integrated product teams, design interface with customer
representatives, use of advanced three-dimensional digital product definition
and digital pre-assembly computer applications, and increased use of automated
manufacturing processes. Although these measures have required significant
current investments, substantial long-term benefits are anticipated from
reductions in design changes and rework and improved quality of internally
manufactured and supplier parts.
A major initiative has been launched to greatly simplify and streamline
commercial aircraft configuration control, production management, and related
systems. Organizations have been realigned and substantial resources have been
dedicated to ensure the new processes and systems are successfully implemented
over the next few years.
The Information, Space and Defense Systems Group (ISDS) continues to
aggressively pursue important process improvements through integrated product
teams that provide cost-effective solutions and maintain technological
superiority. Phantom Works, the advanced research and development organization
of ISDS, focuses on improving ISDS's competitive position through innovative
technologies, improved processes and creation of new products.
The Company is continuing to assess potential opportunities for improved
utilization and consolidation of facilities across all parts of the Company.
Future decisions regarding facilities conversions or consolidations will be
based on long-term business objectives. Within the Information, Space and
Defense Systems segment, any major restructuring actions will be contingent on
demonstration of cost savings for U.S. Government programs and the Company.
49
<PAGE> 50
THE BOEING COMPANY AND SUBSIDARIES
SEGMENT INFORMATION
The Company has adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information.
The Company is organized based on the products and services that it offers.
Under this organizational structure, the Company operates in two principal
areas: commercial aircraft, and information, space and defense systems.
Commercial Aircraft operations principally involve development, production and
marketing of commercial jet aircraft and providing related support services,
principally to the commercial airline industry worldwide. Information, Space
and Defense Systems operations principally involve research, development,
production, modification and support of the following products and related
systems: military aircraft, both land-based and aircraft-carrier-based,
including fighter, transport and attack aircraft with wide mission capability,
and vertical/short takeoff and landing capability; helicopters; space and
missile systems; satellite launching vehicles; rocket engines; and specialized
information services. Although some Information, Space and Defense Systems
products are contracted in the commercial environment, the primary customer is
the U.S. Government. No single product line in the Information, Space and
Defense Systems segment represented more than 10% of consolidated revenues,
operating profits or identifiable assets. The Customer and Commercial
Financing, Other segment is primarily engaged in the financing of commercial
and private aircraft, commercial equipment, and real estate.
The Commercial Aircraft segment is subject to both operational and external
business-environment risks. Operational risks that can seriously disrupt the
Company's ability to make timely delivery of its commercial jet aircraft and
meet its contractual commitments include execution of internal performance
plans, product performance risks associated with regulatory certifications of
the Company's commercial aircraft by the U.S. Government and foreign
governments, other regulatory uncertainties, collective bargaining labor
disputes, and performance issues with key suppliers and subcontractors. While
the Company's principal operations are in the United States, Canada, and
Australia, some key suppliers and subcontractors are located in Europe and
Japan. External business-environment risks include adverse governmental export
and import policies, factors that result in significant and prolonged
disruption to air travel worldwide, and other factors that affect the economic
viability of the commercial airline industry. Examples of factors relating to
external business-environment risks include the volatility of aircraft fuel
prices, global trade policies, worldwide political stability and economic
growth, and a competitive industry structure which results in market pressure
to reduce product prices.
In addition to the foregoing risks associated with the Commercial Aircraft
segment, the Information, Space and Defense Systems segment is subject to
changing priorities or reductions in the U.S. Government defense and space
budgets, and termination of government contracts due
to unilateral government action (termination for convenience) or failure to
perform (termination for default). Civil, criminal or administrative
proceedings involving fines, compensatory and treble damages, restitution,
forfeiture and suspension or debarment from government contracts may result
from violations of business and cost classification regulations on U.S.
Government contracts.
50
<PAGE> 51
As of December 31, 1997, the Company's principal collective bargaining
agreements were with the International Association of Machinists and Aerospace
Workers (IAM) representing 28% of employees (current agreements expiring
September 1999, October 1999, and May 2001), Seattle Professional Engineering
Employees Association (SPEEA) representing 12% of employees (current agreements
expiring December 1999), the United Automobile, Aerospace and Agricultural
Implement Workers of America (UAW) representing 6% of employees (current
agreements expiring June 1999, September 1999, and April 2000), and Southern
California Professional Engineering Association (SCPEA) representing 2% of
employees (current agreement expiring March 2001).
Sales by geographic area consisted of the following:
(Dollars in millions)
Year ended December 31, 1997 1996 1995
==============================================================================
Asia, other than China $11,437 $ 8,470 $ 7,059
China 1,265 951 754
Europe 7,237 4,198 4,087
Oceania 1,078 821 658
Africa 192 156 154
Western Hemisphere, other than the
United States 228 466 734
- ------------------------------------------------------------------------------
21,437 15,062 13,446
United States 24,363 20,391 19,514
- ------------------------------------------------------------------------------
Total sales $45,800 $35,453 $32,960
==============================================================================
Information, Space and Defense Systems sales were approximately 19%, 29% and
38% of total sales in Europe for 1997, 1996 and 1995, respectively, and were
approximately 19%, 22% and 26% of total sales in Asia excluding China for the
same respective years. Exclusive of these amounts, Information, Space and
Defense Systems sales were principally to the U.S. Government.
The information in the following tables is derived directly from the segments'
internal financial reporting used for corporate management purposes. The
expenses, assets and liabilities attributable to corporate activity are not
allocated to the operating segments. Less than 2% of operating assets are
located outside of the United States.
Unallocated costs include goodwill amortization, capitalized interest
amortization, certain unallocated actuarial costs (including $600 million in
1995 for a special retirement charge described in Note 3 on page 59), and
corporate costs not allocated to other internal reporting entities.
Unallocated assets primarily consist of cash and short-term investments,
prepaid pension expense, goodwill, deferred tax assets, and capitalized
interest. Unallocated liabilities include various accrued employee
compensation and benefit liabilities including accrued retiree health care,
taxes payable, and debentures and notes payable. Unallocated capital
expenditures and depreciation relate primarily to shared services assets. Sales
are not recorded for inter-segment transactions.
Losses from operations for 1997 and 1995 include the impact of Douglas Products
Division valuation adjustment and MD-11 accounting charge described in Note 3
on page 59.
51
<PAGE> 52
<TABLE>
<CAPTION>
(Dollars in millions) Net earnings (loss) Revenues Research and development
-------------------- -------------------- ------------------------
Year ended December 31, 1997 1996 1995 1997 1996 1995 1997 1996 1995
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial Aircraft $(1,837) $ 956 $(1,280) $26,929 $19,916 $17,511 $1,208 $1,156 $1,232
ISDS 1,317 1,387 1,312 18,125 14,934 14,849 716 477 442
Other 381 329 355 746 603 600
Unallocated expense (216) (54) (703)
- ----------------------------------------------------------------------------------------------------
Earnings (loss) from
operations (355) 2,618 (316)
Other income,
principally interest 428 388 280
Interest and debt expense (513) (393) (376)
ShareValue Trust 99 (133)
- ----------------------------------------------------------------------------------------------------
Earnings (loss) before taxes (341) 2,480 (412)
Income taxes (benefit) (163) 662 (376)
- ----------------------------------------------------------------------------------------------------
$ (178) $1,818 $ (36) $45,800 $35,453 $32,960 $1,924 $1,633 $1,674
====================================================================================================
Assets at Dec. 31 Liabilities at Dec. 31 Dep. and amortization
-------------------- ---------------------- ----------------------
Year ended December 31, 1997 1996 1995 1997 1996 1995 1997 1996 1995
=====================================================================================================
Commercial Aircraft $12,763 $12,484 $12,923 $ 6,917 $ 5,824 $ 5,249 $ 570 $ 605 $ 629
ISDS 6,597 6,785 5,243 2,379 2,361 1,290 365 299 311
Other 4,716 3,903 4,441 396 286 285 91 110 116
Unallocated 13,948 14,708 9,270 15,379 15,907 12,526 432 252 250
- -----------------------------------------------------------------------------------------------------
$38,024 $37,880 $31,877 $25,071 $24,378 $19,350 $1,458 $1,266 $1,306
=====================================================================================================
Contractual backlog at
Capital expenditures, net December 31 (unaudited)
------------------------- -----------------------
Year ended December 31, 1997 1996 1995 1997 1996 1995
============================================================================
Commercial Aircraft $ 531 $336 $343 $ 93,788 $ 86,151 $73,715
ISDS 463 304 186 27,852 28,022 21,773
Other 1 1 1
Unallocated 396 330 217
- ----------------------------------------------------------------------------
$1,391 $971 $747 $121,640 $114,173 $95,488
============================================================================
</TABLE>
ISDS = Information, Space and Defense Systems.
Other = Customer and Commercial Financing, Other.
52
<PAGE> 53
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions except per share data)
Year ended December 31, 1997 1996 1995
==============================================================================
Sales and other operating revenues $45,800 $35,453 $32,960
Operating costs and expenses 40,644 29,383 27,370
General and administrative expense 2,187 1,819 1,794
Research and development expense 1,924 1,633 1,674
Special charges 1,400 2,438
- ------------------------------------------------------------------------------
Earnings (loss) from operations (355) 2,618 (316)
Other income, principally interest 428 388 280
Interest and debt expense (513) (393) (376)
ShareValue Trust 99 (133)
- ------------------------------------------------------------------------------
Earnings (loss) before income taxes (341) 2,480 (412)
Income taxes (benefit) (163) 662 (376)
- ------------------------------------------------------------------------------
Net earnings (loss) $ (178) $ 1,818 $ (36)
==============================================================================
Earnings (loss) per share
Basic $ (.18) $ 1.88 $ (.04)
Diluted $ (.18) $ 1.85 $ (.04)
==============================================================================
Cash dividends per share $ .56 $ .55 $ .50
==============================================================================
See notes to consolidated financial statements.
53
<PAGE> 54
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in millions except per share data)
December 31, 1997 1996
==============================================================================
Assets
Cash and cash equivalents $ 4,420 $ 5,469
Short-term investments 729 883
Accounts receivable 3,121 2,870
Current portion of customer and commercial financing 261 774
Deferred income taxes 1,765 1,362
Inventories, net of advances and progress billings 8,967 9,151
- ------------------------------------------------------------------------------
Total current assets 19,263 20,509
Customer and commercial financing 4,339 3,114
Property, plant and equipment, net 8,391 8,266
Deferred income taxes 15 143
Goodwill 2,395 2,478
Prepaid pension expense 3,271 3,014
Other assets 350 356
- ------------------------------------------------------------------------------
$38,024 $37,880
==============================================================================
Liabilities and Shareholders' Equity
Accounts payable and other liabilities $11,548 $ 9,901
Advances in excess of related costs 1,575 1,714
Income taxes payable 298 474
Short-term debt and current portion of long-term debt 731 637
- ------------------------------------------------------------------------------
Total current liabilities 14,152 12,726
Accrued retiree health care 4,796 4,800
Long-term debt 6,123 6,852
Shareholders' equity:
Common shares, par value $5.00 -
1,200,000,000 shares authorized;
Shares issued - 1,000,029,538 and 993,347,933 5,000 4,967
Additional paid-in capital 1,090 920
Treasury shares, at cost - 164,667 and 30,440 (9) (1)
Retained earnings 8,147 8,896
Unearned compensation (20) (22)
ShareValue Trust shares - 26,385,260 and 26,119,702 (1,255) (1,258)
- ------------------------------------------------------------------------------
Total shareholders' equity 12,953 13,502
- ------------------------------------------------------------------------------
$38,024 $37,880
==============================================================================
See notes to consolidated financial statements.
54
<PAGE> 55
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
Year ended December 31, 1997 1996 1995
==============================================================================
Cash flows - operating activities:
Net earnings (loss) $ (178) $ 1,818 $ (36)
Adjustments to reconcile net earnings(loss)
to net cash provided by operating activities:
Special charges 1,400 2,438
ShareValue Trust (99) 133
Depreciation 1,354 1,241 1,287
Amortization of goodwill and intangibles 104 25 19
Changes in assets and liabilities -
Short-term investments 154 (874) 559
Accounts receivable (251) 182 145
Inventories, net of advances and
progress billings (1,008) 306 (1,400)
Accounts payable and other
liabilities 1,490 514 (210)
Advances in excess of related costs (139) 441 199
Income taxes payable and deferred (451) (55) (692)
Other assets (272) (246) (337)
Accrued retiree health care (4) 126 163
- ------------------------------------------------------------------------------
Net cash provided by operating activities 2,100 3,611 2,135
- ------------------------------------------------------------------------------
Cash flows - investing activities:
Customer and commercial
financing - additions (1,889) (1,212) (1,543)
Customer and commercial
financing - reductions 1,030 1,482 2,638
Property, plant and equipment,
net additions (1,391) (971) (747)
Other 15 9
- ------------------------------------------------------------------------------
Net cash provided (used) by investing
activities (2,250) (686) 357
- ------------------------------------------------------------------------------
Cash flows - financing activities:
New borrowings 232 1,051 701
Debt repayments (867) (1,160) (547)
ShareValue Trust (891)
Common shares purchased (141) (718) (337)
Common shares issued 268
Stock options exercised, other 166 215 147
Dividends paid (557) (480) (434)
- ------------------------------------------------------------------------------
Net cash used by financing activities (899) (1,983) (470)
- ------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (1,049) 942 2,022
Cash and cash equivalents at
beginning of year 5,469 4,527 2,505
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 4,420 $ 5,469 $ 4,527
==============================================================================
See notes to consolidated financial statements.
55
<PAGE> 56
THE BOEING COMPANY AND SUBSIDARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1997, 1996 and 1995
(Dollars in millions except per share data)
Note 1
- ------
Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of all majority-
owned subsidiaries. Intercompany profits, transactions and balances have been
eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make assumptions and estimates
that directly affect the amounts reported in the consolidated financial
statements. Significant estimates for which changes in the near term are
considered reasonably possible and that may have a material impact on the
financial statements are addressed in these notes to the consolidated financial
statements.
Sales and other operating revenues
Sales under fixed-price-type contracts are generally recognized as deliveries
are made or at the completion of contractual billing milestones. For certain
fixed-price contracts that require substantial performance over an extended
period before deliveries begin, sales are recorded based upon attainment of
scheduled performance milestones. Sales under cost-reimbursement contracts are
recorded as costs are incurred. Certain U.S. Government contracts contain
profit incentives based upon performance relative to predetermined targets.
Incentives based on cost performance are recorded currently, and other
incentives and fee awards are recorded when the amounts can be reasonably
estimated or are awarded. Commercial aircraft sales are recorded as deliveries
are made. Income associated with customer financing activities is included in
sales and other operating revenues.
Contract and program accounting
Information, Space and Defense Systems segment operations principally consist
of performing work under contract, predominantly for the U.S. Government and
foreign governments. Cost of sales for such contracts is determined based on
the estimated average total contract cost and revenue.
Commercial aircraft programs are planned, committed and facilitized based on
long-term delivery forecasts, normally for quantities in excess of
contractually firm orders. Cost of sales for the 737, 747, 757, 767 and 777
commercial aircraft programs is determined under the program method of
accounting based on estimated average total cost and revenue for the current
program quantity. The program method of accounting effectively amortizes or
averages tooling and special equipment costs, as well as unit production costs,
over the program quantity. Because of the higher unit production costs
experienced at the beginning of a new program and the substantial investment
required for initial tooling and special equipment, new commercial jet aircraft
56
<PAGE> 57
programs normally have lower operating profit margins than established
programs. The initial program quantities for the 777 program and the 737-
600/700/800/900 (Next-Generation 737) programs have been established at 400
units, the same initial program quantity as used for the 747, 757 and 767
programs. Deliveries for the 777 program began in 1995, and deliveries for the
Next-Generation 737 program began in the fourth quarter of 1997. The estimated
program average costs and revenues are reviewed and reassessed quarterly, and
changes in estimates are recognized over current and future deliveries
constituting the program quantity.
Cost of sales for the MD-80, MD-90 and MD-11 aircraft programs is determined on
a specific-unit cost method.
To the extent that inventoriable costs are expected to exceed the total
estimated sales price, charges are made to current earnings to reduce
inventoried costs to estimated realizable value.
Inventories
Inventoried costs on commercial aircraft programs and long-term contracts
include direct engineering, production and tooling costs, and applicable
overhead, not in excess of estimated realizable value. In accordance with
industry practice, inventoried costs include amounts relating to programs and
contracts with long production cycles, a portion of which is not expected to be
realized within one year. Commercial spare parts and general stock materials
are stated at average cost not in excess of realizable value.
Interest expense
Interest and debt expense is presented net of amounts capitalized. Interest
expense is subject to capitalization as a construction-period cost of property,
plant and equipment and of commercial program tooling.
Income taxes
Federal, state and foreign income taxes are computed at current tax rates, less
tax credits. Taxes are adjusted both for items that do not have tax
consequences and for the cumulative effect of any changes in tax rates from
those previously used to determine deferred tax assets or liabilities. Tax
provisions include amounts that are currently payable, plus changes in deferred
tax assets and liabilities that arise because of temporary differences between
the time when items of income and expense are recognized for financial
reporting and income tax purposes.
Postretirement benefits
The Company's funding policy for pension plans is to contribute, at a minimum,
the statutorily required amount to an irrevocable trust. Benefits under the
plans are generally based on years of credited service, age at retirement and
average of last five years' earnings. The actuarial cost method used in
determining the net periodic pension cost is the projected unit credit method.
Cash and cash equivalents
Cash and cash equivalents consist of highly liquid instruments, such as
certificates of deposit, time deposits, treasury notes and other money market
instruments, which generally have maturities of less than three months.
Short-term investments
Short-term investments, consisting principally of U.S. Government Treasury
obligations, are classified as trading securities with unrealized gains and
losses reflected in other income.
57
<PAGE> 58
Property, plant and equipment
Property, plant and equipment are recorded at cost, including applicable
construction-period interest, and depreciated principally over the following
estimated useful lives: new buildings and land improvements, from 20 to 45
years; machinery and equipment, from 3 to 13 years. The principal methods of
depreciation are as follows: buildings and land improvements, 150% declining
balance; machinery and equipment, sum-of-the-years' digits.
Goodwill
Goodwill, representing the excess of acquisition costs over the fair value of
net assets of businesses purchased, is being amortized by the straight-line
method over 30 years. Recoverability of the unamortized goodwill balance is
based upon assessment of related operational cash flows.
Goodwill at December 31 consisted of the following:
1997 1996
==============================================================================
Goodwill $2,486 $2,486
Less cumulative amortization (91) (8)
- ------------------------------------------------------------------------------
$2,395 $2,478
==============================================================================
Note 2
- ------
Mergers and Acquisitions
Merger with McDonnell Douglas Corporation
Effective August 1, 1997, McDonnell Douglas Corporation merged with the Company
through a stock-for-stock exchange in which 1.3 shares of Company stock were
issued for each share of McDonnell Douglas stock outstanding. The Company
issued 277.3 million shares in connection with the merger. The combined company
is operating under the name of The Boeing Company.
The merger is accounted for as a pooling of interests. Accordingly, except for
adjustments to reflect conformed accounting policies, the historical results of
operations of the two companies have been combined, and no acquisition
revaluation or goodwill was recorded.
The merger was subject to approval by the United States Federal Trade
Commission and the European Commission. Future requirements or obligations
associated with obtaining these approvals are not expected to have a material
impact on future operations or liquidity of the Company.
The following table presents sales and net earnings for the periods presented.
The conforming accounting adjustments include the following: (1) the
percentage-of-completion method of recognizing sales and earnings for fixed-
price contracts is changed from the cost-to-cost basis of revenue recognition
used by McDonnell Douglas to the delivery basis of revenue recognition; and (2)
the McDonnell Douglas classification of income associated with cash and short-
term investments and gains on sale of assets is changed from "Sales and other
operating revenues" to "Other income, principally interest."
58
<PAGE> 59
Year ended December 31, 1996 1995
==============================================================================
Sales and other operating revenues
The Boeing Company $22,681 $19,515
McDonnell Douglas Corporation 13,834 14,332
Intercompany sales elimination (601) (546)
Conforming accounting adjustments (461) (341)
- ------------------------------------------------------------------------------
Combined $35,453 $32,960
==============================================================================
Net earnings (loss)
The Boeing Company $ 1,095 $ 393
McDonnell Douglas Corporation 788 (416)
Conforming accounting adjustments, net of tax (65) (13)
- ------------------------------------------------------------------------------
Combined $ 1,818 $ (36)
==============================================================================
The conforming accounting adjustments have also resulted in the following
changes applicable to the McDonnell Douglas balance sheet accounts: an increase
in current deferred tax assets; a decrease in inventories, billings in excess
of related costs, and retained earnings; and conformity to a classified balance
sheet separating current and non-current balances. Cash dividends declared by
McDonnell Douglas totaled $50, $104 and $90 for the years ended December 31,
1997, 1996 and 1995, respectively.
Acquisition of Rockwell Aerospace and Defense Business
Effective December 6, 1996, the Company acquired Rockwell's aerospace and
defense business by issuing 9.2 million shares of common stock valued at $875
and assuming debt valued at $2,180. This transaction has been accounted for
under the purchase method. The assets and liabilities have been recorded at
fair value with excess purchase price recorded as goodwill.
Note 3
- ------
Special Charges
Douglas Products Division valuation adjustment
In the fourth quarter of 1997, the Company completed an assessment of the
financial impact of its post-merger strategy decisions related to its McDonnell
Douglas Corporation commercial aircraft product lines and recorded a special
pretax charge of $1,400 relative to these decisions. The charge principally
represents an inventory valuation adjustment based on post-merger assessments
of the market conditions and related program decisions and commitments. Also
included in the charge were valuation adjustments in connection with customer
financing assets. The Douglas Products Division programs currently in
production are the MD-11 trijet and the MD-80 and MD-90 twinjets. Additionally,
the MD-95 twinjet, now referred to as the 717 model program, is currently in
development, with first delivery scheduled for 1999. The MD-80 and MD-90
twinjets will continue to be produced only through 1999, the MD-11 trijet
market opportunities continue to be principally limited to the freighter
version, and the 717 program has been restructured to take advantage of the
longer-term market opportunities currently projected for a 100-seat aircraft.
59
<PAGE> 60
MD-11 accounting charge
Effective October 1, 1995, the Company changed its accounting for the MD-11
program to the specific-unit cost method from the program method of accounting
described in Note 1, and accordingly revalued the MD-11 program inventory to be
consistent with the specific-unit cost method. This revaluation resulted in a
non-cash pretax charge to operations of $1,838 in the fourth quarter of 1995.
Special retirement program expense
A special retirement program was offered during the first half of 1995 to
encourage early retirements, resulting in a pretax charge of $600.
Note 4
- ------
Earnings per Share
The weighted average number of shares outstanding (in millions) used to
compute basic earnings per share were 970.1, 968.7 and 979.5 for the
years ended December 31, 1997, 1996 and 1995, respectively, and for
computing diluted earnings per share were 970.1, 981.9 and 979.5 for the
same respective years. Basic earnings per share are calculated based on the
weighted average number of shares outstanding, excluding the outstanding shares
held by the ShareValue Trust. Diluted earnings per share are calculated based
on the same number of shares plus additional shares representing stock
distributable under stock-based plans computed using the treasury stock
method. Because 1997 and 1995 results reflect a net loss from continuing
operations, basic and diluted earnings per share are calculated based on
the same weighted average number of shares outstanding. The implementation
of Statement of Financial Accounting Standards No. 128, Earnings per Share,
did not have a material impact on the financial statements.
Note 5
- ------
Accounts Receivable
Accounts receivable at December 31 consisted of the following:
1997 1996
==============================================================================
U.S. Government contracts $2,053 $2,159
Other 1,068 711
- ------------------------------------------------------------------------------
$3,121 $2,870
==============================================================================
Accounts receivable included the following as of December 31, 1997 and 1996,
respectively: amounts not currently billable of $587 and $354 relating
primarily to sales values recorded upon attainment of performance milestones
that differ from contractual billing milestones and withholds on U.S.
Government contracts ($161 and $102 not expected to be collected within one
year); $341 and $291 relating to claims and other amounts on U.S. Government
contracts subject to future settlement ($333 and $285 not expected to be
collected within one year); and $62 and $31 of other receivables not expected
to be collected within one year.
60
<PAGE> 61
Note 6
- ------
Inventory
Inventories at December 31 consisted of the following:
1997 1996
==============================================================================
Commercial aircraft programs and long-term
contracts in progress $26,566 $23,291
Commercial spare parts, general stock
materials and other 1,869 1,476
- ------------------------------------------------------------------------------
28,435 24,767
Less advances and progress billings (19,468) (15,616)
- ------------------------------------------------------------------------------
$ 8,967 $ 9,151
==============================================================================
As of December 31, 1997, there were no significant excess deferred production
costs (inventory production costs incurred on in-process and delivered units in
excess of the estimated average cost of such units determined as described in
Note 1) or unamortized tooling costs not recoverable from existing firm orders
for commercial programs other than the 777 and the Next-Generation 737
programs. The program quantity for the 777 and the Next-Generation 737 programs
for determining cost of sales based on estimated average total cost (including
inventory production costs and tooling) and revenue has been established at 400
units.
Inventory costs at December 31, 1997, included unamortized tooling of $2,678
and $809 relating to the 777 and Next-Generation 737 programs, and excess
deferred production costs of $2,384 relating to the 777 program. In the third
quarter of 1997, a charge of $700 was recorded, representing the amount the
Next-Generation 737 total program costs of sales was estimated to exceed total
program revenues for the initial program quantity of 400 units. As a result of
this charge, there were no Next-Generation 737 excess deferred production costs
as of December 31, 1997. Inventory costs at December 31, 1996, included
unamortized tooling of $3,159 and $668 relating to the 777 and
Next-Generation 737 programs, and excess deferred production costs of $2,488
relating to the 777 program. It is estimated that $1,125 of the 777 program
unamortized tooling and excess deferred production costs as of December 31,
1997, will be recovered from firm orders received after December 31, 1997. As
of December 31, 1997, 233 777s were under firm contract, and 104 777s had been
delivered. Next-Generation 737 program unamortized tooling costs are estimated
to be fully recovered from firm orders.
Interest capitalized as construction-period tooling costs amounted to $33, $30
and $33 in 1997, 1996 and 1995, respectively.
As of December 31, 1997 and 1996, inventory balances included $231 subject to
claims or other uncertainties primarily relating to the A-12 program.
The estimates underlying the average costs of deliveries reflected in the
inventory valuations may differ materially from amounts eventually realized for
the reasons outlined in Note 21.
61
<PAGE> 62
Note 7
- ------
Customer and Commercial Financing
Customer and commercial financing at December 31 consisted of the following:
1997 1996
==============================================================================
Aircraft financing
Notes receivable $ 651 $ 334
Investment in sales-type/financing leases 1,646 1,605
Operating lease equipment, at cost,
less accumulated depreciation of $254 and $206 1,289 868
Commercial equipment financing
Notes receivable 313 478
Investment in sales-type/financing leases 407 358
Operating lease equipment, at cost,
less accumulated depreciation of $96 and $106 502 395
- ------------------------------------------------------------------------------
Less valuation allowance (208) (150)
- ------------------------------------------------------------------------------
$4,600 $3,888
==============================================================================
Financing for aircraft is collateralized by security in the related asset, and
historically the Company has not experienced a problem in accessing such
collateral. The operating lease aircraft category includes new and used jet and
commuter aircraft, spare engines and spare parts.
The components of investment in sales-type/financing leases at December 31 were
as follows:
1997 1996
==============================================================================
Minimum lease payments receivable $2,709 $2,735
Estimated residual value of leased assets 519 589
Unearned income (1,220) (1,361)
- ------------------------------------------------------------------------------
$2,008 $1,963
==============================================================================
Scheduled payments on customer and commercial financing are as follows:
Sales-type/ Operating
Principal Financing Lease Lease
Payments on Payments Payments
Year Notes Receivable Receivable Receivable
==============================================================================
1998 $272 $ 312 $214
1999 91 300 164
2000 70 255 129
2001 64 246 108
2002 60 216 97
Beyond 2002 407 1,380 878
62
<PAGE> 63
The Company has entered into interest rate swaps with third-party investors
whereby the interest rate terms differ from the terms in the original
receivable. These interest rate swaps related to $64 of customer financing
receivables as of December 31, 1997. Interest rate swaps on financing
receivables are settled on the same dates interest is due on the underlying
receivables.
Interest rates on fixed-rate notes ranged from 4.00% to 15.67%, and effective
interest rates on variable-rate notes ranged from 0.40% to 1.25% above the
London Interbank Offered Rate (LIBOR).
Sales and other operating revenues included interest income associated with
notes receivable and sales-type/financing leases of $217, $195 and $296 for
1997, 1996 and 1995, respectively.
The valuation allowance is subject to change depending on estimates of
collectability and realizability of the customer financing balances.
Note 8
- ------
Property, Plant and Equipment
Property, plant and equipment at December 31 consisted of the following:
1997 1996
==============================================================================
Land $ 530 $ 539
Buildings 8,133 7,883
Machinery and equipment 9,940 9,778
Construction in progress 691 525
- ------------------------------------------------------------------------------
19,294 18,725
Less accumulated depreciation (10,903) (10,459)
- ------------------------------------------------------------------------------
$ 8,391 $ 8,266
==============================================================================
Depreciation expense was $1,266, $1,132 and $1,172 for 1997, 1996 and 1995,
respectively. Interest capitalized as construction-period property, plant and
equipment costs amounted to $28, $28 and $32 in 1997, 1996 and 1995,
respectively.
Rental expense for leased properties was $308, $242 and $204 for 1997, 1996 and
1995, respectively. These expenses, substantially all minimum rentals, are net
of sublease income. Minimum rental payments under operating leases with initial
or remaining terms of one year or more aggregated $827 at December 31, 1997.
Payments, net of sublease amounts, due during the next five years are as
follows:
1998 1999 2000 2001 2002
------------------------------------
$205 $167 $120 $86 $61
====================================
63
<PAGE> 64
Note 9
- ------
Income Taxes
The provision for taxes on income consisted of the following:
Year ended December 31, 1997 1996 1995
==============================================================================
U.S. Federal
Taxes paid or currently payable $ 103 $ 689 $ 379
Change in deferred taxes (253) (78) (675)
- ------------------------------------------------------------------------------
(150) 611 (296)
State
Taxes paid or currently payable 9 57 32
Change in deferred taxes (22) (6) (112)
- ------------------------------------------------------------------------------
(13) 51 (80)
- ------------------------------------------------------------------------------
Income tax provision (benefit) $(163) $662 $(376)
==============================================================================
The following is a reconciliation of the income tax provision (benefit)
computed by applying the U.S. federal statutory rate of 35 percent to the
recorded income tax provision:
1997 1996 1995
==============================================================================
U.S. federal statutory tax $(119) $ 868 $(144)
Foreign Sales Corporation tax benefit (79) (110) (85)
Research benefit (8) (4) (90)
Prior years' investment tax credit (95)
Prior years' tax adjustment (23) (30)
Nondeductibility of goodwill and merger costs 71 2
State income tax provision, net of effect on
U.S. federal tax (9) 31 (53)
Other provision adjustments 4 (4)
- ------------------------------------------------------------------------------
Income tax provision (benefit) $(163) $ 662 $(376)
==============================================================================
The deferred tax assets, net of deferred tax liabilities, resulted from an
alternative minimum tax credit carryforward and from temporary tax differences
associated with the following:
Year ended December 31, 1997 1996 1995
==============================================================================
Inventory and long-term contract methods of
income recognition $ 1,186 $ 999 $ 861
Pension benefit accruals (1,152) (1,026) (684)
Retiree health care accruals 1,806 1,712 1,307
Other employee benefits accruals 318 339 291
Customer and commercial financing (378) (519) (690)
Alternative minimum tax credit carryforward 130
- ------------------------------------------------------------------------------
Net deferred tax assets $ 1,780 $ 1,505 $1,215
==============================================================================
64
<PAGE> 65
The temporary tax differences associated with inventory and long-term contract
methods of income recognition encompass related costing differences, including
timing and depreciation differences.
Valuation allowances were not required due to the nature of and circumstances
associated with the temporary tax differences.
Income taxes have been settled with the Internal Revenue Service (IRS) for all
years through 1978, and IRS examinations have been completed through 1987.
In connection with these examinations, the Company disagrees with IRS proposed
adjustments, and the years 1979 through 1987 are in litigation. The Company has
also filed refund claims for additional research and development tax credits,
primarily in relation to its fixed-price government development programs.
These credits have not been recorded as the claims are under review by the IRS
in the context of prior years' audits. Successful resolutions will result in
increased income to the Company.
The Company believes adequate provision has been made for all open years.
Income tax payments and transfers were $219, $648 and $263 in 1997, 1996 and
1995, respectively.
Note 10
- -------
Accounts Payable and Other Liabilities
Accounts payable and other liabilities at December 31 consisted of the
following:
1997 1996
==============================================================================
Accounts payable $ 5,609 $4,830
Accrued compensation and employee benefit costs 2,154 2,000
Lease and other deposits 819 399
Other 2,966 2,672
- ------------------------------------------------------------------------------
$11,548 $9,901
==============================================================================
65
<PAGE> 66
Note 11
- -------
Debt
Debt at December 31 consisted of the following:
1997 1996
==============================================================================
Unsecured debentures and notes:
8.63% due Apr.1, 1997 $ - $ 250
7 5/8% due Feb. 17, 1998 301 306
8 7/8% due Sep. 15, 1999 311 319
8.25% due Jul. 1, 2000 200 200
8 3/8% due Feb. 15, 2001 182 212
9.25% due Apr. 1, 2002 120 349
6 3/4% due Sep. 15, 2002 297 297
6.35% due Jun. 15, 2003 299 299
7 7/8% due Feb. 15, 2005 209 210
6 5/8% due Jun. 1, 2005 291 290
6.875% due Nov. 1, 2006 248 248
8 1/10% due Nov. 15, 2006 175 175
9.75% due Apr. 1, 2012 348 347
8 3/4% due Aug. 15, 2021 398 398
7.95% due Aug. 15, 2024 300 300
7 1/4% due Jun. 15, 2025 247 247
8 3/4% due Sep. 15, 2031 248 248
8 5/8% due Nov. 15, 2031 173 173
7.50% due Aug. 15, 2042 100 100
7 7/8% due Apr. 15, 2043 173 173
6 7/8% due Oct. 15, 2043 125 125
Senior debt securities
5.0% - 9.4%, due through 2011 148 159
Senior medium-term notes,
5.5% - 13.6%, due through 2017 1,129 1,124
Subordinated medium-term notes
6.1% - 9.4%, due through 2004 70 95
Capital lease obligations, due through 2008 500 543
Other notes 262 302
- ------------------------------------------------------------------------------
$6,854 $7,489
==============================================================================
The $300 debentures due August 15, 2024, are redeemable at the holder's option
on August 15, 2012. All other debentures and notes are not redeemable prior to
maturity. Maturities of long-term debt for the next five years are as follows:
1998 1999 2000 2001 2002
------------------------------------
$608 $602 $428 $419 $604
====================================
The Company has $3,000 currently available under credit line agreements with a
group of commercial banks. The Company has complied with the restrictive
covenants contained in various debt agreements.
66
<PAGE> 67
During the fourth quarter of 1997, Boeing Capital Corporation (BCC), a
corporation wholly owned by the Company, filed a shelf registration statement
with the Securities and Exchange Commission relating to up to $1,200 aggregate
principal amount of debt securities. In addition, BCC has $240 available but
unused under a credit line agreement with a group of commercial banks. At
December 31, 1997 and 1996, borrowings under commercial paper and uncommitted
short-term bank facilities totaling $98 and $141 were supported by available
unused commitments under the revolving credit agreement.
The $100 notes due August 15, 2042, with a stated rate of 7.50% were issued to
a private investor in connection with an interest rate swap arrangement that
resulted in an effective synthetic rate of 7.865%. The swap arrangement results
in semi-annual interest rate payments at LIBOR, and is scheduled to settle when
the underlying note matures. Additionally, BCC has interest rate swaps totaling
$376 relating to capital lease obligations and $50 relating to medium-term
notes. The swaps attributable to capital lease obligations have a receive rate
that is floating based on LIBOR, and a pay rate that is fixed. The swaps
attributable to medium-term notes have a receive rate that is fixed, and a pay
rate that is based on LIBOR. Interest rate swaps on these capital lease
obligations and medium-term notes are settled on the same dates interest is due
on the underlying obligations.
BCC has available approximately $95 in uncommitted, short-term bank credit
facilities whereby the Company may borrow, at interest rates which are
negotiated at the time of the borrowings, upon such terms as the Company and
the banks may mutually agree. At December 31, 1997 and 1996, borrowings on
these credit facilities totaled $18 and $45.
Total debt interest, including amounts capitalized, was $573, $450 and $440 for
the years ended December 31, 1997, 1996 and 1995, and interest payments were
$588, $436 and $475, respectively.
67
<PAGE> 68
Note 12
- -------
Postretirement Plans
Pensions
The Company has various noncontributory plans covering substantially all
employees. All major pension plans are funded and have plan assets that exceed
accumulated benefit obligations. The following table reconciles the plans'
funded status to the prepaid expense balance at December 31.
1997 1996
==============================================================================
Actuarial present value of benefit obligations:
Vested $(21,530) $(20,155)
Nonvested (1,479) (1,347)
- ------------------------------------------------------------------------------
Accumulated benefit obligation (23,009) (21,502)
Effect of projected future salary increases (2,449) (2,387)
- ------------------------------------------------------------------------------
Projected benefit obligation (25,458) (23,889)
Plan assets at fair value - primarily equities,
fixed income obligations and cash equivalents 33,063 28,178
- ------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 7,605 4,289
Unrecognized net actuarial gain (5,069) (2,015)
Unrecognized prior service cost 1,066 1,154
Unrecognized net asset at January 1, 1987, being
recognized over the plans' average remaining
service lives (331) (414)
- ------------------------------------------------------------------------------
Prepaid pension expense recognized in the
Consolidated Statements of Financial Position $ 3,271 $ 3,014
==============================================================================
The pension provision included the following components:
Year ended December 31, 1997 1996 1995
==============================================================================
Service cost (current period attribution) $ 492 $ 415 $ 387
Interest accretion on projected benefit
obligation 1,697 1,141 1,066
Actual return on plan assets (5,921) (2,899) (4,115)
Net deferral and amortization of
actuarial gains and losses 3,748 1,499 2,802
- ------------------------------------------------------------------------------
Net pension provision $ 16 $ 156 $ 140
==============================================================================
The actuarial present value of the projected benefit obligation at December 31,
1997, 1996 and 1995, respectively, was determined using a weighted average
discount rate of 7.00%, 7.36% and 7.15%, and a rate of increase in future
compensation levels of 5.00%, 5.07% and 4.85%. The expected long-term rate of
return on plan assets for 1997, 1996 and 1995, respectively, was 8.33%, 8.46%
and 8.47%.
68
<PAGE> 69
Certain of the pension plans provide that, in the event there is a change in
control of the Company which is not approved by the Board of Directors and the
plans are terminated within five years thereafter, the assets in the plans
first will be used to provide the level of retirement benefits required by the
Employee Retirement Income Security Act, and then any surplus will be used to
fund a trust to continue present and future payments under the postretirement
medical and life insurance benefits in the Company's group insurance programs.
The Company has an agreement with the Government with respect to certain of the
Company pension plans. Under the agreement, should the Company terminate any of
the plans (although the Company has no intention of doing so) under conditions
in which the plan's assets exceed that plan's obligations, the Government will
be entitled to a fair allocation of any of the plan's assets based on plan
contributions that were reimbursed under Government contracts. Also, the
Revenue Reconciliation Act of 1990 imposes a 20% nondeductible excise tax on
the gross assets reverted if the Company establishes a qualified replacement
plan or amends the terminating plan to provide for benefit increases. Without a
qualified replacement plan, a 50% tax is applied. Any net amount retained by
the Company is treated as taxable income.
The Company has certain unfunded and partially funded plans with a projected
benefit obligation of $387 and $323; plan assets of $56 and $44; and
unrecognized prior service costs and actuarial losses of $131 and $107 as of
December 31, 1997 and 1996, respectively, based on actuarial assumptions
consistent with the funded plans. The net provision for the unfunded plans was
$49 and $39 for 1997 and 1996.
The principal defined contribution plans are the Company-sponsored 401(k) plans
available to substantially all employees and a funded plan for unused sick
leave. The provision for these defined contribution plans in 1997, 1996 and
1995 was $361, $287 and $268, respectively.
Other postretirement benefits
The Company's postretirement benefits other than pensions consist principally
of health care coverage for eligible retirees and qualifying dependents, and to
a lesser extent, life insurance to certain groups of retirees. Retiree health
care is provided principally until age 65 for approximately half those retirees
who are eligible for health care coverage, and certain employee groups,
including employees covered by the United Auto Workers bargaining agreement,
who are provided lifetime health care coverage.
The retiree health care cost provision was $293, $288 and $314 for 1997, 1996
and 1995, respectively. The components of expense were as follows:
Year ended December 31, 1997 1996 1995
==============================================================================
Service cost (current period attribution) $ 86 $ 97 $ 99
Interest accretion on accumulated retiree
health care obligation 274 219 235
Net deferral and amortization of
actuarial gains (67) (28) (20)
- ------------------------------------------------------------------------------
Net provision for retiree health care $293 $288 $314
==============================================================================
69
<PAGE> 70
Benefit costs were calculated based on assumed cost growth for retiree health
care costs of an 8.0% annual rate for 1997, decreasing to a 5.0% annual growth
rate by the year 2008. A 1% increase or decrease in the assumed annual trend
rates would increase or decrease the accumulated retiree health care obligation
by $410, $377 and $354 as of December 31, 1997, 1996 and 1995, respectively,
with a corresponding effect on the retiree health care expense of $43, $41 and
$49. The accumulated retiree health care obligation at December 31, 1997, 1996
and 1995 was determined using a weighted average discount rate of 7.00%, 7.36%
and 7.15%, respectively.
The accumulated retiree health care obligation at December 31 consisted of the
following components:
1997 1996
==============================================================================
Retirees and dependents $2,330 $2,268
Fully eligible active plan participants 450 415
Other active plan participants 1,244 1,071
- ------------------------------------------------------------------------------
Total accumulated retiree health care obligation 4,024 3,754
Unrecognized gain on plan changes 435 475
Unrecognized net actuarial gain 337 571
- ------------------------------------------------------------------------------
Accrued retiree health care $4,796 $4,800
==============================================================================
Note 13
- -------
Shareholders' Equity
Stock split
An increase in the total number of shares of authorized stock from 610,000,000
to 1,220,000,000 was approved by shareholders at the Company's Annual Meeting
on April 28, 1997, and a 2-for-1 stock split was effective as of the close of
business June 6, 1997. Shareholders' equity has been restated to give
retroactive recognition to the stock split for all periods presented by
reclassifying, from additional paid-in capital or retained earnings to common
stock, the par value of the additional shares arising from the split. In
addition, all references to number of shares and per share amounts have been
restated to reflect the stock split.
70
<PAGE> 71
<TABLE>
Changes in shareholders' equity consisted of the following:
<CAPTION>
1997 1996 1995
--------------------------------------------------------
(Shares in thousands) Shares Amount Shares Amount Shares Amount
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Common stock
Beginning balance-January 1 993,348 $ 4,967 989,255 $ 4,946 1,002,028 $5,010
Shares issued 4,550 23
Shares repurchased (19,055) (95) (13,559) (68)
Shares issued for ShareValue Trust 3,466 17
Shares issued for acquisition of
Rockwell aerospace and defense business 18,309 92
Shares issued for incentive stock plans 2,132 10 1,373 7 786 4
- ----------------------------------------------------------------------------------------------------
Ending balance-December 31 1,000,030 $ 5,000 993,348 $ 4,967 989,255 $4,946
====================================================================================================
Additional paid-in capital
Beginning balance-January 1 $ 920 $ 0 $ 0
Shares issued 245
Shares repurchased (383) (44)
Shares issued for incentive plans 14
Incentive stock plan accrual 11
Treasury shares issued for incentive
stock plans, net (20) 27 (11)
Tax benefit related to incentive
stock plans 41 58 21
Stock appreciation rights
expired or surrendered 6 9 9
Shares issued for ShareValue Trust 209
Shares issued for acquisition of
Rockwell aerospace and defense business 784
ShareValue Trust market value adjustment (102) 216
- ----------------------------------------------------------------------------------------------------
Ending balance-December 31 $ 1,090 $ 920 $ 0
====================================================================================================
Treasury stock
Beginning balance-January 1 30 $ (1) 10,608 $ (209) 16,756 $ (328)
Treasury shares issued for
incentive stock plans, net (2,580) 133 (7,614) 150 (6,148) 119
Treasury shares acquired 2,710 (141)
Shares transferred from/to ShareValue
Trust 5 (2,964) 58
-------------------------------------------------------------------------------------------------
Ending balance-December 31 165 $ (9) 30 $ (1) 10,608 $ (209)
====================================================================================================
71
<PAGE> 72
1997 1996 1995
--------------------------------------------------------
(Shares in thousands) Shares Amount Shares Amount Shares Amount
=====================================================================================================
Retained earnings
Beginning balance-January 1 $ 8,896 $7,808 $8,503
Net earnings (178) 1,818 (36)
Shares repurchased (233) (226)
Cash dividends declared (571) (497) (433)
- ----------------------------------------------------------------------------------------------------
Ending balance-December 31 $ 8,147 $8,896 $7,808
====================================================================================================
Unearned compensation
Beginning balance-January 1 $ (22) $ (18) $ (12)
New issuances (29) (20) (17)
Amortization 31 16 11
- ----------------------------------------------------------------------------------------------------
Ending balance-December 31 $ (20) $ (22) $ (18)
====================================================================================================
ShareValue Trust
Beginning balance-January 1 26,120 $(1,258) 0 $ 0 0 $ 0
Shares acquired for original funding (5) 26,032 (1,171)
Shares acquired from dividend reinvestment 270 88 (4)
Market value adjustment 102 (216)
Accrual of appreciation (99) 133
- ----------------------------------------------------------------------------------------------------
Ending balance-December 31 26,385 $(1,255) 26,120 $(1,258) 0 $ 0
====================================================================================================
</TABLE>
Ten million shares of authorized preferred stock remain unissued.
The Rights issued in August 1987 pursuant to the Stockholders Rights Plan
expired in August 1997. Each Right entitled the registered holder to purchase
from the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $1.00 per share (the "Preferred Stock"), under
circumstances set forth in the Plan. The Rights were attached to certificates
for shares of the common stock, par value of $5 each, of the Company and were
transferred only with such common stock certificates. No Preferred Stock has
been issued.
Note 14
- -------
ShareValue Trust
In July 1996, the Company established a self-sustaining, irrevocable 12-year
trust, the ShareValue Trust, designed to allow substantially all employees to
share in the results of increasing shareholder value over the long term. As of
December 31, 1997, the Trust had acquired 26,025,460 shares of the Company's
common stock, equivalent to $1,150 of market value based upon a stock price of
$44 3/16, which was the average price per share on June 28, 1996, plus 359,800
shares acquired from reinvested dividends. Shares of common stock held by the
72
<PAGE> 73
Trust are legally outstanding and entitled to receive dividends. Dividends
received by the Trust are reinvested in additional shares of common stock. If
the term of the Trust is not extended beyond the initial irrevocable 12-year
period, any residual trust balance will revert to the Company.
Two investment periods began on July 1, 1996. One period has a duration of two
years and the other has a duration of four years. Each period was allocated a
fund of one-half of the total shares. Distributions from the ShareValue Trust
to employees in the form of common stock will be made to the extent the market
value of the ShareValue Trust has increased above a pre-defined threshold
amount of 3% per annum at the end of that fund's investment period. The
ShareValue Trust bears its own nominal administrative costs paid out of the
Trust assets. At the end of each investment period, a new four-year investment
period will begin, resulting in overlapping periods with potential
distributions every two years. The Trust fund market value after distribution
will be the base from which the distributable market value appreciation over
the threshold for the succeeding investment period will be determined.
Although the obligation to make these distributions is solely that of the Trust
and no assets of the Company will be required in the future to satisfy the
Trust distribution obligations, the change in Trust appreciation above the
threshold amounts for the respective investment periods is charged or credited
to earnings based on the Trust valuation as of the end of the reporting period.
ShareValue Trust charges and credits reflected in earnings will not impact the
Company's current or future cash flow. As of December 31, 1997, the total
increased value of both current funds exceeded the thresholds by $34.
The shares held by the ShareValue Trust, recorded in the contra equity account
"ShareValue Trust," are legally outstanding and receive dividend payments. The
ShareValue Trust is adjusted to market value at each reporting period, with an
offsetting adjustment to additional paid-in capital.
An additional $550 of funding will be made effective January 1, 1998, as a
result of the merger with McDonnell Douglas Corporation.
Note 15
- -------
Stock-Based Plans
The Company's 1997 incentive stock plan permits the grant of stock options,
stock appreciation rights (SARs) and restricted stock awards (denominated in
stock or stock units) to any employee of the Company or its subsidiaries. Under
the terms of the plan, 30,000,000 shares are authorized for issuance upon
exercise of options, as payment of SARs and as restricted stock awards, of
which no more than an aggregate of 6,000,000 shares are available for issuance
as restricted stock awards and no more than an aggregate of 3,000,000 shares
are available for issuance as restricted stock that is subject to restrictions
based on continuous employment for less than three years. This authorization
for issuance under the 1997 plan will terminate on April 30, 2007. As of
December 31, 1997, no SARs have been granted under the 1997 Plan. The 1993
incentive stock plan permitted the grant of options, SARs and stock to
employees of the Company or its subsidiaries. The 1988 and 1984 stock option
plans permitted the grant of options or SARs to officers or other key employees
of the Company or its subsidiaries. No further grants may be awarded under
these three plans.
73
<PAGE> 74
Options and SARs have been granted with an exercise price equal to the fair
market value of the Company's stock on the date of grant and expire ten years
after the grant date. Vesting is generally over a five-year period with
portions of a grant becoming exercisable at one year, three years and five
years after the grant date. In 1993 and 1994, certain senior executives were
awarded options under the 1993 plan which became exercisable based solely upon
maintenance of certain stock prices for periods of twenty consecutive days.
These options became fully exercisable in late 1995 and expire on December 13,
1998. SARs, which have been granted only under the 1988 and 1984 plans, were
granted in tandem with stock options; therefore, exercise of the SAR cancels
the related option and exercise of the option cancels the attached SAR.
In 1994, McDonnell Douglas shareholders approved the 1994 Performance Equity
Incentive Plan. Restricted stock issued under this plan prior to 1997 vested
upon the merger between McDonnell Douglas and The Boeing Company. As of
December 31, 1997, a total of 594,000 shares had been granted and remain
restricted. Substantially all compensation relating to these restricted shares
is being amortized to expense over three years. Unearned compensation is
reflected as a component of shareholders' equity.
Information concerning stock options issued to directors, officers and other
employees is presented in the following table.
