<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1995
REGISTRATION NO. 33-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COOPER INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
OHIO 31-4156620
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>
------------------------
SUITE 4000, FIRST CITY TOWER
1001 FANNIN
HOUSTON, TEXAS 77002
(713) 739-5400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DIANE KOSMACH SCHUMACHER
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
SUITE 4000, FIRST CITY TOWER
1001 FANNIN
HOUSTON, TEXAS 77002
(713) 739-5400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MARGARET L. WOLFF GREGORY M. SHAW
GREGORY A. FERNICOLA CRAVATH, SWAINE & MOORE
SKADDEN, ARPS, SLATE, MEAGHER & FLOM WORLDWIDE PLAZA
919 THIRD AVENUE 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10019
(212) 735-3000 (212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
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DECSsm............................ 16,500,000 $12.50 $206,250,000 $71,121
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</TABLE>
(1) Includes 1,500,000 DECS that the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of the Securities Act of 1933, as amended, based on the
average of the high and low sales prices per share of Wyman-Gordon Company
Common Stock as reported on The Nasdaq Stock Market's National Market on
October 11, 1995.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION
OCTOBER 17, 1995
<TABLE>
<S> <C>
PROSPECTUS [COOPER LOGO]
15,000,000 DECS(SM)
(DEBT EXCHANGEABLE FOR COMMON STOCK(SM))
COOPER INDUSTRIES, INC.
</TABLE>
% EXCHANGEABLE NOTES DUE , 1998
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF
WYMAN-GORDON COMPANY)
The principal amount of each of the % Exchangeable Notes Due , 1998
(each a "DECS"), of Cooper Industries, Inc. ("Cooper") being offered hereby will
be $ (the last sale price of the common stock, par value $1.00 per share
(the "Wyman-Gordon Common Stock"), of Wyman-Gordon Company ("Wyman-Gordon") on
, 1995, as reported on The Nasdaq Stock Market's National Market) (the
"Initial Price"). The DECS will mature on 1998. Interest on the DECS,
at the rate of % of the principal amount per annum, is payable quarterly on
, , and , beginning , 1995. The DECS are
not subject to any sinking fund or redemption prior to maturity.
At maturity (including as a result of acceleration or otherwise), the principal
amount of each DECS will be mandatorily exchanged by Cooper into a number of
shares of Wyman-Gordon Common Stock (or, in accordance with the terms of the
Indenture (as defined), at Cooper's option, cash with an equal value) at the
Exchange Rate (as defined herein). The Exchange Rate is equal to, subject to
certain adjustments, (a) if the Maturity Price per share of Wyman-Gordon Common
Stock is greater than or equal to $ per share of Wyman-Gordon Common
Stock, share of Wyman-Gordon Common Stock per DECS, (b) if the Maturity
Price is less than $ but is greater than the Initial Price, a fractional
share of Wyman-Gordon Common Stock per DECS so that the value thereof at the
Maturity Price equals the Initial Price and (c) if the Maturity Price is less
than or equal to the Initial Price, one share of Wyman-Gordon Common Stock per
DECS. The "Maturity Price" means the average Closing Price (as defined herein)
per share of Wyman-Gordon Common Stock on the 20 Trading Days (as defined
herein) immediately prior to (but not including) the date of maturity.
Accordingly, holders of the DECS will not necessarily receive an amount equal to
the principal amount thereof. The DECS will be an unsecured obligation of Cooper
ranking pari passu with all of its other unsecured and unsubordinated
indebtedness. Wyman-Gordon will have no obligations with respect to the DECS.
See "Description of the DECS."
For a discussion of certain United States federal income tax consequences for
holders of DECS, see "Certain United States Federal Income Tax Considerations."
Attached hereto as Appendix A is a prospectus of Wyman-Gordon (the "Wyman-Gordon
Prospectus") covering the shares of Wyman-Gordon Common Stock which may be
received by a holder of DECS at maturity. The Wyman-Gordon Prospectus relates to
an aggregate of 16,500,000 shares of Wyman-Gordon Common Stock.
"DECS" and "Debt Exchangeable for Common Stock" are service marks of Salomon
Brothers Inc ("Salomon").
The Wyman-Gordon Common Stock is listed on The Nasdaq Stock Market's National
Market ("Nasdaq") under the symbol "WYMN."
PROSPECTIVE INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED UNDER "RISK FACTORS" ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COOPER(1)(2)
<S> <C> <C> <C>
Per DECS.............................. $ $ $
Total (3)............................. $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1995, to the date of
delivery.
(2) Before deducting expenses payable by Cooper, estimated to be $ .
(3) Cooper has granted the Underwriters an option, exercisable within 30 days
from the date hereof, to purchase up to an additional 1,500,000 DECS at the
Price to Public, less Underwriting Discount, for the purpose of covering
over-allotments, if any. If the Underwriters exercise such option in full,
the total Price to Public, Underwriting Discount and Proceeds to Cooper will
be $ , $ and $ , respectively. See "Plan of
Distribution."
The DECS are offered subject to receipt and acceptance