1997 1996 1995
------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
(Shares in thousands) Shares Price Shares Price Shares Price
==============================================================================
Number of shares under option:
Outstanding at
beginning of year 26,525 $25.47 28,754 $20.19 30,332 $18.92
Granted 6,320 53.16 6,692 40.32 5,814 23.23
Exercised (4,502) 21.77 (8,356) 19.34 (6,406) 17.43
Canceled or expired (223) 47.84 (233) 35.92 (464) 21.65
Exercised as SARs (415) 15.21 (332) 13.70 (522) 12.32
Outstanding at end ------ ------ ------
of year 27,705 32.36 26,525 25.47 28,754 20.19
==============================================================================
Exercisable at
end of year 12,277 $24.09 12,412 $20.13 16,401 $19.21
==============================================================================
As of December 31, 1997, 29,911,000 shares were available for grant under the
1997 Incentive Stock Plan,and 9,965,000 shares were available for grant under
the Incentive Compensation Plan.
74
<PAGE> 75
The following table summarizes information about stock options outstanding at
December 31, 1997 (shares in thousands).
Options Outstanding Options Exercisable
---------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Contractual Exercise Exercise
Exercise Prices Shares Life (years) Price Shares Price
==============================================================================
$ 0 to $ 9 45 4.5 $ 7.20 45 $7.20
$10 to $19 5,254 5.2 16.26 3,522 16.57
$20 to $29 10,029 5.8 23.25 6,730 23.19
$30 to $39 1,790 8.1 38.48 42 36.48
$40 to $49 4,465 8.3 41.05 1,938 41.00
$50 to $59 6,122 9.3 53.18 0 0.00
- ------------------------------------------------------------------------------
27,705 12,277
==============================================================================
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. Expense
(income) recognized for performance-based stock plans and the ShareValue
Program was $(68), $176 and $59 for 1997, 1996 and 1995, respectively.
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, including ShareValue Trust, during 1997, 1996 and 1995 to
be $20.67, $8.39 and $8.13. The fair values of stock-based compensation awards
granted and of potential distributions under the ShareValue Trust arrangement
were estimated using a binomial option pricing model with the following
assumptions.
Expected
-------------------------------------
Grant Dividend Risk-Free
Date Option Term Volatility Yield Interest Rate
==============================================================================
1997 1/13/97 9 years 19% 1.1% 6.6%
2/24/97 9 years 19% 1.1% 6.6%
- ------------------------------------------------------------------------------
1996 1/11/96 5 years 17% 1.3% 5.3%
7/1/96 2 years 17% - 6.3%
7/1/96 4 years 17% - 6.3%
2/26/96 9 years 21% 1.2% 6.0%
- ------------------------------------------------------------------------------
1995 2/27/95 9 years 20% 2.2% 7.2%
==============================================================================
75
<PAGE> 76
Had compensation expense for the Company's stock-based plans been accounted for
using the fair value method prescribed by SFAS No. 123, net income and earnings
per share would have been as follows:
1997 1996 1995
==============================================================================
Net earnings (loss) as reported $(178) $1,818 $(36)
Pro forma net earnings (loss)
under SFAS No. 123 $(332) $1,852 $(50)
- ------------------------------------------------------------------------------
Earnings (loss) per share as reported
Basic $(.18) $ 1.88 $(.04)
Diluted $(.18) $ 1.85 $(.04)
- ------------------------------------------------------------------------------
Pro forma net earnings (loss) under SFAS No. 123
Basic $(.34) $ 1.91 $(.05)
Diluted $(.34) $ 1.89 $(.05)
==============================================================================
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 1995.
Note 16
- -------
Derivative Financial Instruments
The derivative financial instruments held by the Company at December 31, 1997,
consisted of simple and specifically tailored interest rate swaps and foreign
currency forward contracts. The Company does not trade in derivatives for
speculative purposes.
The interest rate swaps, which are associated with certain customer financing
receivables and long-term debt, are designed to achieve a desired balance of
fixed and variable rate positions. These swaps are accounted for as integral
components of the associated receivable and debt, with interest accrued and
recognized based upon the effective rates. Due to the component nature of these
interest rate swaps, there are no associated gains or losses. (See Note 7, Note
11 and Note 19.)
Foreign currency forward contracts are entered into to hedge specific receipt
and expenditure commitments made in foreign currencies. As of December 31, 1997,
the notional amount of foreign currency forward contracts denominated in foreign
currencies was $535, with unrealized gains, net of unrealized losses, of $5.
Note 17
- -------
Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business, principally relating to customer financing
activities. Financial instruments with off-balance-sheet risk include financing
commitments, credit guarantees, and participations in customer financing
receivables with third-party investors which involve interest rate terms
different from the underlying receivables.
76
<PAGE> 77
Irrevocable financing commitments related to aircraft on order, including
options, scheduled for delivery through 2006 totaled $6,029 and $6,454 as of
December 31, 1997 and 1996. The Company anticipates that not all of these
commitments will be utilized and that it will be able to arrange for third-
party investors to assume a portion of the remaining commitments, if necessary.
The Company has additional commitments to arrange for commercial equipment
financing totaling $132 and $77 as of December 31, 1997 and 1996.
Participations in customer financing receivables with third-party investors
which involve interest rate terms different from the underlying receivables
totaled $64 and $77 as of December 31, 1997 and 1996.
The Company's maximum exposure to credit-related losses associated with credit
guarantees, without regard to collateral, totaled $955 ($660 associated with
commercial aircraft and collateralized) and $868 ($722 associated with
commercial aircraft and collateralized) as of December 31, 1997 and 1996.
The Company's maximum exposure to losses associated with asset value
guarantees, without regard to collateral, totaled $470 and $586 as of December
31, 1997 and 1996. These asset value guarantees relate to commercial aircraft
and are collateralized.
Note 18
- -------
Significant Group Concentrations of Credit Risk
Financial instruments involving potential credit risk are predominantly with
commercial airline customers and the U.S. Government. As of December 31, 1997,
off-balance-sheet financial instruments described in Note 17 predominantly
related to commercial aircraft customers. Of the $7,721 in accounts receivable
and customer financing receivables included in the Consolidated Statements of
Financial Position, $4,090 related to aircraft customers and $2,053 related to
the U.S. Government. No single commercial airline customer is associated with
more than 15% of all financial instruments relating to customer financing.
Financing for aircraft is collateralized by security in the related asset, and
historically the Company has not experienced a problem in accessing such
collateral.
The Company has customer financing and commitments to arrange for future
financing with Trans World Airlines (TWA) totaling $988. TWA continues to
operate under a reorganization plan, confirmed by the U.S. Bankruptcy Court in
1995, that restructured its indebtedness and leasehold obligations to its
creditors. In addition, TWA continues to face financial and operational
challenges due in part to an airliner crash in July 1996 and turnover of key
management, which occurred in 1996. Further deterioration of TWA's financial
condition could adversely affect the performance of customer financing extended
to TWA; however, because of the underlying collateral position held by the
Company, possible future nonperformance of financing extended to TWA is not
expected to have a material adverse impact on the Company's liquidity or
results of operations.
77
<PAGE> 78
Note 19
- -------
Disclosures about Fair Value of Financial Instruments
As of December 31, 1997 and 1996, the carrying amount of accounts receivable
was $3,121 and $2,870, and the fair value of accounts receivable was estimated
to be $3,033 and $2,798. The lower fair value reflects a discount due to
deferred collection for certain receivables that will be collected over an
extended period. The carrying value of accounts payable is estimated to
approximate fair value.
The carrying amount of notes receivable, net of valuation allowance, is
estimated to approximate fair value. Although there are generally no quoted
market prices available for customer financing notes receivable, the valuation
assessments were based on the respective interest rates, risk-related rate
spreads and collateral considerations.
As of December 31, 1997 and 1996, the carrying amount of debt, net of capital
leases, was $6,354 and $6,946, and the fair value of debt, based on current
market rates for debt of the same risk and maturities, was estimated at $6,996
and $7,360. The Company's debt, however, is generally not callable until
maturity.
With regard to financial instruments with off-balance-sheet risk, it is not
practicable to estimate the fair value of future financing commitments, and all
other off-balance-sheet financial instruments are estimated to have only a
nominal fair value. The terms and conditions reflected in the outstanding
guarantees and commitments for financing assistance are not materially
different from those that would have been negotiated as of December 31, 1997.
Note 20
- -------
Contingencies
Various legal proceedings, claims and investigations related to products,
contracts and other matters are pending against the Company. Most significant
legal proceedings are related to matters covered by insurance. Major
contingencies are discussed below.
The Company is subject to federal and state requirements for protection of the
environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Due in part to their complexity and
pervasiveness, such requirements have resulted in the Company being involved
with related legal proceedings, claims and remediation obligations since the
1980s.
The Company routinely assesses, based on in-depth studies, expert analyses and
legal reviews, its contingencies, obligations and commitments for remediation
of contaminated sites, including assessments of ranges and probabilities of
recoveries from other responsible parties who have and have not agreed to a
settlement and of recoveries from insurance carriers. The Company's policy is
to immediately accrue and charge to current expense identified exposures
related to environmental remediation sites based on conservative estimates of
investigation, cleanup and monitoring costs to be incurred.
78
<PAGE> 79
The costs incurred and expected to be incurred in connection with such
activities have not had, and are not expected to have, a material impact on the
Company's financial position. With respect to results of operations, related
charges have averaged less than 2% of annual net earnings exclusive of special
charges. Such accruals as of December 31, 1997, without consideration for the
related contingent recoveries from insurance carriers, are less than 2% of
total liabilities.
Because of the regulatory complexities and risk of unidentified contaminated
sites and circumstances, the potential exists for environmental remediation
costs to be materially different from the estimated costs accrued for
identified contaminated sites. However, based on all known facts and expert
analyses, the Company believes it is not reasonably likely that identified
environmental contingencies will result in additional costs that would have a
material adverse impact to the Company's financial position or operating
results and cash flow trends.
The Company is subject to U.S. Government investigations of its practices from
which civil, criminal or administrative proceedings could result. Such
proceedings could involve claims by the Government for fines, penalties,
compensatory and treble damages, restitution and/or forfeitures. Under
government regulations, a company, or one or more of its operating divisions or
subdivisions, can also be suspended or debarred from government contracts, or
lose its export privileges, based on the results of investigations. The Company
believes, based upon all available information, that the outcome of any such
government disputes and investigations will not have a material adverse effect
on its financial position or continuing operations.
On January 7, 1991, the U.S. Navy notified the Company and General Dynamics
Corporation (the Team) that it was terminating for default the Team's contract
for development and initial production of the A-12 aircraft. The Team filed a
legal action to contest the Navy's default termination, to assert its rights to
convert the termination to one for "the convenience of the Government," and to
obtain payment for work done and costs incurred on the A-12 contract but not
paid to date. At December 31, 1997, inventories included approximately $581 of
recorded costs on the A-12 contract, against which the Company has established
a loss provision of $350. The amount of the provision, which was established in
1990, was based on the Company's belief, supported by an opinion of outside
counsel, that the termination for default would be converted to a termination
for convenience, that the Team would establish a claim for contract
adjustments for a minimum of $250, that there was a range of reasonably
possible results on termination for convenience, and that it was prudent to
provide for what the Company then believed was the upper range of possible
loss on termination for convenience, which was $350.
On December 19, 1995, the U.S. Court of Federal Claims ordered that the
Government's termination of the A-12 contract for default be converted to a
termination for convenience of the Government. On December 13, 1996, the Court
issued an opinion confirming its prior no-loss adjustment and no-profit
recovery order. Subsequent to an early 1997 stipulation based on the prior
orders and findings of the Court in which the parties agreed that plaintiffs
were entitled to recover $1,071, the Court has preliminarily determined that
the Government is liable for certain adjustments that increase the plaintiffs'
possible recovery. A trial to determine the plaintiffs' recovery has now
concluded and judgment is expected in the near future. On January 22, 1997, the
Court issued an opinion in which it ruled that plaintiffs are entitled to
recover interest on that recovery.
79
<PAGE> 80
Although the Government is expected to appeal the resulting judgment, the
Company believes the judgment will be sustained. Final resolution of the A-12
litigation will depend on such appeals and possible further litigation, or
negotiations, with the Government. If sustained, however, the expected damages
judgment, including interest, could result in pretax income that would more
than offset the loss provision established in 1990.
On October 31, 1997, a federal securities lawsuit was filed against the Company
in the U.S. District Court for the Western District of Washington, in Seattle.
The lawsuit names as defendants the Company and three of its executive
officers. Additional lawsuits of a similar nature have been filed in the same
court. The plaintiffs in each lawsuit seek to represent a class of purchasers
of Boeing stock between July 21, 1997, and October 22, 1997, (the "Class
Period"), including recipients of Boeing stock in the McDonnell Douglas merger.
July 21, 1997, was the date on which the Company announced its second quarter
results, and October 22, 1997, was the date on which the Company announced
charges to earnings associated with production problems being experienced on
commercial aircraft programs. The lawsuits generally allege that the defendants
desired to keep the Company's share price as high as possible in order to
ensure that the McDonnell Douglas shareholders would approve the merger and, in
the case of two of the individual defendants, to benefit directly from the sale
of Boeing stock during the Class Period. The plaintiffs seek compensatory
damages and treble damages. The Company believes that the allegations are
without merit and that the outcome of these lawsuits will not have a material
adverse effect on its earnings, cash flow or financial position.
Note 21
- -------
Segment Information
Information concerning segment information can be found on pages 50, 51 and 52.
80
<PAGE> 81
THE BOEING COMPANY AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in millions except per share data)
1997 1996
--------------------------------------------------------
Quarter 4th 3rd 2nd 1st 4th 3rd 2nd 1st
==============================================================================
Sales and other
operating
revenues $11,727 $11,371 $12,343 $10,359 $9,977 $9,009 $9,420 $7,047
Earnings from
operations (891) (979) 775 740 732 658 809 419
Net earnings (498) (696) 476 540 444 466 646 262
Basic earnings
per share (.51) (.72) .49 .56 .46 .48 .66 .27
Diluted earnings
per share (.51) (.72) .48 .55 .46 .48 .65 .26
- ------------------------------------------------------------------------------
Net earnings
excluding
ShareValue Trust
charges in 1997
and 1996 and
$1,400 pretax
special charge
relating to
Douglas Products
Division in 1997 290 (675) 541 476 528 469 646 262
Per diluted share (a) .29 (.67) .54 .47 .53 .47 .65 .26
- ------------------------------------------------------------------------------
Cash dividends
per share .14 .14 .14 .14 .14 .14 .14 .13
- ------------------------------------------------------------------------------
Market price:
High 55.25 60.50 58.00 57.25 53.75 48.00 45.25 44.56
Low 43.00 51.31 47.00 49.31 45.13 39.94 37.06 37.69
Quarter end 48.94 54.44 53.06 49.31 53.25 47.25 43.56 43.31
==============================================================================
(a) Per share computation includes outstanding shares held by the ShareValue
Trust.
81
<PAGE> 82
THE BOEING COMPANY AND SUBSIDIARIES
FIVE-YEAR SUMMARY
(Dollars in millions except per share data)
1997 1996 1995 1994 1993
==============================================================================
Operations
Sales and other operating revenues
Commercial aircraft $26,929 $19,916 $17,511 $19,778 $25,120
Information, space and defense
systems 18,125 14,934 14,849 14,676 14,090
Customer and commercial
financing, other 746 603 600 515 501
- ------------------------------------------------------------------------------
Total $45,800 $35,453 $32,960 $34,969 $39,711
- ------------------------------------------------------------------------------
Net earnings (loss) $ (178) $ 1,818 $ (36) $ 1,483 $ 1,640
Basic earnings per share(a) (.18) 1.88 (.04) 1.50 1.66
Diluted earnings per share(a) (.18) 1.85 (.04) 1.48 1.64
- ------------------------------------------------------------------------------
Net earnings excluding
ShareValue Trust and special
charges $ 632 $ 1,905 $ 1,479 $ 1,483 $ 1,640
Diluted earnings per share(b) .63 1.92 1.49 1.48 1.64
Percent of sales 1.4% 5.4% 4.5% 4.2% 4.1%
- ------------------------------------------------------------------------------
Cash dividends paid $ 557 $ 480 $ 434 $ 395 $ 395
Per share .56 .55 .50 .50 .50
- ------------------------------------------------------------------------------
Other income, principally interest 428 388 280 194 241
- ------------------------------------------------------------------------------
Research and development expense 1,924 1,633 1,674 2,076 2,077
General and administrative expense 2,187 1,819 1,794 1,776 1,798
- ------------------------------------------------------------------------------
Additions to plant and equipment,net 1,391 971 747 883 1,349
Depreciation of plant and equipment 1,266 1,132 1,172 1,294 1,211
- ------------------------------------------------------------------------------
Employee salaries and wages 11,287 9,225 8,688 9,037 9,551
Year-end workforce 238,000 211,000 169,000 183,000 195,000
==============================================================================
Financial position at December 31
Total assets $38,024 $37,880 $31,877 $32,259 $31,199
Working capital 5,111 7,783 7,490 6,299 5,108
Net plant and equipment 8,391 8,266 7,927 8,399 8,838
- ------------------------------------------------------------------------------
Cash and short-term investments 5,149 6,352 4,527 3,064 3,194
Total debt 6,854 7,489 5,401 5,247 5,840
Customer and commercial
financing assets 4,600 3,888 4,212 5,408 5,534
- ------------------------------------------------------------------------------
82
<PAGE> 83
FIVE-YEAR SUMMARY (Continued)
(Dollars in millions except per share data)
1997 1996 1995 1994 1993
==============================================================================
Shareholders' equity $12,953 $13,502 $12,527 $13,173 $11,966
Per share 13.31 13.96 12.80 13.37 12.12
Common shares outstanding
(in millions) 973.5 967.2 978.6 985.3 987.1
==============================================================================
Contractual backlog
Commercial aircraft $ 93,788 $ 86,151 $73,715 $68,158 $78,172
Information, space and
defense systems 27,852 28,022 21,773 18,798 18,485
- ------------------------------------------------------------------------------
Total $121,640 $114,173 $95,488 $86,956 $96,657
==============================================================================
Cash dividends have been paid on common stock every year since 1942.
(a) Per share computation excludes outstanding shares held by the ShareValue
Trust.
(b) Per share computation includes outstanding shares held by the ShareValue
Trust.
83
<PAGE> 84
Market for Registrant's Common Equity and Related Stockholder Matters
THE BOEING COMPANY GENERAL OFFICES
7755 East Marginal Way South
Seattle, Washington 98108
(206) 655-2121
TRANSFER AGENT, REGISTRAR AND DIVIDEND PAYING AGENT
BankBoston, N.A.
The transfer agent is responsible for shareholder records, issuance of stock
certificates, and distribution of dividends and IRS Form 1099. Requests
concerning these matters are most efficiently answered by contacting:
BankBoston, N.A.
c/o Boston EquiServe, L.P.
Mail Stop 45-02-64
P.O. Box 8040
Boston, Massachusetts 02266-8040
(781) 575-3400 or (888) 777-0923
Boeing shareholders can obtain answers to frequently asked questions, such as
transfer instructions and the terms of the Dividend Reinvestment and Stock
Purchase Plan, through Boston EquiServe's home page at http://www.equiserve.com
on the World Wide Web.
DUPLICATE SHAREHOLDER ACCOUNTS
Shareholders with duplicate accounts may call BankBoston, N.A. for
instructions on consolidating those accounts. The company recommends that
registered shareholders always use the same form of their names in all stock
transactions to be handled in the same account. Shareholders may also request
the Bank to eliminate excess mailings of annual and midyear reports going to
shareholders in the same household.
CHANGE OF ADDRESS
For Boeing shareholders of record:
BankBoston, N.A.
Transfer Processing - c/o Boston EquiServe, L.P.
Mail Stop 45-01-20
P.O. Box 8040
Boston, MA 02266-8040
or call (888) 777-0923
ANNUAL MEETING
The annual meeting of Boeing shareholders will be held in the Engineering
Campus Auditorium (Bldg. 33) on the corner of Lindbergh and J.S. McDonnell
Boulevards, Hazelwood, Missouri, at 10:00 a.m. on Monday, April 27, 1998.
Formal notice of the meeting, proxy statement, form of proxy and annual
report were mailed to shareholders beginning March 20, 1998.
84
<PAGE> 85
WRITTEN INQUIRIES MAY BE SENT TO:
(write to the Department and Mail Code)
The Boeing Company
P.O. Box 370
Seattle, Washington 98124-2207
Shareholder Services
Mail Code 10-13
Investor Relations
Mail Code 10-16
Data Shipping
To obtain annual reports, 10-K, 10-Q, proxy statements
Mail Code 3T-33, or call (425) 393-4964 or (800) 457-7723
COMPANY SHAREHOLDER SERVICES
Pre-recorded shareholder information and quarterly earnings data are available
toll-free from Boeing Shareholder Services at (800) 457-7723.
STOCK EXCHANGES
The company's common stock is traded principally on the New York Stock
Exchange; the trading symbol is BA. Boeing common stock is also listed on the
Amsterdam, Brussels, London, Swiss and Tokyo stock exchanges. Additionally,
the stock is traded on the Boston, Chicago, Cincinnati, Pacific and
Philadelphia exchanges.
GENERAL AUDITORS
Deloitte & Touche LLP
700 Fifth Avenue, Suite 4500
Seattle, Washington 98104-5044
(206) 292-1800
BOEING ON WORLD WIDE WEB
For more information about Boeing, including an electronic copy of the annual
report and the proxy statement, visit our site at http://www.boeing.com on the
Web.
EQUAL OPPORTUNITY EMPLOYER
Boeing is an equal opportunity employer and seeks to attract and retain the
best-qualified people regardless of race, sex, age, religion, national origin
or veteran status.
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Exhibit (10) (i)
U.S. $ One Billion Five Hundred Million 7-Year Bank Credit
Agreement among The Boeing Company, as Borrower, the Banks
party thereto, Citibank, N.A., as Adiminstrative Agent, and
The Chase Manhattan Bank, as Syndication Agent, dated as of
December 8, 1997.
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THE BOEING COMPANY
U.S. $ ONE BILLION FIVE HUNDRED MILLION
7-YEAR
BANK CREDIT AGREEMENT
among
THE BOEING COMPANY
and the Subsidiaries which are or shall become party hereto,
as Borrower
THE BANKS PARTY HERETO
CITIBANK, N.A.,
as Administrative Agent
and
THE CHASE MANHATTAN BANK,
as Syndication Agent
dated as of December 8, 1997
THIS BANK CREDIT AGREEMENT (the "Agreement") dated as of
December 8, 1997, is by and among: THE BOEING COMPANY, a Delaware corporation
("TBC" or the "Company"); the BORROWERS (as defined below); the BANKS (as
defined below); CITIBANK, N.A., in its capacity as administrative agent for the
Banks (in such capacity, the "Administrative Agent"); and THE CHASE MANHATTAN
BANK, in its capacity as syndication agent for the Banks (in such capacity, the
"Syndication Agent").
RECITALS
TBC has requested that the Banks make loans from time to time
to TBC and certain of its Subsidiaries in an aggregate principal amount of One
Billion Five Hundred Million Dollars ($1,500,000,000). The loans to be provided
hereunder are as follows:
(a) A Advances (as such term and such other terms used in
these Recitals without definition are defined in Article I below) to be made by
all of the Banks, as a part of A Borrowings, which may be either Base Rate
Advances or Eurodollar Rate A Advances; and
(b) B Advances, to be made by any of the Banks in their sole
discretion, as a part of B Borrowings, which may be either Fixed Rate
Advances or Eurodollar Rate B Advances.
The Banks are willing to provide such Advances on the terms and
conditions set forth in this Agreement, including subject to the condition
precedent that TBC, in its capacity as the direct or indirect parent
corporation of all of the other Borrowers, guarantee all of the obligations of
such Subsidiaries under this Agreement prior to any Advances being made to any
such Subsidiaries.
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The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. As used in this Agreement, the
following terms shall have the meanings set out respectively after each:
"A Advance"--An advance made by a Bank to a Borrower as part of
an A Borrowing and refers to a Base Rate Advance or a Eurodollar Rate A Advance,
each of which shall be a "Type" of A Advance.
"A Borrowing"--A borrowing consisting of simultaneous A Advances
of the same Type made by each of the Banks pursuant to Section 2.01.
"A Note"--A promissory note of a Borrower payable to the order
of any Bank, in substantially the form of Exhibit A-1 or A-2 hereto, evidencing
the indebtedness of that Borrower to such Bank resulting from the aggregate of
all Base Rate Advances and the aggregate of all Eurodollar Rate A Advances,
respectively, made by such Bank to that Borrower.
"Administrative Agent"--Citibank, N.A. acting in its capacity as
administrative agent for the Banks, or any successor Administrative Agent
appointed pursuant to Section 7.06.
"Administrative Agent's Account"--The account of the
Administrative Agent maintained by the Administrative Agent with Citibank,
N.A., at its office at 2 Pennsway, Corporate Commons, Suite 200, New Castle,
Delaware 19720, Account No. 36852248, Attention: Jay Moffitt.
"Advance"--An A Advance or a B Advance.
"Agent"--Individually and collectively, as the context shall
require, the Administrative Agent and the Syndication Agent.
PAGE ()
"Agreement"--This agreement, as it may be amended or otherwise
modified from time to time, and any written additions or supplements hereto.
"Applicable Lending Office"--With respect to each Bank, such
Bank's Domestic Lending Office in the case of a Base Rate Advance, and such
Bank's Eurodollar Lending Office in the case of a Eurodollar Rate Advance and,
in the case of a B Advance, the office of such Bank notified by such Bank to the
Administrative Agent as its Applicable Lending Office with respect to such B
Advance.
"Applicable Margin"--Means
with respect to Base Rate Advances, 0% per annum;
with respect to Eurodollar Rate Advances, a fluctuating per
annum amount, equal at any time to the then-applicable rate set
forth in the pricing grid below, depending upon the rating of
the long-term senior unsecured debt of TBC then in effect:
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=========================================================================
|| Public Debt Rating | Applicable Margin ||
|| S&P/Moody's | ||
||---------------------------------------------|-----------------------||
|| Level I | 0.09% ||
|| A by S&P or A2 by Moody's or above | ||
||---------------------------------------------|-----------------------||
|| Level II | 0.13% ||
|| Less than level I but at least A- | ||
|| by S&P or A3 by Moody's | ||
||---------------------------------------------|-----------------------||
|| Level III | 0.17% ||
|| less than level II at least BBB+ | ||
|| by S&P or Baa1 by Moody's | ||
||---------------------------------------------|-----------------------||
|| Level IV | 0.25% ||
|| less than level III | ||
=========================================================================
provided, however, that in the event and during the continuance of an Event of
Default which is described in Section 6.01(a), the Applicable Margin shall
immediately increase by 1.0% above the Applicable Margin then in effect, and,
in the case of a Eurodollar Rate Advance, such Advance shall automatically
convert to a Base Rate Advance at the end of the Interest Period then in effect
for such Eurodollar Rate Advance. If at any time no rating is available from
S&P and Moody's or any other nationally recognized statistical rating
organization designated by TBC and approved in writing by the Majority Banks,
the Applicable Margin for each Interest Period or each other period commencing
during the thirty days following such ratings becoming unavailable shall be the
Applicable Margin in effect immediately prior to such ratings becoming
unavailable. Thereafter, the rating to be used for purposes of this Agreement
until ratings from S&P and Moody's become available shall be as agreed between
TBC and the Administrative Agent, and TBC and the Administrative Agent shall
use good faith efforts to reach such agreement within such thirty day period,
provided, however, that if no such agreement is reached within such thirty day
period the Applicable Margin thereafter, until such agreement shall have been
reached, shall be (A) if any such rating shall have become unavailable as a
result of S&P or Moody's ceasing its business as a rating agency, the
Applicable Margin in effect immediately prior to such cessation or (B)
otherwise, the Applicable Margin as set forth under Level IV above.
"Available Commitment"--As of any date of determination (a) the
aggregate Commitments of the Banks, as such amount may be reduced, changed or
terminated in accordance with the terms of this Agreement, reduced by (b) the
aggregate Advances outstanding on such date of determination.
"B Advance"--An advance by a Bank to a Borrower as part of a B
Borrowing resulting from the auction bidding procedure described in Section
2.05 and refers to a Fixed Rate Advance or a Eurodollar Rate B Advance, each of
which shall be a "Type" of B Advance.
"B Borrowing"--A borrowing consisting of simultaneous B Advances
from each of the Banks whose offer to make one or more B Advances as part of
such borrowing has been accepted by a Borrower under the auction bidding
procedure described in Section 2.05.
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"B Note"--A Promissory note of a Borrower payable to the order
of any Bank, in substantially the form of Exhibit A-3 or A-4 hereto, evidencing
the indebtedness of that Borrower to such Bank resulting from the aggregate of
all Fixed Rate Advances and the aggregate of all Eurodollar Rate B Advances,
respectively, made by such Bank to such Borrower.
"B Reduction"--As defined in Section 2.01.
"Bank"--Subject to the provisions of Section 2.18, any of the
banking institutions that is a signatory hereto or that, pursuant to Section
2.13, 2.17 or 2.18 shall become a "Bank" hereunder.
"Base Rate"--The rate of interest announced publicly by
Citibank, N.A., in New York, New York, from time to time, as Citibank's base
rate.
"Base Rate Advance"--An A Advance which bears interest at the
Base Rate.
"Base Rate A Note"--An A Note evidencing Base Rate Advances.
"BCSC"--Boeing Capital Services Corp., a Delaware corporation
"BFC"--Boeing Financial Corporation, a Delaware corporation.
"Borrower"--Individually and collectively, as the context shall
require, TBC and each Subsidiary Borrower (unless and until it becomes a
"Terminated Subsidiary Borrower" pursuant to Section 2.20).
"Borrower Subsidiary Letter"--With respect to any Subsidiary
Borrower, a letter in the form of Exhibit D hereto, signed by such Subsidiary
Borrower and TBC.
"Borrowing"--An A Borrowing or a B Borrowing.
"Business Day"--A day of the year on which banks are not
required or authorized to close in New York City, and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"Commitment"--For each Bank, the full amount set forth opposite
the name of such Bank in Schedule I attached hereto, or, if such Bank is a
Replacement Bank or a Bank that has entered into one or more assignments
pursuant to Section 2.18 or Section 2.19, the amount set forth for such Bank in
the Register maintained by the Administrative Agent pursuant to Section
2.18(b), as such amount may be reduced pursuant to Section 2.03, Section 2.08
or Section 2.17 or increased pursuant to Section 2.17.
"Company"--The Boeing Company, a Delaware corporation (usually
referred to herein as "TBC").
"Consolidated"--Indicating, as to any accounting concept or
statement, the consolidation of such concept or statement with the same
concepts or statements of all other members of a class made up of TBC and the
Subsidiaries.
"Convert," "Conversion" and "Converted"--Each refers to a
conversion of A Advances of one Type into A Advances of another Type pursuant
to Section 2.10, 2.11 or 2.14.
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"Debt "--(i) indebtedness for borrowed money or for the deferred
purchase price of property or services; (ii) the financial obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
financial obligations as lessee under leases which shall have been or should
be, in accordance with generally accepted accounting principles, recorded as
capital leases; and (iv) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or financial obligations of others of the kind referred to in
clauses (i) through (iii) above.
"Domestic Lending Office"--With respect to any Bank, the office
of such Bank specified as its "Domestic Lending Office" opposite its name on
Schedule I hereto, or in the assignment or other agreement pursuant to which it
became a Bank, or such other office of such Bank as such Bank may from time to
time specify to the Borrowers and the Administrative Agent.
"Effective Date"--As defined in Section 2.17.
"Eligible Assignee"--As defined in Section 2.18.
"Eurocurrency Liabilities"--Has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar A Note"--An A Note evidencing Eurodollar Rate A
Advances.
"Eurodollar B Note"--A B Note evidencing Eurodollar Rate B
Advances.
"Eurodollar Lending Office"--With respect to any Bank, the
office of such Bank specified as its "Eurodollar Lending Office" opposite its
name on Schedule I hereto (or, if no such office is specified, its Domestic
Lending Office), or in the assignment or other agreement pursuant to which it
became a Bank, or such other office of such Bank as such Bank may from time to
time specify to the Borrowers and the Administrative Agent.
"Eurodollar Rate"--For any Interest Period for each Eurodollar
Rate A Advance comprising part of the same Borrowing, and for the relevant
period specified in the applicable Notice of B Borrowing for each Eurodollar
Rate B Advance, an interest rate per annum equal to the offered rate for
deposits in U.S. dollars for a period substantially equal to the relevant
Interest Period (if an A Advance) or the relevant period specified in the
applicable Notice of B Borrowing (if a B Advance), appearing on Telerate Page
3750 (or, if unavailable for any reason by Telerate, then by reference to
Reuters Screen) as of 11:00 a.m. (London time) two business days before the
first day of such Interest Period or the first day of the relevant period
specified in such Notice of B Borrowing; provided, that if the foregoing rate
is unavailable from Telerate or the Reuters Screen for any reason, then such
rate shall be an interest rate per annum equal to the average (rounded upward
to the nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in U.S. dollars are
offered by the principal office of each of the Reference Banks to prime banks in
the London interbank market at 11:00 a.m. (London time) two Business Days before
the first day of such Interest Period or the first day of the relevant period
specified in such Notice of B Borrowing (i) in an amount, for such Eurodollar A
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Advance, substantially equal to such Reference Bank's Eurodollar Rate Advance
comprising part of such A Borrowing and for a period equal to such Interest
Period or, (ii) in an amount, for such Eurodollar Rate B Advance, substantially
equal to the amount of the Eurodollar Rate B Borrowing which includes such B
Advance multiplied by a fraction equal to such Reference Bank's ratable portion
of the Commitments and for a period equal to the relevant period specified in
such Notice of B Borrowing. The Eurodollar Rate for any Interest Period for
each Eurodollar Rate A Advance comprising part of the same Borrowing and for the
relevant period specified in a Notice of B Borrowing for each Eurodollar Rate B
Advance shall be determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the Administrative Agent from the
Reference Banks two Business Days before the first day of such Interest Period
or period, as the case may be, subject, however, to the provisions of Section
2.10.
"Eurodollar Rate Advance"--An A Advance (a "Eurodollar Rate A
Advance") or a B Advance (a "Eurodollar Rate B Advance") which bears interest
at a rate of interest quoted as a margin (which shall be the Applicable Margin
in the case of an A Advance or as offered by a Bank and accepted by a Borrower
in the case of a B Advance) over the Eurodollar Rate.
"Eurodollar Rate B Borrowing"--As defined in Section 2.05(a)(i).
"Eurodollar Rate Reserve Percentage"--Of any Bank for any
Interest Period for any Eurodollar Rate Advance means the reserve percentage
applicable during such Interest Period (or if more than one such percentage
shall be so applicable, the daily average of such percentages for those days in
such Interest Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Bank with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities having a term equal
to such Interest Period.
"Event of Default"--Any of the events described in Section 6.01
hereof.
"Facility Fee"--As defined in Section 2.06.
"Federal Funds Rate"--For any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fixed Rate Advance"--An Advance made by a Bank to a Borrower as
part of a Fixed Rate Borrowing.
"Fixed Rate Borrowing"--As defined in Section 2.05(a)(i).
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"Guaranty"--Each Guaranty Agreement, dated as of even date
herewith, executed by TBC in favor of the Administrative Agent and the Banks,
unconditionally guaranteeing the payment of all obligations of a Subsidiary
Borrower hereunder and under the Notes executed or to be executed by them.
"Interest Period"--For each Eurodollar Rate A Advance comprising
part of the same Borrowing, the period commencing on the date of such A Advance
or the date of the Conversion of any A Advance into such a Eurodollar Rate A
Advance and ending on the last day of the period selected by a Borrower
pursuant to the provisions below and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be one, two,
three, or six months (or nine months, with the consent of all Banks funding
those particular Advances), as a Borrower may, upon notice received by the
Administrative Agent not later than 11:00 a.m. (New York City time) on the
third Business Day prior to the first day of such Interest Period, select,
provided, however, that:
(i) no Interest Period shall end on a date later than the
Termination Date;
(ii) Interest Periods commencing on the same date for A
Advances comprising part of the same A Borrowing shall be of the same duration;
and
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day, provided that if such extension would cause the last day of
such Interest Period to occur in the next following calendar month, the
last day of the Interest Period shall occur on the next preceding
Business Day.
"Majority Banks"--Banks holding greater than 50% of the then
aggregate unpaid principal amount of the A Notes held by Banks, or, if no such
principal amount is then outstanding, Banks having greater than 50% of the
Commitments (provided that, for purposes hereof, none of the Borrowers, and
none of their affiliates, if a Bank, shall be included in (i) the Banks holding
such amount of the A Advances or having such amount of the Commitments or (ii)
determining the aggregate unpaid principal amount of the A Advances or the
total Commitments).
"Moody's"--Moody's Investor Services, Inc.
"Note"--An A Note or a B Note.
"Notice of A Borrowing"--As defined in Section 2.02(a).
"Notice of B Borrowing"--As defined in Section 2.05(a)(i).
"Notice of Borrowing"--A Notice of A Borrowing or a Notice of B
Borrowing.
"Person"--An individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
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"Property, Plant and Equipment"--Any item of real property, or
any interest therein, buildings, improvements and machinery.
"Reference Banks"--The Chase Manhattan Bank, Citibank, N.A.,
BankBoston, N.A., Bank of New York, and National Westminster Bank plc.
"Register"--As defined in Section 2.18.
"Required Assignment"--As defined in Section 2.18.
"Request for Alteration"--A document substantially in the form
of Exhibit C hereto, duly executed by TBC, pursuant to the provisions of Section
2.17.
"S&P"--Standard & Poor's Corporation.
"Subsidiary"--Any corporation in which more than 50% of the
Voting Stock is owned by TBC, by TBC and any one or more other Subsidiaries, or
by any one or more other Subsidiaries.
"Subsidiary Borrower"--Individually and collectively, as the
context shall require, each Subsidiary other than BFC and BCSC in which 100% of
the Voting Stock is owned by TBC, by TBC and any one or more other
Subsidiaries, or by any one or more other Subsidiaries, that is or shall become
a "Borrower" hereunder in accordance with Section 2.20; in each case, unless
and until it becomes a "Terminated Subsidiary Borrower."
"Syndication Agent"--The Chase Manhattan Bank, acting in its
capacity as syndication agent for the Banks.
"TBC"--The Boeing Company, a Delaware corporation.
"Terminated Subsidiary Borrower"--Individually and collectively,
as the context shall required, a Subsidiary Borrower who has ceased to be a
"Borrower" for purposes of this Agreement in accordance with Section 2.20.
"Termination Date"--The earlier to occur of (i) September 30,
2004 and (ii) the date of termination in whole of the Commitments pursuant to
Section 2.08 or Section 6.01.
"Voting Stock"--All the issued and outstanding capital stock of
any corporation having general voting power under ordinary circumstances to
elect a majority of the Board of Directors of such corporation (irrespective of
whether or not any capital stock of any other class or classes shall or might
have voting power upon the occurrence of any contingency).
Section 1.02. Use of Defined Terms. Any defined term used in
the plural preceded by the definite article shall be taken to encompass all
members of the relevant class. Any defined term used in the singular preceded
by "any" shall be taken to indicate any number of the members of the relevant
class.
Section 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistently applied.
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ARTICLE 2
Amounts and Terms of the Advances
Section 2.01. The A Advances. Each Bank severally agrees, on
the terms and conditions hereinafter set forth, to make A Advances to the
Borrowers from time to time on any Business Day during the period from the date
hereof until the Termination Date in an aggregate principal amount at any time
outstanding not to exceed such Bank's Commitment, provided that the aggregate
amount of the Commitments of the Banks shall be deemed used from time to time
to the extent of the aggregate amount of the B Advances then outstanding and
such deemed use of the aggregate amount of the Commitments shall be applied to
the Banks ratably according to their respective Commitments (such deemed use of
the aggregate amount of the Commitments being a "B Reduction"). Each A
Borrowing shall be in an aggregate amount not less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof (or, if less, an aggregate
amount equal to the difference between the aggregate amount of a proposed B
Borrowing requested by a Borrower and the aggregate amount of B Advances
offered to be made by the Banks and accepted by the Borrower in respect of such
B Borrowing, if notice of such A Borrowing is given by the Borrower within two
Business Days of the date of such B Borrowing) and shall consist of A Advances
of the same Type made on the same day by the Banks ratably according to their
respective Commitments. Within the limits of each Bank's Commitment, the
Borrowers may from time to time borrow, prepay pursuant to Section 2.12, and
reborrow under this Section 2.01.
Section 2.02. Making the A Advances . (a) Each A Borrowing
shall be made on notice, given by a Borrower to the Administrative Agent not
later than 11:00 a.m. (New York City time) on the day of the proposed A
Borrowing in the case of a Base Rate Borrowing and on the third Business Day
prior to the date of the proposed A Borrowing in the case of a Eurodollar Rate
Borrowing. The Administrative Agent thereupon shall give to each Bank prompt
notice thereof by telecopier, telex or cable. Each such notice of an A
Borrowing (a "Notice of A Borrowing") shall be by telecopier, telex or cable,
confirmed immediately in writing, in substantially the form of Exhibit B-l
hereto, specifying therein the requested (i) date of such A Borrowing, (ii) Type
of A Advances comprising such A Borrowing, (iii) aggregate amount of such A
Borrowing, and (iv) in the case of an A Borrowing comprised of Eurodollar Rate
Advances, initial Interest Period for each such A Advance. Every Notice of A
Borrowing given by a Subsidiary Borrower must be countersigned by an authorized
representative of TBC, in order to evidence the consent of TBC, in its sole
discretion, to that proposed A Borrowing. Each Bank shall, before 1:00 p.m.
(New York City time) on the date of such A Borrowing, make available for the
account of its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in same day funds, such Bank's ratable portion
of such A Borrowing. After the Administrative Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Article 5, the
Administrative Agent will make such funds available to the Borrower at the
Administrative Agent's aforesaid address.
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(b) Each Notice of A Borrowing shall be irrevocable and
binding. In the case of any A Borrowing which the related Notice of A Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower
requesting such A Borrowing shall indemnify each Bank against any loss, cost or
expense incurred by such Bank on account of any failure to fulfill on or before
the date specified for such A Borrowing in such Notice of A Borrowing the
applicable conditions set forth in Article 5, including, without limitation,
any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by such Bank to fund the A Advance to be made by such Bank as part of such A
Borrowing when such A Advance, as a result of such failure, is not made on such
date.
(c) Unless the Administrative Agent shall have received
notice from a Bank prior to 1:00 p.m. (New York City time) on the day of any A
Borrowing that such Bank will not make available to the Administrative Agent
such Bank's ratable portion of such A Borrowing, the Administrative Agent may
assume that such Bank has made such portion available to the Administrative
Agent on the date of such A Borrowing in accordance with subsection (a) of this
Section 2.02 and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such ratable
portion available to the Administrative Agent, such Bank and such Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to such Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of a Borrower, the
interest rate applicable at the time to A Advances comprising such A Borrowing
and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall
repay to the Administrative Agent such corresponding amount, such amount so
repaid shall constitute such Bank's A Advance as part of such A Borrowing for
purposes of this Agreement.
(d) The failure of any Bank to make the A Advance to be made
by it as part of any A Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its A Advance on the date of such A
Borrowing, but no Bank shall be responsible for the failure of any other Bank
to make the A Advance to be made by such other Bank on the date of any A
Borrowing.
Section 2.03. Repayment of A Advances . Each Borrower shall
repay to the Administrative Agent for the ratable account of the Banks on the
Termination Date the aggregate principal amount of the A Advances then
outstanding in respect of each Borrower.
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Section 2.04. Interest Rate on A Advances. The Borrowers shall
pay interest on the unpaid principal amount of each A Advance made by each Bank
from the date of such A Advance until such principal amount shall be paid in
full, at the following rates per annum: (i) during each period in which such A
Advance is a Base Rate Advance, at a rate per annum equal at all times to the
Base Rate in effect from time to time, plus the Applicable Margin, payable
quarterly in arrears on the first day of each January, April, July and October
and on the Termination Date, or, if the Conversion option described in Section
2.03 is exercised, the Maturity Date, and (ii) during each period in which such
A Advance is a Eurodollar Rate A Advance, at a rate per annum equal at all
times during each relevant Interest Period for such A Advance to the Eurodollar
Rate for such Interest Period plus the Applicable Margin, payable on the last
day of each such Interest Period, and on the date such A Advance is Converted
or paid in full.
Section 2.05. The B Advances. (a) Each Bank severally agrees
that the Borrowers may make B Borrowings under this Section 2.05 from time to
time on any Business Day during the period from the date hereof until the
Termination Date in the manner set forth below, provided that, following the
making of each B Borrowing, the aggregate amount of the Advances then
outstanding shall not exceed the aggregate amount of the Commitments of the
Banks. As provided in Section 2.01 above, the aggregate amount of the
Commitments of the Banks shall be deemed used from time to time to the extent
of the aggregate amount of the B Advances then outstanding and such deemed use
of the aggregate amount of the Commitments shall be applied to the Banks
ratably according to their respective Commitments; provided, however, that any
Bank's B Advances shall not otherwise reduce that Bank's obligation to lend its
pro rata share of the remaining Available Commitment.
(i) Any Borrower may request a B Borrowing under this
Section 2.05 by delivering to the Administrative Agent, by telecopier, telex or
cable, confirmed immediately in writing, a notice of a B Borrowing (a
"Notice of B Borrowing"), in substantially the form of Exhibit B-2
hereto, specifying the date and aggregate amount of the proposed B
Borrowing, the maturity date for repayment of each B Advance to be made
as part of such B Borrowing (which maturity date may not be later than 5
Business Days prior to the Termination Date, but may otherwise be 7 days
or more from the date of such B Advance if the Borrower shall specify in
the Notice of B Borrowing that the rates of interest to be offered by the
Banks shall be fixed rates per annum (a "Fixed Rate Borrowing"), and
either 1, 2, 3, 6 or 9 months from the date of such B Borrowing if the
Borrower shall specify in the Notice of B Borrowing that such B Borrowing
is to be a Borrowing consisting of Eurodollar Rate B Advances (a
"Eurodollar Rate B Borrowing")), the interest payment date or dates
relating thereto, and any other terms to be applicable to such B
Borrowing, not later than 11:00 a.m. (New York City time) (A) at least
one Business Day prior to the date of the proposed B Borrowing if the
Borrower shall specify in the Notice of B Borrowing that such B Borrowing
is to be a Fixed Rate Borrowing, and (B) at least four Business Days
prior to the date of the proposed B Borrowing, if the Borrower shall
instead specify in the Notice of B Borrowing that such B Borrowing is to
be a Eurodollar Rate B Borrowing. Every Notice of B Borrowing given by a
Subsidiary Borrower must be countersigned by an authorized representative
of TBC, in order to evidence the consent of TBC, in its sole discretion,
to that proposed B Borrowing. The Administrative Agent shall in turn
promptly notify each Bank of each request for a B Borrowing received by
it from the Company by sending such Bank a copy of the related Notice of
B Borrowing.
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(ii) Each Bank may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more B Advances to a Borrower as
part of such proposed B Borrowing at a rate or rates of interest
specified by such Bank in its sole discretion (such rate of interest to
be a fixed rate if the Borrower requested Fixed Rate Advances, or a
margin over the Eurodollar Rate if the Borrower requested Eurodollar Rate
B Advances), by notifying the Administrative Agent (which shall give
prompt notice thereof to the Company and such Borrower), before 10:00
a.m. (New York City time) (A) on the date of such proposed B Borrowing,
in the case of a Notice of B Borrowing delivered pursuant to clause (A)
of paragraph (i) above and (B) three Business Days before the date of
such proposed B Borrowing, in the case of a Notice of B Borrowing
delivered pursuant to clause (B) of paragraph (i) above, of the minimum
amount and maximum amount of each B Advance which such Bank would be
willing to make as part of such proposed B Borrowing (which amounts may,
subject to the proviso to the first sentence of this Section 2.05(a),
exceed such Bank's Commitment), the rate or rates of interest therefor
(specified as stated in this paragraph (ii)) and such Bank's Applicable
Lending Office with respect to such B Advance; provided that if the
Administrative Agent in its capacity as a Bank shall, in its sole
discretion, elect to make any such offer, it shall notify such Borrower
and the Company of such offer before 9:30 a.m. (New York City time) on
the date on which notice of such election is to be given to the
Administrative Agent by the other Banks. If, by 10:00 a.m. (New York
City time) on the date on which notice of a Bank's election under this
Section 2.05(a)(ii) is to be made, the Administrative Agent fails to
receive, at its address referred to in Section 8.02, the notice from a
Bank provided for in this Section 2.05(a)(ii), the Administrative Agent
may conclusively presume that such Bank has elected not to offer to make
any B Advances to such Borrower with respect to the related Notice of B
Borrowing.
(iii) Such Borrower shall, in turn, (A) before 11:00 a.m.
(New York City time) on the date of such proposed B Borrowing, in the case of a
Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i)
above, and (B) before 12:00 noon (New York City time) three Business Days
before the date of such proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (B) of paragraph (i) above,
either:
(x) cancel such B Borrowing by giving the
Administrative Agent notice to that effect, or
(y) accept one or more of the offers made by any
Bank or Banks pursuant to Section 2.05(a)(ii), in its sole discretion, by
giving notice to the Administrative Agent of the amount of each B
Advance (which amount shall be equal to or greater than the minimum
amount, and equal to or less than the maximum amount, notified to
the Borrower by the Administrative Agent on behalf of such Bank for
such B Advance pursuant to Section 2.05(a)(ii) above) to be made by
each Bank as part of such B Borrowing, and reject any remaining
offers made by Banks pursuant to Section 2.05(a)(ii) above by
giving the Administrative Agent notice to that effect; provided
that offers will be accepted, if at all, in order of lowest to
highest interest rates, and, if two or more Banks bid at same rate,
the B Borrowing will be allocated among such Banks in proportion to
the amount bid by each such Bank.
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(iv) If the Borrower notifies the Administrative Agent that
such B Borrowing is canceled pursuant to Section 2.05(a)(iii)(x) above, the
Administrative Agent shall give prompt notice thereof to the Banks and
such B Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made
by any Bank or Banks pursuant to Section 2.05(a)(iii)(y) above, the
Administrative Agent shall in turn promptly (A) notify each Bank that has
made an offer as described in Section 2.05(a)(ii) above, of the date and
aggregate amount of such B Borrowing and whether or not any offer or
offers made by such Bank pursuant to Section 2.05(a)(ii) above have been
accepted by the Borrower , (B) notify each Bank that is to make a B
Advance as part of such B Borrowing, of the amount of each B Advance to
be made by such Bank as part of such B Borrowing, and (C) upon
satisfaction of the conditions set forth in 5.03 or 5.06, as applicable,
notify each Bank that is to make a B Advance as part of such B Borrowing
that the applicable conditions set forth in Article 5 appear to have been
satisfied. Each Bank that is to make a B Advance as part of such B
Borrowing shall, before 1:00 p.m. (New York City time) on the date of
such B Borrowing specified in the notice received from the Administrative
Agent pursuant to clause (A) of the preceding sentence and when such Bank
shall have received notice from the Administrative Agent pursuant to
clause (C) of the preceding sentence, make available for the account of
its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account such Bank's portion of such B Borrowing,
in same day funds. Upon fulfillment of the applicable conditions set
forth in Article 5 and after receipt by the Administrative Agent of such
funds, the Administrative Agent will make such funds available to the
Company at the Administrative Agent's Account. Promptly after each B
Borrowing the Administrative Agent will notify each Bank of the amount of
the B Borrowing, the consequent B Reduction and the dates upon which such
B Reduction commenced and will terminate.
(b) Each Notice of B Borrowing shall request an aggregate
amount of B Advances not less than $10,000,000 or an integral multiple of
$1,000,000 in excess thereof provided that the Borrowers may accept offers
aggregating less than $10,000,000 and offers which are not an integral multiple
of $1,000,000 and provided further that following the making of each B
Borrowing, the Borrowers shall be in compliance with the limitation set forth in
the proviso to the first sentence of subsection (a) above. Within the limits
and on the conditions set forth in this Section 2.05, the Borrowers may from
time to time borrow under this Section 2.05, repay or prepay pursuant to
Section 2.05(c), and reborrow under this Section 2.05, provided that a B
Borrowing shall not be made within three Business Days of the date of any other
B Borrowing.
(c) On the maturity date of each B Advance (such maturity
date being that specified by the Borrower for repayment of such B Advance in the
related Notice of B Borrowing delivered pursuant to Section 2.05(a)(i)) the
Borrower shall repay to the Administrative Agent for the account of the Bank
which has made such B Advance the then unpaid principal amount of such B
Advance. The Borrowers shall have no right to prepay any principal amount of
any B Advance.
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(d) The Borrowers shall pay interest on the unpaid principal
amount of each B Advance, from the date of such B Advance to the date the
principal amount of such B Advance is repaid in full, at the fixed rate of
interest for such B Advance (in the case of a Fixed Rate B Advance) specified
by the Bank making such B Advance in its notice with respect thereto delivered
pursuant to Section 2.05(a)(ii) above or (in the case of a Eurodollar Rate B
Advance) the margin specified by the Bank making such B Advance in its notice
with respect thereto delivered pursuant to Section 2.05(a)(ii) above plus the
Eurodollar Rate determined with respect to such B Borrowing pursuant to Section
2.10, payable on the interest payment date or dates specified by the Borrowers
for such B Advance in the related Notice of B Borrowing delivered pursuant to
Section 2.05(a)(i) above.
(e) The indebtedness of each Borrower resulting from all B
Advances made by a Bank shall be evidenced by a single B Note made by such
Borrower and payable to the order of such Bank covering all Fixed Rate
Advances, and a single B Note made by such Borrower and payable to the order of
such Bank covering all Eurodollar B Advances, made by such Bank to such
Borrower.
(f) Any Bank may, without the prior written consent of the
Borrowers , sell or assign all or any part of such Bank's rights in any or all
of the B Advances made by such Bank or the B Notes in connection with such B
Advances as a participation, provided, however, that (i) any such sale or
assignment shall not require the Borrowers to file a registration statement
with the Securities and Exchange Commission or apply to qualify the Notes under
the blue sky laws of any state and the selling or assigning Bank shall
otherwise comply with all federal and state securities laws applicable to such
transaction; (ii) no purchaser or assignee in such a transaction shall thereby
become a "Bank" for any purpose under this Agreement, (iii) such Bank's
obligations under this Agreement (including, without limitation, its Commitment
to the Borrowers hereunder) shall remain unchanged, (iv) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and (v) the Borrowers, the Administrative Agent and the other
Banks shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement.
Section 2.06. Fees . TBC agrees to pay to the Administrative
Agent for the account of each Bank a facility fee ("Facility Fee") on such
Bank's Commitment, without regard to usage. Such fee shall be payable for the
periods from the date hereof in the case of each Bank named in Schedule I
attached hereto, and from the effective date on which any other Bank becomes a
party hereto, until the Termination Date at the rate per annum set forth in the
pricing grid below, depending upon the rating of the long-term senior unsecured
debt of TBC then in effect:
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=========================================================================
|| Public Debt Rating | ||
|| S&P/Moody's | Facility Fee ||
||---------------------------------------------|-----------------------||
|| Level I | ||
|| A by S&P or A2 by Moody's or above | 0.06% ||
||---------------------------------------------|-----------------------||
|| Level II | ||
|| Less than level I or at least A- | 0.07% ||
|| by S&P or A3 by Moody's | ||
||---------------------------------------------|-----------------------||
|| Level III | ||
|| less than level II or at least BBB+ | ||
|| by S&P or Baa1 by Moody's | 0.08% ||
||---------------------------------------------|-----------------------||
|| Level IV | ||
|| less than level III | 0.125% ||
=========================================================================
If at any time no rating is available from S&P and Moody's or any other
nationally recognized statistical rating organization designated by TBC and
approved in writing by the Majority Banks, the fees during the thirty days
following such ratings becoming unavailable shall be those in effect
immediately prior to such ratings becoming unavailable. Thereafter the rating
to be used for purposes of this Agreement until ratings from S&P and Moody's
become available shall be as agreed between TBC and the Administrative Agent,
and TBC and the Administrative Agent shall use good faith efforts to reach such
agreement within such thirty day period, provided, however, that if no such
agreement is reached within such thirty day period the fees thereafter, until
such agreement shall have been reached, shall be (A) if any such rating shall
have become unavailable as a result of S&P or Moody's ceasing its business as a
rating agency, the fees in effect immediately prior to such cessation or (B)
otherwise, the fees as set forth under Level IV above. Facility Fees shall be
payable in arrears on each January 1, April 1, July 1 and October 1 during the
term of this Agreement and on either the Termination Date. The Facility Fee
shall be calculated based on a 360-day year. The amount of the Facility Fee
payable on January 1, 1998 and on either the Termination Date or the date that
the Conversion takes effect, as applicable, shall be prorated based on the
actual number of days elapsed either since the date hereof (in the case of
January 1, 1998 payment) or since the date on which the last payment in respect
of the Facility Fee was made.
Section 2.07. [intentionally omitted] .
Section 2.08. Reduction of the Commitments. TBC shall have the
right, upon at least 3 Business Days' notice to the Administrative Agent, to
terminate in whole or reduce ratably in part the unused portions of the
Commitments of the Banks, provided that each partial reduction shall be in a
minimum amount of $10,000,000 or an integral multiple of $1,000,000 in excess
thereof, and provided further that the aggregate amount of the Commitments of
the Banks shall not be reduced to an amount which is less than the aggregate
principal amount of the B Advances then outstanding.
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Section 2.09. Additional Interest on Eurodollar Rate A
Advances. The Borrowers shall pay to each Bank, so long as such Bank shall be
required under regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities, additional interest on the unpaid
principal amount of each Eurodollar Rate A Advance of such Bank, from the date
of such A Advance until such principal amount is paid in full, at an interest
rate per annum equal at all times to the remainder obtained by subtracting (i)
the Eurodollar Rate for the Interest Period for such A Advance from (ii) the
rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage of such Bank for such Interest
Period, payable on each date on which interest is payable on such A Advance.
Such additional interest shall be determined by such Bank and notified to the
Borrowers through the Administrative Agent.
Section 2.10. Eurodollar Interest Rate Determination.
(a) The Administrative Agent shall determine each Eurodollar
Rate by using the methods described in the definition of the term "Eurodollar
Rate," and shall give prompt notice to the Borrowers and the Banks of each such
Eurodollar Rate.
(b) In the event the rate cannot be determined by the first
method described in the definition of "Eurodollar Rate," each Reference Bank
agrees to furnish to the Administrative Agent timely information for the
purpose of determining each such Eurodollar Rate in accordance with the second
method described therein. If any one or more of the Reference Banks shall not
furnish such timely information to the Administrative Agent for the purpose of
determining any such interest rate, the Administrative Agent shall determine
such interest rate on the basis of timely information furnished by the
remaining Reference Banks. In the event the rate cannot be determined by the
either of the methods described in the definition of "Eurodollar Rate," then:
(i) the Administrative Agent shall forthwith notify the
Borrowers and the Banks that the interest rate cannot be determined for such
Eurodollar Rate Advances,
(ii) each such Advance, if an A Advance, will automatically,
on the last day of the then existing Interest Period therefor, Convert into
a Base Rate Advance (or if the Borrower was attempting to Convert a Base
Rate Advance into a Eurodollar Rate A Advance, such Advance will continue
as a Base Rate Advance), and
(iii) the obligation of the Banks to make Eurodollar Rate B
Advances, or to make, or to Convert A Advances into, Eurodollar Rate A
Advances shall be suspended until the Administrative Agent shall notify
the Borrowers and the Banks that the circumstances causing such
suspension no longer exist.
(c) If, with respect to any Eurodollar Rate A Advances, the
Majority Banks notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such A Advances will not adequately reflect the cost to
such Majority Banks of making, funding or maintaining their respective
Eurodollar Rate A Advances for such Interest Period, the Administrative Agent
shall forthwith so notify the Borrowers and the Banks, whereupon
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(i) each Eurodollar Rate A Advance will automatically, on
the last day of the then existing Interest Period therefor, Convert into a
Base Rate Advance, and
(ii) the obligation of the Banks to make, or to Convert A
Advances into, Eurodollar Rate A Advances shall be suspended until the
Administrative Agent shall notify the Borrowers and such Banks that the
circumstances causing such suspension no longer exist.
(d) If a Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate A Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01,
the Administrative Agent will forthwith so notify the Borrower and the Banks
and such A Advances will automatically, on the last day of the then existing
Interest Period therefor, Convert into Base Rate Advances.
Section 2.11. Voluntary Conversion of A Advances. Any Borrower
may on any Business Day, upon notice given to the Administrative Agent not
later than 11:00 a.m. (New York City time) on the third Business Day prior to
the date of the proposed Conversion and subject to the provisions of Sections
2.10 and 2.14, Convert all A Advances of one Type comprising the same A
Borrowing into Advances of another Type; provided, however, that any Conversion
of any Eurodollar Rate A Advances into Base Rate Advances shall be made on, and
only on, the last day of an Interest Period for such Eurodollar Rate A
Advances. Each such notice of a Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the A Advances
to be Converted, and (iii) if such Conversion is into Eurodollar Rate A
Advances, the duration of the Interest Period for each such A Advance.
Section 2.12. Prepayments. Any Borrower shall have the right
at any time and from time to time, upon prior written notice from the Borrower
to the Administrative Agent, to prepay its outstanding principal obligations
evidenced by its A Notes in whole or ratably (except as provided in Section
2.14 or 2.17) in part and may be obligated to make certain prepayments of
obligations evidenced by one or more A Notes subject to and in accordance with
the following (provided that every notice of prepayment given by a Subsidiary
Borrower must be countersigned by an authorized representative of TBC, in order
to evidence the consent of TBC, in its sole discretion, to that prepayment):
(a) With respect to Base Rate Borrowings, such prepayment
shall be without premium or penalty, upon notice given to the Administrative
Agent, and shall be made not later than 11:00 a.m. (New York City time)
on the date of such prepayment. The Borrower shall designate in such
notice the amount and date of such prepayment. Accrued interest on the
amount so prepaid shall be payable on the first Business Day of the
calendar quarter next following the prepayment. The minimum amount of
Base Rate Borrowings which may be prepaid on any occasion shall be
$10,000,000 or an integral multiple of $1,000,000 in excess thereof or,
if less, the total amount of Base Rate Advances then outstanding for that
Borrower.
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(b) With respect to Eurodollar Rate A Borrowings, such
prepayment shall be made on at least 3 Business Days' prior written notice.
The Borrower shall designate in such notice the amount and date of such
prepayment and the Eurodollar Rate A Borrowings against which each
portion of each prepayment shall be applied, which portion shall be
ratable as among the Banks. The minimum amount of Eurodollar Rate A
Borrowings which may be prepaid on any occasion shall be $10,000,000 or
an integral multiple of $1,000,000 in excess thereof or, if less, the
total amount of Eurodollar Rate A Advances then outstanding for that
Borrower. The Borrower shall, on the date of the prepayment, pay to the
Administrative Agent for the account of each Bank interest accrued to
such date of prepayment on the principal amount prepaid plus, in the case
only of a prepayment on any date which is not the last day of an
applicable Eurodollar Interest Period, any amounts which may be required
to compensate such Bank for any losses or out-of-pocket costs or expenses
(including any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds, but excluding
loss of anticipated profits) incurred by such Bank as a result of such
prepayment, provided that such Bank shall exercise reasonable efforts to
minimize any such losses, costs and expenses.
(c) If due to any prepayment pursuant to Section 2.14 or to
the acceleration of any of the A Notes pursuant to Section 6.01 or otherwise,
any Bank receives payment of its portion of, or is subject to any
Conversion from, any Eurodollar Rate A Advance on any day other than the
last day of an Interest Period with respect to such A Advance, the
Borrowers will pay to the Administrative Agent for the account of such
Bank any amounts which may be payable to such Bank by the Borrower by
reason of payment on such day as provided in Section 2.12(b).
Section 2.13. Increases in Costs. (a) If, due to either (1)
the introduction of, or any change (other than, in the case of Eurodollar Rate
Borrowings, a change by way of imposition or increase of reserve requirements
referred to in Section 2.09) in, or new interpretation of, any law or
regulation effective at any time and from time to time on or after December 8,
1997 or (2) the compliance with any request from or by any central bank or
other governmental authority (whether or not having the force of law), there
shall be any increase in the costs incurred by any Bank in agreeing to make or
making, funding or maintaining any Eurodollar Rate A Advance then or at any
time thereafter outstanding, then the Borrowers shall from time to time, upon
demand of such Bank (with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such Bank such amounts as
shall be required to compensate such Bank for such increased cost, provided
that such Bank shall exercise reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to minimize any such increased
cost. A certificate as to the amount of such increase in costs, submitted to
the Borrowers and the Administrative Agent by such Bank, shall be conclusive
and binding for all purposes under this Section 2.13(a), absent manifest error.
(b) If any Bank determines that compliance with any law or
regulation or any guidelines or request from any central bank or other
governmental authority (whether or not having the force of law) which is
enacted, adopted or issued at any time and from time to time after December 8,
1997 affects or would affect the amount of capital required or expected to be
maintained by such Bank or any corporation controlling such Bank and that the
amount of such capital is increased by or based upon the existence of such
Bank's commitment to lend hereunder and other commitments of this type, then,
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upon demand by such Bank (with a copy of such demand to the Administrative
Agent), the Borrowers shall immediately pay to the Administrative Agent for the
account of such Bank, from time to time as specified by such Bank, additional
amounts sufficient to compensate such Bank in the light of such circumstances,
to the extent that such Bank reasonably determines such increase in capital to
be allocable to the existence of such Bank's commitment to lend hereunder,
provided that such Bank shall exercise reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to minimize any such
compensation payable by the Borrowers hereunder. A certificate as to such
amounts submitted to the Borrowers and the Administrative Agent by such Bank,
shall be conclusive and binding for all purposes, absent manifest error.
(c) (1) Any and all payments by any Borrower hereunder or
under the Notes shall be made, in accordance with Section 2.15, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deduction, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank and the Administrative Agent, taxes
that are imposed on its overall net income by the United States and taxes that
are imposed on its overall net income (and franchise taxes imposed in lieu
thereof) by the state or foreign jurisdiction under the laws of which such Bank
or the Administrative Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Bank, taxes that are imposed on
its overall net income (and franchise taxes imposed in lieu thereof) by the
state or foreign jurisdiction of such Bank's Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as "Taxes"). If any
Borrower shall be required by law to deduct any Taxes from or in respect to any
sum payable hereunder or under any Note to any Bank or the Administrative
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.13(c)) such Bank or the Administrative Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) such Borrower shall make such deductions
and (iii) such Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(2) In addition, each Borrower shall pay any present or
future stamp, documentary, excise, property or similar taxes, charges, or levies
that arise from any payment made hereunder or under the Notes or from the
execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement or the Notes (hereinafter referred to as "Other
Taxes").
(3) Each Borrower shall indemnify each Bank and the
Administrative Agent for and hold it harmless against the full amount of Taxes
and Other Taxes, and for the full amount of taxes of any kind imposed by any
jurisdiction on amounts payable under this Section 2.13(c), imposed on or paid
by such Bank or the Administrative Agent (as the case may be) and any liability
( including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within
30 days from the date such Bank or the Administrative Agent (as the case may
be) makes written demand therefor.
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(4) Within 30 days after the date of any payment of Taxes,
the Borrower which paid such Taxes shall furnish to the Administrative Agent,
at its address referred to in Section 8.02, the original or a certified copy of
a receipt evidencing such payment. In the case of any payment hereunder or
under the Notes by or on behalf of any Borrower through an account or branch
outside the United States or by or on behalf of any Borrower by a payor that is
not a United States person, if the Borrower determines that no taxes are payable
in respect thereof, such Borrower shall furnish, or shall cause such payor to
furnish, to the Administrative Agent, at such address, an opinion of counsel
acceptable to the Administrative Agent stating that such payment is exempt from
Taxes. For purposes of this subsection (4) and subsection (5), the terms
"United States" and "United States person" shall have the meanings specified in
Section 7701 of the Internal Revenue Code.
(5) Each Bank organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement (in the case of each Bank listed in Schedule I
attached hereto), and from the date on which any other Bank becomes party hereto
(in the case of each other Bank), and from time to time thereafter as requested
in writing by TBC (but only so long thereafter as such Bank remains lawfully
able to do so), provide each of the Administrative Agent and TBC with two
original Internal Revenue Service forms 1001 or 4224, as appropriate, or any
successor of other form prescribed by the Internal Revenue Service, certifying
that such Bank is exempt from or entitled to a reduced rate of United States
withholding tax on payments pursuant to this Agreement or the Notes. If the
forms provided by a Bank at the time such Bank first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Bank provides the appropriate form certifying that a
lesser rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date on which a Bank becomes a party to this Agreement,
the Bank assignor was entitled to payments under subsection (1) above in respect
of United States withholding tax with respect to interest paid at such date,
then, to such extent, the term Taxes shall include (in addition to withholding
taxes that may be imposed in the future or other amounts otherwise includable in
Taxes) United States withholding tax, if any, applicable with respect to the
Bank assignee on such date. If any form or document referred to in this
subsection (5) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the date
hereof by Internal Revenue Service form 1001 or 4224, that the Bank reasonably
considers to be confidential, the Bank shall give notice thereof to the
Borrower and shall not be obligated to include in such form or document
confidential information.
(6) For any period with respect to which any Bank has failed
to provide TBC with the appropriate form described in subsection (5) above
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under subsection (5) above), such Bank shall not be entitled to
indemnification under subsection (1) or (3) with respect to Taxes imposed by
the United States by reason of such failure; provided, however, that should a
Bank become subject to Taxes because of its failure to deliver a form required
hereunder, TBC shall take such steps as such Bank shall reasonably request to
assist such Bank to recover such Taxes.
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(d) Upon receipt of notice from any Bank claiming
compensation pursuant to this Section 2.13 and as long as no Event of Default
and no event which with notice or lapse of time or both would constitute an
Event of Default shall have occurred and be continuing, TBC shall have the
right, on or before the 30th day after the date of receipt of such notice, (i)
to arrange for one or more Banks or other commercial banks to assume the
Commitment of such Bank; subject, however, to payment to Administrative Agent
by assignor or assignee of a processing and recording fee of $3,500, in the
event the replacement bank is not a Bank; or (ii) to arrange for the Commitment
of such Bank to be terminated and all A Advances owed to such Bank to be
prepaid; and, in either case, subject to payment in full of all principal,
accrued and unpaid interest, fees and other amounts payable under this Agreement
and then owing to such Bank immediately prior to the assignment or termination
of the Commitment of such Bank.
Section 2.14. Illegality. If there is any introduction of, or
change in, or in the interpretation of, any law or regulation, which in the
opinion of counsel for the Administrative Agent in the relevant jurisdiction
shall make it unlawful, or if any central bank or other governmental authority
shall assert that it is unlawful, for any Bank to continue to fund or maintain
any Eurodollar Rate Advances or to perform its obligations with respect to
Eurodollar Rate Advances as provided hereunder, upon the issuance of such
opinion of counsel or such assertion by a central bank or other governmental
authority and notice given to the Borrowers (accompanied by such opinion, if
applicable) by the Administrative Agent, the Borrowers shall forthwith either
(1) prepay in full all Eurodollar Rate A Advances made by such Bank as a part
of Eurodollar Rate A Borrowings, with accrued interest thereon and all other
amounts which may be payable to such Bank by the Borrowers as provided in
Section 2.12(b) or (2) Convert all such Eurodollar Rate A Advances made by such
Bank into A Borrowings of another Type as provided in Section 2.11. Upon such
demand or such notice of prepayment or Conversion, the obligation of such Bank
to make or to Convert A Advances into, Eurodollar Rate A Advances shall be
suspended until such time as the event giving rise to such prepayment or
Conversion shall no longer apply, at which time the Commitment of such Bank to
make A Advances for the funding of, or Conversion to, Eurodollar Rate A
Borrowings shall be reinstated, subject to its then available Commitment.
Section 2.15. Payments and Computations .
(a) The Borrowers shall make each payment hereunder and
under the Notes not later than 11:00 a.m. (New York City time) on the day when
due in U.S. dollars to the Administrative Agent at the Agent's Account in same
day funds. The Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest or fees
ratably (other than amounts payable pursuant to Section 2.05, 2.09, 2.13, 2.14,
or 2.17) to the Banks for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable to
any Bank to such Bank for the account of its Applicable Lending Office, in each
case to be applied in accordance with the terms of this Agreement. From and
after the effective date of an assignment pursuant to Section 2.18, the
Administrative Agent shall make all payments hereunder and under the Notes in
respect of the interest assigned thereby to the Bank assignee thereunder, and
the parties to such assignment shall make all appropriate adjustments in such
payments for the periods prior to such effective date directly between
themselves.
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(b) All computations of interest based on the Base Rate
shall be made by the Administrative Agent on the basis of a year of 365 or 366
days, as the case may be, and all computations of interest based on the
Eurodollar Rate or the Federal Funds Rate and of Facility Fees shall be made by
the Administrative Agent, and all computations of interest pursuant to Section
2.09 shall be made by a Bank, on the basis of a year of 360 days, in each case
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or fees are payable. Each
determination by the Administrative Agent (or, in the case of Section 2.09, by
a Bank) of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or fee, as the
case may be; provided, however, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(d) Unless the Administrative Agent shall have received
notice from a Borrower prior to the date on which any payment is due to the
Banks hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
that such Borrower shall not have so made such payment in full to the
Administrative Agent, each Bank shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Bank together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Administrative Agent, at the
Federal Funds Rate.
Section 2.16. Sharing of Payments, Etc. If any Bank shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the A Advances made by it (other
than pursuant to Sections 2.09, 2.13, 2.14 or 2.17), in excess of its ratable
share of payments on account of the A Advances obtained by all the Banks, such
Bank shall forthwith purchase from the other Banks such participations in the A
Advances made by them as shall be necessary to cause such purchasing Bank to
share the excess payment ratably with each of them, provided, however, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Bank, such purchase from each Bank shall be rescinded and such Bank
shall repay to the purchasing Bank the purchase price to the extent of such
recovery together with an amount equal to such Bank's ratable share (according
to the proportion of (i) the amount of such Bank's required repayment to (ii)
the total amount so recovered from the purchasing Bank) of any interest or
other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrowers agree that any Bank so purchasing a
participation from another Bank pursuant to this Section 2.16 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Bank were creditor of the Borrowers in the amount of such participation.
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Section 2.17. Alteration of Commitments and Addition of Banks.
By a written agreement executed only by TBC, the Administrative Agent and the
Bank or bank affected:
(i) the Commitment of such Bank may be increased to the
amount set forth in such agreement;
(ii) such bank may be added as a Bank with a Commitment as
set forth in such agreement provided that it agrees to be bound by all the
terms and provisions of this Agreement; and
(iii) the unused portion of the Commitment of such Bank may be
reduced or terminated and the A Advances owing to such Bank may be
prepaid in whole or in part, all as set forth in such agreement.
The Administrative Agent may execute any such agreement without
the prior consent of any Bank (other than the Bank or bank affected), except
that if at the time the Administrative Agent proposes to execute such agreement
either (A) TBC's long-term senior unsecured debt is rated lower than BBB by S&P
or lower than Baa2 by Moody's or (B) an Event of Default, or an event which
with notice or lapse of time or both would constitute an Event of Default,
shall have occurred and be continuing, then the Administrative Agent shall not
execute any such agreement unless it has first obtained the prior written
consent of the Majority Banks and provided that the Administrative Agent shall
not execute any such agreement without the prior written consent of the
Majority Banks if such agreement would increase the total of the Commitments to
an amount in excess of $1,500,000,000. The Administrative Agent shall give
each Bank prompt notice of any such agreement becoming effective. All requests
for Bank consent under the provisions of this Section 2.17 shall specify the
date upon which any such increase, addition, reduction, termination, or
prepayment shall become effective (the "Effective Date") and shall be made by
means of a Request for Alteration substantially in the form as set forth in
Exhibit C. On the Effective Date on which the Commitment of any Bank is
increased, decreased, terminated or created or on which prepayment is made, all
as described in such Request for Alteration, the Borrowers or such Bank, as the
case may be, shall make available to the Administrative Agent not later than
12:30 p.m. (New York City time) on such date, in same day funds, the amount, if
any, which may be required (and the Administrative Agent shall distribute such
funds received by it to the Borrowers or to such Banks, as the case may be) so
that at the close of business on such date the sum of the A Advances of each
Bank then outstanding shall be in the same proportion to the total of the A
Advances of all the Banks then outstanding as the Commitment of each Bank is to
the total of the Commitments. The Administrative Agent shall give each Bank
notice of the amount to be made available by, or to be distributed to, such
Bank at least 5 Business Days before such payment is made.
Section 2.18. Assignments; Sales of Participations and Other
Interests in Notes
(a) From time to time each Bank may with the prior consent
of TBC and the affected Borrowers and subject to the qualifications set forth
below, assign to one or more Banks or other commercial banks (each such Bank or
bank being an "Eligible Assignee") all or any portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the A Advances owing to it and all A Notes held by
it) and will, at any time, if arranged by the Company pursuant to clause (A) of
this sentence upon at least 30 days' notice to such Bank and the Administrative
Agent, assign to one or more Eligible Assignees all of its rights and
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obligations under this Agreement (including without limitation, all of its
Commitment, the A Advances owing to it and all A Notes held by it); provided,
however, that if such Bank shall notify TBC, the affected Borrowers and the
Administrative Agent of its intent to request the consent of TBC and the
affected Borrowers to an assignment, TBC shall have the right, for 30 days
after receipt of such notice and so long as no Event of Default shall have
occurred and be continuing, in its sole discretion either (A) to arrange for
one or more Eligible Assignees to accept such assignment (a "Required
Assignment") or (B) to arrange for the rights and obligations of such Bank
(including, without limitation, such Bank's Commitment), and the total
Commitments of the Banks to be reduced by an amount equal to the amount of such
Bank's Commitment to be assigned and in connection with such reduction, to
prepay that portion of the A Advances owing to such Bank which it proposes to
assign; provided further that if TBC fails to notify such Bank that it has
arranged for an assumption or reduction of the portion of Commitment to be
assigned within 30 days of the receipt by TBC of such Bank's request for
consent to assignment, the Borrowers shall be deemed to consent to the proposed
assignment; provided further that (i) any such assignment shall not require the
Borrowers to file a registration statement with the Securities and Exchange
Commission or apply to qualify the A Notes under the blue sky laws of any state
and the assigning Bank shall otherwise comply with all federal and state
securities laws applicable to such assignment; (ii) the amount of the
Commitment of the assigning Bank being assigned pursuant to each such
assignment (determined as of the date of the assignment) shall either (A) equal
50% of all such rights and obligations (or 100% in the case of a Required
Assignment) or (B) not be less than $10,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (iii) the aggregate amount of the Commitment
of the assigning Bank assigned pursuant to all such assignments of such Bank
(after giving effect to such assignment) shall in no event exceed 50% (except
in the case of a Required Assignment) of all such Bank's Commitment (as set
forth in Section 1.02, in the case of each Bank that is a party hereto as of
December 8, 1997, or as set forth in the Register as the aggregate Commitment
assigned to such Bank pursuant to one or more assignments, in the case of any
assignee). No Bank shall be obligated to make a Required Assignment unless
such Bank shall have received payments in an aggregate amount at least equal to
the outstanding principal amount of all A Advances being assigned, together
with accrued interest thereon to the date of payment of such principal amount
and all other amounts payable to such Bank under this Agreement (including
without limitation Section 2.12(c) provided that such Bank shall receive its
pro rata share of the Facility Fee on the next date on which the Facility Fee
is payable). From and after the effective date of any assignment pursuant to
this Section 2.18(a), (x) the assignee thereunder shall be a party hereto and,
to the extent that rights and obligations hereunder have been assigned to it
pursuant to such assignment have the rights and obligations of a Bank hereunder
except that such assignee may not elect to assign any of its rights and
obligations under this Agreement acquired by any assignment pursuant to this
Section 2.18(a) for a period of nine months following the effective date
specified in such assignment and (y) the Bank assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such assignment relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an assignment covering all or the
remaining portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto). Notwithstanding any
other provision in this Agreement, any Bank may at any time (aa) create a
security interest in all or any portion of its rights under this Agreement
(including without limitation, the Advances owing to it and the Notes held by
it) in favor of any Federal Reserve Bank in accordance with Regulation A of the
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Board of Governors of the Federal Reserve System, and (bb) assign all or any
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the A Advances owing to it and
all A Notes held by it) to an affiliate of such Bank, except if the result of
the assignment is to increase the cost to the Borrowers of requesting,
borrowing, continuing, maintaining, paying or converting any Advances, provided
in each case that such Bank gives prior or contemporaneous notice to TBC, the
affected Borrowers and Administrative Agent of the assignment.
(b) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each assignment delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Banks and the Commitment of, and principal amount of the A Advances of each
Borrower owing to, each Bank from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrowers, the Administrative Agent and the Banks may
treat each entity whose name is recorded in the Register as a Bank hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrowers or any Bank at any reasonable time and from time to
time upon reasonable prior notice. Upon receipt by the Administrative Agent
from the assigning Bank of an assignment in form and substance satisfactory to
the Administrative Agent executed by an assigning Bank and an assignee
representing that it is an Eligible Assignee, together with each A Note subject
to such assignment, and a processing and recording fee of $3,500 (payable by
either the assignor or the assignee), the Administrative Agent shall, if such
assignment is a Required Assignment or has been consented to by the Borrowers
to the extent required by Section 2.18(a), (i) accept such assignment, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to TBC and the affected Borrowers . Within five Business Days
after its receipt of such notice, the Company, at its own expense, shall
execute and deliver to the Administrative Agent in exchange for each
surrendered A Note a new A Note to the order of such Eligible Assignee in an
amount equal to the Commitment assumed by it pursuant to such assignment, and
if the assigning Bank has retained a Commitment hereunder, a new A Note to the
order of the assigning Bank in an amount equal to the Commitment retained by it
hereunder. Such new A Note or A Notes shall be in an aggregate principal
amount equal to the principal amount of such surrendered A Note, shall be dated
the effective date of such assignment and shall otherwise be substantially in
the form of Exhibit A-1 or A-2 hereto, as appropriate.
(c) Each Bank may sell participations in all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitments, the Advances owing to it and the Notes held
by it) to one or more affiliates of such Bank or to one or more other commercial
banks; provided, however, that (i) any such participation shall not require the
Borrowers to file a registration statement with the Securities and Exchange
Commission or apply to qualify the Notes under the blue sky laws of any state
and the Bank selling or granting such participation shall otherwise comply with
all federal and state securities laws applicable to such transaction, (ii) no
purchaser of such a participation shall be considered to be a "Bank" for any
purpose under the Agreement, (iii) such Bank's obligations under this Agreement
(including, without limitation, its Commitment to the Borrowers hereunder)
shall remain unchanged, (iv) such Bank shall remain solely responsible to the
other parties hereto for the performance of such obligations, (v) such Bank
shall remain the holder of such Notes for all purposes of this Agreement, and
(vi) the Borrowers, the Administrative Agent and the other Banks shall continue
to deal solely and directly with such Bank in connection with such Bank's
rights and obligations under this Agreement.
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(d) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
2.18, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers furnished to such Bank
by or on behalf of the Borrowers; provided, however, that, prior to any such
disclosure of information that is not publicly available, such Bank shall
obtain the written consent of the Borrowers, and the assignee or participant or
proposed assignee or participant shall agree to preserve the confidentiality of
any such information received by it from such Bank except as disclosure may be
required or appropriate to governmental authorities, pursuant to legal process
or by law or governmental regulation or authority.
Section 2.19. [intentionally omitted].
Section 2.20. Subsidiary Borrowers . (a) TBC may at any time,
and from time to time, by delivery to the Administrative Agent of a Borrower
Subsidiary Letter substantially in the form of Exhibit D hereto, duly executed
by TBC and the respective Subsidiary, designate such Subsidiary as a
"Subsidiary Borrower" for purposes of this Agreement, and such Subsidiary shall
thereupon become a "Subsidiary Borrower" for purposes of this Agreement and, as
such, shall have all of the rights and obligations of a Borrower hereunder.
The Administrative Agent shall promptly notify each Bank of each such
designation by TBC and the identity of the respective Subsidiary.
(b) No Advances shall be made to a Subsidiary Borrower, and
no Conversion of any Advances at the request of a Subsidiary Borrower shall be
effective, without, in each and every instance, the prior consent of TBC, in
its sole discretion, which shall be evidenced by the countersignature of TBC to
the relevant Notice of Borrowing or notice of Conversion. In addition, no
notices which are to be delivered by a Borrower hereunder shall be effective,
with respect to any Subsidiary Borrower, unless the notice is countersigned by
TBC.
(c) The occurrence of any of the following events with
respect to any Subsidiary Borrower shall constitute a "Subsidiary Borrower
Termination Event" with respect to such Subsidiary Borrower:
(i) such Subsidiary Borrower shall cease to be a Subsidiary,
as defined under this Agreement;
(ii) such Subsidiary Borrower shall liquidate or dissolve;
(iii) such Subsidiary Borrower shall fail to preserve and
maintain its existence, or shall make any material change in the nature of its
business as carried out on the date such Subsidiary Borrower becomes a
Borrower hereunder;
(iv) such Subsidiary Borrower shall merge or consolidate with
or into, or convey, transfer, lease, or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to any Person
(except that a Subsidiary Borrower may merge into or dispose of assets to
another Borrower); or
(v) any of the "Events of Default" described in Section 6.01
shall occur to or with respect to such Subsidiary Borrower as if such
Subsidiary Borrower were TBC.
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(d) Upon the occurrence of a Subsidiary Borrower Termination
Event with respect to any Subsidiary Borrower, such Subsidiary Borrower (the
"Terminated Subsidiary Borrower") shall cease to be a Borrower for purposes of
this Agreement and shall no longer be entitled to request or borrow Advances
hereunder. All outstanding Advances of a Terminated Subsidiary Borrower shall
be automatically due and payable as of the date on which the Subsidiary
Borrower Termination Event of such Terminated Subsidiary Borrower occurred,
together with accrued interest thereon and any other amounts then due and
payable by that Borrower hereunder, unless, in the case of a Subsidiary
Borrower Termination Event described in paragraph (iv) of Section 2.20(c), the
other Person party to the transaction is a Borrower and such other Borrower has
assumed in writing all of the outstanding Advances and other obligations under
this Agreement and under the Notes of the Terminated Subsidiary Borrower.
(e) Each of the Subsidiary Borrowers hereby appoint and
authorize TBC to take such action as agent on their behalf and to exercise such
powers under this Agreement as are delegated to TBC by the terms hereof,
together with such powers as are reasonably incidental thereto.
(f) Notwithstanding anything in this Agreement to the
contrary, each of the Subsidiary Borrowers shall be severally liable for the
liabilities and obligations of such Subsidiary Borrower under this Agreement and
its Notes, and no Subsidiary Borrower shall be liable for the obligations of any
other Borrower under this Agreement and such other Borrower's Notes. Each
Subsidiary Borrower shall be severally liable for all payments of the principal
of and interest on Advances to such Subsidiary Borrower, and any other amount
due hereunder that is specifically allocable to such Subsidiary Borrower or the
Advances of such Subsidiary Borrower. With respect to any amount due
hereunder, including fees, that is not specifically allocable to any particular
Borrower, each Borrower shall be liable for such amount pro rata in the same
proportion as such Borrower's outstanding Advances bear to the total of
then-outstanding Advances to all Borrowers.
ARTICLE 3
Representations, Warranties and Certain Covenants
Section 3.01. Representations and Warranties by the Borrowers.
Each of the Borrowers represent and warrant as follows:
(a) TBC is a duly organized corporation existing in good
standing under the laws of the State of Delaware. Each Subsidiary Borrower is
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, and each of TBC and each Subsidiary
Borrower is qualified to do business in every jurisdiction where such
qualification is required, except where the failure to so qualify would
not have a material adverse effect on the financial condition of TBC and
the Subsidiary Borrowers as a whole.
(b) The execution and delivery and the performance of the
terms of this Agreement, the Notes and each Guaranty are within the corporate
powers of each Borrower party thereto, have been duly authorized by all
necessary corporate action, have received all necessary governmental
approval (which approval remains in full force and effect), and do not
contravene any law, any provision of the Certificate of Incorporation or
By-Laws of any Borrower party thereto or any contractual restriction
binding on any Borrower party thereto.
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(c) This Agreement and the Notes, when duly executed and
delivered by each Borrower party thereto, will constitute legal, valid
and binding obligations of such Borrower, enforceable against such
Borrower in accordance with their respective terms, and each Guaranty,
when duly executed and delivered by TBC, will constitute a legal, valid
and binding obligation of TBC, enforceable against TBC in accordance with
its terms.
(d) In TBC's opinion, there are no pending or threatened
actions or proceedings before any court or administrative agency which can
reasonably be expected to materially adversely affect the financial
condition or operations of the Company or any Subsidiary.
(e) The Consolidated statement of financial position as of
December 31, 1996 and the related Consolidated statement of earnings and
retained earnings for the year then ended (copies of which have been
furnished to each Bank) correctly set forth the Consolidated financial
condition of TBC and its Subsidiaries as of such date and the result of
the Consolidated operations for such year, and since such date there has
been no material adverse change in such condition or operations which is
likely to impair the ability of TBC to repay the Advances.
(f) No Borrower is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock within the
meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System, and no proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock. Following application of the
proceeds of each Advance, not more than 25 percent of the value of the
assets (either of any Borrower only or of each Borrower and its
subsidiaries on a consolidated basis) subject to the provisions of
Section 4.02(a) will be margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System).
(g) No Borrower is an "investment company," or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. Neither the making of any Advances, nor the application of
the proceeds or repayment thereof by any Borrower, nor the consummation of the
other transactions contemplated hereby, will violate any provision of such Act
or any rule, regulation or order of the Securities and Exchange Commission
thereunder.
Section 3.02. Representation by the Banks . Each Bank
represents that its present intent is that it will acquire the A Notes drawn to
its order for its own account and that each such A Note is being acquired for
the purpose of investment and not with a view to distribution or resale thereof,
subject, nevertheless, to the necessity that such Bank remain in control at all
times of the disposition of property held by it for its own account.
ARTICLE 4
Covenants of TBC
Section 4.01. Affirmative Covenants of TBC. From the date of
this Agreement and so long as any amount shall be payable by the Borrowers to
any Bank hereunder or any Commitment shall be outstanding, TBC will:
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(a) Furnish to the Banks: (1) within 60 days after the
close of each of the first three quarters of each of TBC's fiscal years, a
Consolidated statement of financial position of TBC and the Subsidiaries
as of the end of such quarter and a Consolidated comparative statement of
earnings and retained earnings of TBC and the Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end
of such quarter, each certified by an authorized officer of TBC, (2)
within 120 days after the close of each of TBC's fiscal years, and if
requested by the Administrative Agent, within 60 days after the close of
each of the first three quarters thereof, a statement certified by an
authorized officer of TBC showing in detail the computations required by
the provisions of Sections 4.02(a), 4.02(b), 4.02(c) and 4.02(d), hereof,
based on the figures which appear on the books of account of TBC and the
Subsidiaries at the close of such quarters, (3) within 120 days after the
close of each of TBC's fiscal years, a copy of the annual audit report of
TBC, certified by independent public accountants of recognized standing
acceptable to the Administrative Agent, together with financial
statements consisting of a Consolidated statement of financial position
of TBC and the Subsidiaries as of the end of such fiscal year and a
Consolidated statement of earnings and retained earnings of TBC and the
Subsidiaries for such fiscal year, (4) within 120 days after the close of
each of TBC's fiscal years, a statement certified by the independent
public accountants who shall have prepared the corresponding audit report
furnished to the Banks pursuant to the provisions of clause (3) of this
subsection (a), to the effect that, in the course of preparing such audit
report, such accountants had obtained no knowledge, except as
specifically stated, that TBC had been in violation of the provisions of
any one of the following Sections: Sections 4.02(a), 4.02(b), 4.02(c)
and 4.02(d), at any time during such fiscal year, (5) promptly upon their
becoming available, all financial statements, reports and proxy
statements which TBC may send to its stockholders, (6) promptly upon
their becoming available, all regular and periodic financial reports
which TBC or any Subsidiary shall file with the Securities and Exchange
Commission or any national securities exchange, (7) within 3 Business
Days after the discovery of the occurrence of any event which constitutes
an Event of Default or would constitute an Event of Default with the
passage of time or the giving of notice, or both, notice of such
occurrence together with a detailed statement by a responsible officer of
TBC of the steps being taken by TBC or the appropriate Subsidiary to cure
the effect of such event and (8) such other information respecting the
financial condition and operations of TBC or the Subsidiaries as the
Administrative Agent may from time to time reasonably request.
(b) Duly pay and discharge, and cause each Subsidiary duly
to pay and discharge, all taxes, assessments and governmental charges upon it or
against its properties prior to a date which is 5 Business Days after the date
on which penalties are attached thereto, except and to the extent only that the
same shall be contested in good faith and by appropriate proceedings by TBC or
the appropriate Subsidiary.
(c) Maintain, and cause each Subsidiary to maintain, with
financially sound and reputable insurance companies or associations, insurance
of the kinds, covering the risks and in the relative proportionate amounts
usually carried by companies engaged in businesses similar to that of TBC or
such Subsidiary, except, to the extent consistent with good business practices,
such insurance may be provided by TBC through its program of self insurance.
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(d) Preserve and maintain its corporate existence.
Section 4.02. General Negative Covenants of TBC. From the date
of this Agreement and so long as any amount shall be payable by TBC to any Bank
hereunder or any Commitment shall be outstanding, TBC will not:
(a) Create, incur, assume or suffer to exist any mortgage,
pledge, lien, security interest or other charge or encumbrance (including
the lien or retained security title of a conditional vendor) upon or with
respect to any of its Property, Plant and Equipment, or upon or with
respect to the Property, Plant and Equipment of any Subsidiary, or assign
or otherwise convey, or permit any Subsidiary to assign or otherwise
convey, any right to receive income from or with respect to its Property,
Plant and Equipment, except (1) liens in connection with workmen's
compensation, unemployment insurance or other social security
obligations, (2) liens securing the performance of bids, tenders,
contracts (other than for the repayment of borrowed money), leases,
statutory obligations, surety and appeal bonds, liens to secure progress
or partial payments made to TBC or such Subsidiary and other liens of
like nature made in the ordinary course of business, (3) mechanics',
workmen's, materialmen's or other like liens arising in the ordinary
course of business in respect of obligations which are not due or which
are being contested in good faith, (4) liens for taxes not yet due or
being contested in good faith and by appropriate proceedings by TBC or
the affected Subsidiary, and (5) other liens, charges and encumbrances,
so long as the aggregate amount of the Consolidated Debt for which all
such liens, charges and encumbrances serve as security does not exceed
15% of Consolidated net Property, Plant and Equipment.
(b) Permit Consolidated Debt to be at any time more than 60%
of Total Capital, where "Total Capital" means the sum of Shareholders' Equity
and Consolidated Debt.
(c) Make any payment, or permit any Subsidiary to make any
payment, of principal or interest on any Debt which payment would
constitute a violation of the terms of this Agreement or of the terms of
any indenture or agreement binding on such corporation or to which such
corporation is a party.
(d) Merge or consolidate with or into, or convey, transfer,
lease, or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person.
(e) Make any material change in the nature of its business
as carried out on the date hereof.
Section 4.03. Financial Statement Terms. For purposes of
Section 4.02(b) above, all capitalized terms shall be as they appear on TBC's
published Consolidated financial statements and calculated under the generally
accepted accounting principles and practices applied by TBC on the date hereof
in the preparation of such financial statements. However, notwithstanding the
foregoing: (i) such terms shall exclude amounts attributable to BCSC and its
subsidiaries and BFC; and (ii) Total Capital shall exclude the effects of any
repurchase by TBC of its common stock and any merger-related accounting
adjustments which are attributable to the merger with or acquisition of the
McDonnell Douglas Corporation by TBC.
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Section 4.04. Waivers of Covenants. The departure by TBC or any
Subsidiary from the requirements of any of the provisions of this Article 4
shall be permitted only if such departure shall have been consented to in
advance in a writing signed by Banks representing 66-2/3% or more of the then
outstanding aggregate principal amount of the A Notes or, if no such principal
or face amount is outstanding, Banks having at least 66-2/3% of the total of
the Commitments, and such writing shall be effective as a consent only to the
specific departure described in such writing. Such departure by TBC or any
Subsidiary when properly consented to by the required number of Banks as set
out in the preceding sentence shall not constitute an Event of Default under
Section 6.01(c).
ARTICLE 5
Conditions Precedent to Borrowings
Section 5.01. Conditions Precedent to the Initial Borrowing of
TBC. The obligation of each Bank to make its initial Advance to TBC is subject
to the fulfillment of all of the following conditions:
The Administrative Agent shall have received on or before the
day of the initial Borrowing all of the following, each dated the day of the
initial Borrowing, in form and substance satisfactory to the
Administrative Agent and its counsel.
(a) A Base Rate A Note, a Eurodollar A Note, a Fixed Rate B
Note and a Eurodollar B Note drawn to the order of each Bank executed and
delivered by TBC to the Administrative Agent for delivery to each Bank.
(b) Copies of all documents, certified by an officer of TBC,
evidencing necessary corporate action by TBC and governmental approvals,
if any, with respect to this Agreement and the Notes.
(c) A certificate of the Secretary or an Assistant Secretary
of TBC which shall certify the names of the officers of TBC authorized to
sign the Notes and the other documents to be delivered hereunder,
together with true specimen signatures of such officers and facsimile
signatures of officers authorized to sign by facsimile signature. Each
Bank may conclusively rely on such certificate until it shall have
received a further certificate of the Secretary or an Assistant Secretary
of TBC canceling or amending the prior certificate and submitting
signatures of the officers named in such further certificate.
(d) A favorable opinion of the chief legal officer of TBC
substantially in the form of Exhibit E hereto and as to such other
matters as the Administrative Agent may reasonably request, which opinion
TBC hereby expressly instructs such chief legal officer to prepare and
deliver.
(e) A favorable opinion of Shearman & Sterling, counsel for
the Administrative Agent, substantially in the form of Exhibit F hereto.
(f) TBC shall have terminated in whole the commitments of
the banks parties to the Credit Agreement dated as of September 27, 1996
among TBC, the banks parties thereto and Citibank, N.A., as agent (the
"1996 Loan Agreement").
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(g) TBC and its Subsidiaries shall have satisfied all of
their respective obligations under the 1996 Loan Agreement including, without
limitation, the payment of all fees under such agreement.
Section 5.02. Conditions Precedent to Each A Borrowing of TBC.
The obligation of each Bank to make an A Advance on the occasion of each A
Borrowing (including the initial Borrowing) is subject to the further
conditions precedent that on the date of such request and the date of such
Borrowing, the following statements shall be true, and each of the giving of
the applicable Notice of A Borrowing and the acceptance by TBC of the proceeds
of such A Borrowing shall be a representation by TBC that:
(i) the representations and warranties contained in Section
3.01 hereof are true and accurate on and as of each such date as though made
on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date); and
(ii) as of each such date no event has occurred and is
continuing, or would result from the proposed A Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for the
requirement that notice be given or time elapse or both.
Section 5.03. Conditions Precedent to Each B Borrowing of TBC.
The obligation of each Bank to make a B Advance on the occasion of each B
Borrowing (including the initial Borrowing) is subject to the further conditions
precedent that (1) TBC shall have furnished to the Administrative Agent in
connection with such B Borrowing, (x) a Consolidated statement of financial
position of TBC and the Subsidiaries as of the end of each of the first three
quarters of TBC's fiscal year (other than a quarter ending within sixty days
prior to the date of the related Notice of B Borrowing) and a Consolidated
comparative statement of earnings and retained earnings of TBC and the
Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, each certified by an authorized
officer of TBC and (y) a copy of the annual audit report of TBC, certified by
independent public accountants of recognized standing acceptable to the
Administrative Agent, together with financial statements consisting of a
Consolidated statement of the financial position of TBC and the Subsidiaries as
of the end of the applicable fiscal year and a Consolidated statement of
earnings and retained earnings of TBC and the Subsidiaries for such fiscal year
(the applicable fiscal year being the most recent year with respect to which
the annual audit report of TBC is due pursuant to Section 4.01(a)(3)) and (2)
on the date of such request and the date of such Borrowing, the following
statements shall be true, and each of the giving of the applicable Notice of B
Borrowing and the acceptance by TBC of the proceeds of such B Borrowing shall
be a representation by TBC that:
(i) the representations and warranties contained in Section
3.01 hereof are true and accurate on and as of each such date as though made
on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date);
(ii) as of each such date no event has occurred and is
continuing, or would result from the proposed B Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for the
requirement that notice be given or time elapse or both; and
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(iii) no event has occurred and no circumstance exists as a
result of which the information concerning TBC that has been provided by TBC to
the Administrative Agent or the Banks in connection with such B Borrowing
would include an untrue statement of a material fact or omit to state any
material fact or any fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
Section 5.04. Conditions Precedent to the Initial Borrowing of
a Subsidiary Borrower. The obligation of each Bank to make its initial Advance
to any particular Subsidiary Borrower is subject to the receipt by the
Administrative Agent, on or before the day of the initial Borrowing by such
Subsidiary Borrower, all of the following, each dated the day of the initial
Borrowing, in form and substance satisfactory to the Administrative Agent and
its counsel:
(i) A Borrower Subsidiary Letter, substantially in the form
of Exhibit D hereto, executed by such Subsidiary Borrower and TBC;
(ii) A Base Rate A Note, a Eurodollar A Note, a Fixed Rate B
Note and a Eurodollar B Note drawn to the order of each Bank executed and
delivered by the Subsidiary Borrower to the Administrative Agent for
delivery to each Bank.
(iii) Copies of all documents, certified by an officer of the
Subsidiary Borrower, evidencing necessary corporate action by the
Subsidiary Borrower and governmental approvals, if any, with respect to
this Agreement and the Notes.
(iv) A certificate of the Secretary or an Assistant Secretary
of TBC or the Subsidiary Borrower which shall certify the names of the
officers of the Subsidiary Borrower authorized to sign the Notes and the
other documents to be delivered hereunder, together with true specimen
signatures of such officers and facsimile signatures of officers
authorized to sign by facsimile signature. Each Bank may conclusively
rely on such certificate until it shall have received a further
certificate of the Secretary or an Assistant Secretary of TBC or the
Subsidiary Borrower canceling or amending the prior certificate and
submitting signatures of the officers named in such further certificate.
(v) A favorable opinion of in-house counsel to the
Subsidiary Borrower, substantially in the form of Exhibit G hereto and as to
such other matters as the Administrative Agent may reasonably request, which
opinion TBC and each Subsidiary Borrower hereby expressly instruct such
counsel to prepare and deliver.
(vi) The Guaranty of TBC, which unconditionally guarantees
the payment of all obligations of such Subsidiary Borrower hereunder and
under the Notes of such Subsidiary Borrower, substantially in the form of
Exhibit H hereto, executed and delivered by TBC to the Administrative
Agent.
Section 5.05. Conditions Precedent to Each A Borrowing of a
Subsidiary Borrower. The obligation of each Bank to make an A Advance to a
Subsidiary Borrower on the occasion of each A Borrowing (including the initial
Borrowing) is subject to the further conditions precedent that on the date of
such request and the date of such Borrowing, the following statements shall be
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true, and each of the giving of the applicable Notice of A Borrowing and the
acceptance by that particular Subsidiary Borrower of the proceeds of such A
Borrowing shall be (a) a representation by such Subsidiary Borrower that:
(i) the representations and warranties of that Subsidiary
Borrower contained (A) in Section 3.01 are true and accurate on and as of
each such date as though made on and as of each such date (except to the
extent that such representations and warranties relate solely to an
earlier date), and (B) in its Borrower Subsidiary Letter are true and
correct on and as of the date of such borrowing, before and after giving
effect to such borrowing; and
(ii) as of each such date no event has occurred and is
continuing, or would result from the proposed A Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for the
requirement that notice be given or time elapse or both;
and (b) a representation by TBC that the representations and warranties of TBC
contained in Section 3.01 are true and accurate on and as of each such date as
though made on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date), and that, as
of each such date, no event has occurred and is continuing, or would result
from the proposed A Borrowing which constitutes an Event of Default or would
constitute such an Event of Default but for the requirement that notice be
given or time elapse or both.
Section 5.06. Conditions Precedent to Each B Borrowing of a
Subsidiary Borrower. The obligation of each Bank to make a B Advance to any
particular Subsidiary Borrower on the occasion of each B Borrowing (including
the initial Borrowing) is subject to the further conditions precedent that (1)
TBC shall have furnished to the Administrative Agent in connection with such B
Borrowing, (x) a Consolidated statement of financial position of TBC and its
Subsidiaries as of the end of each of the first three quarters of TBC's fiscal
year (other than a quarter ending within sixty days prior to the date of the
related Notice of B Borrowing) and a Consolidated comparative statement of
earnings and retained earnings of TBC and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, each certified by an authorized officer of TBC and (y) a copy of
the annual audit report of TBC, certified by independent public accountants of
recognized standing acceptable to the Administrative Agent, together with
financial statements consisting of a Consolidated statement of the financial
position of TBC and its Subsidiaries as of the end of the applicable fiscal
year and a Consolidated statement of earnings and retained earnings of TBC and
its Subsidiaries for such fiscal year (the applicable fiscal year being the
most recent year with respect to which the annual audit report of TBC is due
pursuant to Section 4.01(a)(3)) and (2) on the date of such request and the
date of such Borrowing, the following statements shall be true, and each of the
giving of the applicable Notice of B Borrowing and the acceptance by the
Subsidiary of the proceeds of such B Borrowing shall be (a) a representation by
such Subsidiary Borrower that:
(i) the representations and warranties contained (A) in
Section 3.01 hereof with respect to such Subsidiary Borrower are true and
accurate on and as of each such date as though made on and as of each
such date (except to the extent that such representations and warranties
relate solely to an earlier date), and (B) in its Borrower Subsidiary
Letter are true and correct on and as of the date of such borrowing,
before and after giving effect to such borrowing;
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(ii) as of each such date no event has occurred and is
continuing, or would result from the proposed B Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for the
requirement that notice be given or time elapse or both; and
(iii) no event has occurred and no circumstance exists as a
result of which the information concerning TBC or the Subsidiary Borrower that
has been provided by TBC or the Subsidiary Borrower to the Administrative
Agent or the Banks in connection with such B Borrowing would include an
untrue statement of a material fact or omit to state any material fact or
any fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading;
and (b) a representation by TBC that the representations and warranties of TBC
contained in Section 3.01 are true and accurate on and as of each such date as
though made on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date), and that, as
of each such date, no event has occurred and is continuing, or would result
from the proposed A Borrowing which constitutes an Event of Default or would
constitute such an Event of Default but for the requirement that notice be
given or time elapse or both.
ARTICLE 6
Events of Default
Section 6.01. Events of Default. The following shall
constitute the Events of Default:
(a) Failure by TBC to make when due any payment of
principal of or interest on any Note or the Guaranty when the same becomes
due and payable and such failure is not remedied within 5 Business Days
thereafter.
(b) When any representation or warranty made by TBC in
connection with the execution and delivery of this Agreement, the Notes or the
Guaranty or otherwise furnished pursuant hereto shall prove to be at any
time incorrect in any material respect.
(c) Failure by TBC to perform any other term, covenant or
agreement contained in this Agreement, and such failure is not remedied
within 15 days after written notice thereof shall have been given to TBC
by the Administrative Agent, at the request, or with the consent, of
Banks representing 33-1/3% or more of the total of the Commitments.
(d) Failure of TBC to pay when due on any regularly
scheduled payment date any obligation for the payment of borrowed money or
following acceleration thereof or of any other monetary obligation, if
the aggregate unpaid principal amount of the obligation with respect to
which such failure to pay or acceleration occurred equals or exceeds
$50,000,000 and such failure is not remedied within 5 Business Days after
notice thereof is received from the Administrative Agent or the creditor
on such obligation.
(e) TBC or any of its Subsidiaries
(1) shall incur liability with respect to any
employee pension benefit plan in excess of $150,000,000 in the aggregate under
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(A) Sections 4062, 4063, 4064 or 4201 of
the Employee Retirement Income Security Act of 1974 ("ERISA"); or
(B) otherwise under Title IV of ERISA as a
result of any reportable event within the meaning of ERISA (other than a
reportable event as to which the provision of 30 days' notice is waived under
applicable regulations);
(2) shall have or shall be likely to have a lien
imposed on its property and rights to property under Section 4068 of ERISA on
account of a liability in excess of $37,500,000 in the aggregate;
or
(3) shall incur or shall be likely to incur
liability under Title IV of ERISA
(A) in excess of $37,500,000 in the
aggregate as a result of the Company or any Subsidiary having filed a notice
of intent to terminate any employee pension benefit plan
under the "distress termination" provision of Section 4041 of
ERISA or
(B) in excess of $37,500,000 in the
aggregate as a result of the Pension Benefit Guaranty Corporation having
instituted proceedings to terminate, or to have a trustee appointed to
administer, any such plan.
(f) The happening of any of the following events, provided
the same has not then been cured or stayed: (1) the insolvency or bankruptcy
of TBC, (2) the cessation by TBC of the payment of its debts as they
mature, (3) the making of an assignment for the benefit of the creditors
of TBC, (4) the appointment of a trustee or receiver or liquidator for
TBC or for a substantial part of its property, or (5) the institution of
bankruptcy, reorganization, arrangement, insolvency or similar
proceedings by or against TBC under the laws of any jurisdiction.
(g) So long as any Subsidiary is a Borrower hereunder, the
Guaranty with respect to such Subsidiary Borrower shall for any reason
cease to be valid and binding on TBC or TBC shall so state in writing.
If an Event of Default shall occur or be continuing, then, the
Administrative Agent shall at the request, or may with the consent, of Banks
having at least 33-1/3% of the total of the Commitments, by notice to TBC and
the affected Borrowers, (A) declare the obligation of each Bank to make further
Advances to be terminated, whereupon the same shall forthwith terminate, and
(B) declare the Notes, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrowers; provided, however, that in
the event of any order for relief with respect to the Borrowers under the
Federal Bankruptcy Code (whether in connection with a voluntary or an
involuntary case), (A) the obligation of each Bank to make Advances shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrowers.
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ARTICLE 7
The Administrative Agent
Section 7.01. Authorization and Action. Each Bank hereby
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of holders of more than 50% in principal amount of the A
Notes then outstanding (or if no A Notes are at the time outstanding, upon the
instructions of Banks having greater than 50% of the Commitments), and such
instructions shall be binding upon all Banks and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or
which is contrary to this Agreement or applicable law. The Administrative
Agent agrees to give to each Bank prompt notice of each notice given to it by
the Borrowers pursuant to the terms of this Agreement.
Section 7.02. Administrative Agent's Reliance, Etc. Neither
the Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Administrative Agent: (a) may treat the payee of any Note as
the holder thereof until the Administrative Agent receives and accepts an
assignment entered into by the Bank which is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 2.18;
(b) may consult with legal counsel (including counsel for the Borrowers),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or other experts; (c)
makes no warranty or representation to any Bank and shall not be responsible to
any Bank for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (d) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement on the part of any Borrower or
to inspect the property (including the books and records) of any Borrower; (e)
shall not be responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other instrument or document furnished pursuant hereto; and (f) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by it to be genuine and signed
or sent by the proper party or parties.
Section 7.03. Citibank, N.A. and Its Affiliates. With respect
to its Commitment, the Advances made by it, and the Notes issued to it,
Citibank, N.A., shall have the same rights and powers under this Agreement as
any other Bank and may exercise the same as though it were not an Agent
hereunder; and the term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include Citibank, N.A., in its individual capacity. Citibank, N.A.
and its Affiliates may accept deposits from, lend money to, accept drafts drawn
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by, act as trustee under indentures of, and generally engage in any kind of
business with, the Company, any of its subsidiaries and any person or entity who
may do business with or own securities of the Company or any subsidiary, all as
if Citibank, N.A. was not the Agent hereunder and without any duty to account
therefor to the other Banks.
Section 7.04. Bank Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Administrative Agent
or any other Bank and based on the financial statements referred to in Section
3.01(e) and the representations and warranties contained in Sections 3.01 and
3.02 and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
Section 7.05. Indemnification. The Banks agree to indemnify
the Administrative Agent (to the extent not reimbursed by TBC or any other
Borrower), ratably according to the respective principal amounts of the A Notes
then held by each of them (or if no A Notes are at the time outstanding or if
any A Notes are held by persons which are not Banks, ratably according to the
respective amounts of their Commitments), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Administrative Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by the Administrative Agent under this Agreement, provided that no Bank
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank agrees to reimburse
the Administrative Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative
Agent is not reimbursed for such expenses by TBC or any other Borrower.
Section 7.06. Successor Administrative Agent.
The Administrative Agent may resign at any time by giving written notice thereof
to the Banks and TBC and may be removed at any time with or without cause by the
Majority Banks. Upon any such resignation or removal, the Majority Banks shall
have the right to appoint a successor Administrative Agent, which shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $50,000,000. If no successor Administrative Agent shall have been so
appointed by the Majority Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation or the removal of the retiring Administrative Agent as provided
herein, then the retiring Administrative Agent may, on behalf of the Banks,
appoint a successor Administrative Agent which meets the requirements set out
in the previous sentence. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
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Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article 7 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
Section 7.07. Certain Obligations May Be Performed by
Affiliates. The Administrative Agent may appoint any of its Affiliates to
perform its obligations hereunder other than any obligation requiring the
Administrative Agent to receive, pay, or otherwise handle funds or Notes and
provided that the Administrative Agent shall continue to be responsible to the
Borrowers and the Banks for the due performance of the Administrative Agent's
obligations under this Agreement.
ARTICLE 8
Miscellaneous
Section 8.01. Modification, Consents and Waivers. No failure
or delay on the part of any Bank in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power preclude any other or further exercise thereof or the
exercise of any other right or power hereunder. No notice to or demand on the
Borrowers in any case shall entitle the Borrowers to any other or further
notice or demand in similar or other circumstances. No amendment or waiver of
any provision of this Agreement or of the A Notes, nor consent to any departure
by the Borrowers therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Majority Banks, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no amendment, waiver or
consent shall, unless in writing and signed by all the Banks, do any of the
following: (a) waive any of the conditions specified in Section 5.01, 5.02, or
5.03, (b) except as provided in Section 2.17 or Section 2.19, increase the
Commitments of the Banks or subject the Banks to any additional obligations,
(c) reduce the principal of, or interest on, the A Notes or any fees or other
amounts payable hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the A Notes or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the A Notes or the number of Banks required for the
Banks or any of them to take any action hereunder, (f) amend this Section 8.01
or (g) release TBC from any of its obligations under any Guaranty; and provided
further that no amendment, waiver, or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Banks required above to
take such action, affect the rights or duties of the Administrative Agent under
this Agreement or any Note. Notwithstanding the foregoing, this Section 8.01
shall not affect the provisions of Section 4.04 or 6.01.
Section 8.02. Addresses for Notices . All communications and
notices provided for hereunder shall be by telex or in writing and, if to the
Administrative Agent, mailed, telexed, faxed or delivered to it, addressed to
it at its office at Citibank, N.A., Global Aviation, 399 Park Avenue, New York,
New York 10043, facsimile number (212) 793-3734, Attention: Relationship
Manager, and, if to any Borrower, mailed, telexed or delivered to it, addressed
to such Borrower, care of The Boeing Company, at its office at 7755 East
Marginal Way South, Seattle, Washington 98108, facsimile number (206) 655-0799,
Attention: Treasurer, and, if to any Bank, to its office at the address given
125
<PAGE> 126
on the signature pages of this Agreement; or, as to each party, at such other
address as shall have been designated by such party in a written notice to each
other party referring specifically to this Agreement.
Section 8.03. Costs, Expenses and Taxes. TBC agrees to pay all
costs and expenses in connection with the preparation, execution and delivery
of this Agreement, the Notes and the Guaranty (including printing costs and the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent) and costs and expenses, if any, in connection with the enforcement of
this Agreement, the Notes and the Guaranty (whether through negotiations, legal
proceedings or otherwise and including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel), as well as any and all stamp and other
taxes, and to save the Banks and other holders of the Notes harmless from any
and all liabilities with respect to or resulting from any delay by or omission
of the Borrowers to pay such taxes, if any, which may be payable or determined
to be payable in connection with the execution and delivery of this Agreement,
the Notes and the Guaranty.
Section 8.04. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Borrowers, the Banks and the
Administrative Agent, and their respective successors and assigns, except that
the Borrowers may not assign or transfer their rights hereunder without the
prior written consent of the Banks.
Section 8.05. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 8.06. Governing Law. This Agreement, the Notes and
each Borrower Subsidiary Letter shall be deemed to be contracts under the laws
of the State of New York and for all purposes shall be construed in accordance
with the laws of such State.
Section 8.07. Headings. The Table of Contents and Article and
Section headings used in this Agreement are for convenience only and shall not
affect the construction of this Agreement.
Section 8.08. Execution in Counterparts. This Agreement may
be executed by the parties hereto individually or in any combinations of the
parties hereto in several separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
agreement.
Section 8.09. Right of Set-Off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Bank is hereby authorized at any time and from
time to time to the fullest extent permitted by law, without notice to any
Borrower (any such notice being expressly waived by each Borrower), to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Bank to or for the credit or the account of any Borrower against any and all of
the obligations to such Bank of such Borrower now or hereafter existing under
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<PAGE> 127
this Agreement and the Notes held by such Bank, irrespective of whether or not
such Bank shall have made any demand under this Agreement or such Notes and
although such obligations may be unmatured. Each Bank shall promptly notify
any Borrower after any such setoff and application made by such Bank, provided
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Bank may have.
Section 8.10. Agreement in Effect. This Agreement shall become
effective upon its execution and delivery, respectively, to the Administrative
Agent and TBC by TBC, the Administrative Agent, and each Bank listed in Section
1.02.
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<PAGE> 128
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized as of the
day and year first above written.
THE BOEING COMPANY
By___________________________
Title: Assistant Treasurer
CITIBANK, N.A.
Individually and as Administrative Agent
399 Park Avenue
Eighth Floor, Zone 6
New York, New York 10043
By______________________
Title: Vice-President
THE CHASE MANHATTAN BANK
Individually and as Syndication Agent
By______________________
Title: Vice-President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By______________________
Title:
CREDIT LYONNAIS
By______________________
Title:
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By______________________
Title:
THE SUMITOMO BANK, LIMITED
By______________________
Title:
BANK OF AMERICA, NT & SA
By______________________
Title:
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<PAGE> 129
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By______________________
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By______________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By______________________
Title:
BANQUE NATIONALE DE PARIS
By______________________
Title:
BANK OF CHINA, NEW YORK BRANCH
By______________________
Title:
WACHOVIA BANK, N.A.
By______________________
Title:
BANKERS TRUST COMPANY
By______________________
Title:
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By______________________
Title:
By______________________
Title:
129
<PAGE> 130
CANADIAN IMPERIAL BANK OF
COMMERCE
By______________________
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY
By______________________
Title:
CREDIT AGRICOLE INDOSUEZ
By______________________
Title:
NATIONSBANK OF TEXAS, N.A.
By______________________
Title:
NATIONAL WESTMINSTER
BANK PLC, NEW YORK BRANCH
By______________________
Title:
NATIONAL WESTMINSTER
BANK PLC, NASSAU BRANCH
By______________________
Title:
THE BANK OF NEW YORK
By______________________
Title:
THE SUMITOMO TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By______________________
Title:
BANK BOSTON, N.A.
By______________________
Title:
130
<PAGE> 131
ABN AMRO BANK N.V.
By______________________
Title:
131
<PAGE> 132
TABLE OF CONTENTS
[Page numbers have not been updated for the EDGAR filing]
Page
ARTICLE 1
Definitions
Section 1.01. Definitions................................................1
Section 1.02. Use of Defined Terms......................................10
Section 1.03. Accounting Terms..........................................10
ARTICLE 2
Amounts and Terms of the Advances
Section 2.01. The A Advances............................................10
Section 2.02. Making the A Advances.....................................10
Section 2.03. Repayment of A Advances...................................12
Section 2.04. Interest Rate on A Advances...............................12
Section 2.05. The B Advances............................................12
Section 2.06. Fees......................................................16
Section 2.07. [intentionally omitted]...................................17
Section 2.08. Reduction of the Commitments..............................17
Section 2.09. Additional Interest on Eurodollar Rate A Advances.........18
Section 2.10. Eurodollar Interest Rate Determination....................18
Section 2.11. Voluntary Conversion of A Advances........................19
Section 2.12. Prepayments...............................................19
Section 2.13. Increases in Costs........................................20
Section 2.14. Illegality................................................24
Section 2.15. Payments and Computations.................................24
Section 2.16. Sharing of Payments, Etc..................................25
Section 2.17. Alteration of Commitments and Addition of Banks...........26
Section 2.18. Assignments; Sales of Participations and Other Interests
in Notes.................................................27
Section 2.19. [intentionally omitted]...................................29
Section 2.20. Subsidiary Borrowers......................................30
ARTICLE 3
Representations, Warranties and Certain Covenants
Section 3.01. Representations and Warranties by the Borrowers...........31
Section 3.02. Representation by the Banks...............................33
132
<PAGE> 133
ARTICLE 4
Covenants of TBC
Section 4.01. Affirmative Covenants of TBC..............................33
Section 4.02. General Negative Covenants of TBC.........................34
Section 4.03. Financial Statement Terms.................................35
Section 4.04. Waivers of Covenants......................................36
ARTICLE 5
Conditions Precedent to Borrowings
Section 5.01. Conditions Precedent to the Initial Borrowing of TBC......36
Section 5.02. Conditions Precedent to Each A Borrowing of TBC...........37
Section 5.03. Conditions Precedent to Each B Borrowing of TBC...........37
Section 5.04. Conditions Precedent to the Initial Borrowing of a
Subsidiary Borrower......................................38
Section 5.05. Conditions Precedent to Each A Borrowing of a
Subsidiary Borrower......................................39
Section 5.06. Conditions Precedent to Each B Borrowing of a
Subsidiary Borrower......................................40
ARTICLE 6
Events of Default
Section 6.01. Events of Default.........................................41
ARTICLE 7
The Administrative Agent
Section 7.01. Authorization and Action..................................43
Section 7.02. Administrative Agent's Reliance, Etc......................44
Section 7.03. Citibank, N.A. and Its Affiliates.........................44
Section 7.04. Bank Credit Decision......................................44
Section 7.05. Indemnification...........................................45
Section 7.06. Successor Administrative Agent............................45
Section 7.07. Certain Obligations May Be Performed by Affiliates........46
ARTICLE 8
Miscellaneous
Section 8.01. Modification, Consents and Waivers........................46
Section 8.02. Addresses for Notices.....................................47
Section 8.03. Costs, Expenses and Taxes.................................47
Section 8.04. Binding Effect............................................47
Section 8.05. Severability..............................................47
Section 8.06. Governing Law.............................................47
Section 8.07. Headings..................................................47
Section 8.08. Execution in Counterparts.................................48
Section 8.09. Right of Set-Off..........................................48
Section 8.10. Agreement in Effect.......................................49
133
<PAGE> 134
Exhibit A-1 - Base Rate Advance A Note
Exhibit A-2 - Term A Note
Exhibit A-3 - Fixed Rate B Note
Exhibit A-4 - Fixed Rate B Note
Exhibit B-1 - Notice of A Borrowing
Exhibit B-2 - Notice of B Borrowing
Exhibit C - Request for Alteration
Exhibit D - Borrower Subsidiary Letter
Exhibit E - Opinion of Chief Legal Officer of Borrower
Exhibit F - Opinion of in-house counsel to Subsidiary Borrower
Exhibit G - Guaranty of TBC
Schedule I - Commitments
134
<PAGE> 135
EXHIBIT A-1
FORM OF A NOTE
FOR BASE RATE ADVANCES
U.S.$_______________ Dated: ________________,
19____
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
(the "Lender") for the account of its Applicable Lending Office
(as defined in the Credit Agreement referred to below) on September 30, 2004
the principal sum of [the amount of the Lender's Commitment in words] United
States Dollars (U.S.$[amount of the Lender's Commitment in figures]) or, if
less, the aggregate unpaid principal amount of the A Advances (as defined
below) made by the Lender to the Borrower and the other borrowers under and
pursuant to the Credit Agreement which are Base Rate Advances (as defined in
the Credit Agreement) as determined pursuant to the Credit Agreement from time
to time.
The Borrower promises to pay interest on the unpaid principal
amount of each Base Rate Advance from the date of such Base Rate Advance until
such principal amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Administrative Agent, at 399
Park Avenue, New York, New York 10043, in same day funds.
This Promissory Note is one of the A Notes referred to in, and
is entitled to the benefits of, The Boeing Company $1,500,000,000 Bank Credit
Agreement dated as of December __, 1997 (the "Credit Agreement") among [the
Borrower] [The Boeing Company], certain other borrowers parties thereto, the
Lender and certain other banks parties thereto, Citibank, N.A., as
Administrative Agent for the Lender and such other banks, and The Chase
Manhattan Bank, as Syndication Agent for the Lender and such other banks. The
Credit Agreement, among other things, (i) provides for the making of advances
(the "A Advances") by the Lender to the Company from time to time in an
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each
such A Advance which is a Base Rate Advance being evidenced by this Promissory
Note, (ii) provides for the conversion from time to time of Base Rate Advances
into Eurodollar Rate A Advances (as defined in the Credit Agreement) and of
Eurodollar Rate A Advances into Base Rate Advances, (iii) provides for the
Borrower's obligation to pay Eurodollar Rate A Advances to be evidenced by a
separate Promissory Note, and (iv) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
A-1-1
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
right hereunder on the part of the holder hereof shall operate as a waiver
of such rights.
135
<PAGE> 136
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York, United States.
[NAME OF BORROWER]
By ________________________________
Title:
EXHIBIT A-2
FORM OF A NOTE
FOR EURODOLLAR RATE ADVANCES
U.S.$___________________ Dated: _______________,
19_____
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________ corporation (the "Borrower") HEREBY PROMISES TO PAY to the order of
(the "Lender") for the account of its Applicable Lending
Office (as defined in the Credit Agreement referred to below) on September 30,
2004 the principal sum of [the amount of the Lender's Commitment in words]
United States Dollars (U.S.$[amount of the Lender's Commitment in figures])
or, if less, the aggregate unpaid principal amount of the A Advances (as
defined below) made by the Lender to the Borrower and the other borrowers
under and pursuant to the Credit Agreement which are Base Rate Advances (as
defined in the Credit Agreement) as determined pursuant to the Credit
Agreement from time to time.
The Borrower promises to pay interest on the unpaid principal
amount of each Eurodollar Rate Advance from the date of such Eurodollar Rate
Advance until such principal amount is paid in full, at such interest rates,
and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Administrative Agent, at 399
Park Avenue, New York, New York 10043, in same day funds.
This Promissory Note is one of the A Notes referred to in, and
is entitled to the benefits of, The Boeing Company $1,500,000,000 Bank Credit
Agreement dated as of December __, 1997 (the "Credit Agreement") among [the
Borrower] [The Boeing Company], certain other borrowers parties thereto, the
Lender and certain other banks parties thereto, Citibank, N.A., as
Administrative Agent for the Lender and such other banks, and The Chase
Manhattan Bank, as Syndication Agent for the Lender and such other banks. The
Credit Agreement, among other things, (i) provides for the making of advances
(the "A Advances") by the Lender to the Company from time to time in an
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Company resulting from each
such A Advance which is a Eurodollar Rate Advance being evidenced by this
Promissory Note, (ii) provides for the conversion from time to time of Base
Rate Advances into Eurodollar Rate A Advances (as defined in the Credit
Agreement) and of Eurodollar Rate A Advances into Base Rate Advances, (iii)
provides for the Company's obligation to pay Eurodollar Rate A Advances to be
136
<PAGE> 137
evidenced by a separate Promissory Note, and (iv) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified.
A-2-2
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
right hereunder on the part of the holder hereof shall operate as a waiver
of such rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York, United States.
[NAME OF BORROWER]
By ____________________________________
Title:
EXHIBIT A-3
FORM OF B NOTE
FOR FIXED RATE BORROWINGS
U.S.$___________________ Dated: _______________,
19_____
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
_____________ (the "Lender") for the account of its Applicable Lending Office
(as defined in the Credit Agreement referred to below) the principal sum of
One Billion Five Hundred Million Dollars ($1,500,000,000) or, if less, the
aggregate unpaid principal amount of each B Advance (as defined below) which
is part of a Fixed Rate Borrowing (as defined in the Credit Agreement) owing
to the Lender by the Borrower and the other borrowers under and pursuant to
the Credit Agreement, provided that the aggregate unpaid principal amount of
such B Advances shall be paid no later than the Termination Date.
The Borrower promises to pay interest on the unpaid principal
amount of each B Advance from the date of such B Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
have been agreed between the Borrower and the Lender acting pursuant to the
Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Administrative Agent, at 399
Park Avenue, New York, New York 10043, in same day funds. Each B Advance
owing to the Lender by the Borrower which is part of a Fixed Rate Borrowing
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<PAGE> 138
and the maturity thereof, and all payments made on account of principal
thereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto, which is part of this Promissory Note.
This Promissory Note is one of the B Notes referred to in, and
is entitled to the benefits of, The Boeing Company $1,500,000,000 Bank Credit
Agreement dated as of December __, 1997 (the "Credit Agreement") among [the
Borrower] [The Boeing Company], certain other Borrowers parties thereto, the
Lender and certain other banks parties thereto, Citibank, N.A., as
Administrative Agent for the Lender and such other banks, and The Chase
Manhattan Bank, as Syndication Agent for the Lender and such other Banks. The
Credit Agreement, among other things, (i) provides for the making of B
advances (the "B Advances") by the Lender to the Borrower from time to time in
an aggregate amount not to exceed at any time outstanding the U.S. dollar
amount first above mentioned, the indebtedness of the Borrower resulting from
each such B Advance which is part of a Fixed Rate Borrowing being evidenced by
this Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
A-3-3
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York, United States.
[NAME OF BORROWER]
By ____________________________________
Title:
ADVANCES AND PAYMENTS OF PRINCIPAL
Date
Amount of
Advance
Maturity
Date
Amount of Principal
Paid or Prepaid
Unpaid
Principal
Balance
138
<PAGE> 139
Notation Made by
EXHIBIT A-4
FORM OF B NOTE
FOR EURODOLLAR RATE ADVANCES
U.S.$___________________ Dated: _______________, 19_____
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order
of _____________ (the "Lender") for the account of its Applicable Lending
Office (as defined in the Credit Agreement referred to below) the principal
sum of One Billion Five Hundred Million Dollars ($1,500,000,000) or, if less,
the aggregate unpaid principal amount of each B Advance (as defined below)
which is part of a Eurodollar Rate B Borrowing (as defined in the Credit
Agreement) owing to the Lender by the Borrower pursuant to the Credit
Agreement, provided that the aggregate unpaid principal amount of such B
Advances shall be paid no later than the Termination Date.
The Borrower promises to pay interest on the unpaid principal
amount of each B Advance from the date of such B Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
have been agreed between the Borrower and the Lender acting pursuant to the
Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Administrative Agent, at 399
Park Avenue, New York, New York 10043, in same day funds. Each B Advance
owing to the Lender by the Borrower which is part of a Fixed Rate Borrowing
and the maturity thereof, and all payments made on account of principal
thereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto, which is part of this Promissory Note.
This Promissory Note is one of the B Notes referred to in, and
is entitled to the benefits of, The Boeing Company $1,500,000,000 Bank Credit
Agreement dated as of December __, 1997 (the "Credit Agreement") among [the
Borrower] [The Boeing Company], certain other borrowers parties thereto, the
Lender and certain other banks parties thereto, Citibank, N.A., as
Administrative Agent for the Lender and such other banks, and The Chase
Manhattan Bank, as Syndication Agent for the Lender and such other banks. The
Credit Agreement, among other things, (i) provides for the making of B
advances (the "B Advances") by the Lender to the Borrower from time to time in
an aggregate amount not to exceed at any time outstanding the U.S. dollar
amount first above mentioned, the indebtedness of the Borrower resulting from
each such B Advance which is a Eurodollar Rate Advance being evidenced by this
Promissory Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.
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<PAGE> 140
A-4-4
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York, United States.
[NAME OF BORROWER]
By _________________________________
Title:
ADVANCES AND PAYMENTS OF PRINCIPAL
Date
Amount of
Advance
Maturity
Date
Amount of Principal
Paid or Prepaid
Unpaid
Principal
Balance
Notation Made by
140
<PAGE> 141
EXHIBIT B-1
NOTICE OF A BORROWING
Citibank, N.A., as Administrative Agent
for the Banks parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
[Date]
Attention: _______________________
Gentlemen:
The undersigned, [NAME OF BORROWER], refers to The Boeing
Company $1,500,000,000 Bank Credit Agreement dated as of December __, 1997
(the "Credit Agreement", the terms defined therein being used herein as
therein defined) among the undersigned, [The Boeing Company], certain Banks
parties thereto, Citibank, N.A., as Administrative Agent for said Banks and
The Chase Manhattan Bank, as Syndication Agent for said Banks, and hereby
gives you notice, irrevocably, pursuant to Section 2.02 of the Credit
Agreement that the undersigned hereby requests an A Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such A Borrowing (the "Proposed A Borrowing") as required by Section 2.02(a)
of the Credit Agreement:
(i) The Business Day of the Proposed A Borrowing is
________________, 19__.
(ii) The Type of A Advances comprising the Proposed A
Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed A Borrowing is
$____________.
[(iv) The initial Interest Period for each Eurodollar Rate
Advance made as part of the Proposed A Borrowing is ____
months[s]].
The undersigned hereby certifies that the following statements
are true date hereof, and will be true on the date of the
Proposed A Borrowing:
(A) the representations and warranties contained in Section 3.01 of
the Credit Agreement are true and accurate on and as of each such date as
though made on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date); [and]
B-1-2
141
<PAGE> 142
(B) as of each such date no event has occurred and is continuing
or would result from such Proposed A Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for
the requirement that notice be given or time elapse or both.
[(C) the representations and warranties of the undersigned
Subsidiary Borrower contained (A) in Section 3.01 of the Credit
Agreement are true and accurate on and as of each such date as though
made on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date), and
(B) in the Borrower Subsidiary Letter of the undersigned Borrower
Subsidiary are true and correct on and as of the date of such borrowing,
before and after giving effect to such borrowing; and
(D) as of each such date no event has occurred and its
continuing, or would result from the Proposed A Borrowing which
constitutes an Event of Default or would constitute such an Event of
Default but for the requirement that notice be given or time elapse or
both]*
` Very truly yours,
[NAME OF SUBSIDIARY BORROWER]*
[By __________________________
Title:]
THE BOEING COMPANY
By ___________________________
Title:
EXHIBIT B-2
NOTICE OF B BORROWING
Citibank, N.A., as Administrative Agent
for the Banks parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
[Date]
Attention: _______________________
Gentlemen:
The undersigned, [NAME OF BORROWER], refers to The Boeing
Company $1,500,000,000 Bank Credit Agreement dated as of December __,
1997 (the "Credit Agreement", the terms defined therein being used
142
<PAGE> 143
herein as therein defined) among the undersigned, [The Boeing Company],
certain Banks parties thereto, Citibank, N.A., as Administrative Agent
for said Banks, and The Chase Manhattan Bank, as Syndication Agent for
said Banks, and hereby gives you notice pursuant to Section 2.05(a)(i)
of the Credit Agreement that the undersigned hereby requests a B
Borrowing under the Credit Agreement, and in that connection sets forth
the terms on which such B Borrowing (the "Proposed B Borrowing") is
requested to be made:
(A) Date of B Borrowing _________________________________
(B) Amount of B Borrowing _________________________________
(C) Maturity Date _________________________________
(D) Interest Rate Basis [Fixed Rate] [Eurodollar Rate]
(E) Interest Payment Date(s)
_________________________________
(F) Interest Calculation Basis
_________________________________
[(G) Interest Rate Period
_________________________________]
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of
the Proposed B Borrowing:
(a) the representations and warranties contained in Section 3.01
of the Credit Agreement are true and accurate on and as of each such
date as though made on and as of each such date (except to the extent
that such representations and warranties relate solely to an earlier
date);
(b) as of each such date no event has occurred and is continuing,
or would result from the Proposed B Borrowing which constitutes an Event
of Default or would constitute such Event of Default but for the
requirement that notice be given or time
elapse or both; and
B-2-2
(c) no event has occurred and no circumstance exists as a result
of which the information concerning [the Borrower] [The Boeing Company]*
that has been provided by [the Borrower] [The Boeing Company]* to the
Administrative Agent or the Banks in connection with the Proposed B
Borrowing would include an untrue statement of a material fact or omit
to state any material fact or any fact necessary to make the statements
contained therein, in the light of the circumstances under which they
were made, not misleading.
[(d) the representations and warranties contained (A) in Section
3.01 of the Credit Agreement with respect to the undersigned Subsidiary
Borrower are true and accurate on and as of each such date as though
made on and as of each such date (except to the extent that such
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<PAGE> 144
representations and warranties related solely to an earlier date), and
(B) in the Borrower Subsidiary Letter of the undersigned Borrower
Subsidiary are true and correct on and as of the date of such borrowing,
before and after giving effect to such borrowing;
(e) as of each such date no event has occurred and is
continuing, or would result from the Proposed B Borrowing which
constitutes an Event of Default or would constitute such an Event of
Default but for the requirement that notice be given or time elapse or
both; and
(f) no event has occurred and no circumstance exists as a result
of which the information concerning The Boeing Company or the
undersigned Subsidiary Borrower that has been provided by The Boeing
Company or the undersigned Subsidiary Borrower to the Administrative
Agent or the Banks in connection with such B Borrowing would include an
untrue statement of a material fact or omit to state any material fact
or any fact necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.]**
B-2-3
The undersigned hereby confirms that the Proposed B Borrowing
is to be made available to it in accordance with Section 2.05(a)(v) of the
Credit Agreement.
Very truly yours,
NAME OF BORROWER
By _________________________***
Title:
THE BOEING COMPANY
By __________________________
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EXHIBIT C
REQUEST FOR ALTERATION
To the Banks Parties to
The Boeing Company Bank Credit
Agreement dated as of
December __, 1997
Gentlemen:
In accordance with Section 2.17 of The Boeing Company
$1,500,000,000 Bank Credit Agreement dated as of December __, 1997 as it may
have been amended to the date hereof (the "Agreement") you are hereby notified
that, with the consent, if any, required of the Banks pursuant to such Section
2.17:
[Complete as Appropriate]
______________________________________ shall become a party to the
Agreement with a Commitment of $________________.
the Commitment of _________________ shall be increased/decreased from
$__________ to $_________.
the Commitment of _________________ shall be terminated,
the A Advances of _______________________ shall be prepaid in the amount
of $__________.
All terms used in this Request which are defined in the
Agreement are used here as they are there defined.
If this Request for Alteration has been executed by the
Company, the Administrative Agent and each Bank affected by this Request for
Alteration and all prepayments called for hereby shall have been paid in full
on or before ________, 19__ (the "Effective Date"), then pursuant to Section
2.17 of the Agreement this Request for Alteration, and each increase,
decrease, termination or creation effected hereby, shall thereupon become
effective on the Effective Date. [The Company hereby certifies that no event
exists, or would result from giving effect to this Request for Alteration,
which would require the Administrative Agent to obtain the consent of the
Majority Banks before signing this Request for Alteration.] [The
Administrative Agent may not sign this Request for Alteration without the
prior written consent of the Majority Banks.]
C-1
Please indicate your consent to this Request for Alteration by
signing the enclosed copy and returning it to the Administrative Agent.
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<PAGE> 146
Very truly yours,
THE BOEING COMPANY
By: ________________________________
Title:
We hereby consent to the foregoing.
[Name of Affected Bank]
By __________________________
Title:
CITIBANK, N.A. as Administrative Agent
By ___________________________
Title:
[We hereby consent to the foregoing.
[If Majority Bank consent is required.]]
[Name of Bank]
By ___________________________
Title:
* Include if Borrower is not The Boeing Company.
* Reference should describe The Boeing Company.
** Include if Borrower is not The Boeing Company.
*** Include if the Borrower is not The Boeing Company.
(..continued)
SS_NYL3A/52882 2
7-Year Credit Agreement
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<PAGE> 147
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
147
<PAGE> 148
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
148
<PAGE> 149
SS_NYL3A/52882 2
7-Year Credit Agreement
7-Year Facility
2
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
7-Year Facility
2
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
149
<PAGE> 150
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
7-Year Facility
1
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
SS_NYL3A/52882 2
7-Year Credit Agreement
150
<PAGE> 151
EXHIBIT E
FORM OF OPINION OF CHIEF LEGAL
OFFICER OF THE COMPANY
[Date]
To each of the Banks parties
to The Boeing Company Bank
Credit Agreement dated as of
December __, 1997 among
The Boeing Company,
certain other borrowers parties thereto,
said Banks, Citibank, N.A.,
as Administrative Agent for
said Banks and The Chase
Manhattan Bank, as Syndication
Agent for said Banks, and to Citibank,
N.A., as Administrative Agent
The Boeing Company
Gentlemen:
This opinion is furnished to you pursuant to Section 5.01(d) of The
Boeing Company $1,500,000,000 Bank Credit Agreement dated as of December __,
1996 (the "Credit Agreement") among The Boeing Company (the "Company"), certain
other borrowers parties thereto, the Banks parties thereto, Citibank, N.A., as
Administrative Agent for said Banks, and The Chase Manhattan Bank, as
Syndication Agent for said Banks. Terms defined in the Credit Agreement are
used herein as therein defined.
I am the [chief legal officer] of the Company, and have acted in
such capacity in connection with the preparation, execution and delivery of,
and the initial Borrowing made by the Company under, the Credit Agreement.
In that connection, I have examined:
(1) The Credit Agreement.
(2) The other documents furnished by the Company pursuant to
Article 5 of the Credit Agreement.
(3) The Certificate of Incorporation of the Company and all
amendments thereto (the "Charter").
(4) The by-laws of the Company and all amendments thereto (the
"By-laws").
(5) A certificate of the Secretary of State of the State of
Delaware, dated , 19 , attesting to the continued corporate
existence and good standing of the Company in that State.
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<PAGE> 151
In addition, I have examined the originals, or copies certified to
my satisfaction, of such other corporate records of the Company, certificates
of public officials and of officers of the Company, and agreements, instruments
and other documents, as I have deemed necessary as a basis for the opinions
expressed below. I have assumed the due execution and delivery, pursuant to
due authorization, of the Credit Agreement by the Banks and the Agent.
I am qualified to practice law in the State of Washington and I do
not purport to be an expert on any laws other than the laws of the State of
Washington, the General Corporation Law of the State of Delaware and the
Federal laws of the United States.
Based upon the foregoing and upon such investigation as I have
deemed necessary, I am of the following opinions:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by the Company of the
Credit Agreement and the Notes are within the Company's corporate powers,
have been duly authorized by all necessary corporate action, and do not
contravene (i) the Charter of the By-laws or (ii) any law, rule or
regulation applicable to the Company (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or
(iii) any contractual or legal restriction binding on the Company. The
Credit Agreement and the Notes have been duly executed and delivered on
behalf of the Company.
3. No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of the
Credit
Agreement and the Notes[, except for , all of which have been
duly obtained or made and are in full force and effect].
4. In any action or proceeding arising out of or relating to the
Credit Agreement or the Notes in any court of the State of Washington or in
any federal court sitting in the State of Washington, such court would
recognize and give effect to the provisions of Section 8.06 of the Credit
Agreement wherein the parties thereto agree that the Credit Agreement and the
Notes shall be governed by, and construed in accordance with, the laws of the
State of New York. Without limiting the generality of the foregoing, a court
of the State of Washington or a federal court sitting in the State of
Washington would apply the usury law of the State of New York, and would not
apply the usury law of the State of Washington, to the Credit Agreement and
the Notes. However, if a court were to hold that the Credit Agreement and the
Notes are governed by, and to be construed in accordance with, the laws of the
State of Washington, the Credit Agreement and the Notes would be, under the
laws of the State of Washington, legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms.
5. To the best of my knowledge, there are no pending overtly
threatened actions or proceedings against the Company or any of its
Subsidiaries before any court or administrative agency which (i) purport to
affect the legality, validity, binding effect or enforceability of the Credit
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<PAGE> 152
Agreement or any of the Notes or (ii) except as disclosed in the Company's
financial statements delivered to you prior to the date hereof pursuant to
Section 3.01(e) of the Credit Agreement, can reasonably be expected to
materially adversely affect the financial condition or operations of the
Company or any Subsidiary.
The opinions set forth above are subject to the following qualifications:
(a) My opinion in paragraph 4 above is subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors' rights generally.
(b) My opinion in paragraph 4 above is subject to the effect of
general principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
I am aware that Shearman & Sterling will rely upon the opinions set
forth in paragraphs 1, 2 and 3 of this opinion in rendering their opinion
furnished pursuant to Section 5.01(e) of the Credit Agreement.
Very truly yours,
To each of the Banks, parties
to The Boeing Company, 364-Day
Credit Agreement ("Bank Credit Agreement") dated as of
December 8th, 1997 among
The Boeing Company, certain other borrowers parties thereto,
the Banks, Citibank, N.A.,
as Administrative Agent for
said Banks, and The Chase
Manhattan Bank, as Syndication
Agent for said Banks, and to Citibank,
N.A., as Administrative Agent
Re: Termination of the 364- Day Credit Agreement
Ladies and Gentlemen:
This letter confirms the termination in whole of the commitments of the banks
parties to the Credit Agreement dated as of September 27, 1996, among The
Boeing Company, the banks partied thereto and Citibank, N.A., as agent, which
Credit Agreement is commonly referred to as the 364- Day Credit Agreement.
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<PAGE> 153
The termination is and shall be effective as of the moment immediately
preceding the execution and delivery, The Chase Manhattan Bank, as Syndication
Agent, by The Boeing Company, Citibank, N.A., as Administrative Agent, and each
of the banks listed in Schedule 1 of the Bank Cradit Agreement.
Sincerely,
EXHIBIT D - FORM OF BORROWER SUBSIDIARY LETTER
[DATE]
To each of the Banks
parties to the Credit Agreement
(as defined below) and to Citibank N.A.,
as Administrative Agent for such Lenders
Ladies and Gentlemen:
Reference is made to The Bank Credit Agreement dated as of December 8, 1997
among The Boeing Company (the "Company"), certain other borrowers parties
thereto, the Banks named therein, Citibank N.A., as Administrative Agent for
said Banks, and The Chase Manhattan Bank, as Syndication Agent for said Banks
(the "Credit Agreement"). Terms used herein and defined in the Credit
Agreement shall have the respective meanings ascribed to such terms in the
Credit Agreement.
Please be advised that the Company hereby designates its undersigned
Subsidiary, ____________ ("Subsidiary Borrower"), as a "Subsidiary Borrower"
under and for all purposes of the Credit Agreement.
The Subsidiary Borrower, in consideration of each Bank's agreement to extend
credit to it under and on the terms and conditions set forth in the Credit
Agreement, does hereby assume each of the obligations imposed upon a
"Subsidiary Borrower" and a "Borrower" under the Credit Agreement and agrees
153
<PAGE> 154
to be bound by the terms and conditions of the Credit Agreement. In
furtherance of the foregoing, the Subsidiary Borrower hereby represents and
warrants to each Lenders as follows:
(a)The Subsidiary Borrower is a corporation duly organized, validly existing
and in good standing under the laws of ______________________. The Subsidiary
Borrower is qualified to do business in every jurisdiction where such
qualification is required, except where the failure to so qualify would not
have a materially adverse effect on the financial condition of the Company and
the Subsidiary Borrowers as a whole.
(b)The execution, delivery and performance by the Subsidiary Borrower of this
Subsidiary Borrower Letter, the Credit Agreement and its Notes are
within the Subsidiary Borrower's corporate powers, have been duly
authorized by all necessary corporate action, have received all
necessary governmental approval (which approval remains in full force
and effect), and do not contravene any law, any provision of the
Subsidiary Borrower's charter or by-laws or any contractual restriction
binding on the Subsidiary Borrower.
(c)This Subsidiary Borrower Letter is, and the Notes of the Subsidiary
Borrower when duly executed and delivered by the Subsidiary Borrower,
will constitute legal, valid and binding obligations of the Subsidiary
Borrower, enforceable against the Subsidiary Borrower in accordance with
their respective terms.
(d)In the Subsidiary Borrower's opinion, there are no pending or threatened
actions or proceedings before any court or administrative agency which
can reasonably be expected to materially adversely affect the financial
condition or operations of the Subsidiary Borrower or any Subsidiary.
(e)The Consolidated statement of financial position as of December 31, 1996
and the related Consolidated statement of earnings and retained earnings
for the year then ended (copies of which have been furnished to each
Bank) correctly set forth the Consolidated financial condition of the
Company and its Subsidiaries as of such date and the result of the
Consolidated operations for such year, and since such date there has
been no material adverse change in such condition or operations which is
likely to impair the ability of the Company to repay Advances.
(f)The Subsidiary Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any Advance will be used to purchase
or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock. Following application of
the proceeds of each Advance, not more than 25 percent of the value of
the assets (either of the Subsidiary Borrower only or of the Subsidiary
Borrower and its subsidiaries on a consolidated basis) subject to the
provisions of Section 4.02(a) of the Credit Agreement will be margin
stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System).
(g)The Subsidiary Borrower is not an "investment company," or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended. Neither the making of any Advances, nor the
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<PAGE> 155
application of the proceeds or repayment thereof by the Subsidiary
Borrower, nor the consummation of the other transactions contemplated
hereby, will violate any provision of such Act or any rule, regulation
or order of the Securities and Exchange Commission thereunder.
Very truly yours,
THE BOEING COMPANY
By _________________________
Name:
Title:
[SUBSIDIARY BORROWER]
By __________________________
Name:
Title:
(..continued)
D-2
47299.4/NYL3A
7-Year Credit Agreement
47299.4/NYL3A
7-Year Credit Agreement
To each of the Banks, parties
to The Boeing Company, 7-Year
Credit Agreement ("Bank Credit Agreement") dated as of
December 8th, 1997 among
The Boeing Company, certain other borrowers parties thereto,
the Banks, Citibank, N.A.,
as Administrative Agent for
said Banks, and The Chase
Manhattan Bank, as Syndication
Agent for said Banks, and to Citibank,
N.A., as Administrative Agent
Re: Termination of the 7- Year Credit Agreement
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<PAGE> 156
Ladies and Gentlemen:
This letter confirms the termination in whole of the commitments of the banks
parties to the Credit Agreement dated as of September 27, 1996, among The
Boeing Company, the banks partied thereto and Citibank, N.A., as agent, which
Credit Agreement is commonly referred to as the 7-Year Credit Agreement.
The termination is and shall be effective as of the moment immediately
preceding the execution and delivery, The Chase Manhattan Bank, as Syndication
Agent, by The Boeing Company, Citibank, N.A., as Administrative Agent, and each
of the banks listed in Schedule 1 of the Bank Cradit Agreement.
Sincerely,
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<PAGE> 157
EXHIBIT F
FORM OF OPINION OF IN-HOUSE COUNSEL TO
SUBSIDIARY BORROWER
[Date]
To each of the Banks parties
to The Boeing Company Bank
Credit Agreement dated as of
December 8, 1997 among
The Boeing Company,
certain other borrowers parties thereto,
said Banks, Citibank, N.A.,
as Administrative Agent for
said Banks, and The Chase
Manhattan Bank , as Syndication
Agent for said Banks, and to Citibank,
N.A., as Administrative Agent
The Boeing Company
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 5.04(v) of The
Boeing Company $1,500,000,000 Bank Credit Agreement dated as of December 8,
1997 (the "Credit Agreement") among The Boeing Company (the "Company"), certain
other borrowers parties thereto, the Banks parties thereto, Citibank, N.A., as
Administrative Agent for said Banks, and the Chase Manhattan Bank, as
Syndication Agent for said Banks. Terms defined in the Credit Agreement are
used herein as therein defined.
I am the [chief legal officer] of the Company, and legal counsel
for [insert name of Subsidiary Borrower] (the "Subsidiary Borrower"), and have
acted in such capacity in connection with the execution and delivery of the
Borrower Subsidiary Letter dated as of [month, date, year] by the Company and
the Subsidiary Borrower (the "Borrower Subsidiary Letter"), the execution and
delivery of the Guaranty Agreement dated as of [month, date, year] made by the
Company in favor of the Administrative Agent and the Banks (the "Guaranty"),
the execution and delivery of the Credit Agreement by the Subsidiary Borrower,
and the initial Borrowing made by the Subsidiary Borrower under the Credit
Agreement.
In that connection, I have examined:
(1) The Credit Agreement.
(2) The Guaranty.
(3) The Borrower Subsidiary Letter.
(4) The other documents furnished by the Company and/or the
Subsidiary Borrower pursuant to Article 5 of the Credit Agreement.
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(5) The Certificate of Incorporation of the Company and all
amendments thereto (the "Company Charter").
(6) The by-laws of the Company and all amendments thereto (the
"Company By-laws").
(7) A certificate of the Secretary of State of the State of
Delaware, dated __________, 1997, attesting to the continued corporate
existence and good standing of the Company in that State.
(8) The Certificate of Incorporation of the Subsidiary Borrower
and all amendments thereto (the "Subsidiary Borrower Charter").
(9) The by-laws of the Subsidiary Borrower and all amendments
thereto (the "Subsidiary Borrower By-laws").
(10) A certificate of the Secretary of State of the State of [insert
state of incorporation of Subsidiary Borrower], dated___________, 1997,
attesting to the continued corporate existence and good standing of the
Subsidiary Borrower in that State.
In addition, I have examined the originals, or copies certified to my
satisfaction, of such other corporate records of the Company and the Subsidiary
Borrower, certificates of public officials and of officers of the Company and
the Subsidiary Borrower, and agreements, instruments and other documents, as I
have deemed necessary as a basis for the opinions expressed below. I have
assumed the due execution and delivery, pursuant to due authorization, of the
Credit Agreement by the Banks, the Administrative Agent and the Syndication
Agent.
I am qualified to practice law in the State of Washington and I do
not purport to be an expert on any laws other than the laws of the State of
Washington, the General Corporation Law of the State of Delaware [and insert
state of incorporation of the Subsidiary Borrower if other than Delaware] and
the Federal laws of the United States.
Based upon the foregoing and upon such investigation as I have
deemed necessary, I am of the following opinions:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The
Subsidiary Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of [insert state of
incorporation].
2. The execution, delivery and performance by the Company of the
Guaranty and the Borrower Subsidiary Letter are within the Company's
corporate powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Company Charter or the Company By-
laws or (ii) any law, rule or regulation applicable to the Company
(including, without limitation, Regulation X of the Board of Governors of
the Federal Reserve System) or (iii) any contractual or legal restriction
binding on the Company. The execution, delivery and performance by the
Subsidiary Borrower of the Credit Agreement, the Borrower Subsidiary
Letter and the Subsidiary Borrower's Notes are within the Subsidiary
Borrower's corporate powers, have been duly authorized by all necessary
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<PAGE> 159
corporate action, and do not contravene (i) the Subsidiary Borrower
Charter or the Subsidiary Borrower By-laws or (ii) any law, rule or
regulation applicable to the Subsidiary Borrower (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System) or (iii) any contractual or legal restriction binding on the
Subsidiary Borrower. The Guaranty and the Borrower Subsidiary Letter
have been duly executed and delivered on behalf of the Company. have been
duly executed and delivered on behalf of the Company. The Credit
Agreement, the Borrower Subsidiary Letter and the Subsidiary Borrower's
Notes have been duly executed and delivered on behalf of the Subsidiary
Borrower.
3. No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of the
Guaranty and the Borrower Subsidiary Letter [, except for , all of
which have been duly obtained or made and are in full force and effect].
No authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Subsidiary Borrower of the
Credit Agreement, the Borrower Subsidiary Letter and the Subsidiary
Borrower's Notes [, except for , all of which have been
duly obtained or made and are in full force and effect].
4. In any action or proceeding arising out of or relating to the
Credit Agreement, the Guaranty, the Borrower Subsidiary Letter, or the
Subsidiary Borrower's Notes in any court of the State of Washington or in
any federal court sitting in the State of Washington, such court would
recognize and give effect to the provisions in the Credit Agreement, the
Guaranty, the Borrower Subsidiary Letter and the Subsidiary Borrower's
Notes wherein the parties thereto agree that the Credit Agreement, the
Guaranty, the Borrower Subsidiary Letter and the Subsidiary Borrower's
Notes shall be governed by, and construed in accordance with, the laws of
the State of New York. Without limiting the generality of the foregoing,
a court of the State of Washington or a federal court sitting in the
State of Washington would apply the usury law of the State of New York,
and would not apply the usury law of the State of Washington, to the
Credit Agreement, the Guaranty, the Borrower Subsidiary Letter or the
Subsidiary Borrower's Notes. However, if a court were to hold that the
Credit Agreement, the Guaranty, the Borrower Subsidiary Letter and the
Subsidiary Borrower's Notes are governed by, and are to be construed in
accordance with, the laws of the State of Washington, to the Credit
Agreement, the Guaranty, the Borrower Subsidiary Letter and the
Subsidiary Borrower's Notes would be, under the laws of the State of
Washington, legal, valid and binding obligations of the Company and the
Subsidiary Borrower parties thereto, enforceable against the Company and
the Subsidiary Borrower parties thereto in accordance with their
respective terms.
5. To the best of my knowledge, there are no pending overtly
threatened actions or proceedings against the Company or any of its
Subsidiaries (including the Subsidiary Borrower) before any court or
administrative agency which (i) purport to affect the legality, validity,
binding effect or enforceability of the Credit Agreement, the Guaranty,
the Borrower Subsidiary Letter or any of the Subsidiary Borrower's Notes,
or (ii) except as disclosed in the Company's financial statements
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<PAGE> 160
delivered to you prior to the date hereof pursuant to the Credit
Agreement, can reasonably be expected to materially adversely affect the
financial condition or operations of the Company or any Subsidiary
(including the Subsidiary Borrower).
The opinions set forth above are subject to the following
qualifications:
(a) My opinion in paragraph 4 above is subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors' rights generally.
(b) My opinion in paragraph 4 above is subject to the effect of
general principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
Very truly yours,
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<PAGE> 161
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
|Initial Issuing| Term A & B | Domestic |Eurodollar/Operations |
|Bank | Commitment | Lending Office | Lending Office |
- -------------------------------------------------------------------------------
| ABN Amro Bank | $40,000,000|One Union Square |135 South LaSalle St. |
| N.V. | |600 University St. |Suite 625 |
| | |Suite 2323 |Chicago, IL 60603 |
| | |Seattle, WA 98101 |Attn: Loan |
| | |Attn:James J. Rice |Administration |
| | |Tel:(206)587-2360 |Tel:(312)904-8855 |
| | |Fax:(206)682-5641 |Fax:(312)904-6893 |
- ------------------------------------------------------------------------------
|Bank of America|$60,000,000 |555 South Flower St. |555 South Flower St. |
|NT & SA | |11th Floor |11th Floor |
| | |Los Angeles, CA 90071 |Los Angeles, CA 90071 |
| | |Attn: Dianne Allen |Attn: Rosalie Baca |
| | |Tel: (213) 228-2820 |Tel: (213) 228-2824 |
| | |Fax: (213) 228-2756 |Fax: (213) 228-2756 |
- -------------------------------------------------------------------------------
|Bank of China, |$15,000,000 |410 Madison Avenue |410 Madison Avenue |
|New York Branch| |New York, NY 10017 |New York, NY 10017 |
| | |Attn: Anna Yuen |Attn: Rhonda Chen |
| | |Tel: (212) 935-3101 |Tel: (212) 935-3101 |
| | |x212 |x443 |
| | |Fax: (212) 688-0919 |Fax: (212) 688-0919 |
- -------------------------------------------------------------------------------
|The Bank of |$60,000,000 |10990 Wilshire Blvd |One Wall Street |
|New York | |Suite 1125 |22nd Floor |
| | |Los Angeles, CA 90024 |New York, NY 10286 |
| | |Attn: Robert J. Louk |Attn: Sandra Morgan |
| | |Tel: (310) 996-8663 |Tel: (212) 636-6743 |
| | |Fax: (310) 996-8667 |Fax: (212) 635-6877 |
- -------------------------------------------------------------------------------
|The Bank of |$91,000,000 |1201 Third Avenue |1201 Third Avenue |
|Tokyo- | |Suite 1100 |Suite 1100 |
|Mitsubishi, Ltd| |Seattle, WA 98101 |Seattle, WA 98101 |
| | |Attn: David M. Purcell|Attn: Ken Johnson |
| | |Tel: (206) 382-6049 |Tel: (206) 382-6021 |
| | |Fax: (206) 382-6067 |Fax: (206) 382-6067 |
- -------------------------------------------------------------------------------
|BankBoston, |$50,000,000 |100 Federal Street |100 Federal Street |
|N.A. | |Large Corporate 01-09-|Large Corporate 01-09- |
| | |05 |05 |
| | |Boston, MA 02110 |Boston, MA 02110 |
| | |Attn: Judith Kelly |Attn: Denise M. Dowd |
| | |Tel: (617) 434-5280 |Tel: (617) 434-7462 |
| | |Fax: (617) 434-6685 |Fax: (617) 434-9933 |
- -------------------------------------------------------------------------------
|Bankers Trust |50,000,000 |One Bankers Trust |One Bankers Trust |
| Company | |Plaza, 14th Floor |Plaza, 14th Floor |
| | |New York, NY 10006 |New York, NY 10006 |
| | |Attn:Anthony LoGrippo |Attn: Hsing Huang |
| | |Tel: (212) 250-4886 |Tel: (212) 250-2431 |
| | |Fax: (212) 250-7218 |Fax: (212) 250-7351 |
- -------------------------------------------------------------------------------
161
<PAGE> 162
COMMITMENTS AND APPLICABLE LENDING OFFICES (Continued)
|Initial Issuing| Term A & B | Domestic |Eurodollar/Operations |
|Bank | Commitment | Lending Office | Lending Office |
- -------------------------------------------------------------------------------
|Banque |$30,000,000 |180 Montgomery Street |180 Montgomery Street |
|Nationale | |3rd Floor |3rd Floor |
|de Paris | |San Francisco,CA 94194|San Francisco,CA 94194 |
| | |Attn: D. Guy Gibb |Attn: Don Hart |
| | |Tel: (415) 956-0707 |Tel: (415) 956-2511 |
| | |Fax: (415) 296-8954 |Fax: (415) 989-9041 |
- -------------------------------------------------------------------------------
|Credit |$15,000,000 |101 California Street |55 East Monroe St. |
|Agricole | |Suite 4390 |Suite 4700 |
|Indosuez | |San Francisco,CA 94111|Chicago, IL 60603 |
| | |Attn: John Hyun |Attn: Julie Ferreh |
| | |Tel: (415) 773-1283 |Tel: (312) 917-7421 |
| | |Fax: (415) 986-4116 |Fax: (312) 372-3848 |
- -------------------------------------------------------------------------------
|Canadian |$99,000,000 |350 S. Grand Avenue |2727 Paces Ferry Road |
|Imperial Bank | |Suite 2600 |Suite 1200, Bldg. 2 |
|of Commerce | |Los Angeles, CA 90071 |Atlanta, GA 30339 |
| | |Attn: Robert J. Wagner|Attn: Clare Coyne |
| | |Tel: (213) 617-6248 |Tel: (770) 319-4836 |
| | |Fax: (213) 346-0157 |Fax: (770) 319-4950 |
- -------------------------------------------------------------------------------
|The Chase |$110,000,000|270 Park Avenue |270 Park Avenue |
|Manhattan | |New York, NY 10019 |New York, NY 10019 |
|Bank, N.A. | |Attn: Sherwood Exum |Attn: Sherwood Exum |
| | |Tel: (212) 270-6075 |Tel: (212) 270-6075 |
| | |Fax: (212) 270-1469 |Fax: (212) 270-1469 |
- -------------------------------------------------------------------------------
|Citicorp |$110,000,000|399 Park Avenue |399 Park Avenue |
|Securities, | |12th Floor, Zone 2 |12th Floor, Zone 2 |
|Inc. | |New York, NY 10043 |New York, NY 10043 |
| | |Attn: Thomas B. Boyle |Attn: Chris Young |
| | |Tel: (212) 559-6149 |Tel: (212) 559-1477 |
| | |Fax: (212) 793-1246 |Fax: (212) 583-7185 |
- -------------------------------------------------------------------------------
|Credit Lyonnais|$76,000,000 |1301 Avenue of the |1301 Avenue of the |
| | |Americas |Americas |
| | |New York, NY 10019 |New York, NY 10019 |
| | |Attn: Bertrand Cousin |Attn: Kenia A. Perez |
| | |Tel:(212) 261-7363 |Tel: (212) 261-7313 |
| | |Fax: (212) 261-7368 |Fax: (212) 261-7368 |
- -------------------------------------------------------------------------------
|Deutsche Bank |$30,000,000 |31 West 52nd Street |31 West 52nd Street |
|AG New York | |New York, NY 10019 |New York, NY 10019 |
| | |Attn: Robert M. Wood |Attn: Noble Samuel |
| | |Tel: (212) 469-7839 |Tel: (212) 469-4091 |
| | |Fax: (212) 469-8212 |Fax: (212) 469-4139 |
- -------------------------------------------------------------------------------
|The Industrial |$76,000,000 |350 South Grand Avenue|350 South Grand Avenue |
|Bank of Japan | |Suite 1500 |Suite 1500 |
| | |Los Angeles, CA 90071 |Los Angeles, CA 90071 |
| | |Attn: Craig Papayanis |Attn: Janice Luong |
| | |Tel: (213) 893-6441 |Tel: (212) 893-6387 |
| | |Fax: (213) 488-9840 |Fax: (212) 688-9840 |
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<PAGE> 163
COMMITMENTS AND APPLICABLE LENDING OFFICES (Continued)
|Initial Issuing| Term A & B | Domestic |Eurodollar/Operations |
|Bank | Commitment | Lending Office | Lending Office |
- -------------------------------------------------------------------------------
|The Long-Term |$100,000,000|350 South Grand Avenue|350 South Grand Avenue |
|Credit Bank of | |Suite 3000 |Suite 3000 |
|Japan, Ltd., | |Los Angeles, CA 90071 |Los Angeles, CA 90071 |
|Los Angeles | |Attn: Tamotsu Ukai |Attn: Mitchell Davis |
|Agency | |Tel: (213) 689-6345 |Tel: (213) 689-6238 |
| | |Fax: (213) 626-1067 |Fax: (213) 626-1067 |
- -------------------------------------------------------------------------------
|The Mitsubishi |$99,000,000 |520 Madison Avenue |520 Madison Avenue |
|Trust and | |New York, NY 10022 |New York, NY 10022 |
|Banking | |Attn: Joe Shammas |Attn: Ming Hwa Chou |
|Corporation | |Tel: (212) 891-8451 |Tel: (212) 891-8263 |
| | |Fax: (212) 644-6825 |Fax: (212) 755-2349 |
- -------------------------------------------------------------------------------
|Morgan Guaranty|$50,000,000 |60 Wall Street |Nassau Bahamas Office |
|Trust Company | |New York, NY 10260 |c/o J.P. Morgan |
|of New York | |Attn: Robert Osieski |Services Inc. |
| | |Tel: (212) 648-7173 |500 Stanton Christiana |
| | |Fax: (212) 648-5018 |Road |
| | | |Newark, DE 19713 |
| | | |Tel: (302) 634-1938 |
| | | |Fax: (302) 634-1852 |
- -------------------------------------------------------------------------------
|National |$40,000,000 |175 Water Street |175 Water Street |
|Westminster | |New York, NY 10038 |New York, NY 10038 |
|Bank Plc | |Attn: Stephen Sayre |Attn: Angela Bozorgmir |
| | |Tel: (212) 602-5521 |Tel: (212) 602-5491 |
| | |Fax: (212) 602-4354 |Fax: (212) 602-4500 |
- -------------------------------------------------------------------------------
|NationsBank of |$99,000,000 |444 South Flower St. |901 Main Street |
|Texas, N.A. | |Suite 400 |Dallas, TX 75202 |
| | |Los Angeles, CA 90071 |Attn: Karen Puente |
| | |Attn:George V. Hausler|Tel: (214) 508-3089 |
| | |Tel: (213) 236-4925 |Fax: (214) 508-0944 |
| | |Fax: (213) 624-5815 | |
- -------------------------------------------------------------------------------
|PNC Bank, |$50,000,000 |One PNC Plaza, 2nd Fl.|One PNC Plaza, 6th Fl. |
|National | |249 Fifth Avenue |249 Fifth Avenue |
|Association | |Pittsburgh, PA 15222 |Pittsburgh, PA 15222 |
| | |Atn:Philip K.Liebshcer|Attn: Sally Hunter |
| | |Tel: (412) 762-3202 |Tel: (412) 768-3807 |
| | |Fax: (412) 762-6484 |Fax: (412) 768-4586 |
- -------------------------------------------------------------------------------
|The Sumitomo |$40,000,000 |1201 Third Avenue, |777 South Figueroa, |
|Bank, Limited | |Suite 5320 |Suite 2600 |
| | |Seattle, WA 98101 |Los Angeles, CA 90017 |
| | |Attn: Robert Granfelt |Attn: Miriam Delgado |
| | |Tel: (206) 223-4050 |Tel: (213) 955-0883 |
| | |Fax: (206) 623-8551 |Fax: (213) 623-6832 |
- -------------------------------------------------------------------------------
163
<PAGE> 164
COMMITMENTS AND APPLICABLE LENDING OFFICES (Continued)
|Initial Issuing| Term A & B | Domestic |Eurodollar/Operations |
|Bank | Commitment | Lending Office | Lending Office |
- -------------------------------------------------------------------------------
|The Sumitomo | $50,000,000|333 South Grand Ave., |333 South Grand Ave., |
|Trust & Banking| |Suite 5300 |Suite 5300 |
|Co., Ltd., Los | |Los Angeles, CA 90071 |Los Angeles, CA 90071 |
|Angeles Agency | |Attn: Eleanor Chan |Attn: Bettina Wen |
| | |Tel: (213) 229-2170 |Tel: (213) 229-2123 |
| | |Fax: (213) 613-1083 |Fax: (213) 613-1083 |
- -------------------------------------------------------------------------------
|Wachovia Bank, |$60,000,000 |191 Peachtree St.,NE |191 Peachtree St.,NE |
|N.A. | |Atlanta, GA 30303 |Atlanta, GA 30303 |
| | |Attn: John Whitner |Attn: Gloria Freeman |
| | |Tel: (404) 332-6738 |Tel: (404) 332-6485 |
| | |Fax: (404) 332-6898 |Fax: (404) 332-6898 |
- -------------------------------------------------------------------------------
164
<PAGE> 165
Exhibit (10) (ii)
U.S. $ One Billion Five Hundred Million 364-Day Credit
Agreement among The Boeing Company, as Borrower, the Banks
party thereto, Citibank, N.A., as Adiminstrative Agent, and
The Chase Manhattan Bank, as Syndication Agent, dated as of
December 8, 1997.
165
<PAGE> 166
THE BOEING COMPANY
U.S. $ ONE BILLION FIVE HUNDRED MILLION
364-DAY
BANK CREDIT AGREEMENT
among
THE BOEING COMPANY
and the Subsidiaries which are or shall become party hereto,
as Borrower
THE BANKS PARTY HERETO
CITIBANK, N.A.,
as Administrative Agent
and
THE CHASE MANHATTAN BANK,
as Syndication Agent
dated as of December 8, 1997
THIS BANK CREDIT AGREEMENT (the "Agreement") dated as of
December 8, 1997, is by and among: THE BOEING COMPANY, a Delaware corporation
("TBC" or the "Company"); the BORROWERS (as defined below); the BANKS (as
defined below); CITIBANK, N.A., in its capacity as administrative agent for
the Banks (in such capacity, the "Administrative Agent"); and THE CHASE
MANHATTAN BANK, in its capacity as syndication agent for the Banks (in such
capacity, the "Syndication Agent").
RECITALS
TBC has requested that the Banks make loans from time to time
to TBC and certain of its Subsidiaries in an aggregate principal amount of One
Billion Five Hundred Million Dollars ($1,500,000,000). The loans to be
provided hereunder are as follows:
166
<PAGE> 167
(a) A Advances (as such term and such other terms used in
these Recitals without definition are defined in Article I below) to be made
by all of the Banks, as a part of A Borrowings, which may be either Base Rate
Advances or Eurodollar Rate A Advances; and
(b) B Advances, to be made by any of the Banks in their
sole discretion, as a part of B Borrowings, which may be either Fixed Rate
Advances or Eurodollar Rate B Advances.
The Banks are willing to provide such Advances on the terms and
conditions set forth in this Agreement, including subject to the condition
precedent that TBC, in its capacity as the direct or indirect parent
corporation of all of the other Borrowers, guarantee all of the obligations of
such Subsidiaries under this Agreement prior to any Advances being made to any
such Subsidiaries.
The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. As used in this Agreement, the
following terms shall have the meanings set out respectively after each:
"A Advance"--An advance made by a Bank to a Borrower as part
of an A Borrowing and refers to a Base Rate Advance or a Eurodollar Rate A
Advance, each of which shall be a "Type" of A Advance.
"A Borrowing"--A borrowing consisting of simultaneous A
Advances of the same Type made by each of the Banks pursuant to Section 2.01.
"A Note"--A promissory note of a Borrower payable to the order
of any Bank, in substantially the form of Exhibit A-1 or A-2 hereto, evidencing
the indebtedness of that Borrower to such Bank resulting from the aggregate of
all Base Rate Advances and the aggregate of all Eurodollar Rate A Advances,
respectively, made by such Bank to that Borrower.
"Administrative Agent"--Citibank, N.A. acting in its capacity
as administrative agent for the Banks, or any successor Administrative Agent
appointed pursuant to Section 7.06.
"Administrative Agent's Account"--The account of the
Administrative Agent maintained by the Administrative Agent with Citibank,
N.A., at its office at 2 Pennsway, Corporate Commons, Suite 200, New Castle,
Delaware 19720, Account No. 35852248, Attention: Jay Moffitt.
"Advance"--An A Advance or a B Advance.
"Agent"--Individually and collectively, as the context shall
require, the Administrative Agent and the Syndication Agent.
"Agreement"--This agreement, as it may be amended or otherwise
modified from time to time, and any written additions or supplements hereto.
167
<PAGE> 168
"Applicable Lending Office"--With respect to each Bank, such
Bank's Domestic Lending Office in the case of a Base Rate Advance, and such
Bank's Eurodollar Lending Office in the case of a Eurodollar Rate Advance and,
in the case of a B Advance, the office of such Bank notified by such Bank to
the Administrative Agent as its Applicable Lending Office with respect to such
B Advance.
"Applicable Margin"--Means
with respect to Base Rate Advances, 0% per annum;
with respect to Eurodollar Rate Advances which have not been
Converted to Term Loans, 0.12% per annum;
with respect to Eurodollar Rate Advances which have been
Converted to Term Loans, a fluctuating per annum amount,
commencing on the date of the Conversion and ending on the
Maturity Date, equal at any time to then-applicable rate set
forth in the pricing grid below, depending upon the rating of
the long-term senior unsecured debt of TBC then in effect:
=========================================================================
|| Public Debt Rating | Applicable Margin ||
|| S&P/Moody's | ||
||---------------------------------------------|-----------------------||
|| Level I | 0.15% ||
|| A by S&P or A2 by Moody's or above | ||
||---------------------------------------------|-----------------------||
|| Level II | 0.20% ||
|| Less than level I but at least A- | ||
|| by S&P or A3 by Moody's | ||
||---------------------------------------------|-----------------------||
|| Level III | 0.25% ||
|| less than level II but at least BBB+ | ||
|| by S&P or Baa1 by Moody's | ||
||---------------------------------------------|-----------------------||
|| Level IV | 0.375%||
|| less than level III | ||
=========================================================================
provided, however, that in the event and during the
continuance of an Event of Default which is described in
Section 6.01(a), the Applicable Margin shall immediately
increase by 1.0% above the Applicable Margin then in effect,
and, in the case of a Eurodollar Rate Advance, such Advance
shall automatically convert to a Base Rate Advance at the end
of the Interest Period then in effect for such Eurodollar Rate
168
<PAGE> 169
Advance. If at any time no rating is available from S&P and
Moody's or any other nationally recognized statistical rating
organization designated by TBC and approved in writing by the
Majority Banks, the Applicable Margin for each Interest Period
or each other period commencing during the thirty days
following such ratings becoming unavailable shall be the
Applicable Margin in effect immediately prior to such ratings
becoming unavailable. Thereafter the rating to be used for
purposes of this Agreement until ratings from S&P and Moody's
become available shall be as agreed between TBC and the
Administrative Agent, and TBC and the Administrative Agent
shall use good faith efforts to reach such agreement within
such thirty day period, provided, however, that if no such
agreement is reached within such thirty day period the
Applicable Margin thereafter, until such agreement shall have
been reached, shall be (A) if any such rating shall have
become unavailable as a result of S&P or Moody's ceasing its
business as a rating agency, the Applicable Margin in effect
immediately prior to such cessation or (B) otherwise, the
Applicable Margin as set forth under Level IV above.
"Available Commitment" -- As of any date of determination, (a)
the aggregate Commitments of the Banks, as such amount may be reduced,
changed or terminated in accordance with the terms of this Agreement, reduced
by (b) the aggregate Advances outstanding on such date of determination.
"B Advance"--An advance by a Bank to a Borrower as part of a B
Borrowing resulting from the auction bidding procedure described in Section
2.05 and refers to a Fixed Rate Advance or a Eurodollar Rate B Advance, each of
which shall be a "Type" of B Advance.
"B Borrowing"--A borrowing consisting of simultaneous B
Advances from each of the Banks whose offer to make one or more B Advances as
part of such borrowing has been accepted by a Borrower under the auction
bidding procedure described in Section 2.05.
"B Note"--A Promissory note of a Borrower payable to the order
of any Bank, in substantially the form of Exhibit A-3 or A-4 hereto, evidencing
the indebtedness of that Borrower to such Bank resulting from the aggregate of
all Fixed Rate Advances and the aggregate of all Eurodollar Rate B Advances,
respectively, made by such Bank to such Borrower.
"B Reduction"--As defined in Section 2.01.
"Bank"--Subject to the provisions of Section 2.18, any of the
banking institutions that is a signatory hereto or that, pursuant to Section
2.13, 2.17, 2.18 or 2.19 shall become a "Bank" hereunder.
"Base Rate"--The rate of interest announced publicly by
Citibank, N.A., in New York, New York, from time to time, as Citibank's base
rate.
"Base Rate Advance"--An A Advance which bears interest at the
Base Rate.
"Base Rate A Note"--An A Note evidencing Base Rate Advances.
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<PAGE> 170
"BCSC" --Boeing Capital Services Corp., a Delaware corporation
"BFC"--Boeing Financial Corporation, a Delaware corporation.
"Borrower"--Individually and collectively, as the context shall
require, TBC and each Subsidiary Borrower (unless and until it becomes a
"Terminated Subsidiary Borrower" pursuant to Section 2.20).
"Borrower Subsidiary Letter" -- With respect to any Subsidiary
Borrower, a letter in the form of Exhibit D hereto, signed by such Subsidiary
Borrower and TBC.
"Borrowing"--An A Borrowing or a B Borrowing.
"Business Day"--A day of the year on which banks are not
required or authorized to close in New York City, and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"Commitment"--For each Bank, the full amount set forth opposite
the name of such Bank in Schedule I attached hereto, or, if such Bank is a
Replacement Bank or a Bank that has entered into one or more assignments
pursuant to Section 2.18 or Section 2.19, the amount set forth for such Bank in
the Register maintained by the Administrative Agent pursuant to Section
2.18(b), as such amount may be reduced pursuant to Section 2.03, Section 2.08
or Section 2.17 or increased pursuant to Section 2.17.
"Company"--The Boeing Company, a Delaware corporation (usually
referred to herein as "TBC").
"Consolidated"--Indicating, as to any accounting concept or
statement, the consolidation of such concept or statement with the same
concepts or statements of all other members of a class made up of TBC and the
Subsidiaries.
"Continuing Bank" -- As defined in Section 2.19(a).
"Convert," "Conversion" and "Converted"--Each refers to a
conversion of A Advances of one Type into A Advances of another Type pursuant
to Section 2.10, 2.11 or 2.14, or to the conversion of A Advances to a Term
Loan pursuant to Section 2.03 (as the context shall require).
"Debt " (i) Indebtedness for borrowed money or for the deferred
purchase price of property or services; (ii) the financial obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
financial obligations as lessee under leases which shall have been or should
be, in accordance with generally accepted accounting principles, recorded as
capital leases; and (iv) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or financial obligations of others of the kind referred to in
clauses (i) through (iii) above.
"Domestic Lending Office"--With respect to any Bank, the office
of such Bank specified as its "Domestic Lending Office" opposite its name on
Schedule I hereto, or in the assignment or other agreement pursuant to which it
170
<PAGE> 171
became a Bank, or such other office of such Bank as such Bank may from time to
time specify to the Borrowers and the Administrative Agent.
"Effective Date"--As defined in Section 2.17.
"Eligible Assignee"--As defined in Section 2.18.
"Eurocurrency Liabilities"--Has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar A Note"--An A Note evidencing Eurodollar Rate A
Advances.
"Eurodollar B Note"--A B Note evidencing Eurodollar Rate B
Advances.
"Eurodollar Lending Office"--With respect to any Bank, the
office of such Bank specified as its "Eurodollar Lending Office" opposite its
name on Schedule I hereto (or, if no such office is specified, its Domestic
Lending Office), or in the assignment or other agreement pursuant to which it
became a Bank, or such other office of such Bank as such Bank may from time to
time specify to the Borrowers and the Administrative Agent.
"Eurodollar Rate"--For any Interest Period for each Eurodollar
Rate A Advance comprising part of the same Borrowing, and for the relevant
period specified in the applicable Notice of B Borrowing for each Eurodollar
Rate B Advance, an interest rate per annum equal to the offered rate for
deposits in U.S. dollars for a period substantially equal to the relevant
Interest Period (if an A Advance) or the relevant period specified in the
applicable Notice of B Borrowing (if a B Advance), appearing on Telerate Page
3750 (or, if unavailable for any reason by Telerate, then by reference to
Reuters Screen) as of 11:00 a.m. (London time) two business days before the
first day of such Interest Period or the first day of the relevant period
specified in such Notice of B Borrowing; provided, that if the foregoing rate
is unavailable from Telerate or the Reuters Screen for any reason, then such
rate shall be an interest rate per annum equal to the average (rounded upward
to the nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in U.S. dollars are
offered by the principal office of each of the Reference Banks to prime banks
in the London interbank market at 11:00 a.m. (London time) two Business Days
before the first day of such Interest Period or the first day of the relevant
period specified in such Notice of B Borrowing (i) in an amount, for such
Eurodollar A Advance, substantially equal to such Reference Bank's Eurodollar
Rate Advance comprising part of such A Borrowing and for a period equal to
such Interest Period or, (ii) in an amount, for such Eurodollar Rate B
Advance, substantially equal to the amount of the Eurodollar Rate B Borrowing
which includes such B Advance multiplied by a fraction equal to such Reference
Bank's ratable portion of the Commitments and for a period equal to the
relevant period specified in such Notice of B Borrowing. The Eurodollar Rate
for any Interest Period for each Eurodollar Rate A Advance comprising part of
the same Borrowing and for the relevant period specified in a Notice of B
Borrowing for each Eurodollar Rate B Advance shall be determined by the
Administrative Agent on the basis of applicable rates furnished to and
received by the Administrative Agent from the Reference Banks two Business
Days before the first day of such Interest Period or period, as the case may
be, subject, however, to the provisions of Section 2.10.
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<PAGE> 172
"Eurodollar Rate Advance"--An A Advance (a "Eurodollar Rate A
Advance") or a B Advance (a "Eurodollar Rate B Advance") which bears interest
at a rate of interest quoted as a margin (which shall be the Applicable Margin
in the case of an A Advance or as offered by a Bank and accepted by a Borrower
in the case of a B_Advance) over the Eurodollar Rate.
"Eurodollar Rate B Borrowing"--As defined in Section 2.05(a)(i).
"Eurodollar Rate Reserve Percentage"--Of any Bank for any
Interest Period for any Eurodollar Rate Advance means the reserve percentage
applicable during such Interest Period (or if more than one such percentage
shall be so applicable, the daily average of such percentages for those days
in such Interest Period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for such Bank with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Event of Default"--Any of the events described in Section 6.01
hereof.
"Facility Fee"--As defined in Section 2.06.
"Federal Funds Rate"--For any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"Fixed Rate Advance"--An Advance made by a Bank to a Borrower
as part of a Fixed Rate Borrowing.
"Fixed Rate Borrowing"--As defined in Section 2.05(a)(i).
"Guaranty"--Each Guaranty Agreement, dated as of even date
herewith, executed by TBC in favor of the Administrative Agent and the Banks,
unconditionally guaranteeing the payment of all obligations of a Subsidiary
Borrower hereunder and under the Notes executed or to be executed by them.
"Interest Period"--For each Eurodollar Rate A Advance
comprising part of the same Borrowing, the period commencing on the date of
such A Advance or the date of the Conversion of any A Advance into such a
Eurodollar Rate A Advance and ending on the last day of the period selected by
a Borrower pursuant to the provisions below and, thereafter, each subsequent
period commencing on the last day of the immediately preceding Interest Period
and ending on the last day of the period selected by the Borrower pursuant to
the provisions below. The duration of each such Interest Period shall be one,
two, three, or six months (or nine months, with the consent of all Banks
funding those particular Advances), as a Borrower may, upon notice received by
the Administrative Agent not later than 11:00 a.m. (New York City time) on the
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<PAGE> 173
third Business Day prior to the first day of such Interest Period, select,
provided however, that:
(i) no Interest Period shall end on a date later than the
Termination Date (or in the case of an A Advance which is Converted to a
term loan pursuant to Section 2.03, the Maturity Date);
(ii) Interest Periods commencing on the same date for A
Advances comprising part of the same A Borrowing shall be of the same
duration; and
(iii) Whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day, provided, that if such extension would cause the last day
of such Interest Period to occur in the next following calendar month,
the last day of the Interest Period shall occur on the next preceding
Business Day.
"Majority Banks"--Banks holding greater than 50% of the then
aggregate unpaid principal amount of the A Notes held by Banks, or, if no such
principal amount is then outstanding, Banks having greater than 50% of the
Commitments (provided that, for purposes hereof, none of the Borrowers, and
none of their affiliates, if a Bank, shall be included in (i) the Banks holding
such amount of the A Advances or having such amount of the Commitments or (ii)
determining the aggregate unpaid principal amount of the A Advances or the
total Commitments).
"Maturity Date" -- The Termination Date, or, if the Term Loan
Conversion Option described in Section 2.03 has been exercised, the date that
is the three-year anniversary of the Termination Date.
"Moody's"--Moody's Investor Services, Inc.
"Non-Extending Bank" -- As defined in Section 2.19(a).
"Note"--An A Note or a B Note.
"Notice of A Borrowing"--As defined in Section 2.02(a).
"Notice of B Borrowing"--As defined in Section 2.05(a)(i).
"Notice of Borrowing"--A Notice of A Borrowing or a Notice of B
Borrowing.
"Person" -- An individual, partnership, corporation (including
a business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Property, Plant and Equipment"--Any item of real property, or
any interest therein, buildings, improvements and machinery.
"Reference Banks"--The Chase Manhattan Bank, Citibank, N.A.,
BankBoston, N.A., Bank of New York, and National Westminster Bank plc.
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"Register"--As defined in Section 2.18.
"Replacement Banks" -- As defined in Section 2.19(c).
"Required Assignment"--As defined in Section 2.18.
"Request for Alteration"--A document substantially in the form
of Exhibit C hereto, duly executed by TBC, pursuant to the provisions of
Section 2.17.
"S&P"--Standard & Poor's Corporation.
"Subsidiary"--Any corporation in which more than 50% of the
Voting Stock is owned by TBC, by TBC and any one or more other Subsidiaries,
or by any one or more other Subsidiaries.
"Subsidiary Borrower"--Individually and collectively, as the
context shall require, each Subsidiary other than BFC and BCSC in which 100% of
the Voting Stock is owned by TBC, by TBC and any one or more other
Subsidiaries, or by any one or more other Subsidiaries, that is or shall become
a "Borrower" hereunder in accordance with Section 2.20; in each case, unless
and until it becomes a "Terminated Subsidiary Borrower."
"Syndication Agent"--The Chase Manhattan Bank, acting in its
capacity as syndication agent for the Banks.
"TBC"--The Boeing Company, a Delaware corporation.
"Term Loan Conversion Option"--The option described under
Section 2.03 for a Borrower to Convert, as of the Termination Date, all A
Advances then outstanding into a term loan.
"Terminated Subsidiary Borrower"--Individually and
collectively, as the context shall required, a Subsidiary Borrower who has
ceased to be a "Borrower" for purposes of this Agreement in accordance with
Section 2.20.
"Termination Date"--The earlier to occur of (i) September 30,
1998, as such date may be extended from time to time pursuant to Section 2.19,
and (ii) the date of termination in whole of the Commitments pursuant to
Section 2.08 or Section 6.01.
"Voting Stock"--All the issued and outstanding capital stock of
any corporation having general voting power under ordinary circumstances to
elect a majority of the Board of Directors of such corporation (irrespective
of whether or not any capital stock of any other class or classes shall or
might have voting power upon the occurrence of any contingency).
Section 1.02. Use of Defined Terms. Any defined term used in
the plural preceded by the definite article shall be taken to encompass all
members of the relevant class. Any defined term used in the singular preceded
by "any" shall be taken to indicate any number of the members of the relevant
class.
Section 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistently applied.
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ARTICLE 2
Amounts and Terms of the Advances
Section 2.01. The A Advances. Each Bank severally agrees, on
the terms and conditions hereinafter set forth, to make A Advances to the
Borrowers from time to time on any Business Day during the period from the
date hereof until the Termination Date in an aggregate principal amount at any
time outstanding not to exceed such Bank's Commitment, provided that the
aggregate amount of the Commitments of the Banks shall be deemed used from
time to time to the extent of the aggregate amount of the B Advances then
outstanding and such deemed use of the aggregate amount of the Commitments
shall be applied to the Banks ratably according to their respective
Commitments (such deemed use of the aggregate amount of the Commitments being
a "B Reduction"). Each A Borrowing shall be in an aggregate amount not less
than $10,000,000 or an integral multiple of $1,000,000 in excess thereof (or,
if less, an aggregate amount equal to the difference between the aggregate
amount of a proposed B Borrowing requested by a Borrower and the aggregate
amount of B Advances offered to be made by the Banks and accepted by the
Borrower in respect of such B Borrowing, if notice of such A Borrowing is
given by the Borrower within two Business Days of the date of such B
Borrowing) and shall consist of A Advances of the same Type made on the same
day by the Banks ratably according to their respective Commitments. Within
the limits of each Bank's Commitment, the Borrowers may from time to time
borrow, prepay pursuant to Section 2.12, and reborrow under this Section 2.01.
Section 2.02. Making the A Advances (a) Each A Borrowing
shall be made on notice, given by a Borrower to the Administrative Agent not
later than 11:00 a.m. (New York City time) on the day of the proposed A
Borrowing in the case of a Base Rate Borrowing and on the third Business Day
prior to the date of the proposed A Borrowing in the case of a Eurodollar Rate
Borrowing. The Administrative Agent thereupon shall give to each Bank prompt
notice thereof by telecopier, telex or cable. Each such notice of an A
Borrowing (a "Notice of A Borrowing") shall be by telecopier, telex or cable,
confirmed immediately in writing, in substantially the form of Exhibit B-l
hereto, specifying therein the requested (i) date of such A Borrowing, (ii)
Type of A Advances comprising such A Borrowing, (iii) aggregate amount of such
A Borrowing, and (iv) in the case of an A Borrowing comprised of Eurodollar
Rate Advances, initial Interest Period for each such A Advance. Every Notice
of A Borrowing given by a Subsidiary Borrower must be countersigned by an
authorized representative of TBC, in order to evidence the consent of TBC, in
its sole discretion, to that proposed A Borrowing. Each Bank shall, before
1:00 p.m. (New York City time) on the date of such A Borrowing, make available
for the account of its Applicable Lending Office to the Administrative Agent
at the Administrative Agent's Account, in same day funds, such Bank's ratable
portion of such A Borrowing. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
5, the Administrative Agent will make such funds available to the Borrower at
the Administrative Agent's aforesaid address.
(b) Each Notice of A Borrowing shall be irrevocable and
binding. In the case of any A Borrowing which the related Notice of A
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the
Borrower requesting such A Borrowing shall indemnify each Bank against any
loss, cost or expense incurred by such Bank on account of any failure to
fulfill on or before the date specified for such A Borrowing in such Notice of
A Borrowing the applicable conditions set forth in Article 5, including,
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without limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Bank to fund the A Advance to be made by such
Bank as part of such A Borrowing when such A Advance, as a result of such
failure, is not made on such date.
(c) Unless the Administrative Agent shall have received
notice from a Bank prior to 1:00 p.m. (New York City time) on the day of any A
Borrowing that such Bank will not make available to the Administrative Agent
such Bank's ratable portion of such A Borrowing, the Administrative Agent may
assume that such Bank has made such portion available to the Administrative
Agent on the date of such A Borrowing in accordance with subsection (a) of
this Section 2.02 and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that such Bank shall not have so made such
ratable portion available to the Administrative Agent, such Bank and such
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to such Borrower until the date
such amount is repaid to the Administrative Agent, at (i) in the case of a
Borrower, the interest rate applicable at the time to A Advances comprising
such A Borrowing and (ii) in the case of such Bank, the Federal Funds Rate.
If such Bank shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Bank's A Advance as part
of such A Borrowing for purposes of this Agreement.
(d) The failure of any Bank to make the A Advance to be
made by it as part of any A Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its A Advance on the date of such A
Borrowing, but no Bank shall be responsible for the failure of any other Bank
to make the A Advance to be made by such other Bank on the date of any A
Borrowing.
Section 2.03. Conversion to Term Loan, Repayment. TBC may,
upon notice given to the Administrative Agent not later than 11:00 a.m. (New
York City time) on the Termination Date, Convert the aggregate unpaid
principal amount of the A Advances outstanding as of the Termination Date into
a term loan. If this Conversion option is exercised, then, on the Termination
Date, immediately prior to the time when the aggregate unpaid principal amount
of the A Advances would otherwise be due, the aggregate unpaid principal
amount of the A Advances then outstanding shall automatically convert into a
term loan which each Borrower shall repay to the Administrative Agent for the
ratable account of the Banks on the Maturity Date. The amounts so converted
shall be treated for all purposes of this Agreement as A Advances except that
after the Termination Date:
(a) the Borrowers may not make any additional borrowings;
(b) any amounts paid or prepaid may not be reborrowed;
(c) the amount of each Bank's Commitment shall be equal at
all times to the principal amount of the A Borrowing payable to such Bank from
time to time;
(d) the provisions of Section 2.17 shall not be effective;
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(e) no Bank shall have the right to assign its rights in
any A Advances outstanding; and
(f) no Facility Fees shall accrue or be payable after the
Termination Date.
Section 2.04. Interest Rate on A Advances The Borrowers shall
pay interest on the unpaid principal amount of each A Advance made by each
Bank from the date of such A Advance until such principal amount shall be paid
in full, at the following rates per annum: (i) during each period in which
such A Advance is a Base Rate Advance, at a rate per annum equal at all times
to the Base Rate in effect from time to time, plus the Applicable Margin,
payable quarterly in arrears on the first day of each January, April, July and
October and on the Termination Date, or, if the Conversion option described in
Section 2.03 is exercised, the Maturity Date, and (ii) during each period in
which such A Advance is a Eurodollar Rate Advance, at a rate per annum equal
at all times during each relevant Interest Period for such A Advance to the
Eurodollar Rate for such Interest Period plus the Applicable Margin, payable
on the last day of each such Interest Period, and on the date such A Advance
is Converted or paid in full.
Section 2.05. The B Advances (a) Each Bank severally agrees
that the Borrowers may make B Borrowings under this Section 2.05 from time to
time on any Business Day during the period from the date hereof until the
Termination Date in the manner set forth below, provided that, following the
making of each B Borrowing, the aggregate amount of the Advances then
outstanding shall not exceed the aggregate amount of the Commitments of the
Banks. As provided in Section 2.01 above, the aggregate amount of the
Commitments of the Banks shall be deemed used from time to time to the extent
of the aggregate amount of the B Advances then outstanding and such deemed use
of the aggregate amount of the Commitments shall be applied to the Banks
ratably according to their respective Commitments; provided, however, that any
Bank's B Advances shall not otherwise reduce that Bank's obligation to lend its
pro rata share of the remaining Available Commitment.
(i) Any Borrower may request a B Borrowing under this
Section 2.05 by delivering to the Administrative Agent, by telecopier, telex
or cable, confirmed immediately in writing, a notice of a B Borrowing (a
"Notice of B Borrowing"), in substantially the form of Exhibit B-2 hereto,
specifying the date and aggregate amount of the proposed B Borrowing, the
maturity date for repayment of each B Advance to be made as part of such
B Borrowing (which maturity date may not be later than 5 Business Days
prior to the Termination Date, but may otherwise be 7 days or more from
the date of such B Advance if the Borrower shall specify in the Notice of
B Borrowing that the rates of interest to be offered by the Banks shall
be fixed rates per annum (a "Fixed Rate Borrowing"), and either 1, 2, 3,
6 or 9 months from the date of such B Borrowing if the Borrower shall
specify in the Notice of B Borrowing that such B Borrowing is to be a
Borrowing consisting of Eurodollar Rate B Advances (a "Eurodollar Rate B
Borrowing")), the interest payment date or dates relating thereto, and
any other terms to be applicable to such B Borrowing, not later than
11:00 a.m. (New York City time) (A) at least one Business Day prior to
the date of the proposed B Borrowing if the Borrower shall specify in the
Notice of B Borrowing that such B Borrowing is to be a Fixed Rate
Borrowing, and (B) at least four Business Days prior to the date of the
proposed B Borrowing, if the Borrower shall instead specify in the Notice
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of B Borrowing that such B Borrowing is to be a Eurodollar Rate B
Borrowing. Every Notice of B Borrowing given by a Subsidiary Borrower
must be countersigned by an authorized representative of TBC, in order to
evidence the consent of TBC, in its sole discretion, to that proposed B
Borrowing. The Administrative Agent shall in turn promptly notify each
Bank of each request for a B Borrowing received by it from the Company by
sending such Bank a copy of the related Notice of B Borrowing.
(ii) Each Bank may, if, in its sole discretion, it elects
to do so, irrevocably offer to make one or more B Advances to a Borrower as
part of such proposed B Borrowing at a rate or rates of interest specified by
such Bank in its sole discretion (such rate of interest to be a fixed
rate if the Borrower requested Fixed Rate Advances, or a margin over the
Eurodollar Rate if the Borrower requested Eurodollar Rate B Advances), by
notifying the Administrative Agent (which shall give prompt notice
thereof to the Company and such Borrower), before 10:00 a.m. (New York
City time) (A) on the date of such proposed B Borrowing, in the case of a
Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i)
above and (B) three Business Days before the date of such proposed B
Borrowing, in the case of a Notice of B Borrowing delivered pursuant to
clause (B) of paragraph (i) above, of the minimum amount and maximum
amount of each B Advance which such Bank would be willing to make as part
of such proposed B Borrowing (which amounts may, subject to the proviso
to the first sentence of this Section 2.05(a), exceed such Bank's
Commitment), the rate or rates of interest therefor (specified as stated
in this paragraph (ii)) and such Bank's Applicable Lending Office with
respect to such B Advance; provided that if the Administrative Agent in
its capacity as a Bank shall, in its sole discretion, elect to make any
such offer, it shall notify such Borrower and the Company of such offer
before 9:30 a.m. (New York City time) on the date on which notice of such
election is to be given to the Administrative Agent by the other Banks.
If, by 10:00 a.m. (New York City time) on the date on which notice of a
Bank's election under this Section 2.05(a)(ii) is to be made, the
Administrative Agent fails to receive, at its address referred to in
Section 8.02, the notice from a Bank provided for in this Section
2.05(a)(ii), the Administrative Agent may conclusively presume that such
Bank has elected not to offer to make any B Advances to such Borrower
with respect to the related Notice of B Borrowing.
(iii) Such Borrower shall, in turn, (A) before 11:00 a.m.
(New York City time) on the date of such proposed B Borrowing, in the case of
a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i)
above, and (B) before 12:00 noon (New York City time) three Business Days
before the date of such proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (B) of paragraph (i) above,
either:
(x) cancel such B Borrowing by giving the
Administrative Agent notice to that effect, or
(y) accept one or more of the offers made by any
Bank or Banks pursuant to Section 2.05(a)(ii), in its sole discretion, by
giving notice to the Administrative Agent of the amount of each B Advance
(which amount shall be equal to or greater than the minimum amount, and equal
to or less than the maximum amount, notified to the Borrower by the
Administrative Agent on behalf of such Bank for such B Advance pursuant to
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Section 2.05(a)(ii) above) to be made by each Bank as part of such B
Borrowing, and reject any remaining offers made by Banks pursuant to Section
2.05(a)(ii) above by giving the Administrative Agent notice to that effect;
provided that offers will be accepted, if at all, in order of lowest to
highest interest rates, and, if two or more Banks bid at same rate, the B
Borrowing will be allocated among such Banks in proportion to the amount bid
by each such Bank.
(iv) If the Borrower notifies the Administrative Agent that
such B Borrowing is canceled pursuant to Section 2.05(a)(iii)(x) above, the
Administrative Agent shall give prompt notice thereof to the Banks and
such B Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made
by any Bank or Banks pursuant to Section 2.05(a)(iii)(y) above, the
Administrative Agent shall in turn promptly (A) notify each Bank that has made
an offer as described in Section 2.05(a)(ii) above, of the date and aggregate
amount of such B Borrowing and whether or not any offer or offers made by such
Bank pursuant to Section 2.05(a)(ii) above have been accepted by the Borrower
, (B) notify each Bank that is to make a B Advance as part of such B
Borrowing, of the amount of each B Advance to be made by such Bank as part of
such B Borrowing, and (C) upon satisfaction of the conditions set forth in
5.03 or 5.06, as applicable, notify each Bank that is to make a B Advance as
part of such B Borrowing that the applicable conditions set forth in Article 5
appear to have been satisfied. Each Bank that is to make a B Advance as part
of such B Borrowing shall, before 1:00 p.m. (New York City time) on the date
of such B Borrowing specified in the notice received from the Administrative
Agent pursuant to clause (A) of the preceding sentence and when such Bank
shall have received notice from the Administrative Agent pursuant to
clause (C) of the preceding sentence, make available for the account of
its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account such Bank's portion of such B Borrowing,
in same day funds. Upon fulfillment of the applicable conditions set
forth in Article 5 and after receipt by the Administrative Agent of such
funds, the Administrative Agent will make such funds available to the
Company at the Administrative Agent's Account. Promptly after each B
Borrowing the Administrative Agent will notify each Bank of the amount of
the B Borrowing, the consequent B Reduction and the dates upon which such
B Reduction commenced and will terminate.
(b) Each Notice of B Borrowing shall request an aggregate
amount of B Advances not less than $10,000,000 or an integral multiple of
$1,000,000 in excess thereof provided that the Borrowers may accept offers
aggregating less than $10,000,000 and offers which are not an integral
multiple of $1,000,000 and provided further that following the making of each
B Borrowing, the Borrowers shall be in compliance with the limitation set
forth in the proviso to the first sentence of subsection (a) above. Within
the limits and on the conditions set forth in this Section 2.05, the Borrowers
may from time to time borrow under this Section 2.05, repay or prepay pursuant
to Section 2.05(c), and reborrow under this Section 2.05, provided that a B
Borrowing shall not be made within three Business Days of the date of any
other B Borrowing.
(c) On the maturity date of each B Advance (such maturity
date being that specified by the Borrower for repayment of such B Advance in
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the related Notice of B Borrowing delivered pursuant to Section 2.05(a)(i))
the Borrower shall repay to the Administrative Agent for the account of the
Bank which has made such B Advance the then unpaid principal amount of such B
Advance. The Borrowers shall have no right to prepay any principal amount of
any B Advance.
(d) The Borrowers shall pay interest on the unpaid
principal amount of each B Advance, from the date of such B Advance to the
date the principal amount of such B Advance is repaid in full, at the fixed
rate of interest for such B Advance (in the case of a Fixed Rate B Advance)
specified by the Bank making such B Advance in its notice with respect thereto
delivered pursuant to Section 2.05(a)(ii) above or (in the case of a
Eurodollar Rate B Advance) the margin specified by the Bank making such B
Advance in its notice with respect thereto delivered pursuant to Section
2.05(a)(ii) above plus the Eurodollar Rate determined with respect to such B
Borrowing pursuant to Section 2.10, payable on the interest payment date or
dates specified by the Borrowers for such B Advance in the related Notice of B
Borrowing delivered pursuant to Section 2.05(a)(i) above.
(e) The indebtedness of each Borrower resulting from all B
Advances made by a Bank shall be evidenced by a single B Note made by such
Borrower and payable to the order of such Bank covering all Fixed Rate
Advances, and a single B Note made by such Borrower and payable to the order
of such Bank covering all Eurodollar B Advances, made by such Bank to such
Borrower.
(f) Any Bank may, without the prior written consent of the
Borrowers , sell or assign all or any part of such Bank's rights in any or all
of the B Advances made by such Bank or the B Notes in connection with such B
Advances as a participation, provided, however, that (i) any such sale or
assignment shall not require the Borrowers to file a registration statement
with the Securities and Exchange Commission or apply to qualify the Notes under
the blue sky laws of any state and the selling or assigning Bank shall
otherwise comply with all federal and state securities laws applicable to such
transaction; (ii) no purchaser or assignee in such a transaction shall thereby
become a "Bank" for any purpose under this Agreement, (iii) such Bank's
obligations under this Agreement (including, without limitation, its Commitment
to the Borrowers hereunder) shall remain unchanged, (iv) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and (v) the Borrowers, the Administrative Agent and the other
Banks shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement.
Section 2.06. Fees. TBC agrees to pay to the Administrative
Agent for the account of each Bank a facility fee ("Facility Fee") on such
Bank's Commitment, without regard to usage. Such fee shall be payable for the
periods from the date hereof in the case of each Bank named in Schedule I
attached hereto, and from the effective date on which any other Bank becomes
party hereto, until the Termination Date at the rate of .03% per annum;
provided, however, that if the Term Loan Conversion Option has been exercised,
no Facility Fees shall accrue or be payable during the period following the
effective date of that Conversion. Facility Fees shall be payable in arrears
on each January 1, April 1, July 1 and October 1 during the term of this
Agreement and on either the Termination Date (in the event the Term Loan
Conversion Option has not been exercised) or the date that the Conversion takes
effect (in the event the Term Loan Conversion Option has been exercised). The
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Facility Fee shall be calculated based on a 360-day year. The amount of the
Facility Fee payable on January 1, 1998 and on either the Termination Date or
the date that the Conversion takes effect, as applicable, shall be prorated
based on the actual number of days elapsed either since the date hereof (in the
case of January 1, 1998 payment) or since the date on which the last payment in
respect of the Facility Fee was made (in the case of the payment made on either
the Termination Date or the date that the Conversion takes effect, as
applicable).
Section 2.07. [intentionally omitted.]
Section 2.08. Reduction of the Commitments.
(a) Optional Reductions. TBC shall have the right, upon at
least 3 Business Days' notice to the Administrative Agent, to terminate in
whole or reduce ratably in part the unused portions of the Commitments of the
Banks, provided that each partial reduction shall be in a minimum amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof, and
provided further that the aggregate amount of the Commitments of the Banks
shall not be reduced to an amount which is less than the aggregate principal
amount of the B Advances then outstanding.
(b) Mandatory Reduction. At the close of business on the
Termination Date, the aggregate Commitments of the Banks shall be automatically
and permanently reduced, on a pro rata basis, by an amount equal to the amount
by which the aggregate Commitments immediately prior to giving effect to such
reduction exceeds the aggregate unpaid principal amount of the A Advances then
outstanding.
Section 2.09. Additional Interest on Eurodollar Rate A
Advances. The Borrowers shall pay to each Bank, so long as such Bank shall be
required under regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities, additional interest on the unpaid
principal amount of each Eurodollar Rate A Advance of such Bank, from the date
of such A Advance until such principal amount is paid in full, at an interest
rate per annum equal at all times to the remainder obtained by subtracting (i)
the Eurodollar Rate for the Interest Period for such A Advance from (ii) the
rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage of such Bank for such Interest
Period, payable on each date on which interest is payable on such A Advance.
Such additional interest shall be determined by such Bank and notified to the
Borrowers through the Administrative Agent.
Section 2.10. Eurodollar Interest Rate Determination.
(a) The Administrative Agent shall determine each Eurodollar Rate by using
the methods described in the definition of the term "Eurodollar Rate," and
shall give prompt notice to the Borrowers and the Banks of each such
Eurodollar Rate.
(b) In the event the rate cannot be determined by the
first method described in the definition of "Eurodollar Rate," each Reference
Bank agrees to furnish to the Administrative Agent timely information for the
purpose of determining each such Eurodollar Rate in accordance with the second
method described therein. If any one or more of the Reference Banks shall not
furnish such timely information to the Administrative Agent for the purpose of
determining any such interest rate, the Administrative Agent shall determine
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such interest rate on the basis of timely information furnished by the
remaining Reference Banks. In the event the rate cannot be determined by the
either of the methods described in the definition of "Eurodollar Rate," then:
(i) the Administrative Agent shall forthwith notify the
Borrowers and the Banks that the interest rate cannot be determined for such
Eurodollar Rate Advances,
(ii) each such Advance, if an A Advance, will automatically,
on the last day of the then existing Interest Period therefor, Convert into a
Base Rate Advance (or if the Borrower was attempting to Convert a Base
Rate Advance into a Eurodollar Rate A Advance, such Advance will continue
as a Base Rate Advance), and
(iii) the obligation of the Banks to make Eurodollar Rate B
Advances, or to make, or to Convert A Advances into, Eurodollar Rate A
Advances shall be suspended until the Administrative Agent shall notify
the Borrowers and the Banks that the circumstances causing such
suspension no longer exist.
(c) If, with respect to any Eurodollar Rate A Advances, the
Majority Banks notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such A Advances will not adequately reflect the cost to
such Majority Banks of making, funding or maintaining their respective
Eurodollar Rate A Advances for such Interest Period, the Administrative Agent
shall forthwith so notify the Borrowers and the Banks, whereupon
(i) each Eurodollar Rate A Advance will automatically, on
the last day of the then existing Interest Period therefor, Convert into a
Base Rate Advance, and
(ii) the obligation of the Banks to make, or to Convert A
Advances into, Eurodollar Rate A Advances shall be suspended until the
Administrative Agent shall notify the Borrowers and such Banks that the
circumstances causing such suspension no longer exist.
(d) If a Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate A Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01,
the Administrative Agent will forthwith so notify the Borrower and the Banks
and such A Advances will automatically, on the last day of the then existing
Interest Period therefor, Convert into Base Rate Advances.
Section 2.11. Voluntary Conversion of A Advances. Any
Borrower may on any Business Day, upon notice given to the Administrative
Agent not later than 11:00 a.m. (New York City time) on the third Business Day
prior to the date of the proposed Conversion and subject to the provisions of
Sections 2.10 and 2.14, Convert all A Advances of one Type comprising the same
A Borrowing into Advances of another Type; provided, however, that any
Conversion of any Eurodollar Rate A Advances into Base Rate Advances shall be
made on, and only on, the last day of an Interest Period for such Eurodollar
Rate A Advances. Each such notice of a Conversion shall, within the
restrictions specified above, specify (i) the date of such Conversion, (ii)
the A Advances to be Converted, and (iii) if such Conversion is into
Eurodollar Rate A Advances, the duration of the Interest Period for each such
A Advance.
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Section 2.12. Prepayments. Any Borrower shall have the right
at any time and from time to time, upon prior written notice from the Borrower
to the Administrative Agent, to prepay its outstanding principal obligations
evidenced by its A Notes in whole or ratably (except as provided in Section
2.14 or 2.17) in part and may be obligated to make certain prepayments of
obligations evidenced by one or more A Notes subject to and in accordance with
the following (provided that every notice of prepayment given by a Subsidiary
Borrower must be countersigned by an authorized representative of TBC, in order
to evidence the consent of TBC, in its sole discretion, to that prepayment):
(a) With respect to Base Rate Borrowings, such prepayment
shall be without premium or penalty, upon notice given to the Administrative
Agent, and shall be made not later than 11:00 a.m. (New York City time) on the
date of such prepayment. The Borrower shall designate in such notice the
amount and date of such prepayment. Accrued interest on the amount so prepaid
shall be payable on the first Business Day of the calendar quarter next
following the prepayment. The minimum amount of Base Rate Borrowings which
may be prepaid on any occasion shall be $10,000,000 or an integral multiple of
$1,000,000 in excess thereof or, if less, the total amount of Base Rate
Advances then outstanding for that Borrower.
(b) With respect to Eurodollar Rate A Borrowings, such
prepayment shall be made on at least 3 Business Days' prior written notice.
The Borrower shall designate in such notice the amount and date of such
prepayment and the Eurodollar Rate A Borrowings against which each portion of
each prepayment shall be applied, which portion shall be ratable as among the
Banks. The minimum amount of Eurodollar Rate A Borrowings which may be prepaid
on any occasion shall be $10,000,000 or an integral multiple of $1,000,000 in
excess thereof or, if less, the total amount of Eurodollar Rate A Advances
then outstanding for that Borrower. The Borrower shall, on the date of the
prepayment, pay to the Administrative Agent for the account of each Bank
interest accrued to such date of prepayment on the principal amount prepaid
plus, in the case only of a prepayment on any date which is not the last day of
an applicable Eurodollar Interest Period, any amounts which may be required to
compensate such Bank for any losses or out-of-pocket costs or expenses
(including any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds, but excluding loss of anticipated
profits) incurred by such Bank as a result of such prepayment, provided that
such Bank shall exercise reasonable efforts to minimize any such losses, costs
and expenses.
(c) If due to any prepayment pursuant to Section 2.14 or to
the acceleration of any of the A Notes pursuant to Section 6.01 or otherwise,
any Bank receives payment of its portion of, or is subject to any Conversion
from, any Eurodollar Rate A Advance on any day other than the last day of an
Interest Period with respect to such A Advance, the Borrowers will pay to the
Administrative Agent for the account of such Bank any amounts which may be
payable to such Bank by the Borrower by reason of payment on such day as
provided in Section 2.12(b).
Section 2.13. Increases in Costs. (a) If, due to either (1)
the introduction of, or any change (other than, in the case of Eurodollar Rate
Borrowings, a change by way of imposition or increase of reserve requirements
referred to in Section 2.09) in, or new interpretation of, any law or
regulation effective at any time and from time to time on or after December 8,
1997 or (2) the compliance with any request from or by any central bank or
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other governmental authority (whether or not having the force of law), there
shall be any increase in the costs incurred by any Bank in agreeing to make or
making, funding or maintaining any Eurodollar Rate A Advance then or at any
time thereafter outstanding, then the Borrowers shall from time to time, upon
demand of such Bank (with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such Bank such amounts as
shall be required to compensate such Bank for such increased cost, provided
that such Bank shall exercise reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to minimize any such increased
cost. A certificate as to the amount of such increase in costs, submitted to
the Borrowers and the Administrative Agent by such Bank, shall be conclusive
and binding for all purposes under this Section 2.13(a), absent manifest error.
(b) If any Bank determines that compliance with any law or
regulation or any guidelines or request from any central bank or other
governmental authority (whether or not having the force of law) which is
enacted, adopted or issued at any time and from time to time after December 8,
1997 affects or would affect the amount of capital required or expected to be
maintained by such Bank or any corporation controlling such Bank and that the
amount of such capital is increased by or based upon the existence of such
Bank's commitment to lend hereunder and other commitments of this type, then,
upon demand by such Bank (with a copy of such demand to the Administrative
Agent), the Borrowers shall immediately pay to the Administrative Agent for the
account of such Bank, from time to time as specified by such Bank, additional
amounts sufficient to compensate such Bank in the light of such circumstances,
to the extent that such Bank reasonably determines such increase in capital to
be allocable to the existence of such Bank's commitment to lend hereunder,
provided that such Bank shall exercise reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to minimize any such
compensation payable by the Borrowers hereunder. A certificate as to such
amounts submitted to the Borrowers and the Administrative Agent by such Bank,
shall be conclusive and binding for all purposes, absent manifest error.
(c) (1) Any and all payments by any Borrower hereunder or
under the Notes shall be made, in accordance with Section 2.15, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deduction, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank and the Administrative Agent,
taxes that are imposed on its overall net income by the United States and
taxes that are imposed on its overall net income (and franchise taxes imposed
in lieu thereof) by the state or foreign jurisdiction under the laws of which
such Bank or the Administrative Agent (as the case may be) is organized or
any political subdivision thereof and, in the case of each Bank, taxes that
are imposed on its overall net income ( and franchise taxes imposed in lieu
thereof) by the state or foreign jurisdiction of such Bank's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or under the Notes being hereinafter referred to
as "Taxes"). If any Borrower shall be required by law to deduct any Taxes
from or in respect to any sum payable hereunder or under any Note to any Bank
or the Administrative Agent, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.13(c)) such Bank or
the Administrative Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) such
Borrower shall make such deductions and (iii) such Borrower shall pay the
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full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(2) In addition, each Borrower shall pay any
present or future stamp, documentary, excise, property or similar taxes,
charges, or levies that arise from any payment made hereunder or under the
Notes or from the execution, delivery or registration of, performing under, or
otherwise with respect to, this Agreement or the Notes (hereinafter referred
to as "Other Taxes").
(3) Each Borrower shall indemnify each Bank and the
Administrative Agent for and hold it harmless against the full amount of Taxes
and Other Taxes, and for the full amount of taxes of any kind imposed by any
jurisdiction on amounts payable under this Section 2.13(c), imposed on or paid
by such Bank or the Administrative Agent (as the case may be) and any
liability ( including penalties, additions to tax, interest and expenses)
arising therefrom or with respect thereto. This indemnification
shall be made within 30 days from the date such Bank or the Administrative
Agent (as the case may be) makes written demand therefor.
(4) Within 30 days after the date of any payment of
Taxes, the Borrower which paid such Taxes shall furnish to the Administrative
Agent, at its address referred to in Section 8.02, the original or a certified
copy of a receipt evidencing such payment. In the case of any payment
hereunder or under the Notes by or on behalf of any Borrower through an
account or branch outside the United States or by or on behalf of any Borrower
by a payor that is not a United States person, if the Borrower determines that
no taxes are payable in respect thereof, such Borrower shall furnish, or shall
cause such payor to furnish, to the Administrative Agent, at such address, an
opinion of counsel acceptable to the Administrative Agent stating that such
payment is exempt from Taxes. For purposes of this subsection (4) and
subsection (5), the terms "United States" and "United States person" shall
have the meanings specified in Section 7701 of the Internal Revenue Code.
(5) Each Bank organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date of its
execution and delivery of this Agreement (in the case of each Bank listed in
Schedule I attached hereto), and from the date on which any other Bank becomes
party hereto (in the case of each other Bank), and from time to time
thereafter as requested in writing by TBC (but only so long thereafter as such
Bank remains lawfully able to do so), provide each of the Administrative Agent
and TBC with two original Internal Revenue Service forms 1001 or 4224, as
appropriate, or any successor of other form prescribed by the Internal Revenue
Service, certifying that such Bank is exempt from or entitled to a reduced
rate of United States withholding tax on payments pursuant to this Agreement
or the Notes. If the forms provided by a Bank at the time such Bank first
becomes a party to this Agreement indicates a United States interest
withholding tax rate in excess of zero, withholding tax at such rate shall be
considered excluded from Taxes unless and until such Bank provides the
appropriate form certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered excluded from Taxes for
periods governed by such form; provided, however, that, if at the date on
which a Bank becomes a party to this Agreement, the Bank assignor was entitled
to payments under subsection (1) above in respect of United States withholding
tax with respect to interest paid at such date, then, to such extent, the term
Taxes shall include (in addition to withholding taxes that may be imposed in
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the future or other amounts otherwise includable in Taxes) United States
withholding tax, if any, applicable with respect to the Bank assignee on such
date. If any form or document referred to in this subsection (5) requires the
disclosure of information, other than information necessary to compute the tax
payable and information required on the date hereof by Internal Revenue
Service form 1001 or 4224, that the Bank reasonably considers to be
confidential, the Bank shall give notice thereof to the Borrower and shall not
be obligated to include in such form or document confidential information.
(6) For any period with respect to which any Bank
has failed to provide TBC with the appropriate form described in subsection
(5) above (other than if such failure is due to a change in law occurring
after the date on which a form originally was required to be provided or if
such form otherwise is not required under subsection (5) above), such Bank
shall not be entitled to indemnification under subsection (1) or (3) with
respect to Taxes imposed by the United States by reason of such failure;
provided, however, that should a Bank become subject to Taxes because of its
failure to deliver a form required hereunder, TBC shall take such steps as
such Bank shall reasonably request to assist such Bank to recover such Taxes.
(d) Upon receipt of notice from any Bank claiming
compensation pursuant to this Section 2.13 and as long as no Event of Default
and no event which with notice or lapse of time or both would constitute an
Event of Default shall have occurred and be continuing, TBC shall have the
right, on or before the 30th day after the date of receipt of such notice, (i)
to arrange for one or more Banks or other commercial banks to assume the
Commitment of such Bank; subject, however, to payment to Administrative Agent
by assignor or assignee of a processing and recording fee of $3,500, in the
event the replacement bank is not a Bank; or (ii) to arrange for the
Commitment of such Bank to be terminated and all A Advances owed to such Bank
to be prepaid; and, in either case, subject to payment in full of all
principal, accrued and unpaid interest, fees and other amounts payable under
this Agreement and then owing to such Bank immediately prior to the assignment
or termination of the Commitment of such Bank.
Section 2.14. Illegality. If there is any introduction of, or
change in, or in the interpretation of, any law or regulation, which in the
opinion of counsel for the Administrative Agent in the relevant jurisdiction
shall make it unlawful, or if any central bank or other governmental authority
shall assert that it is unlawful, for any Bank to continue to fund or maintain
any Eurodollar Rate Advances or to perform its obligations with respect to
Eurodollar Rate Advances as provided hereunder, upon the issuance of such
opinion of counsel or such assertion by a central bank or other governmental
authority and notice given to the Borrowers (accompanied by such opinion, if
applicable) by the Administrative Agent, the Borrowers shall forthwith either
(1) prepay in full all Eurodollar Rate A Advances made by such Bank as a part
of Eurodollar Rate A Borrowings, with accrued interest thereon and all other
amounts which may be payable to such Bank by the Borrowers as provided in
Section 2.12(b) or (2) Convert all such Eurodollar Rate A Advances made by such
Bank into A Borrowings of another Type as provided in Section 2.11. Upon such
demand or such notice of prepayment or Conversion, the obligation of such Bank
to make or to Convert A Advances into, Eurodollar Rate A Advances shall be
suspended until such time as the event giving rise to such prepayment or
Conversion shall no longer apply, at which time the Commitment of such Bank to
make A Advances for the funding of, or Conversion to, Eurodollar Rate A
Borrowings shall be reinstated, subject to its then available Commitment.
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Section 2.15. Payments and Computations. (a) The Borrowers
shall make each payment hereunder and under the Notes not later than 11:00
a.m. (New York City time) on the day when due in U.S. dollars to the
Administrative Agent at the Agent's Account in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal or interest or fees ratably (other
than amounts payable pursuant to Section 2.05, 2.09, 2.13, 2.14, or 2.17) to
the Banks for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Bank to
such Bank for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. From and after the
effective date of an assignment pursuant to Section 2.18, the Administrative
Agent shall make all payments hereunder and under the Notes in respect of the
interest assigned thereby to the Bank assignee thereunder, and the parties to
such assignment shall make all appropriate adjustments in such payments for
the periods prior to such effective date directly between themselves.
(b) All computations of interest based on the Base Rate
shall be made by the Administrative Agent on the basis of a year of 365 or 366
days, as the case may be, and all computations of interest based on the
Eurodollar Rate or the Federal Funds Rate and of Facility Fees shall be made
by the Administrative Agent, and all computations of interest pursuant to
Section 2.09 shall be made by a Bank, on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or fees are
payable. Each determination by the Administrative Agent (or, in the case of
Section 2.09, by a Bank) of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or fee, as the
case may be; provided, however, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(d) Unless the Administrative Agent shall have received
notice from a Borrower prior to the date on which any payment is due to the
Banks hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that such Borrower shall not have so made such payment in full to the
Administrative Agent, each Bank shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Administrative
Agent, at the Federal Funds Rate.
Section 2.16. Sharing of Payments, Etc. If any Bank shall
obtain any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise) on account of the A Advances made by it
(other than pursuant to Sections 2.09, 2.13, 2.14 or 2.17), in excess of its
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ratable share of payments on account of the A Advances obtained by all the
Banks, such Bank shall forthwith purchase from the other Banks such
participations in the A Advances made by them as shall be necessary to cause
such purchasing Bank to share the excess payment ratably with each of them,
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, such purchase from each Bank
shall be rescinded and such Bank shall repay to the purchasing Bank the
purchase price to the extent of such recovery together with an amount equal to
such Bank's ratable share (according to the proportion of (i) the amount of
such Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrowers
agree that any Bank so purchasing a participation from another Bank pursuant
to this Section 2.16 may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Bank were creditor of the Borrowers in the
amount of such participation.
Section 2.17. Alteration of Commitments and Addition of Banks.
By a written agreement executed only by TBC, the Administrative Agent and the
Bank or bank affected:
(i) the Commitment of such Bank may be increased to the
amount set forth in such agreement;
(ii) such bank may be added as a Bank with a Commitment as
set forth in such agreement provided that it agrees to be bound by all the
terms and provisions of this Agreement; and
(iii) the unused portion of the Commitment of such Bank may
be reduced or terminated and the A Advances owing to such Bank may be prepaid
in whole or in part, all as set forth in such agreement.
The Administrative Agent may execute any such agreement without
the prior consent of any Bank (other than the Bank or bank affected), except
that if at the time the Administrative Agent proposes to execute such
agreement either (A) TBC's long-term senior unsecured debt is rated lower than
BBB by S&P or lower than Baa2 by Moody's or (B) an Event of Default, or an
event which with notice or lapse of time or both would constitute an Event of
Default, shall have occurred and be continuing, then the Administrative Agent
shall not execute any such agreement unless it has first obtained the prior
written consent of the Majority Banks and provided that the Administrative
Agent shall not execute any such agreement without the prior written consent
of the Majority Banks if such agreement would increase the total of the
Commitments to an amount in excess of $1,500,000,000. The Administrative
Agent shall give each Bank prompt notice of any such agreement becoming
effective. All requests for Bank consent under the provisions of this Section
2.17 shall specify the date upon which any such increase, addition, reduction,
termination, or prepayment shall become effective (the "Effective Date") and
shall be made by means of a Request for Alteration substantially in the form
as set forth in Exhibit C. On the Effective Date on which the Commitment of
any Bank is increased, decreased, terminated or created or on which prepayment
is made, all as described in such Request for Alteration, the Borrowers or
such Bank, as the case may be, shall make available to the Administrative
Agent not later than 12:30 p.m. (New York City time) on such date, in same day
funds, the amount, if any, which may be required (and the Administrative Agent
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shall distribute such funds received by it to the Borrowers or to such Banks,
as the case may be) so that at the close of business on such date the sum of
the A Advances of each Bank then outstanding shall be in the same proportion
to the total of the A Advances of all the Banks then outstanding as the
Commitment of each Bank is to the total of the Commitments. The
Administrative Agent shall give each Bank notice of the amount to be made
available by, or to be distributed to, such Bank at least 5 Business Days
before such payment is made.
Section 2.18. Assignments; Sales of Participations and Other
Interests in Notes.
(a) From time to time each Bank may with the prior consent of
TBC and the affected Borrowers and subject to the qualifications set forth
below, assign to one or more Banks or other commercial banks (each such Bank
or bank being an "Eligible Assignee") all or any portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the A Advances owing to it and all A Notes held by
it) and will, at any time, if arranged by the Company pursuant to clause (A)
of this sentence upon at least 30 days' notice to such Bank and the
Administrative Agent, assign to one or more Eligible Assignees all of its
rights and obligations under this Agreement (including without limitation, all
of its Commitment, the A Advances owing to it and all A Notes held by it);
provided, however, that if such Bank shall notify TBC, the affected Borrowers
and the Administrative Agent of its intent to request the consent of TBC and
the affected Borrowers to an assignment, TBC shall have the right, for 30 days
after receipt of such notice and so long as no Event of Default shall have
occurred and be continuing, in its sole discretion either (A) to arrange for
one or more Eligible Assignees to accept such assignment (a "Required
Assignment") or (B) to arrange for the rights and obligations of such Bank
(including, without limitation, such Bank's Commitment), and the total
Commitments of the Banks to be reduced by an amount equal to the amount of
such Bank's Commitment to be assigned and in connection with such reduction,
to prepay that portion of the A Advances owing to such Bank which it proposes
to assign; provided further that if TBC fails to notify such Bank that it has
arranged for an assumption or reduction of the portion of Commitment to be
assigned within 30 days of the receipt by TBC of such Bank's request for
consent to assignment, the Borrowers shall be deemed to consent to the
proposed assignment; provided further that (i) any such assignment shall not
require the Borrowers to file a registration statement with the Securities and
Exchange Commission or apply to qualify the A Notes under the blue sky laws of
any state and the assigning Bank shall otherwise comply with all federal and
state securities laws applicable to such assignment; (ii) the amount of the
Commitment of the assigning Bank being assigned pursuant to each such
assignment (determined as of the date of the assignment) shall either (A) equal
50% of all such rights and obligations (or 100% in the case of a Required
Assignment) or (B) not be less than $10,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (iii) the aggregate amount of the Commitment
of the assigning Bank assigned pursuant to all such assignments of such Bank
(after giving effect to such assignment) shall in no event exceed 50% (except
in the case of a Required Assignment) of all such Bank's Commitment (as set
forth in Section 1.02, in the case of each Bank that is a party hereto as of
December 8, 1997, or as set forth in the Register as the aggregate Commitment
assigned to such Bank pursuant to one or more assignments, in the case of any
assignee). No Bank shall be obligated to make a Required Assignment unless
such Bank shall have received payments in an aggregate amount at least equal to
the outstanding principal amount of all A Advances being assigned, together
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with accrued interest thereon to the date of payment of such principal amount
and all other amounts payable to such Bank under this Agreement (including
without limitation Section 2.12(c) provided that such Bank shall receive its
pro rata share of the Facility Fee on the next date on which the Facility Fee
is payable). From and after the effective date of any assignment pursuant to
this Section 2.18(a), (x) the assignee thereunder shall be a party hereto and,
to the extent that rights and obligations hereunder have been assigned to it
pursuant to such assignment have the rights and obligations of a Bank hereunder
except that such assignee may not elect to assign any of its rights and
obligations under this Agreement acquired by any assignment pursuant to this
Section 2.18(a) for a period of nine months following the effective date
specified in such assignment and (y) the Bank assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such assignment relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an assignment covering all or the
remaining portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto). Notwithstanding any
other provision in this Agreement, any Bank may at any time (aa) create a
security interest in all or any portion of its rights under this Agreement
(including without limitation, the Advances owing to it and the Notes held by
it) in favor of any Federal Reserve Bank in accordance with Regulation A of the
Board of Governors of the Federal Reserve System, and (bb) assign all or any
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the A Advances owing to it and
all A Notes held by it) to an affiliate of such Bank, except if the result of
the assignment is to increase the cost to the Borrowers of requesting,
borrowing, continuing, maintaining, paying or converting any Advances, provided
in each case that such Bank gives prior or contemporaneous notice to TBC, the
affected Borrowers and Administrative Agent of the assignment.
(b) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each assignment delivered to and
accepted by it and a register for the recordation of the names and addresses
of the Banks and the Commitment of, and principal amount of the A Advances of
each Borrower owing to, each Bank from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrowers, the Administrative Agent and the
Banks may treat each entity whose name is recorded in the Register as a Bank
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrowers or any Bank at any reasonable time and from
time to time upon reasonable prior notice. Upon receipt by the Administrative
Agent from the assigning Bank of an assignment in form and substance
satisfactory to the Administrative Agent executed by an assigning Bank and an
assignee representing that it is an Eligible Assignee, together with each A
Note subject to such assignment, and a processing and recording fee of $3,500
(payable by either the assignor or the assignee), the Administrative Agent
shall, if such assignment is a Required Assignment or has been consented to by
the Borrowers to the extent required by Section 2.18(a) or has been effected
pursuant to Section 2.19(c), (i) accept such assignment, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to TBC and the affected Borrowers. Within five Business Days after
its receipt of such notice, the Company, at its own expense, shall execute and
deliver to the Administrative Agent in exchange for each surrendered A Note a
new A Note to the order of such Eligible Assignee in an amount equal to the
Commitment assumed by it pursuant to such assignment, and if the assigning
Bank has retained a Commitment hereunder, a new A Note to the order of the
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assigning Bank in an amount equal to the Commitment retained by it hereunder.
Such new A Note or A Notes shall be in an aggregate principal amount equal to
the principal amount of such surrendered A Note, shall be dated the effective
date of such assignment and shall otherwise be substantially in the form of
Exhibit A-1 or A-2 hereto, as appropriate.
(c) Each Bank may sell participations in all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Notes held by it) to one or more affiliates of such Bank or to one or more
other commercial banks; provided, however, that (i) any such participation
shall not require the Borrowers to file a registration statement with the
Securities and Exchange Commission or apply to qualify the Notes under the
blue sky laws of any state and the Bank selling or granting such participation
shall otherwise comply with all federal and state securities laws applicable
to such transaction, (ii) no purchaser of such a participation shall be
considered to be a "Bank" for any purpose under the Agreement, (iii) such
Bank's obligations under this Agreement (including, without limitation, its
Commitment to the Borrowers hereunder) shall remain unchanged, (iv) such Bank
shall remain solely responsible to the other parties hereto for the
performance of such obligations, (v) such Bank shall remain the holder of such
Notes for all purposes of this Agreement, and (vi) the Borrowers, the
Administrative Agent and the other Banks shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement.
(d) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
2.18, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers furnished to such Bank
by or on behalf of the Borrowers; provided, however, that, prior to any such
disclosure of information that is not publicly available, such Bank shall
obtain the written consent of the Borrowers, and the assignee or participant
or proposed assignee or participant shall agree to preserve the
confidentiality of any such information received by it from such Bank except
as disclosure may be required or appropriate to governmental authorities,
pursuant to legal process or by law or governmental regulation or authority.
Section 2.19. Extension of Termination Date.
(a) TBC may, on behalf of itself and the Subsidiary Borrowers,
by written notice to the Administrative Agent in the form of Exhibit E (each
such notice being an "Extension Request") given no earlier than 45 days and no
later than 30 days prior to the then applicable Termination Date, request that
the then applicable Termination Date be extended to a date 364 days after the
then applicable Termination Date. Such extension shall be effective with
respect to each Bank which, by a written notice in the form of Exhibit F (a
"Continuation Notice") to TBC and the Administrative Agent given no earlier
than 30 days and no later than 20 days prior to the then applicable
Termination Date, consents, in its sole discretion, to such extension (each
Bank giving a Continuation Notice being referred to sometimes as a "Continuing
Bank" and each Bank other than a Continuing Bank being a "Non-Extending Bank")
provided, however, that such extension shall be effective only if the
aggregate Commitments of the Continuing Banks are not less than 66-2/3% of the
aggregate Commitments of the Banks on the date of the Extension Request. No
Bank shall have any obligation to consent to any such extension of the
Termination Date. The Administrative Agent shall notify each Bank of the
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receipt of an Extension Request within three (3) Business Days after receipt
thereof. The Administrative Agent shall notify the Company and the Banks no
later than 15 days prior to the applicable Termination Date whether the
Administrative Agent has received Continuation Notices from Banks holding at
least 66-2/3% of the Aggregate Commitments on the date of the Extension
Request.
(b) The Commitment of each Non-Extending Bank shall
terminate at the close of business on the Termination Date in effect prior to
the delivery of such Extension Request without giving any effect to such
proposed extension, and on such Termination Date TBC shall take one of the
following three actions:
(i) Replace the Non-Extending Banks pursuant to Section
2.19(c); or
(ii) Pay or cause to be paid to the Administrative Agent,
for the account of the Non-Extending Banks, an amount equal to the
Non-Extending Banks' A Advances, together with accrued but unpaid interest and
fees thereon and all other amounts then payable hereunder; or
(iii) By giving notice to the Administrative Agent no later
than three days prior to the Termination Date, elect not to extend the
Termination Date beyond the then applicable Termination Date and in this event
the Borrowers may in their sole discretion repay any amount of the A Advances
then outstanding or make an A Borrowing pursuant to Article 2 and the amount
of the A Advances outstanding thereafter shall convert to a term loan pursuant
to Section 2.03.
(c) A Non-Extending Bank shall be obligated, at the request
of TBC to assign at any time prior to the close of business on the Termination
Date applicable to such Non-Extending Bank all of its rights (other than
rights that would survive the termination of the Agreement pursuant to Section
8.03) and obligations hereunder to one or more Banks or other commercial banks
nominated by TBC and willing to become Banks in place of such Non-Extending
Bank (the "Replacement Banks"). In order to qualify as a Replacement Bank, a
Bank or bank must satisfy all of the requirements of this Agreement (including
without limitation the terms of Section 2.18 relating to Required
Assignments). Such obligation of the Non-Extending Banks is subject to such
Non-Extending Bank receiving (i) payment in full from the Replacement Banks of
the principal amount of all Advances owing to such Non-Extending Bank
immediately prior to an assignment to the Replacement Banks and (ii) payment
in full from the Borrowers of all accrued interest and fees and other amounts
payable hereunder and then owing to such Non-Extending Bank immediately prior
to the assignment to the Replacement Banks. Upon such assignment, the
Non-Extending Bank shall no longer be a Bank, such Replacement Banks shall
become Continuing Banks, and the Administrative Agent shall make appropriate
entries in the Register to reflect the foregoing.
Section 2.20. Subsidiary Borrowers. (a) TBC may at any time,
and from time to time, by delivery to the Administrative Agent of a Borrower
Subsidiary Letter substantially in the form of Exhibit D hereto, duly executed
by TBC and the respective Subsidiary, designate such Subsidiary as a
"Subsidiary Borrower" for purposes of this Agreement, and such Subsidiary
shall thereupon become a "Subsidiary Borrower" for purposes of this Agreement
and, as such, shall have all of the rights and obligations of a Borrower
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hereunder. The Administrative Agent shall promptly notify each Bank of each
such designation by TBC and the identity of the respective Subsidiary.
(b) No Advances shall be made to a Subsidiary Borrower, and
no Conversion of any Advances at the request of a Subsidiary Borrower shall be
effective, without, in each and every instance, the prior consent of TBC, in
its sole discretion, which shall be evidenced by the countersignature of TBC
to the relevant Notice of Borrowing or notice of Conversion. In addition, no
notices which are to be delivered by a Borrower hereunder shall be effective,
with respect to any Subsidiary Borrower, unless the notice is countersigned by
TBC.
(c) The occurrence of any of the following events with
respect to any Subsidiary Borrower shall constitute a "Subsidiary Borrower
Termination Event" with respect to such Subsidiary Borrower:
(i) such Subsidiary Borrower shall cease to be a
Subsidiary, as defined under this Agreement;
(ii) such Subsidiary Borrower shall liquidate or dissolve;
(iii) such Subsidiary Borrower shall fail to preserve and
maintain its existence, or shall make any material change in the nature of its
business as carried out on the date such Subsidiary Borrower becomes a
Borrower hereunder;
(iv) such Subsidiary Borrower shall merge or consolidate
with or into, or convey, transfer, lease, or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to any Person (except
that a Subsidiary Borrower may merge into or dispose of assets to another
Borrower); or
(vii) any of the "Events of Default" described in Section
6.01 shall occur to or with respect to such Subsidiary Borrower as if such
Subsidiary Borrower were TBC.
(d) Upon the occurrence of a Subsidiary Borrower
Termination Event with respect to any Subsidiary Borrower, such Subsidiary
Borrower (the "Terminated Subsidiary Borrower") shall cease to be a Borrower
for purposes of this Agreement and shall no longer be entitled to request or
borrow Advances hereunder. All outstanding Advances of a Terminated
Subsidiary Borrower shall be automatically due and payable as of the date on
which the Subsidiary Borrower Termination Event of such Terminated Subsidiary
Borrower occurred, together with accrued interest thereon and any other
amounts then due and payable by that Borrower hereunder, unless, in the case
of a Subsidiary Borrower Termination Event described in paragraph (iv) of
Section 2.20(c), the other Person party to the transaction is a Borrower and
such other Borrower has assumed in writing all of the outstanding Advances and
other obligations under this Agreement and under the Notes of the Terminated
Subsidiary Borrower.
(e) Each of the Subsidiary Borrowers hereby appoint and
authorize TBC to take such action as agent on their behalf and to exercise
such powers under this Agreement as are delegated to TBC by the terms hereof,
together with such powers as are reasonably incidental thereto.
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(f) Notwithstanding anything in this Agreement to the
contrary, each of the Subsidiary Borrowers shall be severally liable for the
liabilities and obligations of such Subsidiary Borrower under this Agreement
and its Notes, and no Subsidiary Borrower shall be liable for the obligations
of any other Borrower under this Agreement and such other Borrower's Notes.
Each Subsidiary Borrower shall be severally liable for all payments of the
principal of and interest on Advances to such Subsidiary Borrower, and any
other amount due hereunder that is specifically allocable to such Subsidiary
Borrower or the Advances of such Subsidiary Borrower. With respect to any
amount due hereunder, including fees, that is not specifically allocable to
any particular Borrower, each Borrower shall be liable for such amount pro
rata in the same proportion as such Borrower's outstanding Advances bear to
the total of then-outstanding Advances to all Borrowers.
ARTICLE 3
Representations, Warranties and Certain Covenants
Section 3.01. Representations and Warranties by the Borrowers.
Each of the Borrowers represent and warrant as follows:
(a) TBC is a duly organized corporation existing in good
standing under the laws of the State of Delaware. Each Subsidiary Borrower is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and each of TBC and each Subsidiary Borrower
is qualified to do business in every jurisdiction where such qualification is
required, except where the failure to so qualify would not have a material
adverse effect on the financial condition of TBC and the Subsidiary Borrowers
as a whole.
(b) The execution and delivery and the performance of the
terms of this Agreement, the Notes and each Guaranty are within the corporate
powers of each Borrower party thereto, have been duly authorized by all
necessary corporate action, have received all necessary governmental approval
(which approval remains in full force and effect), and do not contravene any
law, any provision of the Certificate of Incorporation or By-Laws of any
Borrower party thereto or any contractual restriction binding on any Borrower
party thereto.
(c) This Agreement and the Notes, when duly executed and
delivered by each Borrower party thereto, will constitute legal, valid and
binding obligations of such Borrower, enforceable against such Borrower in
accordance with their respective terms, and each Guaranty, when duly executed
and delivered by TBC, will constitute a legal, valid and binding obligation of
TBC, enforceable against TBC in accordance with its terms.
(d) In TBC's opinion, there are no pending or threatened
actions or proceedings before any court or administrative agency which can
reasonably be expected to materially adversely affect the financial condition
or operations of the Company or any Subsidiary.
(e) The Consolidated statement of financial position as of
December 31, 1996 and the related Consolidated statement of earnings and
retained earnings for the year then ended (copies of which have been furnished
to each Bank) correctly set forth the Consolidated financial condition of TBC
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and its Subsidiaries as of such date and the result of the Consolidated
operations for such year, and since such date there has been no material
adverse change in such condition or operations which is likely to impair the
ability of TBC to repay the Advances.
(f) No Borrower is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock within the
meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System, and no proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock. Following application of the
proceeds of each Advance, not more than 25 percent of the value of the assets
(either of any Borrower only or of each Borrower and its subsidiaries on a
consolidated basis) subject to the provisions of Section 4.02(a) will be
margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System).
(g) No Borrower is an "investment company," or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended. Neither the making of any Advances, nor the application
of the proceeds or repayment thereof by any Borrower, nor the consummation of
the other transactions contemplated hereby, will violate any provision of such
Act or any rule, regulation or order of the Securities and Exchange Commission
thereunder.
Section 3.02. Representation by the Banks. Each Bank
represents that its present intent is that it will acquire the A Notes drawn
to its order for its own account and that each such A Note is being acquired
for the purpose of investment and not with a view to distribution or resale
thereof, subject, nevertheless, to the necessity that such Bank remain in
control at all times of the disposition of property held by it for its own
account.
ARTICLE 4
Covenants of TBC
Section 4.01. Affirmative Covenants of TBC. From the date of
this Agreement and so long as any amount shall be payable by the Borrowers to
any Bank hereunder or any Commitment shall be outstanding, TBC will:
(a) Furnish to the Banks: (1) within 60 days after the
close of each of the first three quarters of each of TBC's fiscal years, a
Consolidated statement of financial position of TBC and the Subsidiaries as of
the end of such quarter and a Consolidated comparative statement of earnings
and retained earnings of TBC and the Subsidiaries for the period commencing at
the end of the previous fiscal year and ending with the end of such quarter,
each certified by an authorized officer of TBC, (2) within 120 days after the
close of each of TBC's fiscal years, and if requested by the Administrative
Agent, within 60 days after the close of each of the first three quarters
thereof, a statement certified by an authorized officer of TBC showing in
detail the computations required by the provisions of Sections 4.02(a),
4.02(b), 4.02(c) and 4.02(d), hereof, based on the figures which appear on the
books of account of TBC and the Subsidiaries at the close of such quarters,
(3) within 120 days after the close of each of TBC's fiscal years, a copy of
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the annual audit report of TBC, certified by independent public accountants of
recognized standing acceptable to the Administrative Agent, together with
financial statements consisting of a Consolidated statement of financial
position of TBC and the Subsidiaries as of the end of such fiscal year and a
Consolidated statement of earnings and retained earnings of TBC and the
Subsidiaries for such fiscal year, (4) within 120 days after the close of each
of TBC's fiscal years, a statement certified by the independent public
accountants who shall have prepared the corresponding audit report furnished
to the Banks pursuant to the provisions of clause (3) of this subsection (a),
to the effect that, in the course of preparing such audit report, such
accountants had obtained no knowledge, except as specifically stated, that TBC
had been in violation of the provisions of any one of the following Sections:
Sections 4.02(a), 4.02(b), 4.02(c) and 4.02(d), at any time during such fiscal
year, (5) promptly upon their becoming available, all financial statements,
reports and proxy statements which TBC may send to its stockholders, (6)
promptly upon their becoming available, all regular and periodic financial
reports which TBC or any Subsidiary shall file with the Securities and
Exchange Commission or any national securities exchange, (7) within 3 Business
Days after the discovery of the occurrence of any event which constitutes an
Event of Default or would constitute an Event of Default with the passage of
time or the giving of notice, or both, notice of such occurrence together with
a detailed statement by a responsible officer of TBC of the steps being taken
by TBC or the appropriate Subsidiary to cure the effect of such event and (8)
such other information respecting the financial condition and operations of
TBC or the Subsidiaries as the Administrative Agent may from time to time
reasonably request.
(b) Duly pay and discharge, and cause each Subsidiary duly
to pay and discharge, all taxes, assessments and governmental charges upon it
or against its properties prior to a date which is 5 Business Days after the
date on which penalties are attached thereto, except and to the extent only
that the same shall be contested in good faith and by appropriate proceedings
by TBC or the appropriate Subsidiary.
(c) Maintain, and cause each Subsidiary to maintain, with
financially sound and reputable insurance companies or associations, insurance
of the kinds, covering the risks and in the relative proportionate amounts
usually carried by companies engaged in businesses similar to that of TBC or
such Subsidiary, except, to the extent consistent with good business practices,
such insurance may be provided by TBC through its program of self insurance.
(d) Preserve and maintain its corporate existence.
Section 4.02. General Negative Covenants of TBC. From the
date of this Agreement and so long as any amount shall be payable by TBC to
any Bank hereunder or any Commitment shall be outstanding, TBC will not:
(a) Create, incur, assume or suffer to exist any mortgage,
pledge, lien, security interest or other charge or encumbrance (including the
lien or retained security title of a conditional vendor) upon or with respect
to any of its Property, Plant and Equipment, or upon or with respect to the
Property, Plant and Equipment of any Subsidiary, or assign or otherwise
convey, or permit any Subsidiary to assign or otherwise convey, any right to
receive income from or with respect to its Property, Plant and Equipment,
except (1) liens in connection with workmen's compensation, unemployment
insurance or other social security obligations, (2) liens securing the
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performance of bids, tenders, contracts (other than for the repayment of
borrowed money), leases, statutory obligations, surety and appeal bonds, liens
to secure progress or partial payments made to TBC or such Subsidiary and
other liens of like nature made in the ordinary course of business, (3)
mechanics', workmen's, materialmen's or other like liens arising in the
ordinary course of business in respect of obligations which are not due or
which are being contested in good faith, (4) liens for taxes not yet due or
being contested in good faith and by appropriate proceedings by TBC or the
affected Subsidiary, and (5) other liens, charges and encumbrances, so long as
the aggregate amount of the Consolidated Debt for which all such liens,
charges and encumbrances serve as security does not exceed 15% of Consolidated
net Property, Plant and Equipment.
(b) Permit Consolidated Debt to be at any time more than
60% of Total Capital, where "Total Capital" means the sum of Shareholders'
Equity and Consolidated Debt.
(c) Make any payment, or permit any Subsidiary to make any
payment, of principal or interest on any Debt which payment would constitute a
violation of the terms of this Agreement or of the terms of any indenture or
agreement binding on such corporation or to which such corporation is a party.
(d) Merge or consolidate with or into, or convey, transfer,
lease, or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person.
(e) Make any material change in the nature of its business
as carried out on the date hereof.
Section 4.03. Financial Statement Terms. For purposes of
Section 4.02(b) above, all capitalized terms shall be as they appear on TBC's
published Consolidated financial statements and calculated under the generally
accepted accounting principles and practices applied by TBC on the date hereof
in the preparation of such financial statements. However, notwithstanding the
foregoing: (i) such terms shall exclude amounts attributable to BCSC and its
subsidiaries and BFC; and (ii) Total Capital shall exclude the effects of any
repurchase by TBC of its common stock and any merger-related accounting
adjustments which are attributable to the merger with or acquisition of the
McDonnell Douglas Corporation by TBC.
Section 4.04. Waivers of Covenants. The departure by TBC or
any Subsidiary from the requirements of any of the provisions of this Article
4 shall be permitted only if such departure shall have been consented to in
advance in a writing signed by Banks representing 66-2/3% or more of the then
outstanding aggregate principal amount of the A Notes or, if no such principal
or face amount is outstanding, Banks having at least 66-2/3% of the total of
the Commitments, and such writing shall be effective as a consent only to the
specific departure described in such writing. Such departure by TBC or any
Subsidiary when properly consented to by the required number of Banks as set
out in the preceding sentence shall not constitute an Event of Default under
Section 6.01(c).
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ARTICLE 5
Conditions Precedent to Borrowings
Section 5.01. Conditions Precedent to the Initial Borrowing
of TBC. The obligation of each Bank to make its initial Advance to TBC is
subject to the fulfillment of all of the following conditions:
The Administrative Agent shall have received on or before
the day of the initial Borrowing all of the following, each dated the day of
the initial Borrowing, in form and substance satisfactory to the
Administrative Agent and its counsel.
(a) A Base Rate A Note, a Eurodollar A Note, a Fixed Rate B
Note and a Eurodollar B Note drawn to the order of each Bank executed and
delivered by TBC to the Administrative Agent for delivery to each Bank.
(b) Copies of all documents, certified by an officer of
TBC, evidencing necessary corporate action by TBC and governmental approvals,
if any, with respect to this Agreement and the Notes.
(c) A certificate of the Secretary or an Assistant
Secretary of TBC which shall certify the names of the officers of TBC
authorized to sign the Notes and the other documents to be delivered
hereunder, together with true specimen signatures of such officers and
facsimile signatures of officers authorized to sign by facsimile signature.
Each Bank may conclusively rely on such certificate until it shall have
received a further certificate of the Secretary or an Assistant Secretary of
TBC canceling or amending the prior certificate and submitting signatures of
the officers named in such further certificate.
(d) A favorable opinion of the chief legal officer of TBC
substantially in the form of Exhibit G hereto and as to such other matters as
the Administrative Agent may reasonably request, which opinion TBC hereby
expressly instructs such chief legal officer to prepare and deliver.
(e) A favorable opinion of Shearman & Sterling, counsel for
the Administrative Agent, substantially in the form of Exhibit H hereto.
(f) TBC shall have terminated in whole the commitments of
the banks parties to the Credit Agreement dated as of September 27, 1996 among
TBC, the banks parties thereto and Citibank, N.A., as agent (the "1996 Loan
Agreement").
(g) TBC and its Subsidiaries shall have satisfied all of
their respective obligations under the 1996 Loan Agreement including, without
limitation, the payment of all fees under such agreement.
Section 5.02. Conditions Precedent to Each A Borrowing of TBC.
The obligation of each Bank to make an A Advance on the occasion of each A
Borrowing (including the initial Borrowing) is subject to the further
conditions precedent that on the date of such request and the date of such
Borrowing, the following statements shall be true, and each of the giving of
the applicable Notice of A Borrowing and the acceptance by TBC of the proceeds
of such A Borrowing shall be a representation by TBC that:
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(i) the representations and warranties contained in Section
3.01 hereof are true and accurate on and as of each such date as though made
on and as of each such date (except to the extent that such representations
and warranties relate solely to an earlier date); and
(ii) as of each such date no event has occurred and is
continuing, or would result from the proposed A Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for the
requirement that notice be given or time elapse or both.
Section 5.03. Conditions Precedent to Each B Borrowing of TBC.
The obligation of each Bank to make a B Advance on the occasion of each B
Borrowing (including the initial Borrowing) is subject to the further
conditions precedent that (1) TBC shall have furnished to the Administrative
Agent in connection with such B Borrowing, (x) a Consolidated statement of
financial position of TBC and the Subsidiaries as of the end of each of the
first three quarters of TBC's fiscal year (other than a quarter ending within
sixty days prior to the date of the related Notice of B Borrowing) and a
Consolidated comparative statement of earnings and retained earnings of TBC
and the Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, each certified by an
authorized officer of TBC and (y) a copy of the annual audit report of TBC,
certified by independent public accountants of recognized standing acceptable
to the Administrative Agent, together with financial statements consisting of
a Consolidated statement of the financial position of TBC and the Subsidiaries
as of the end of the applicable fiscal year and a Consolidated statement of
earnings and retained earnings of TBC and the Subsidiaries for such fiscal year
(the applicable fiscal year being the most recent year with respect to which
the annual audit report of TBC is due pursuant to Section 4.01(a)(3)) and (2)
on the date of such request and the date of such Borrowing, the following
statements shall be true, and each of the giving of the applicable Notice of B
Borrowing and the acceptance by TBC of the proceeds of such B Borrowing shall
be a representation by TBC that:
(i) the representations and warranties contained in Section
3.01 hereof are true and accurate on and as of each such date as though made
on and as of each such date (except to the extent that such representations
and warranties relate solely to an earlier date);
(ii) as of each such date no event has occurred and is
continuing, or would result from the proposed B Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for the
requirement that notice be given or time elapse or both; and
(iii) no event has occurred and no circumstance exists as a
result of which the information concerning TBC that has been provided by TBC
to the Administrative Agent or the Banks in connection with such B Borrowing
would include an untrue statement of a material fact or omit to state any
material fact or any fact necessary to make the statements contained therein,
in light of the circumstances under which they were made, not misleading.
Section 5.04. Conditions Precedent to the Initial Borrowing of
a Subsidiary Borrower. The obligation of each Bank to make its initial
Advance to any particular Subsidiary Borrower is subject to the receipt by the
Administrative Agent, on or before the day of the initial Borrowing by such
Subsidiary Borrower, all of the following, each dated the day of the initial
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Borrowing, in form and substance satisfactory to the Administrative Agent and
its counsel:
(i) A Borrower Subsidiary Letter, substantially in the form
of Exhibit D hereto, executed by such Subsidiary Borrower and TBC;
(ii) A Base Rate A Note, a Eurodollar A Note, a Fixed Rate B
Note and a Eurodollar B Note drawn to the order of each Bank executed and
delivered by the Subsidiary Borrower to the Administrative Agent for delivery
to each Bank.
(iii) Copies of all documents, certified by an officer of the
Subsidiary Borrower, evidencing necessary corporate action by the
Subsidiary Borrower and governmental approvals, if any, with respect to
this Agreement and the Notes.
(iv) A certificate of the Secretary or an Assistant
Secretary of TBC or the Subsidiary Borrower which shall certify the names of
the officers of the Subsidiary Borrower authorized to sign the Notes and the
other documents to be delivered hereunder, together with true specimen
signatures of such officers and facsimile signatures of officers authorized to
sign by facsimile signature. Each Bank may conclusively rely on such
certificate until it shall have received a further certificate of the
Secretary or an Assistant Secretary of TBC or the Subsidiary Borrower
canceling or amending the prior certificate and submitting signatures of the
officers named in such further certificate.
(v) A favorable opinion of in-house counsel to the
Subsidiary Borrower, substantially in the form of Exhibit I hereto and as to
such other matters as the Administrative Agent may reasonably request, which
opinion TBC and each Subsidiary Borrower hereby expressly instruct such
counsel to prepare and deliver.
(vi) The Guaranty of TBC, which unconditionally guarantees
the payment of all obligations of such Subsidiary Borrower hereunder and under
the Notes of such Subsidiary Borrower, substantially in the form of Exhibit J
hereto, executed and delivered by TBC to the Administrative Agent.
Section 5.05. Conditions Precedent to Each A Borrowing of a
Subsidiary Borrower. The obligation of each Bank to make an A Advance to a
Subsidiary Borrower on the occasion of each A Borrowing (including the initial
Borrowing) is subject to the further conditions precedent that on the date of
such request and the date of such Borrowing, the following statements shall be
true, and each of the giving of the applicable Notice of A Borrowing and the
acceptance by that particular Subsidiary Borrower of the proceeds of such A
Borrowing shall be (a) a representation by such Subsidiary Borrower that:
(i) the representations and warranties of that Subsidiary
Borrower contained (A) in Section 3.01 are true and accurate on and as of each
such date as though made on and as of each such date (except to the extent
that such representations and warranties relate solely to an earlier date),
and (B) in its Borrower Subsidiary Letter are true and correct on and as of
the date of such borrowing, before and after giving effect to such borrowing;
and
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(ii) as of each such date no event has occurred and is
continuing, or would result from the proposed A Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for the
requirement that notice be given or time elapse or both;
and (b) a representation by TBC that the representations and warranties of TBC
contained in Section 3.01 are true and accurate on and as of each such date as
though made on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date), and that, as
of each such date, no event has occurred and is continuing, or would result
from the proposed A Borrowing which constitutes an Event of Default or would
constitute such an Event of Default but for the requirement that notice be
given or time elapse or both.
Section 5.06. Conditions Precedent to Each B Borrowing of a
Subsidiary Borrower. The obligation of each Bank to make a B Advance to any
particular Subsidiary Borrower on the occasion of each B Borrowing (including
the initial Borrowing) is subject to the further conditions precedent that (1)
TBC shall have furnished to the Administrative Agent in connection with such B
Borrowing, (x) a Consolidated statement of financial position of TBC and its
Subsidiaries as of the end of each of the first three quarters of TBC's fiscal
year (other than a quarter ending within sixty days prior to the date of the
related Notice of B Borrowing) and a Consolidated comparative statement of
earnings and retained earnings of TBC and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, each certified by an authorized officer of TBC and (y) a copy of
the annual audit report of TBC, certified by independent public accountants of
recognized standing acceptable to the Administrative Agent, together with
financial statements consisting of a Consolidated statement of the financial
position of TBC and its Subsidiaries as of the end of the applicable fiscal
year and a Consolidated statement of earnings and retained earnings of TBC and
its Subsidiaries for such fiscal year (the applicable fiscal year being the
most recent year with respect to which the annual audit report of TBC is due
pursuant to Section 4.01(a)(3)) and (2) on the date of such request and the
date of such Borrowing, the following statements shall be true, and each of the
giving of the applicable Notice of B Borrowing and the acceptance by the
Subsidiary of the proceeds of such B Borrowing shall be (a) a representation by
such Subsidiary Borrower that:
(i) the representations and warranties contained (A) in
Section 3.01 hereof with respect to such Subsidiary Borrower are true and
accurate on and as of each such date as though made on and as of each such
date (except to the extent that such representations and warranties relate
solely to an earlier date), and (B) in its Borrower Subsidiary Letter are true
and correct on and as of the date of such borrowing, before and after giving
effect to such borrowing;
(ii) as of each such date no event has occurred and is
continuing, or would result from the proposed B Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for the
requirement that notice be given or time elapse or both; and
(iii) no event has occurred and no circumstance exists as a
result of which the information concerning TBC or the Subsidiary Borrower that
has been provided by TBC or the Subsidiary Borrower to the Administrative
Agent or the Banks in connection with such B Borrowing would include an untrue
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statement of a material fact or omit to state any material fact or any fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading;
and (b) a representation by TBC that the representations and warranties of TBC
contained in Section 3.01 are true and accurate on and as of each such date as
though made on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date), and that, as
of each such date, no event has occurred and is continuing, or would result
from the proposed A Borrowing which constitutes an Event of Default or would
constitute such an Event of Default but for the requirement that notice be
given or time elapse or both.
ARTICLE 6
Events of Default
Section 6.01. Events of Default. The following shall
constitute the Events of Default:
(a) Failure by TBC to make when due any payment of
principal of or interest on any Note or the Guaranty when the same becomes due
and payable and such failure is not remedied within 5 Business Days thereafter.
(b) When any representation or warranty made by TBC in
connection with the execution and delivery of this Agreement, the Notes or the
Guaranty or otherwise furnished pursuant hereto shall prove to be at any time
incorrect in any material respect.
(c) Failure by TBC to perform any other term, covenant or
agreement contained in this Agreement, and such failure is not remedied within
15 days after written notice thereof shall have been given to TBC by the
Administrative Agent, at the request, or with the consent, of Banks
representing 33-1/3% or more of the total of the Commitments.
(d) Failure of TBC to pay when due on any regularly
scheduled payment date any obligation for the payment of borrowed money or
following acceleration thereof or of any other monetary obligation, if the
aggregate unpaid principal amount of the obligation with respect to which such
failure to pay or acceleration occurred equals or exceeds $50,000,000 and such
failure is not remedied within 5 Business Days after notice thereof is
received from the Administrative Agent or the creditor on such obligation.
(e) TBC or any of its Subsidiaries
(1) shall incur liability with respect to any employee
pension benefit plan in excess of $150,000,000 in the aggregate under
(A) Sections 4062, 4063, 4064 or 4201 of the
Employee Retirement Income Security Act of 1974 ("ERISA"); or
(B) otherwise under Title IV of ERISA as a
result of any reportable event within the meaning of ERISA (other than a
reportable event as to which the provision of 30 days' notice is waived under
applicable regulations);
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(2) shall have or shall be likely to have a lien
imposed on its property and rights to property under Section 4068 of ERISA on
account of a liability in excess of $37,500,000 in the aggregate; or
(3) shall incur or shall be likely to incur liability
under Title IV of ERISA
(A) in excess of $37,500,000 in the aggregate
as a result of the Company or any Subsidiary having filed a notice of intent
to terminate any employee pension benefit plan under the "distress
termination" provision of Section 4041 of ERISA or
(B) in excess of $37,500,000 in the aggregate
as a result of the Pension Benefit Guaranty Corporation having instituted
proceedings to terminate, or to have a trustee appointed to administer, any
such plan.
(f) The happening of any of the following events, provided
the same has not then been cured or stayed: (1) the insolvency or bankruptcy
of TBC, (2) the cessation by TBC of the payment of its debts as they mature,
(3) the making of an assignment for the benefit of the creditors of TBC, (4)
the appointment of a trustee or receiver or liquidator for TBC or for a
substantial part of its property, or (5) the institution of bankruptcy,
reorganization, arrangement, insolvency or similar proceedings by or against
TBC under the laws of any jurisdiction.
(g) So long as any Subsidiary is a Borrower hereunder, the
Guaranty with respect to such Subsidiary Borrower shall for any reason cease
to be valid and binding on TBC or TBC shall so state in writing.
If an Event of Default shall occur or be continuing, then, the
Administrative Agent shall at the request, or may with the consent, of Banks
having at least 33-1/3% of the total of the Commitments, by notice to TBC and
the affected Borrowers, (A) declare the obligation of each Bank to make further
Advances to be terminated, whereupon the same shall forthwith terminate, and
(B) declare the Notes, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrowers provided, however, that in
the event of any order for relief with respect to the Borrowers under the
Federal Bankruptcy Code (whether in connection with a voluntary or an
involuntary case), (A) the obligation of each Bank to make Advances shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrowers.
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ARTICLE 7
The Administrative Agent
Section 7.01. Authorization and Action. Each Bank hereby
appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. As to any matters not expressly
provided for by this Agreement (including without limitation, enforcement or
collection of the Notes), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of holders of more than 50% in principal
amount of the A Notes then outstanding (or if no A Notes are at the time
outstanding, upon the instructions of Banks having greater than 50% of the
Commitments), and such instructions shall be binding upon all Banks and all
holders of Notes; provided, however, that the Administrative Agent shall not
be required to take any action which exposes the Administrative Agent to
personal liability or which is contrary to this Agreement or applicable law.
The Administrative Agent agrees to give to each Bank prompt notice of each
notice given to it by the Borrowers pursuant to the terms of this Agreement.
Section 7.02. Administrative Agent's Reliance, Etc. Neither
the Administrative Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement, except for its or their own
gross negligence or willful misconduct. Without limiting the generality of
the foregoing, the Administrative Agent: (a) may treat the payee of any Note
as the holder thereof until the Administrative Agent receives and accepts an
assignment entered into by the Bank which is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 2.18;
(b) may consult with legal counsel (including counsel for the Borrowers ),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or other experts; (c)
makes no warranty or representation to any Bank and shall not be responsible to
any Bank for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (d) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement on the part of any Borrower or
to inspect the property (including the books and records) of any Borrower; (e)
shall not be responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other instrument or document furnished pursuant hereto; and (f) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by it to be genuine and signed
or sent by the proper party or parties.
Section 7.03. Citibank, N.A. and its Affiliates. With respect
to its Commitment, the Advances made by it, and the Notes issued to it,
Citibank, N.A., shall have the same rights and powers under this Agreement as
any other Bank and may exercise the same as though it were not an Agent
hereunder; and the term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include Citibank, N.A., in its individual capacity. Citibank, N.A.
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and its Affiliates may accept deposits from, lend money to, accept drafts
drawn by, act as trustee under indentures of, and generally engage in any kind
of business with, the Company, any of its subsidiaries and any person or
entity who may do business with or own securities of the Company or any
subsidiary, all as if Citibank, N.A. was not the Agent hereunder and without
any duty to account therefor to the other Banks.
Section 7.04. Bank Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Administrative Agent
or any other Bank and based on the financial statements referred to in Section
3.01(e) and the representations and warranties contained in Sections 3.01 and
3.02 and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
Section 7.05. Indemnification. The Banks agree to indemnify
the Administrative Agent (to the extent not reimbursed by TBC or any other
Borrower), ratably according to the respective principal amounts of the A Notes
then held by each of them (or if no A Notes are at the time outstanding or if
any A Notes are held by persons which are not Banks, ratably according to the
respective amounts of their Commitments), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Administrative Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by the Administrative Agent under this Agreement, provided that no Bank
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank agrees to reimburse
the Administrative Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative
Agent is not reimbursed for such expenses by TBC or any other Borrower.
Section 7.06. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving written notice thereof
to the Banks and TBC and may be removed at any time with or without cause by
the Majority Banks. Upon any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Administrative Agent, which shall
be a commercial bank organized or licensed under the laws of the United States
of America or of any State thereof and having a combined capital and surplus
of at least $50,000,000. If no successor Administrative Agent shall have been
so appointed by the Majority Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation or the removal of the retiring Administrative Agent as provided
herein, then the retiring Administrative Agent may, on behalf of the Banks,
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appoint a successor Administrative Agent which meets the requirements set out
in the previous sentence. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article 7 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
Section 7.07. Certain Obligations May be Performed by
Affiliates. The Administrative Agent may appoint any of its Affiliates to
perform its obligations hereunder other than any obligation requiring the
Administrative Agent to receive, pay, or otherwise handle funds or Notes and
provided that the Administrative Agent shall continue to be responsible to the
Borrowers and the Banks for the due performance of the Administrative Agent's
obligations under this Agreement.
ARTICLE 8
Miscellaneous
Section 8.01. Modification, Consents and Waivers. No failure
or delay on the part of any Bank in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power preclude any other or further exercise thereof or the
exercise of any other right or power hereunder. No notice to or demand on the
Borrowers in any case shall entitle the Borrowers to any other or further
notice or demand in similar or other circumstances. No amendment or waiver of
any provision of this Agreement or of the A Notes, nor consent to any
departure by the Borrowers therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Majority Banks, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Banks, do any of the
following: (a) waive any of the conditions specified in Section 5.01, 5.02, or
5.03, (b) except as provided in Section 2.17 or Section 2.19, increase the
Commitments of the Banks or subject the Banks to any additional obligations,
(c) reduce the principal of, or interest on, the A Notes or any fees or other
amounts payable hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the A Notes or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the A Notes or the number of Banks required for the
Banks or any of them to take any action hereunder, (f) amend this Section 8.01
or (g) release TBC from any of its obligations under any Guaranty; and provided
further, that no amendment, waiver, or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Banks required above to
take such action, affect the rights or duties of the Administrative Agent under
this Agreement or any Note. Notwithstanding the foregoing, this Section 8.01
shall not affect the provisions of Section 4.04 or 6.01.
Section 8.02. Addresses for Notices. All communications and
notices provided for hereunder shall be by telex or in writing and, if to the
Administrative Agent, mailed, telexed, faxed or delivered to it, addressed to
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it at its office at Citibank, N.A., Global Aviation, 399 Park Avenue, New York,
New York 10043, facsimile number (212) 793-3734, Attention: Relationship
Manager, and, if to any Borrower, mailed, telexed or delivered to it, addressed
to such Borrower, care of The Boeing Company, at its office at 7755 East
Marginal Way South, Seattle, Washington 98108, facsimile number (206) 655-0799,
Attention: Treasurer, and, if to any Bank, to its office at the address given
on the signature pages of this Agreement; or, as to each party, at such other
address as shall have been designated by such party in a written notice to each
other party referring specifically to this Agreement.
Section 8.03. Costs, Expenses and Taxes. TBC agrees to pay
all costs and expenses in connection with the preparation, execution and
delivery of this Agreement, the Notes and the Guaranty (including printing
costs and the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent) and costs and expenses, if any, in connection with the
enforcement of this Agreement, the Notes and the Guaranty (whether through
negotiations, legal proceedings or otherwise and including, without
limitation, the reasonable fees and out-of pocket expenses of counsel), as
well as any and all stamp and other taxes, and to save the Banks and other
holders of the Notes harmless from any and all liabilities with respect to or
resulting from any delay by or omission of the Borrowers to pay such taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of this Agreement, the Notes and the Guaranty.
Section 8.04. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Borrowers , the Banks and the
Administrative Agent, and their respective successors and assigns, except that
the Borrowers may not assign or transfer their rights hereunder without the
prior written consent of the Banks.
Section 8.05. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 8.06. Governing Law. This Agreement, the Notes, the
Guaranty and each Borrower Subsidiary Letter shall be deemed to be contracts
under the laws of the State of New York and for all purposes shall be construed
in accordance with the laws of such State.
Section 8.07. Headings. The Table of Contents and Article and
Section headings used in this Agreement are for convenience only and shall not
affect the construction of this Agreement.
Section 8.08. Execution in Counterparts. This Agreement may
be executed by the parties hereto individually or in any combinations of the
parties hereto in several separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
agreement.
Section 8.09. Right of Set-Off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
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the Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Bank is hereby authorized at any time and from
time to time to the fullest extent permitted by law, without notice to any
Borrower (any such notice being expressly waived by each Borrower), to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Bank to or for the credit or the account of any Borrower against any and all of
the obligations to such Bank of such Borrower now or hereafter existing under
this Agreement and the Notes held by such Bank, irrespective of whether or not
such Bank shall have made any demand under this Agreement or such Notes and
although such obligations may be unmatured. Each Bank shall promptly notify
any Borrower after any such setoff and application made by such Bank, provided
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Bank may have.
Section 8.10. Agreement in Effect. This Agreement shall
become effective upon its execution and delivery, respectively, to the
Administrative Agent and TBC by TBC, the Administrative Agent, and each Bank
listed in Section 1.02.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first above written.
THE BOEING COMPANY
By____________________
Title: Assistant Treasurer
CITIBANK, N.A.
Individually and as
Administrative Agent
By____________________
Title: Vice-President
THE CHASE MANHATTAN BANK
Individually and as Syndication Agent
By____________________
Title: Vice-President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By____________________
Title
CREDIT LYONNAIS
By____________________
Title
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By____________________
Title
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THE SUMITOMO BANK, LIMITED
By____________________
Title
BANK OF AMERICA, NT & SA
By____________________
Title
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By____________________
Title
THE BANK OF TOKYO-MITSUBISHI, LTD.
By____________________
Title
PNC BANK, NATIONAL ASSOCIATION
By____________________
Title
BANQUE NATIONALE DE PARIS
By____________________
Title
BANK OF CHINA, NEW YORK BRANCH
By____________________
Title
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WACHOVIA BANK, N.A.
By____________________
Title
BANKERS TRUST COMPANY
By____________________
Title
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By____________________
Title
By____________________
Title
CANADIAN IMPERIAL BANK OF
COMMERCE
By____________________
Title
THE LONG TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY
By____________________
Title
CREDIT AGRICOLE INDOSUEZ
By____________________
Title
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NATIONSBANK OF TEXAS, N.A.
By____________________
Title
NATIONAL WESTMINSTER
BANK PLC, NEW YORK BRANCH
By____________________
Title
NATIONAL WESTMINSTER
BANK PLC, NASSAU BRANCH
By____________________
Title
THE BANK OF NEW YORK
By____________________
Title
THE SUMITOMO TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By____________________
Title
BANK BOSTON, N.A.
By____________________
Title
ABN AMRO BANK N.V.
By____________________
Title
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TABLE OF CONTENTS
[Page numbers have not been updated for the EDGAR filing]
Page
ARTICLE 1
Definitions
Section 1.01. Definitions ...................................... 1
Section 1.02. Use of Defined Terms ............................. 10
Section 1.03. Accounting Terms ................................. 10
ARTICLE 2
Amounts and Terms of the Advances
Section 2.01. The A Advances ................................... 11
Section 2.02. Making the A Advances ............................ 11
Section 2.03. Conversion to Term Loan, Repayment ............... 12
Section 2.04. Interest Rate on A Advances ...................... 13
Section 2.05. The B Advances ................................... 13
Section 2.06. Fees ............................................. 17
Section 2.07. [intentionally omitted.] ......................... 18
Section 2.08. Reduction of the Commitments ..................... 18
Section 2.09. Additional Interest on Eurodollar Rate A Advances 18
Section 2.10. Eurodollar Interest Rate Determination ........... 18
Section 2.11. Voluntary Conversion of A Advances ............... 19
Section 2.12. Prepayments ...................................... 20
Section 2.13. Increases in Costs ............................... 21
Section 2.14. Illegality ....................................... 24
Section 2.15. Payments and Computations ........................ 25
Section 2.16. Sharing of Payments, Etc ......................... 26
Section 2.17. Alteration of Commitments and Addition of Banks .. 26
Section 2.18. Assignments; Sales of Participations and Other
Interests in Notes .............................. 27
Section 2.19. Extension of Termination Date .................... 30
Section 2.20. Subsidiary Borrowers ............................. 31
ARTICLE 3
Representations, Warranties and Certain Covenants
Section 3.01. Representations and Warranties by the Borrowers .. 33
Section 3.02. Representation by the Banks ...................... 35
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ARTICLE 4
Covenants of TBC
Section 4.01. Affirmative Covenants of TBC ..................... 35
Section 4.02. General Negative Covenants of TBC ................ 36
Section 4.03. Financial Statement Terms ........................ 37
Section 4.04. Waivers of Covenants ............................. 37
ARTICLE 5
Conditions Precedent to Borrowings
Section 5.01. Conditions Precedent to the Initial
Borrowing of TBC ................................ 38
Section 5.02. Conditions Precedent to Each A Borrowing of TBC .. 39
Section 5.03. Conditions Precedent to Each B Borrowing of TBC .. 39
Section 5.04. Conditions Precedent to the Initial
Borrowing of a Subsidiary Borrower .............. 40
Section 5.05. Conditions Precedent to Each A Borrowing of a
Subsidiary Borrower ............................. 41
Section 5.06. Conditions Precedent to Each B Borrowing of a
Subsidiary Borrower ............................. 42
ARTICLE 6
Events of Default
Section 6.01. Events of Default ................................ 43
ARTICLE 7
The Administrative Agent
Section 7.01. Authorization and Action ......................... 45
Section 7.02. Administrative Agent's Reliance, Etc ............. 45
Section 7.03. Citibank, N.A. and its Affiliates ................ 46
Section 7.04. Bank Credit Decision ............................. 46
Section 7.05. Indemnification .................................. 46
Section 7.06. Successor Administrative Agent ................... 47
Section 7.07. Certain Obligations May be Performed by Affiliates 47
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ARTICLE 8
Miscellaneous
Section 8.01. Modification, Consents and Waivers ............... 48
Section 8.02. Addresses for Notices ............................ 48
Section 8.03. Costs, Expenses and Taxes ........................ 48
Section 8.04. Binding Effect ................................... 49
Section 8.05. Severability ..................................... 49
Section 8.06. Governing Law .................................... 49
Section 8.07. Headings ......................................... 49
Section 8.08. Execution in Counterparts ........................ 49
Section 8.09. Right of Set-Off ................................. 49
Section 8.10. Agreement in Effect .............................. 50
Exhibit A-1 - Base Rate Advance A Note
Exhibit A-2 - Term A Note
Exhibit A-3 - Fixed Rate B Note
Exhibit A-4 - Fixed Rate B Note
Exhibit B-1 - Notice of A Borrowing
Exhibit B-2 - Notice of B Borrowing
Exhibit C - Request for Alteration
Exhibit D - Borrower Subsidiary Letter
Exhibit E - Extension Request
Exhibit F - Continuation Note
Exhibit G - Opinion of Chief Legal Officer of Borrower
Exhibit H - Opinion of in-house counsel to Subsidiary Borrower
Exhibit I - Guaranty of TBC
Schedule I - Commitments
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EXHIBIT A-1
FORM OF A NOTE
FOR BASE RATE ADVANCES
U.S.$_______________ Dated: ________________,
19____
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
(the "Lender") for the account of its Applicable Lending Office
(as defined in the Credit Agreement referred to below) in accordance with the
terms of the Credit Agreement the principal sum of [the amount of the Lender's
Commitment in words] United States Dollars (U.S.$[amount of the Lender's
Commitment in figures]) or, if less, the aggregate unpaid principal amount of
the A Advances (as defined below) made by the Lender to the Borrower and the
other borrowers under and pursuant to the Credit Agreement which are Base Rate
Advances (as defined in the Credit Agreement) as determined pursuant to the
Credit Agreement from time to time.
The Borrower promises to pay interest on the unpaid principal
amount of each Base Rate Advance from the date of such Base Rate Advance until
such principal amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Administrative Agent, at 399
Park Avenue, New York, New York 10043, in same day funds.
This Promissory Note is one of the A Notes referred to in, and is
entitled to the benefits of, The Boeing Company $1,500,000,000 Bank Credit
Agreement dated as of December __, 1997 (the "Credit Agreement") among [the
Borrower] [The Boeing Company], certain other borrowers parties thereto, the
Lender and certain other banks parties thereto, Citibank, N.A., as
Administrative Agent for the Lender and such other banks, and The Chase
Manhattan Bank, as Syndication Agent for the Lender and such other banks. The
Credit Agreement, among other things, (i) provides for the making of advances
(the "A Advances") by the Lender to the Company from time to time in an
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each
such A Advance which is a Base Rate Advance being evidenced by this Promissory
Note, (ii) provides for the conversion from time to time of Base Rate Advances
into Eurodollar Rate A Advances (as defined in the Credit Agreement) and of
Eurodollar Rate A Advances into Base Rate Advances, (iii) provides for the
Borrower's obligation to pay Eurodollar Rate A Advances to be evidenced by a
separate Promissory Note, and (iv) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
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<PAGE> 217
A-1-1
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York, United States.
[NAME OF BORROWER]
By ____________________________________
Title:
EXHIBIT A-2
FORM OF A NOTE
FOR EURODOLLAR RATE ADVANCES
U.S.$___________________ Dated: _______________,
19_____
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________ corporation (the "Borrower") HEREBY PROMISES TO PAY to the order of
(the "Lender") for the account of its Applicable Lending
Office (as defined in the Credit Agreement referred to below) in accordance
with the terms of the Credit Agreement the principal sum of [the amount of the
Lender's Commitment in words] United States Dollars (U.S.$[amount of the
Lender's Commitment in figures]) or, if less, the aggregate unpaid principal
amount of the A Advances (as defined below) made by the Lender to the Borrower
and the other borrowers under and pursuant to the Credit Agreement which are
Base Rate Advances (as defined in the Credit Agreement) as determined pursuant
to the Credit Agreement from time to time.
The Borrower promises to pay interest on the unpaid principal
amount of each Eurodollar Rate Advance from the date of such Eurodollar Rate
Advance until such principal amount is paid in full, at such interest rates,
and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Administrative Agent, at 399
Park Avenue, New York, New York 10043, in same day funds.
This Promissory Note is one of the A Notes referred to in, and is
entitled to the benefits of, The Boeing Company $1,500,000,000 Bank Credit
Agreement dated as of December __, 1997 (the "Credit Agreement") among [the
Borrower] [The Boeing Company], certain other borrowers parties thereto, the
Lender and certain other banks parties thereto, Citibank, N.A., as
Administrative Agent for the Lender and such other banks, and The Chase
Manhattan Bank, as Syndication Agent for the Lender and such other banks. The
Credit Agreement, among other things, (i) provides for the making of advances
217
<PAGE> 218
(the "A Advances") by the Lender to the Company from time to time in an
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Company resulting from each
such A Advance which is a Eurodollar Rate Advance being evidenced by this
Promissory Note, (ii) provides for the conversion from time to time of Base
Rate Advances into Eurodollar Rate A Advances (as defined in the Credit
Agreement) and of Eurodollar Rate A Advances into Base Rate Advances, (iii)
provides for the Company's obligation to pay Eurodollar Rate A Advances to be
evidenced by a separate Promissory Note, and (iv) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified.
A-2-2
The Borrower hereby waives presentment, demand, protest and notice
of any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York, United States.
[NAME OF BORROWER]
By ____________________________________
Title:
EXHIBIT A-3
FORM OF B NOTE
FOR FIXED RATE BORROWINGS
U.S.$___________________ Dated: _______________,
19_____
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
_____________ (the "Lender") for the account of its Applicable Lending Office
(as defined in the Credit Agreement referred to below) the principal sum of
One Billion Five Hundred Million Dollars ($1,500,000,000) or, if less, the
aggregate unpaid principal amount of each B Advance (as defined below) which
is part of a Fixed Rate Borrowing (as defined in the Credit Agreement) owing
to the Lender by the Borrower and the other borrowers under and pursuant to
the Credit Agreement, provided that the aggregate unpaid principal amount of
such B Advances shall be paid no later than the date specified by the terms of
the Credit Agreement.
218
<PAGE> 219
The Borrower promises to pay interest on the unpaid principal
amount of each B Advance from the date of such B Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
have been agreed between the Borrower and the Lender acting pursuant to the
Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Administrative Agent, at 399
Park Avenue, New York, New York 10043, in same day funds. Each B Advance
owing to the Lender by the Borrower which is part of a Fixed Rate Borrowing
and the maturity thereof, and all payments made on account of principal
thereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto, which is part of this Promissory Note.
This Promissory Note is one of the B Notes referred to in, and is
entitled to the benefits of, The Boeing Company $1,500,000,000 Bank Credit
Agreement dated as of December __, 1997 (the "Credit Agreement") among [the
Borrower] [The Boeing Company], certain other Borrowers parties thereto, the
Lender and certain other banks parties thereto, Citibank, N.A., as
Administrative Agent for the Lender and such other banks, and The Chase
Manhattan Bank, as Syndication Agent for the Lender and such other Banks. The
Credit Agreement, among other things, (i) provides for the making of B
advances (the "B Advances") by the Lender to the Borrower from time to time in
an aggregate amount not to exceed at any time outstanding the U.S. dollar
amount first above mentioned, the indebtedness of the Borrower resulting from
each such B Advance which is part of a Fixed Rate Borrowing being evidenced by
this Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
A-3-3
The Borrower hereby waives presentment, demand, protest and notice
of any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York, United States.
[NAME OF BORROWER]
By ____________________________________
Title:
219
<PAGE> 220
ADVANCES AND PAYMENTS OF PRINCIPAL
Date
Amount of
Advance
Maturity
Date
Amount of Principal
Paid or Prepaid
Unpaid
Principal
Balance
Notation Made by
220
<PAGE> 221
EXHIBIT A-4
FORM OF B NOTE
FOR EURODOLLAR RATE ADVANCES
U.S.$___________________ Dated: _______________,
19_____
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a _________
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of ___________
(the "Lender") for the account of its Applicable Lending Office (as defined in
the Credit Agreement referred to below) the principal sum of One Billion Five
Hundred Million Dollars ($1,500,000,000) or, if less, the aggregate unpaid
principal amount of each B Advance (as defined below) which is part of a
Eurodollar Rate B Borrowing (as defined in the Credit Agreement) owing to the
Lender by the Borrower pursuant to the Credit Agreement, provided that the
aggregate unpaid principal amount of such B Advances shall be paid no later than
the date specified by the terms of the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
each
B Advance from the date of such B Advance until such principal amount is paid in
full, at such interest rates, and payable at such times, as have been agreed
between the Borrower and the Lender acting pursuant to the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Citibank, N.A., as Administrative Agent, at 399 Park
Avenue, New York, New York 10043, in same day funds. Each B Advance owing to
the Lender by the Borrower which is part of a Fixed Rate Borrowing and the
maturity thereof, and all payments made on account of principal thereof, shall
be recorded by the Lender and, prior to any transfer hereof, endorsed on the
grid attached hereto, which is part of this Promissory Note.
This Promissory Note is one of the B Notes referred to in, and is
entitled to the benefits of, The Boeing Company $1,500,000,000 Bank Credit
Agreement dated as of December __, 1997 (the "Credit Agreement") among [the
Borrower] [The Boeing Company], certain other borrowers parties thereto, the
Lender and certain other banks parties thereto, Citibank, N.A., as
Administrative Agent for the Lender and such other banks, and The Chase
Manhattan Bank, as Syndication Agent for the
Lender and such other banks. The Credit Agreement, among other things, (i)
provides for the making of B advances (the "B Advances") by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such B Advance which is a Eurodollar Rate
Advance being evidenced by this Promissory Note, and (ii) contains provisions
for acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments on account ofprincipal hereof prior to the
maturity hereof upon the terms and conditions there inspecified.
A-4-4
The Borrower hereby waives presentment, demand, protest and notice of any
221
<PAGE> 222
kind. No failure to exercise, and no delay in exercising, any rights hereunder
on the part of the holder hereof shall operate as a waiver of such rights.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York, United States.
[NAME OF BORROWER]
By _________________________________
Title:
ADVANCES AND PAYMENTS OF PRINCIPAL
Date
Amount of
Advance
Maturity
Date
Amount of Principal
Paid or Prepaid
Unpaid
Principal
Balance
Notation Made by
222
<PAGE> 223
EXHIBIT B-1
NOTICE OF A BORROWING
Citibank, N.A., as Administrative Agent
for the Banks parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
[Date]
Attention: _______________________
Gentlemen:
The undersigned, [NAME OF BORROWER], refers to The Boeing Company
$1,500,000,000 Bank Credit Agreement dated as of December __, 1997 (the "Credit
Agreement", the terms defined therein being used herein as therein defined)
among the undersigned, [The Boeing Company], certain Banks parties thereto,
Citibank, N.A., as Administrative Agent for said Banks and The Chase Manhattan
Bank, as Syndication Agent for said Banks, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests an A Borrowing under the Credit Agreement, and in
that connection sets forth below the information relating to such A Borrowing
(the "Proposed A Borrowing") as required by Section 2.02(a) of the Credit
Agreement:
(i) The Business Day of the Proposed A Borrowing is ________________,
19__.
(ii) The Type of A Advances comprising the Proposed A Borrowing is [Base
Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed A Borrowing is $____________.
[(iv) The initial Interest Period for each Eurodollar Rate Advance made
as part of the Proposed A Borrowing is ____ months[s]].
The undersigned hereby certifies that the following statements are true
and the date hereof, and will be true on the date of the Proposed A Borrowing:
(A) the representations and warranties contained in Section 3.01 of
the Credit Agreement are true and accurate on and as of each such date
as though made on and as of each such date (except to the extent that
such representations and warranties relate solely to an earlier date);
[and]
B-1-2
(B) as of each such date no event has occurred and is continuing
or would result from such Proposed A Borrowing which constitutes an
Event of Default or would constitute such an Event of Default but for
the requirement that notice be given or time elapse or both.
223
<PAGE> 224
[(C) the representations and warranties of the undersigned
Subsidiary Borrower contained (A) in Section 3.01 of the Credit
Agreement are true and accurate on and as of each such date as though
made on and as of each such date (except to the extent that such
representations and warranties relate solely to an earlier date), and
(B) in the Borrower Subsidiary Letter of the undersigned Borrower
Subsidiary are true and correct on and as of the date of such borrowing,
before and after giving effect to such borrowing; and
(D) as of each such date no event has occurred and its
continuing, or would result from the Proposed A Borrowing which
constitutes an Event of Default or would constitute such an Event of
Default but for the requirement that notice be given or time elapse or
both]*
` Very truly yours,
[NAME OF SUBSIDIARY BORROWER]*
[By __________________________
Title:]
THE BOEING COMPANY
By ___________________________
Title:
EXHIBIT B-2
NOTICE OF B BORROWING
Citibank, N.A., as Administrative Agent
for the Banks parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
[Date]
Attention: _______________________
Gentlemen:
The undersigned, [NAME OF BORROWER], refers to The Boeing
Company $1,500,000,000 Bank Credit Agreement dated as of December __,
1997 (the "Credit Agreement", the terms defined therein being used
herein as therein defined) among the undersigned, [The Boeing Company],
certain Banks parties thereto, Citibank, N.A., as Administrative Agent
for said Banks, and The Chase Manhattan Bank, as Syndication Agent for
said Banks, and hereby gives you notice pursuant to Section 2.05(a)(i)
of the Credit Agreement that the undersigned hereby requests a B
Borrowing under the Credit Agreement, and in that connection sets forth
224
<PAGE> 225
the terms on which such B Borrowing (the "Proposed B Borrowing") is
requested to be made:
(A) Date of B Borrowing _________________________________
(B) Amount of B Borrowing _________________________________
(C) Maturity Date _________________________________
(D) Interest Rate Basis [Fixed Rate] [Eurodollar Rate]
(E) Interest Payment Date(s)
_________________________________
(F) Interest Calculation Basis
_________________________________
[(G) Interest Rate Period
_________________________________]
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of
the Proposed B Borrowing:
(a) the representations and warranties contained in Section 3.01
of the Credit Agreement are true and accurate on and as of each such
date as though made on and as of each such date (except to the extent
that such representations and warranties relate solely to an earlier
date);
(b) as of each such date no event has occurred and is continuing,
or would result from the Proposed B Borrowing which constitutes an Event
of Default or would constitute such Event of Default but for the
requirement that notice be given or time
elapse or both; and
B-2-2
(c) no event has occurred and no circumstance exists as a result
of which the information concerning [the Borrower] [The Boeing Company]
that has been provided by [the Borrower] [The Boeing Company]* to the
Administrative Agent or the Banks in connection with the Proposed B
Borrowing would include an untrue statement of a material fact or omit
to state any material fact or any fact necessary to make the statements
contained therein, in the light of the circumstances under which they
were made, not misleading.
[(d) the representations and warranties contained (A) in Section
3.01 of the Credit Agreement with respect to the undersigned Subsidiary
Borrower are true and accurate on and as of each such date as though
made on and as of each such date (except to the extent that such
representations and warranties related solely to an earlier date), and
(B) in the Borrower Subsidiary Letter of the undersigned Borrower
Subsidiary are true and correct on and as of the date of such borrowing,
before and after giving effect to such borrowing;
225
<PAGE> 226
(e) as of each such date no event has occurred and is
continuing, or would result from the Proposed B Borrowing which
constitutes an Event of Default or would constitute such an Event of
Default but for the requirement that notice be given or time elapse or
both; and
(f) no event has occurred and no circumstance exists as a result
of which the information concerning The Boeing Company or the
undersigned Subsidiary Borrower that has been provided by The Boeing
Company or the undersigned Subsidiary Borrower to the Administrative
Agent or the Banks in connection with such B Borrowing would include an
untrue statement of a material fact or omit to state any material fact
or any fact necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.]**
B-2-3
The undersigned hereby confirms that the Proposed B Borrowing is
to be made available to it in accordance with Section 2.05(a)(v) of the Credit
Agreement.
Very truly yours,
[[NAME OF BORROWER]
By _________________________]*
Title:
THE BOEING COMPANY
By __________________________
EXHIBIT C
REQUEST FOR ALTERATION
To the Banks Parties to
The Boeing Company Bank Credit
Agreement dated as of
December __, 1997
Gentlemen:
In accordance with Section 2.17 of The Boeing Company
$1,500,000,000 Bank Credit Agreement dated as of December __, 1997 as it may
have been amended to the date hereof (the "Agreement") you are hereby notified
that, with the consent, if any, required of the Banks pursuant to such Section
2.17:
226
<PAGE> 227
[Complete as Appropriate]
______________________________________ shall become a party to the
Agreement with a Commitment of $________________.
the Commitment of _________________ shall be increased/decreased from
$__________ to $_________.
the Commitment of _________________ shall be terminated,
the A Advances of _______________________ shall be prepaid in the amount
of $__________.
All terms used in this Request which are defined in the Agreement
are used here as they are there defined.
If this Request for Alteration has been executed by the Company,
the Administrative Agent and each Bank affected by this Request for Alteration
and all prepayments called for hereby shall have been paid in full on or
before ________, 19__ (the "Effective Date"), then pursuant to Section 2.17 of
the Agreement this Request for Alteration, and each increase, decrease,
termination or creation effected hereby, shall thereupon become effective on
the Effective Date. [The Company hereby certifies that no event exists, or
would result from giving effect to this Request for Alteration, which would
require the Administrative Agent to obtain the consent of the Majority Banks
before signing this Request for Alteration.] [The Administrative Agent may
not sign this Request for Alteration without the prior written consent of the
Majority Banks.]
C-1
Please indicate your consent to this Request for Alteration by
signing the enclosed copy and returning it to the Administrative Agent.
Very truly yours,
THE BOEING COMPANY
By: ________________________________
Title:
227
<PAGE> 228
We hereby consent to the foregoing.
[Name of Affected Bank]
By __________________________
Title:
CITIBANK, N.A. as Administrative Agent
By ___________________________
Title:
[We hereby consent to the foregoing.
[If Majority Bank consent is required.]]
[Name of Bank]
By ___________________________
Title:
* Include if Borrower is not The Boeing Company.
* Reference should describe The Boeing Company.
** Include if Borrower is not The Boeing Company.
* Include if the Borrower is not The Boeing Company.
(..continued)
SS_NYL3A/53237.1
364-Day Credit Agreement
SS_NYL3A/53237.1
364-Day Credit Agreement
SS_NYL3A/53237.1
364-Day Credit Agreement
228
<PAGE> 229
SS_NYL3A/53237.1
364-Day Credit Agreement
32611/225/tmj/7-year
SS_NYL3A/53237.1
364-Day Credit Agreement
32611/225/tmj/7-year
SS_NYL3A/53237.1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
229
<PAGE> 230
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
7-Year Facility
2
SS_NYL3A/53237 1
364-Day Credit Agreement
230
<PAGE> 231
SS_NYL3A/53237 1
364-Day Credit Agreement
7-Year Facility
2
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
231
<PAGE> 232
SS_NYL3A/53237 1
364-Day Credit Agreement
7-Year Facility
1
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
SS_NYL3A/53237 1
364-Day Credit Agreement
232
<PAGE> 233
EXHIBIT G
FORM OF OPINION OF CHIEF LEGAL
OFFICER OF THE COMPANY
[Date]
To each of the Banks parties
to The Boeing Company Bank
Credit Agreement dated as of
December __, 1997 among
The Boeing Company,
certain other borrowers parties thereto,
said Banks, Citibank, N.A.,
as Administrative Agent for
said Banks and The Chase
Manhattan Bank, as Syndication
Agent for said Banks, and to Citibank,
N.A., as Administrative Agent
The Boeing Company
------------------
Gentlemen:
This opinion is furnished to you pursuant to Section 5.01(d) of The
Boeing Company $1,500,000,000 Bank Credit Agreement dated as of December __,
1996 (the "Credit Agreement") among The Boeing Company (the "Company"), certain
other borrowers parties thereto, the Banks parties thereto, Citibank, N.A., as
Administrative Agent for said Banks, and The Chase Manhattan Bank, as
Syndication Agent for said Banks. Terms defined in the Credit Agreement are
used herein as therein defined.
I am the [chief legal officer] of the Company, and have acted in
such capacity in connection with the preparation, execution and delivery of,
and the initial Borrowing made by the Company under, the Credit Agreement.
In that connection, I have examined:
(1) The Credit Agreement.
(2) The other documents furnished by the Company pursuant to
Article 5 of the Credit Agreement.
(3) The Certificate of Incorporation of the Company and all
amendments thereto (the "Charter").
(4) The by-laws of the Company and all amendments thereto (the
"By-laws").
(5) A certificate of the Secretary of State of the State of
Delaware, dated , 19 , attesting to the continued corporate
existence and good standing of the Company in that State.
233
<PAGE> 234
In addition, I have examined the originals, or copies certified to
my satisfaction, of such other corporate records of the Company, certificates
of public officials and of officers of the Company, and agreements, instruments
and other documents, as I have deemed necessary as a basis for the opinions
expressed below. I have assumed the due execution and delivery, pursuant to
due authorization, of the Credit Agreement by the Banks and the Agent.
I am qualified to practice law in the State of Washington and I do
not purport to be an expert on any laws other than the laws of the State of
Washington, the General Corporation Law of the State of Delaware and the
Federal laws of the United States.
Based upon the foregoing and upon such investigation as I have
deemed necessary, I am of the following opinions:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by the Company of the
Credit Agreement and the Notes are within the Company's corporate powers,
have been duly authorized by all necessary corporate action, and do not
contravene (i) the Charter of the By-laws or (ii) any law, rule or
regulation applicable to the Company (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or
(iii) any contractual or legal restriction binding on the Company. The
Credit Agreement and the Notes have been duly executed and delivered on
behalf of the Company.
3. No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of the
Credit
Agreement and the Notes[, except for , all of which have been
duly obtained or made and are in full force and effect].
4. In any action or proceeding arising out of or relating to the
Credit Agreement or the Notes in any court of the State of Washington or in any
federal court sitting in the State of Washington, such court would recognize
and give effect to the provisions of Section 8.06 of the Credit Agreement
wherein the parties thereto agree that the Credit Agreement and the Notes shall
be governed by, and construed in accordance with, the laws of the State of New
York. Without limiting the generality of the foregoing, a court of the State
of Washington or a federal court sitting in the State of Washington would apply
the usury law of the State of New York, and would not apply the usury law of
the State of Washington, to the Credit Agreement and the Notes. However, if a
court were to hold that the Credit Agreement and the Notes are governed by, and
to be construed in accordance with, the laws of the State of Washington, the
Credit Agreement and the Notes would be, under the laws of the State of
Washington, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
234
<PAGE> 235
5. To the best of my knowledge, there are no pending overtly
threatened actions or proceedings against the Company or any of its Subsidiaries
before any court or administrative agency which (i) purport to affect the
legality, validity, binding effect or enforceability of the Credit Agreement or
any of the Notes or (ii) except as disclosed in the Company's financial
statements delivered to you prior to the date hereof pursuant to Section
3.01(e) of the Credit Agreement, can reasonably be expected to materially
adversely affect the financial condition or operations of the Company or any
Subsidiary.
The opinions set forth above are subject to the following
qualifications:
(a) My opinion in paragraph 4 above is subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally.
(b) My opinion in paragraph 4 above is subject to the effect of general
principles of equity, including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether considered
in a proceeding in equity or at law).
I am aware that Shearman & Sterling will rely upon the opinions set
forth in paragraphs 1, 2 and 3 of this opinion in rendering their opinion
furnished pursuant to Section 5.01(e) of the Credit Agreement.
Very truly yours,
235
<PAGE> 236
To each of the Banks, parties
to The Boeing Company, 364-Day
Credit Agreement ("Bank Credit Agreement") dated as of
December 8th, 1997 among
The Boeing Company, certain other borrowers parties thereto,
the Banks, Citibank, N.A.,
as Administrative Agent for
said Banks, and The Chase
Manhattan Bank, as Syndication
Agent for said Banks, and to Citibank,
N.A., as Administrative Agent
Re: Termination of the 364- Day Credit Agreement
Ladies and Gentlemen:
This letter confirms the termination in whole of the commitments of the banks
parties to the Credit Agreement dated as of September 27, 1996, among The
Boeing Company, the banks partied thereto and Citibank, N.A., as agent, which
Credit Agreement is commonly referred to as the 364- Day Credit Agreement.
The termination is and shall be effective as of the moment immediately
preceding the execution and delivery, The Chase Manhattan Bank, as Syndication
Agent, by The Boeing Company, Citibank, N.A., as Administrative Agent, and each
of the banks listed in Schedule 1 of the Bank Cradit Agreement.
Sincerely,
236
<PAGE> 237
To each of the Banks, parties
to The Boeing Company, 7-Year
Credit Agreement ("Bank Credit Agreement") dated as of
December 8th, 1997 among
The Boeing Company, certain other borrowers parties thereto,
the Banks, Citibank, N.A.,
as Administrative Agent for
said Banks, and The Chase
Manhattan Bank, as Syndication
Agent for said Banks, and to Citibank,
N.A., as Administrative Agent
Re: Termination of the 7- Year Credit Agreement
Ladies and Gentlemen:
This letter confirms the termination in whole of the commitments of the banks
parties to the Credit Agreement dated as of September 27, 1996, among The
Boeing Company, the banks partied thereto and Citibank, N.A., as agent, which
Credit Agreement is commonly referred to as the 7-Year Credit Agreement.
The termination is and shall be effective as of the moment immediately
preceding the execution and delivery, The Chase Manhattan Bank, as Syndication
Agent, by The Boeing Company, Citibank, N.A., as Administrative Agent, and each
of the banks listed in Schedule 1 of the Bank Cradit Agreement.
Sincerely,
237
<PAGE> 238
EXHIBIT D - FORM OF BORROWER SUBSIDIARY LETTER
[DATE]
To each of the Banks
parties to the Credit Agreement
(as defined below) and to Citibank N.A.,
as Administrative Agent for such Lenders
Ladies and Gentlemen:
Reference is made to The Bank Credit Agreement dated as of
December 8, 1997 among The Boeing Company (the "Company"), certain other
borrowers parties thereto, the Banks named therein, Citibank N.A., as Admin-
istrative Agent for said Banks, and The Chase Manhattan Bank, as Syndication
Agent for said Banks (the "Credit Agreement"). Terms used herein and defined
in the Credit Agreement shall have the respective meanings ascribed to such
terms in the Credit Agreement.
Please be advised that the Company hereby designates its
undersigned Subsidiary, ____________ ("Subsidiary Borrower"), as a "Subsidiary
Borrower" under and for all purposes of the Credit Agreement.
The Subsidiary Borrower, in consideration of each Bank's
agreement to extend credit to it under and on the terms and conditions set
forth in the Credit Agreement, does hereby assume each of the obligations
imposed upon a "Subsidiary Borrower" and a "Borrower" under the Credit Agreement
and agrees to be bound by the terms and conditions of the Credit Agreement. In
furtherance of the foregoing, the Subsidiary Borrower hereby represents and
warrants to each Lenders as follows:
(a) The Subsidiary Borrower is a corporation duly organized,
validly existing and in good standing under the laws of
______________________. The Subsidiary Borrower is qualified to do
business in every jurisdiction where such qualification is required,
except where the failure to so qualify would not have a materially
adverse effect on the financial condition of the Company and the
Subsidiary Borrowers as a whole.
(b) The execution, delivery and performance by the
Subsidiary Borrower of this Subsidiary Borrower Letter, the Credit Agreement
and its Notes are within the Subsidiary Borrower's corporate powers, have
been duly authorized by all necessary corporate action, have received all
necessary governmental approval (which approval remains in full force and
effect), and do not contravene any law, any provision of the Subsidiary
Borrower's charter or by-laws or any contractual restriction binding on
the Subsidiary Borrower.
(c) This Subsidiary Borrower Letter is, and the Notes of the
Subsidiary Borrower when duly executed and delivered by the Subsidiary
Borrower, will constitute legal, valid and binding obligations of the
Subsidiary Borrower, enforceable against the Subsidiary Borrower in
accordance with their respective terms.
238
<PAGE> 239
(d) In the Subsidiary Borrower's opinion, there are no
pending or threatened actions or proceedings before any court or administrative
agency which can reasonably be expected to materially adversely affect
the financial condition or operations of the Subsidiary Borrower or any
Subsidiary.
(e) The Consolidated statement of financial position as of
December 31, 1996 and the related Consolidated statement of earnings and
retained earnings for the year then ended (copies of which have been
furnished to each Bank) correctly set forth the Consolidated financial
condition of the Company and its Subsidiaries as of such date and the
result of the Consolidated operations for such year, and since such date
there has been no material adverse change in such condition or operations
which is likely to impair the ability of the Company to repay Advances.
(f) The Subsidiary Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock. Following
application of the proceeds of each Advance, not more than 25 percent of
the value of the assets (either of the Subsidiary Borrower only or of the
Subsidiary Borrower and its subsidiaries on a consolidated basis) subject
to the provisions of Section 4.02(a) of the Credit Agreement will be
margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System).
(g) The Subsidiary Borrower is not an "investment company,"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company
Act of 1940, as amended. Neither the making of any Advances, nor the
application of the proceeds or repayment thereof by the Subsidiary
Borrower, nor the consummation of the other transactions contemplated
hereby, will violate any provision of such Act or any rule, regulation or
order of the Securities and Exchange Commission thereunder.
Very truly yours,
THE BOEING COMPANY
By _________________________
Name:
Title:
[SUBSIDIARY BORROWER]
By __________________________
Name:
Title:
239
<PAGE> 240
EXHIBIT H
FORM OF OPINION OF IN-HOUSE COUNSEL TO
SUBSIDIARY BORROWER
[Date]
To each of the Banks parties
to The Boeing Company Bank
Credit Agreement dated as of
December 8, 1997 among
The Boeing Company,
certain other borrowers parties thereto,
said Banks, Citibank, N.A.,
as Administrative Agent for
said Banks, and The Chase
Manhattan Bank , as Syndication
Agent for said Banks, and to Citibank,
N.A., as Administrative Agent
The Boeing Company
------------------
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 5.04(v) of The
Boeing Company $1,500,000,000 Bank Credit Agreement dated as of December 8,
1997 (the "Credit Agreement") among The Boeing Company (the "Company"), certain
other borrowers parties thereto, the Banks parties thereto, Citibank, N.A., as
Administrative Agent for said Banks, and the Chase Manhattan Bank, as
Syndication Agent for said Banks. Terms defined in the Credit Agreement are
used herein as therein defined.
I am the [chief legal officer] of the Company, and legal counsel
for [insert name of Subsidiary Borrower] (the "Subsidiary Borrower"), and have
acted in such capacity in connection with the execution and delivery of the
Borrower Subsidiary Letter dated as of [month, date, year] by the Company and
the Subsidiary Borrower (the "Borrower Subsidiary Letter"), the execution and
delivery of the Guaranty Agreement dated as of [month, date, year] made by the
Company in favor of the Administrative Agent and the Banks (the "Guaranty"),
the execution and delivery of the Credit Agreement by the Subsidiary Borrower,
and the initial Borrowing made by the Subsidiary Borrower under the Credit
Agreement.
240
<PAGE> 241
In that connection, I have examined:
(1) The Credit Agreement.
(2) The Guaranty.
(3) The Borrower Subsidiary Letter.
(4) The other documents furnished by the Company and/or the
Subsidiary Borrower pursuant to Article 5 of the Credit Agreement.
(5) The Certificate of Incorporation of the Company and all
amendments thereto (the "Company Charter").
(6) The by-laws of the Company and all amendments thereto (the
"Company By-laws").
(7) A certificate of the Secretary of State of the State of
Delaware, dated __________, 1997, attesting to the continued corporate
existence and good standing of the Company in that State.
(8) The Certificate of Incorporation of the Subsidiary Borrower
and all amendments thereto (the "Subsidiary Borrower Charter").
(9) The by-laws of the Subsidiary Borrower and all amendments
thereto (the "Subsidiary Borrower By-laws").
(10) A certificate of the Secretary of State of the State of [insert
state of incorporation of Subsidiary Borrower], dated___________, 1997,
attesting to the continued corporate existence and good standing of the
Subsidiary Borrower in that State.
In addition, I have examined the originals, or copies certified to my
satisfaction, of such other corporate records of the Company and the Subsidiary
Borrower, certificates of public officials and of officers of the Company and
the Subsidiary Borrower, and agreements, instruments and other documents, as I
have deemed necessary as a basis for the opinions expressed below. I have
assumed the due execution and delivery, pursuant to due authorization, of the
Credit Agreement by the Banks, the Administrative Agent and the Syndication
Agent.
I am qualified to practice law in the State of Washington and I do
not purport to be an expert on any laws other than the laws of the State of
Washington, the General Corporation Law of the State of Delaware [and insert
state of incorporation of the Subsidiary Borrower if other than Delaware] and
the Federal laws of the United States.
241
<PAGE> 242
Based upon the foregoing and upon such investigation as I have
deemed necessary, I am of the following opinions:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The
Subsidiary Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of [insert state of
incorporation].
2. The execution, delivery and performance by the Company of the
Guaranty and the Borrower Subsidiary Letter are within the Company's
corporate powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Company Charter or the Company By-
laws or (ii) any law, rule or regulation applicable to the Company
(including, without limitation, Regulation X of the Board of Governors of
the Federal Reserve System) or (iii) any contractual or legal restriction
binding on the Company. The execution, delivery and performance by the
Subsidiary Borrower of the Credit Agreement, the Borrower Subsidiary
Letter and the Subsidiary Borrower's Notes are within the Subsidiary
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Subsidiary Borrower
Charter or the Subsidiary Borrower By-laws or (ii) any law, rule or
regulation applicable to the Subsidiary Borrower (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System) or (iii) any contractual or legal restriction binding on the
Subsidiary Borrower. The Guaranty and the Borrower Subsidiary Letter
have been duly executed and delivered on behalf of the Company. have been
duly executed and delivered on behalf of the Company. The Credit
Agreement, the Borrower Subsidiary Letter and the Subsidiary Borrower's
Notes have been duly executed and delivered on behalf of the Subsidiary
Borrower.
3. No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of the
Guaranty and the Borrower Subsidiary Letter [, except for , all of
which have been duly obtained or made and are in full force and effect].
No authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Subsidiary Borrower of the
Credit Agreement, the Borrower Subsidiary Letter and the Subsidiary
Borrower's Notes [, except for , all of which have been
duly obtained or made and are in full force and effect].
242
<PAGE> 243
4. In any action or proceeding arising out of or relating to the
Credit Agreement, the Guaranty, the Borrower Subsidiary Letter, or the
Subsidiary Borrower's Notes in any court of the State of Washington or in
any federal court sitting in the State of Washington, such court would
recognize and give effect to the provisions in the Credit Agreement, the
Guaranty, the Borrower Subsidiary Letter and the Subsidiary Borrower's
Notes wherein the parties thereto agree that the Credit Agreement, the
Guaranty, the Borrower Subsidiary Letter and the Subsidiary Borrower's
Notes shall be governed by, and construed in accordance with, the laws of
the State of New York. Without limiting the generality of the foregoing,
a court of the State of Washington or a federal court sitting in the
State of Washington would apply the usury law of the State of New York,
and would not apply the usury law of the State of Washington, to the
Credit Agreement, the Guaranty, the Borrower Subsidiary Letter or the
Subsidiary Borrower's Notes. However, if a court were to hold that the
Credit Agreement, the Guaranty, the Borrower Subsidiary Letter and the
Subsidiary Borrower's Notes are governed by, and are to be construed in
accordance with, the laws of the State of Washington, to the Credit
Agreement, the Guaranty, the Borrower Subsidiary Letter and the
Subsidiary Borrower's Notes would be, under the laws of the State of
Washington, legal, valid and binding obligations of the Company and the
Subsidiary Borrower parties thereto, enforceable against the Company and
the Subsidiary Borrower parties thereto in accordance with their
respective terms.
5. To the best of my knowledge, there are no pending overtly
threatened actions or proceedings against the Company or any of its
Subsidiaries (including the Subsidiary Borrower) before any court or
administrative agency which (i) purport to affect the legality, validity,
binding effect or enforceability of the Credit Agreement, the Guaranty,
the Borrower Subsidiary Letter or any of the Subsidiary Borrower's Notes,
or (ii) except as disclosed in the Company's financial statements
delivered to you prior to the date hereof pursuant to the Credit
Agreement, can reasonably be expected to materially adversely affect the
financial condition or operations of the Company or any Subsidiary
(including the Subsidiary Borrower).
The opinions set forth above are subject to the following
qualifications:
(a) My opinion in paragraph 4 above is subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors' rights generally.
(b) My opinion in paragraph 4 above is subject to the effect of
general principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
Very truly yours,
243
<PAGE> 244
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
|Initial Issuing| Term A & B | Domestic |Eurodollar/Operations |
|Bank | Commitment | Lending Office | Lending Office |
- -------------------------------------------------------------------------------
| ABN Amro Bank | $40,000,000|One Union Square |135 South LaSalle St. |
| N.V. | |600 University St. |Suite 625 |
| | |Suite 2323 |Chicago, IL 60603 |
| | |Seattle, WA 98101 |Attn: Loan |
| | |Attn:James J. Rice |Administration |
| | |Tel:(206)587-2360 |Tel:(312)904-8855 |
| | |Fax:(206)682-5641 |Fax:(312)904-6893 |
- ------------------------------------------------------------------------------
|Bank of America|$60,000,000 |555 South Flower St. |555 South Flower St. |
|NT & SA | |11th Floor |11th Floor |
| | |Los Angeles, CA 90071 |Los Angeles, CA 90071 |
| | |Attn: Dianne Allen |Attn: Rosalie Baca |
| | |Tel: (213) 228-2820 |Tel: (213) 228-2824 |
| | |Fax: (213) 228-2756 |Fax: (213) 228-2756 |
- -------------------------------------------------------------------------------
|Bank of China, |$15,000,000 |410 Madison Avenue |410 Madison Avenue |
|New York Branch| |New York, NY 10017 |New York, NY 10017 |
| | |Attn: Anna Yuen |Attn: Rhonda Chen |
| | |Tel: (212) 935-3101 |Tel: (212) 935-3101 |
| | |x212 |x443 |
| | |Fax: (212) 688-0919 |Fax: (212) 688-0919 |
- -------------------------------------------------------------------------------
|The Bank of |$60,000,000 |10990 Wilshire Blvd |One Wall Street |
|New York | |Suite 1125 |22nd Floor |
| | |Los Angeles, CA 90024 |New York, NY 10286 |
| | |Attn: Robert J. Louk |Attn: Sandra Morgan |
| | |Tel: (310) 996-8663 |Tel: (212) 636-6743 |
| | |Fax: (310) 996-8667 |Fax: (212) 635-6877 |
- -------------------------------------------------------------------------------
|The Bank of |$91,000,000 |1201 Third Avenue |1201 Third Avenue |
|Tokyo- | |Suite 1100 |Suite 1100 |
|Mitsubishi, Ltd| |Seattle, WA 98101 |Seattle, WA 98101 |
| | |Attn: David M. Purcell|Attn: Ken Johnson |
| | |Tel: (206) 382-6049 |Tel: (206) 382-6021 |
| | |Fax: (206) 382-6067 |Fax: (206) 382-6067 |
- -------------------------------------------------------------------------------
|BankBoston, |$50,000,000 |100 Federal Street |100 Federal Street |
|N.A. | |Large Corporate 01-09-|Large Corporate 01-09- |
| | |05 |05 |
| | |Boston, MA 02110 |Boston, MA 02110 |
| | |Attn: Judith Kelly |Attn: Denise M. Dowd |
| | |Tel: (617) 434-5280 |Tel: (617) 434-7462 |
| | |Fax: (617) 434-6685 |Fax: (617) 434-9933 |
- -------------------------------------------------------------------------------
|Bankers Trust |50,000,000 |One Bankers Trust |One Bankers Trust |
| Company | |Plaza, 14th Floor |Plaza, 14th Floor |
| | |New York, NY 10006 |New York, NY 10006 |
| | |Attn:Anthony LoGrippo |Attn: Hsing Huang |
| | |Tel: (212) 250-4886 |Tel: (212) 250-2431 |
| | |Fax: (212) 250-7218 |Fax: (212) 250-7351 |
- -------------------------------------------------------------------------------
244
<PAGE> 245
COMMITMENTS AND APPLICABLE LENDING OFFICES (Continued)
|Initial Issuing| Term A & B | Domestic |Eurodollar/Operations |
|Bank | Commitment | Lending Office | Lending Office |
- -------------------------------------------------------------------------------
|Banque |$30,000,000 |180 Montgomery Street |180 Montgomery Street |
|Nationale | |3rd Floor |3rd Floor |
|de Paris | |San Francisco,CA 94194|San Francisco,CA 94194 |
| | |Attn: D. Guy Gibb |Attn: Don Hart |
| | |Tel: (415) 956-0707 |Tel: (415) 956-2511 |
| | |Fax: (415) 296-8954 |Fax: (415) 989-9041 |
- -------------------------------------------------------------------------------
|Credit |$15,000,000 |101 California Street |55 East Monroe St. |
|Agricole | |Suite 4390 |Suite 4700 |
|Indosuez | |San Francisco,CA 94111|Chicago, IL 60603 |
| | |Attn: John Hyun |Attn: Julie Ferreh |
| | |Tel: (415) 773-1283 |Tel: (312) 917-7421 |
| | |Fax: (415) 986-4116 |Fax: (312) 372-3848 |
- -------------------------------------------------------------------------------
|Canadian |$99,000,000 |350 S. Grand Avenue |2727 Paces Ferry Road |
|Imperial Bank | |Suite 2600 |Suite 1200, Bldg. 2 |
|of Commerce | |Los Angeles, CA 90071 |Atlanta, GA 30339 |
| | |Attn: Robert J. Wagner|Attn: Clare Coyne |
| | |Tel: (213) 617-6248 |Tel: (770) 319-4836 |
| | |Fax: (213) 346-0157 |Fax: (770) 319-4950 |
- -------------------------------------------------------------------------------
|The Chase |$110,000,000|270 Park Avenue |270 Park Avenue |
|Manhattan | |New York, NY 10019 |New York, NY 10019 |
|Bank, N.A. | |Attn: Sherwood Exum |Attn: Sherwood Exum |
| | |Tel: (212) 270-6075 |Tel: (212) 270-6075 |
| | |Fax: (212) 270-1469 |Fax: (212) 270-1469 |
- -------------------------------------------------------------------------------
|Citicorp |$110,000,000|399 Park Avenue |399 Park Avenue |
|Securities, | |12th Floor, Zone 2 |12th Floor, Zone 2 |
|Inc. | |New York, NY 10043 |New York, NY 10043 |
| | |Attn: Thomas B. Boyle |Attn: Chris Young |
| | |Tel: (212) 559-6149 |Tel: (212) 559-1477 |
| | |Fax: (212) 793-1246 |Fax: (212) 583-7185 |
- -------------------------------------------------------------------------------
|Credit Lyonnais|$76,000,000 |1301 Avenue of the |1301 Avenue of the |
| | |Americas |Americas |
| | |New York, NY 10019 |New York, NY 10019 |
| | |Attn: Bertrand Cousin |Attn: Kenia A. Perez |
| | |Tel:(212) 261-7363 |Tel: (212) 261-7313 |
| | |Fax: (212) 261-7368 |Fax: (212) 261-7368 |
- -------------------------------------------------------------------------------
|Deutsche Bank |$30,000,000 |31 West 52nd Street |31 West 52nd Street |
|AG New York | |New York, NY 10019 |New York, NY 10019 |
| | |Attn: Robert M. Wood |Attn: Noble Samuel |
| | |Tel: (212) 469-7839 |Tel: (212) 469-4091 |
| | |Fax: (212) 469-8212 |Fax: (212) 469-4139 |
- -------------------------------------------------------------------------------
245
<PAGE> 246
COMMITMENTS AND APPLICABLE LENDING OFFICES (Continued)
|Initial Issuing| Term A & B | Domestic |Eurodollar/Operations |
|Bank | Commitment | Lending Office | Lending Office |
- -------------------------------------------------------------------------------
|The Industrial |$76,000,000 |350 South Grand Avenue|350 South Grand Avenue |
|Bank of Japan | |Suite 1500 |Suite 1500 |
| | |Los Angeles, CA 90071 |Los Angeles, CA 90071 |
| | |Attn: Craig Papayanis |Attn: Janice Luong |
| | |Tel: (213) 893-6441 |Tel: (212) 893-6387 |
| | |Fax: (213) 488-9840 |Fax: (212) 688-9840 |
- -------------------------------------------------------------------------------
|The Long-Term |$100,000,000|350 South Grand Avenue|350 South Grand Avenue |
|Credit Bank of | |Suite 3000 |Suite 3000 |
|Japan, Ltd., | |Los Angeles, CA 90071 |Los Angeles, CA 90071 |
|Los Angeles | |Attn: Tamotsu Ukai |Attn: Mitchell Davis |
|Agency | |Tel: (213) 689-6345 |Tel: (213) 689-6238 |
| | |Fax: (213) 626-1067 |Fax: (213) 626-1067 |
- -------------------------------------------------------------------------------
|The Mitsubishi |$99,000,000 |520 Madison Avenue |520 Madison Avenue |
|Trust and | |New York, NY 10022 |New York, NY 10022 |
|Banking | |Attn: Joe Shammas |Attn: Ming Hwa Chou |
|Corporation | |Tel: (212) 891-8451 |Tel: (212) 891-8263 |
| | |Fax: (212) 644-6825 |Fax: (212) 755-2349 |
- -------------------------------------------------------------------------------
|Morgan Guaranty|$50,000,000 |60 Wall Street |Nassau Bahamas Office |
|Trust Company | |New York, NY 10260 |c/o J.P. Morgan |
|of New York | |Attn: Robert Osieski |Services Inc. |
| | |Tel: (212) 648-7173 |500 Stanton Christiana |
| | |Fax: (212) 648-5018 |Road |
| | | |Newark, DE 19713 |
| | | |Tel: (302) 634-1938 |
| | | |Fax: (302) 634-1852 |
- -------------------------------------------------------------------------------
|National |$40,000,000 |175 Water Street |175 Water Street |
|Westminster | |New York, NY 10038 |New York, NY 10038 |
|Bank Plc | |Attn: Stephen Sayre |Attn: Angela Bozorgmir |
| | |Tel: (212) 602-5521 |Tel: (212) 602-5491 |
| | |Fax: (212) 602-4354 |Fax: (212) 602-4500 |
- -------------------------------------------------------------------------------
|NationsBank of |$99,000,000 |444 South Flower St. |901 Main Street |
|Texas, N.A. | |Suite 400 |Dallas, TX 75202 |
| | |Los Angeles, CA 90071 |Attn: Karen Puente |
| | |Attn:George V. Hausler|Tel: (214) 508-3089 |
| | |Tel: (213) 236-4925 |Fax: (214) 508-0944 |
| | |Fax: (213) 624-5815 | |
- -------------------------------------------------------------------------------
|PNC Bank, |$50,000,000 |One PNC Plaza, 2nd Fl.|One PNC Plaza, 6th Fl. |
|National | |249 Fifth Avenue |249 Fifth Avenue |
|Association | |Pittsburgh, PA 15222 |Pittsburgh, PA 15222 |
| | |Atn:Philip K.Liebshcer|Attn: Sally Hunter |
| | |Tel: (412) 762-3202 |Tel: (412) 768-3807 |
| | |Fax: (412) 762-6484 |Fax: (412) 768-4586 |
- -------------------------------------------------------------------------------
246
<PAGE> 247
COMMITMENTS AND APPLICABLE LENDING OFFICES (Continued)
|Initial Issuing| Term A & B | Domestic |Eurodollar/Operations |
|Bank | Commitment | Lending Office | Lending Office |
- -------------------------------------------------------------------------------
|The Sumitomo |$40,000,000 |1201 Third Avenue, |777 South Figueroa, |
|Bank, Limited | |Suite 5320 |Suite 2600 |
| | |Seattle, WA 98101 |Los Angeles, CA 90017 |
| | |Attn: Robert Granfelt |Attn: Miriam Delgado |
| | |Tel: (206) 223-4050 |Tel: (213) 955-0883 |
| | |Fax: (206) 623-8551 |Fax: (213) 623-6832 |
- -------------------------------------------------------------------------------
|The Sumitomo | $50,000,000|333 South Grand Ave., |333 South Grand Ave., |
|Trust & Banking| |Suite 5300 |Suite 5300 |
|Co., Ltd., Los | |Los Angeles, CA 90071 |Los Angeles, CA 90071 |
|Angeles Agency | |Attn: Eleanor Chan |Attn: Bettina Wen |
| | |Tel: (213) 229-2170 |Tel: (213) 229-2123 |
| | |Fax: (213) 613-1083 |Fax: (213) 613-1083 |
- -------------------------------------------------------------------------------
|Wachovia Bank, |$60,000,000 |191 Peachtree St.,NE |191 Peachtree St.,NE |
|N.A. | |Atlanta, GA 30303 |Atlanta, GA 30303 |
| | |Attn: John Whitner |Attn: Gloria Freeman |
| | |Tel: (404) 332-6738 |Tel: (404) 332-6485 |
| | |Fax: (404) 332-6898 |Fax: (404) 332-6898 |
- -------------------------------------------------------------------------------
247
<PAGE> 248
Exhibit (3) (xx)
Retention Agreement with John A. McLuckey
September 16, 1996
Mr. J. A. McLuckey Robert H. Murphy
President & COO Senior Vice President
Aerospace & Defense Organization & Human Resources
2201 Seal Beach Boulevard
Seal Beach, CA 90740
Dear John:
We have recently discussed with you the planned divestiture of the
Aerospace and Defense businesses to Boeing North American, Inc.
("Boeing',) and have emphasized to you that your continued support and
dedication are particularly important for this transaction to be
successful now and in the future.
Since your continued support in the effective operation of the Aerospace
and Defense businesses is considered extremely important, both before and
after the divestiture of those businesses, we have arranged for providing
you with compensation for the: continued support, as well as protection
in the event that Boeing should deem it necessary after the closing of
the divestiture (the 'Closing Date-) to terminate your employment or
materially diminish your responsibilities. Accordingly, you will be
provided with the following:
Retention Payment:
A Retention Payment of $830,000, which equates to 24 months of pay,
will be paid to you by Boeing, if all the following conditions are
satisfied:
1. the Aerospace and Defense businesses are divested;
2. you remain with Rockwell through the closing of the divestiture
(the "Closing Date"); and
3. you continue employment with Boeing and do not voluntarily
terminate your employment before completion of 12 months of
service with Boeing immediately following the Closing Date.
You will not be eligible for the Retention Payment, if you voluntarily
terminate your employment with Boeing within the 12- month period
immediately following the Closing Date (unless your responsibilities had
been materially diminished prior to your termination or if your
248
<PAGE> 249
J. A. McLuckey
September 16,1996
Page 2
employment is terminated for cause either by Rockwell prior to the
Closing Date or by Boeing within the 12-month period immediately
following the Closing Date.
If the above conditions are satisfied, your retention Payment will be
paid to you at the time and in the manner you elect on the attached form.
If you do not make an election by October 31, 1996, your retention
Payment will be paid in a lump sum 13 months after the Closing Date.
Severance Payments:
During the 12 months immediately following the Closing Date, you will be
eligible for a Severance Payment from Boeing in the amount of $
1,245,000. Thereafter and through the 24th month following the Closing
Date, you will be eligible for a Severance Payment from Boeing in the
amount of $415,000. The applicable Severance Payment will be made to you
in a lump sum, if you continue employment with Boeing immediately
following the Closing Date, but:
1. you are involuntarily terminated by Boeing, other
than for cause; or
2. your responsibilities are materially diminished by Boeing
and you voluntarily terminate your employment with Boeing
within the 12-month period immediately following the Closing Date in the
case of the first form of Severance Payment or within the second 12-month
period following the Closing Date, in the case of the second form of
Severance Payment.
You will not be eligible for either of the above Severance Payments, if
you voluntarily terminate your employment with Boeing within the 24-month
period immediately following the Closing Date (unless your
responsibilities had been materially diminished prior to your
termination) or if your employment is terminated for cause, either by
Rockwell prior to the Closing Date or by Boeing following the Closing
Date or by Boeing following the Closing Date.
For purposes of this letter, the term "Materially" diminished
responsibilities" refers to substantial reduction in scope of job duties
or a substantial reduction in base and/or incentive compensation or
opportunities for such forms of compensation because of changes in job
responsibilities. Boeing and Rockwell both agree that it is the intention
of both companies that the initial transfer of an executive from
employment with Rockwell to employment with Boeing does not constitute a
material diminution of responsibilities which would qualify the executive
for either a Retention Payment or a Severance Payment.
249
<PAGE> 250
J. A. McLuckey
September 16,1996
Page 3
As you can understand, a certain amount of restructuring and/or
consolidation of the Aerospace and Defense businesses with the Boeing
Defense & Space businesses may well occur during the 24-month period
following the Closing Date. It is the intention of both companies that
any job title changes, revisions in your management reporting
relationships or changes in your job responsibilities which might result
from such a restructuring or consolidation (including any related
transfer of assets) will not constitute "materially diminished
responsibilities,' on your part, unless such a change is accompanied by a
substantial reduction in your base and/or incentive compensation or in
your opportunities for such forms of compensation.
On the ongoing basis, reductions in base or incentive compensation
(including any reductions in opportunities for such compensation) which
are related to business performance or individual performance issues or
compensation plan changes do not constitute a material diminution of
responsibilities and will also be excluded from consideration in
determining an executive's eligibility for retention or Severance
Payments hereunder.
The Retention and Severance Payments provided for herein are in lieu of
any other compensation or payments under Rockwell and Boeing policies.
programs and agreements pertaining to retention and severance pay.
All of the foregoing is contingent upon satisfactory performance of your
current assignment, and your agreement to keep confidential al]
information relating to this matter. None of Rockwell's or Boeing's
rights with respect to your employment are affected by this letter except
as specifically set forth herein.
Please sign, date, and return a copy of this letter to indicate your
full understanding of the teens and conditions contained herein.
Sincerely,
/s/ Robert H. Murphy
Robert H. Murphy
Senior Vice President
Organization & Human Resources
/s/ John A. McLuckey 11/26/96
------------------------- ------------
Date
250
<PAGE> 251
To: Rockwell International Corporation
This is to evidence my election concerning the time and manner in which I wish
to receive the Retention Payment which may become payable to me from Boeing
North American, Inc. ("Boeing") in connection with the consummation of the
proposed merger transaction between Boeing and Rockwell International
Corporation ("Rockwell") involving assumption by Boeing of Rockwell's Aerospace
and Defense businesses (the "A&D Transaction").
If all of the conditions necessary for payment of the said Retention
Payment which are described in the attached letter are satisfied and
if I become eligible for receipt of the said Retention Payment, I
hereby irrevocably elect to have the retention Payment paid to me by
Boeing as follows: (Choose one)
___ in a lump sum on the sixtieth (60th) day after my
termination of employment with Boeing; or
X in 10 (2-10) annual installments commencing on the sixtieth
___ (60th) day after my termination of employment with Boeing.
I understand and agree that, until paid, any such Retention Payment amount
would earn interest Mom the Closing date of the A&D Transaction to the time of
payment at a rate which is identical to the interest rate applied to deferred
compensation under the The Boeing Company Deferred Compensation Plan.
Signed at 9:00 am /s/ John A. McLuckey
September 30, 1996 ---------------------------
251
<PAGE> 252
EXHIBIT (21) - List of Company Subsidiaries
THE BOEING COMPANY AND SUBSIDIARIES
(Wholly owned unless identified by Asterick)
Place of Date
Name Incorporation Incorporated
==============================================================================
2433265 Manitoba Ltd. Manitoba 1989
692567 Ontario Limited Ontario 1986
757UA, Inc. Delaware 1989
767ER, Inc. Delaware 1987
ACN 004 471 078 PTY LIMITED Australia 1960
AeroSpace Technologies of Australia
Limited Australia 1986
Aileron Inc. Delaware 1989
Aldford-1 Corporation Delaware 1993
Amwell-1 Corporation Delaware 1993
Andsell-1 Corporation Delaware 1993
ARGOSystems, Inc. California 1969
Arneway-1 Corporation Delaware 1993
Astro Limited Bermuda 1975
Astro-II, Inc. Vermont 1984
Atlantic Intermountain Express, Inc. Pennsylvania 1980
Autonetics, Inc. Delaware 1958
Bahasa Aircraft Corporation Delaware 1993
BCS Richland, Inc. Washington 1975
Beaufoy-1 Corporation Delaware 1993
BNA International Systems, Inc. Delaware 1974
BNA Operations International, Inc. Delaware 1996
Boeing Aerospace Operations, Inc. Washington 1972
Boeing Agri-Industrial Company Oregon 1973
Boeing Aircraft Holding Company Delaware 1984
Boeing Australia Limited Australia 1986
Boeing Canada Inc.. Ontario 1929
Boeing Capital Corporation Delaware 1968
Boeing Capital Services Corporation Delaware 1988
Boeing China, Inc. Delaware 1986
Boeing Commercial Information and
Communication Company Delaware 1997
Boeing Commercial Space Company Delaware 1987
Boeing Constructors, Inc. Texas 1970
Boeing Defence UK Limited England 1976
Boeing Defense & Space - Corinth Co. Delaware 1987
Boeing Defense & Space - Irving Co. Delaware 1979
Boeing Defense & Space -
Oak Ridge, Inc. Delaware 1980
Boeing Domestic Sales Corporation Washington 1974
Boeing Enterprises, Inc. Delaware 1997
Boeing Equipment Holding Company Washington 1968
Boeing Financial Corporation Washington 1965
252
<PAGE> 253
EXHIBIT (21) - List of Company Subsidiaries (Continued)
THE BOEING COMPANY AND SUBSIDIARIES
(Wholly owned unless identified by Asterick)
Place of Date
Name Incorporation Incorporated
==============================================================================
Boeing Georgia, Inc. Delaware 1980
Boeing Information Services, Inc. Delaware 1981
Boeing International Corporation Delaware 1953
Boeing International Holdings, Ltd. Bermuda 1998
Boeing International Logistics
Spares, Inc. Delaware 1996
Boeing International Sales Corporation Washington 1971
Boeing Investment Company, Inc. Delaware 1985
Boeing Leasing Company Delaware 1988
Boeing Louisiana, Inc. Delaware 1986
Boeing Middle East Limited Delaware 1982
Boeing Nevada, Inc. Delaware 1989
Boeing North American Services, Inc. Texas 1973
Boeing North American Space Alliance
Company Delaware 1995
Boeing North American Space
Enterprises Canada, Inc. Canada 1996
Boeing North American Space
Operations Company Delaware 1983
Boeing North American, Inc. Delaware 1928
Boeing of Canada Ltd. Delaware 1986
Boeing Offset Company, Inc. Delaware 1985
Boeing Operations International,
Incorporated Delaware 1981
Boeing Precision Gear, Inc. Delaware 1994
Boeing Realty Corporation California 1972
Boeing Sales Corporation Guam 1984
Boeing Sales Corporation, Limited Bermuda 1993
Boeing Technology International, Inc. Washington 1973
Boeing Travel Management Company Delaware 1980
Boeing Worldwide Operations Limited Bermuda 1998
Braham-1 Corporation Delaware 1993
Canard Holdings, Inc. Delaware 1996
CBSA Leasing II, Limited Delaware 1998
CBSA Leasing, Inc. Delaware 1998
Douglas Express Limited Virgin Islands 1996
Douglas Federal Leasing Limited Virgin Islands 1996
Douglas Leasing Inc. Delaware 1996
Douglas Realty Company, Inc. California 1965
Falcon II Leasing Limited Virgin Islands 1998
Falcon Leasing Limited Virgin Islands 1998
Fine Chemicals Offset Limited British Virgin Islands 1996
Finnish American International
Trade, Inc. * Delaware 1988
Gainford-1 Corporation Delaware 1993
Gaucho-1 Inc. Delaware 1994
GAUCHO-2 Inc. Delaware 1994
253
<PAGE> 254
EXHIBIT (21) - List of Company Subsidiaries (Continued)
THE BOEING COMPANY AND SUBSIDIARIES
(Wholly owned unless identified by Asterick)
Place of Date
Name Incorporation Incorporated
==============================================================================
Grape Corporation Delaware 1993
Ham's Express, Inc. Pennsylvania 1970
Hanway Corporation Delaware 1993
Kuta-3 Aircraft Corporation, Limited Delaware 1994
Kuta-One Aircraft Corporation, Limited Delaware 1994
Kuta-Three Aircraft Corporation Delaware 1993
Kuta-Two Aircraft Corporation Delaware 1993
Longacres Park, Inc. Washington 1948
Longbow Golf Club Corporation Delaware 1997
MCAUTO International, Inc. Delaware 1980
MCAUTO Systems Group, Inc. Delaware 1981
McDonnell Douglas (Australia) Pty. Ltd. Delaware 1980
McDonnell Douglas (Singapore) Pte. Ltd. Singapore 1989
McDonnell Douglas Administrative
Services Missouri 1993
McDonnell Douglas Aerospace
(Malaysia) Sdn. Bhd. Malaysia 1993
McDonnell Douglas Aerospace - Hungary Hungary 1997
McDonnell Douglas Aerospace -
Middle East Limited Delaware 1993
McDonnell Douglas Aerospace -
Poland, Sp. zoo. Poland 1996
McDonnell Douglas Aerospace -
Switzerland, Inc. Delaware 1972
McDonnell Douglas Aerospace -
U.K., Ltd. Delaware 1993
McDonnell Douglas Aerospace Services
Company Delaware 1978
McDonnell Douglas Aerospace -
Tactical Aircraft & Missile Systems
Co. - Support Services Delaware 1981
McDonnell Douglas Aircraft Finance
Corporation Delaware 1989
McDonnell Douglas Canada Limited Canada 1964
McDonnell Douglas Capital Corporation Delaware 1987
McDonnell Douglas Capital Leasing
Corporation Delaware 1987
McDonnell Douglas China Technical
Services, Inc. Delaware 1985
McDonnell Douglas Commercial
Delta, Inc. Delaware 1988
McDonnell Douglas Corporation Maryland 1939
McDonnell Douglas Dakota Leasing, Inc. Delaware 1996
McDonnell Douglas Express, Inc. Delaware 1996
McDonnell Douglas F-15 Technical
Services Company, Inc. Delaware 1978
254
<PAGE> 255
EXHIBIT (21) - List of Company Subsidiaries (Continued)
THE BOEING COMPANY AND SUBSIDIARIES
(Wholly owned unless identified by Asterick)
Place of Date
Name Incorporation Incorporated
==============================================================================
McDonnell Douglas Finance Corporation
- Federal Leasing, Limited Virgin Islands 1994
McDonnell Douglas Finland Oy Finland 1991
McDonnell Douglas Foreign Sales
Corporation Virgin Islands 1984
McDonnell Douglas Helicopter Company Delaware 1980
McDonnell Douglas Helicopter Support
Services, Inc. Delaware 1984
McDonnell Douglas Indonesia
Leasing, Inc. Delaware 1997
McDonnell Douglas Insurance
Holdings Corporation Delaware 1989
McDonnell Douglas International
Radio Services Corporation California 1983
McDonnell Douglas International
Sales Corporation Delaware 1972
McDonnell Douglas Japan, Ltd. Japan 1958
McDonnell Douglas Korea, Ltd. Delaware 1986
McDonnell Douglas Macedonia
Leasing, Inc. Delaware 1997
McDonnell Douglas Middle East, Ltd. Delaware 1989
McDonnell Douglas Overseas Finance
Corporation Delaware 1975
McDonnell Douglas Overseas, Inc. Delaware 1984
McDonnell Douglas Pacific & Asia, Ltd. Delaware 1980
McDonnell Douglas Radio Services
Corporation Delaware 1973
McDonnell Douglas Services, Inc. Missouri 1980
McDonnell Douglas Spain Ltd. Delaware 1983
McDonnell Douglas Support Services
- Military, Inc. Delaware 1991
McDonnell Douglas Support
Services, Inc. Delaware 1980
McDonnell Douglas Technical Services
Company Delaware 1980
McDonnell Douglas Training Systems
Support Services, Inc. Delaware 1989
McDonnell Douglas Truck Services, Inc. Delaware 1982
McDonnell Douglas Worldwide, Ltd. British West Indies 1986
McDonnell Douglas, Ltd. Delaware 1980
MD Computer Sales, Ltd. British West Indies 1986
MD Dakota Leasing, Ltd. Virgin Islands 1996
MD Indonesia Limited Virgin Islands 1997
MD Industrial Participation, Inc. Delaware 1981
MD Technical Services International,
Inc. Delaware 1991
MD-Air Leasing Limited Virgin Islands 1996
255
<PAGE> 256
EXHIBIT (21) - List of Company Subsidiaries (Continued)
THE BOEING COMPANY AND SUBSIDIARIES
(Wholly owned unless identified by Asterick)
Place of Date
Name Incorporation Incorporated
==============================================================================
MD-Federal Holding Company Delaware 1996
MDAFC - Nashville Company Delaware 1996
MDC Cypress Properties, Inc. California 1984
MDC Properties, Inc. Michigan 1979
MDFC - Aircraft Leasing Company Delaware 1995
MDFC - Aircraft Leasing Limited Virgin Islands 1995
MDFC - Aircraft Ltd. Ireland 1995
MDFC - Bali, Limited Virgin Islands 1993
MDFC - Carson Company Delaware 1997
MDFC - Carson Limited Virgin Islands 1996
MDFC - Express Leasing Company Delaware 1995
MDFC - Express Leasing Limited Virgin Islands 1995
MDFC - Federal Leasing, Ltd. Virgin Islands 1994
MDFC - Jakarta, Limited Virgin Islands 1993
MDFC - Knoxville Company Delaware 1996
MDFC - Knoxville Limited Virgin Islands 1995
MDFC - Lakewood Company Delaware 1996
MDFC - Lakewood Limited Virgin Islands 1996
MDFC - Memphis Company Delaware 1996
MDFC - Memphis Ltd. Virgin Islands 1995
MDFC - Nashville Ltd. Virgin Islands 1995
MDFC - Reno Company Delaware 1996
MDFC - Sierra Company Delaware 1985
MDFC - Spring Limited Virgin Islands 1996
MDFC - Tahoe Company Delaware 1996
MDFC Equipment Leasing Corporation Delaware 1972
MDFC Loan Corporation Delaware 1983
MDRC of Missouri, Inc. Missouri 1989
Montana Aviation Research Company Delaware 1991
Network Information Service Co., Ltd. Japan 1984
North American Aviation, Inc. Delaware 1967
Pacific Business Enterprises, Inc. Delaware 1988
Plaza Realty Holdings Corporation Delaware 1986
Processing Properties, Inc. Delaware 1993
Rainier Aircraft Leasing, Inc. Delaware 1992
RGL-1 Corporation Delaware 1993
RGL-2 Corporation Delaware 1993
RGL-3 Corporation Delaware 1993
RGL-4 Corporation Delaware 1993
RGL-5 Corporation Delaware 1993
RGL-6 Corporation Delaware 1993
Rocketdyne Technical Services Company Delaware 1986
Rocketdyne, Inc. Delaware 1958
Sunshine Leasing Company - 1 Delaware 1997
Taiko Leasing, Inc. Delaware 1998
Team Apache Systems, LLC * Delaware 1997
Thayer Leasing, Inc. Delaware 1997
256
<PAGE> 257
EXHIBIT (21) - List of Company Subsidiaries (Continued)
THE BOEING COMPANY AND SUBSIDIARIES
(Wholly owned unless identified by Asterick)
Place of Date
Name Incorporation Incorporated
==============================================================================
Troy Capital Services, Inc. Delaware 1987
VC-X 757, Inc. Delaware 1996
Wingspan, Inc. Delaware 1994
257
<PAGE> 258
EXHIBIT (99)
Commercial Program Method of Accounting
The Company's accounting practice relative to its major commercial aircraft
programs is a method of accounting developed through industry practice beginning
in the 1960s, but is not specifically addressed in formal accounting standards
such as statements of financial accounting standards by the Financial Accounting
Standards Board. Although this specialized accounting method is not
specifically addressed in existing standards, in 1974 the Securities and
Exchange Commission (SEC) codified, through Accounting Series Release No. 164,
specifically delineated disclosure requirements for the program method of
accounting, following the SEC's formal due process procedures.
The Company's commercial aircraft program method of accounting is described in
Note 1, "Summary of Significant Accounting Policies - Contract and Program
Accounting," to the Consolidated Financial Statements filed under the Form
10-K for the fiscal year ended December 31, 1997. The relevant disclosure in
Note 1 is as follows:
Commercial aircraft programs are planned, committed and facilitized based on
long-term delivery forecasts, normally for quantities in excess of
contractually firm orders. Cost of sales for the 737, 747, 757, 767 and 777
commercial aircraft programs is determined under the program method of
accounting based on estimated average total cost and revenue for the current
program quantity. The program method of accounting effectively amortizes or
averages tooling and special equipment costs, as well as unit production
costs, over the program quantity. Because of the higher unit production
costs experienced at the beginning of a new program and the substantial
investment required for initial tooling and special equipment, new
commercial jet aircraft programs normally have lower operating profit
margins than established programs. The initial program quantities for the
777 program and the 737- 600/700/800/900 (Next-Generation 737) programs have
been established at 400 units, the same initial program quantity as used for
the 747, 757 and 767 programs. Deliveries for the 777 program began in 1995,
and deliveries for the Next-Generation 737 program began in the fourth
quarter of 1997. The estimated program average costs and revenues are
reviewed and reassessed quarterly, and changes in estimates are recognized
over current and future deliveries constituting the program quantity.
Related disclosures are included in Note 6, "Inventories," to the Consolidated
Financial Statements filed under the Form 10-K for the fiscal year ended
December 31, 1997. Specific disclosures are limited to those programs for
which deferred production costs in excess of estimated average cost of
deliveries or unamortized tooling costs not recoverable from existing firm
orders are material in amount.
258
<PAGE> 259
The accounting theory underlying the program method of accounting is essentially
the same as "contract accounting," which is addressed in the AICPA Statement
of Position 81-1. The important difference in methodology is the definitional
size of the "accounting contract" over which costs are averaged. The program
"accounting contract" is not limited to production units under contract (as is
normally the case with contract accounting), but rather is often based on a
quantity in excess of the units covered by firm backlog. The Company began
using the program method of accounting over 30 years ago, and has applied the
accounting method to its major commercial programs (707, 727, 737, 747, 757,
767 and 777), and only its major commercial programs.
The program method of accounting was originally applied by the Company in
connection with the 707 program to provide an appropriate matching of sales and
cost of sales. The Company believes the application of the program method of
accounting is appropriate only under certain circumstances, typically for
production programs having the following characteristics:
(a) The production program represents a major commitment of the Company
based on an evaluation of the estimated overall rate of return or
profitability of the program as a whole. (Initial contractual
orders are normally not adequate to allow for recovery of the
related production costs.)
(b) Initial and early production stages require investment of substantial
resources relative to the Company's financial position. Due to the
nature of the production item (generally involving high technology,
labor intensive processes), earlier production units require
substantially more effort (labor and non-labor resources) than
subsequent units such that an improvement curve benefit will be
realized with significant cost implications over a period of several
years. Design and fabrication of special tools and equipment are
commonly necessary, for which virtually no economic benefits can be
realized other than in connection with the particular production
program.
(c) Because of market constraints or competitive factors, the substantial
investment of resources can only be recovered over a several-year
market quantity. Sales prices are principally market determined,
and are relatively constant in real terms over the program life.
(d) Because of the substantial and long-term investment of resources
necessary for such production programs, which normally includes
significant pre-production design and developmental costs, the market
will have no more than a few producers for that basic product.
Proposed criteria for use of the program method of accounting were documented in
a 1980 AICPA Task Force draft of a proposed Statement of Position on "Program
Accounting." The Company believes that the proposed criteria for use, as
outlined below, provide appropriate guidance:
259
<PAGE> 260
Criteria for Use of Program Accounting
1) The program method of accounting may be used in circumstances in which a
contractor has invested substantial resources to design and produce multiple
units of a product that
o requires substantial research and development as well as
initial production tooling and facility costs unique to its production,
o is based on anticipation of decreasing unit costs arising
from the effects of a learning curve,
o requires a substantial period to produce the number of units
in the program, and
o is intended to be sold on the basis of level pricing, which
requires that the pricing of the product, except for the effects of
changes in the general price level, will be level over all units or
will correlate closely with changes in the specific prices of direct
costs of production.
2) At the beginning of a program the Company will have identified a number of
anticipated customers, but will have obtained firm contracts for the
production and delivery of a number of units of the product that will not,
by themselves, permit recovery of the initial and early investment in the
production effort. The program accounting method may be used only if a
contractor
o can demonstrate a demand for the product expressed in a number
of units, or a range of the number of units, over the program's
estimated sales life that will permit recovery of costs incurred under
the program,
o has previously financed and produced similar products,
o has documented its ability to finance and produce the program
product, and
o is able to make reasonably dependable estimates of (a) the
number of units to be produced and sold, (b) the length of time to
produce and sell them, and (c) their associated production costs,
revenues and gross margin.
The Company believes that the above stringent criteria are necessary for the
appropriate application of program accounting, and the Company's use of program
accounting is consistent with these criteria.
260
<PAGE> 261
Appendix of graphic and image material pursuant
to Rule 304(a) of Regulation S-T
Graphic and image material item Number 1
Revenues by industry segment:
A bar chart for the five years 1993-1997 indicating revenues by industry
segment (Dollars in billions):
1993 1994 1995 1996 1997
Commercial Aircraft 25.120 19.778 17.511 19.916 26.929
Information, Space and Defense Systems 14.090 14.676 14.849 14.934 18.125
Customer and Commercial Financing, other 0.501 0.515 0.600 0.603 0.746
Total 39.711 34.969 32.960 35.453 45.800
Graphic and image material item Number 2
Commercial sales by geographic region:
A bar chart for the five years 1993-1997 indicating sales by region of
customer (Dollars in billions):
1993 1994 1995 1996 1997
United States 9.050 6.044 7.530 8.634 9.625
Asia, Other than China 8.448 6.847 5.256 6.576 9.254
China 1.297 1.284 0.754 0.950 1.265
Europe 5.078 4.545 2.533 2.757 5.886
Oceania 0.732 0.995 0.599 0.536 0.560
Other 0.723 0.291 0.839 0.463 0.339
Total 25.328 20.006 17.511 19.916 26.929
Graphic and image material item Number 3
Comparative net earnings:
A bar chart of comparative net earnings for the five years 1993-1997
(Dollars in millions):
1993 - 1,640; 1994 - 1,483; 1995 - 1,479; 1996 - 1,905; 1997 - 632
261
<PAGE> 262
Graphic and image material item Number 4
Research and development expensed by segment:
A bar chart of research and development expensed for the five
years 1993-1997 (Dollars in billions):
1993 1994 1995 1996 1997
Commercial Aircraft 1.662 1.681 1.232 1.156 1.208
Information, Space and Defense Systems 0.415 0.395 0.442 0.477 0.716
Total 2.077 2.076 1.674 1.633 1.924
Graphic and image material item Number 5
Go-ahead and certification/delivery graph:
A time line graph indicating go-ahead and certification/delivery for
various major airplane programs and derivatives.
Go-ahead Certification/Delivery
(month/year) (month/year)
777-200 < 1/1995 4/1995
777-200ER < 1/1995 2/1997
777-300 6/1995 6/1998
737-700 < 1/1995 12/1997
737-800 < 1/1995 3/1998
737-600 3/1995 10/1998
737-900 11/1997 1/2001
757-300 9/1996 2/1999
767-400ER 4/1997 4/2000
717-200 10/1995 6/1999
Graphic and image material item Number 6
Procurement budget - Department of Defense and NASA:
A bar chart for the six years 1992 - 1997 indicating Procurement budgets -
Department of Defense and NASA (Dollars in billions):
1992 - 113.9; 1993 - 105.1; 1994 - 93.3;
1995 - 91.9; 1996 - 91.2; 1997 - 94.5
262
<PAGE> 263
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders, The Boeing Company
We have audited the accompanying consolidated statements of financial position
of The Boeing Company and subsidiaries as of December 31, 1997 and 1996, and
the related statements of operations and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements based on our audits. The consolidated
financial statements give retroactive effect to the merger of The Boeing
Company and McDonnell Douglas Corporation, which has been accounted for as a
pooling of interests as described in Note 2 to the consolidated financial
statements. We did not audit the statement of financial position of McDonnell
Douglas Corporation as of December 31, 1996, or the related statements of
operations and cash flows for the years ended December 31, 1996 and 1995, which
statements reflect total assets of $11,631,000,000 as of December 31, 1996, and
total revenues of $13,834,000,000 and $14,332,000,000 for the years ended
December 31, 1996 and 1995, respectively. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for McDonnell Douglas Corporation for
1996 and 1995, is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of The Boeing Company and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Seattle, Washington
January 27, 1998
263
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,420
<SECURITIES> 729
<RECEIVABLES> 3,932
<ALLOWANCES> 233
<INVENTORY> 8,967
<CURRENT-ASSETS> 19,263
<PP&E> 19,294
<DEPRECIATION> 10,903
<TOTAL-ASSETS> 38,024
<CURRENT-LIABILITIES> 14,152
<BONDS> 6,854
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<OTHER-SE> 7,953
<TOTAL-LIABILITY-AND-EQUITY> 38,024
<SALES> 45,800
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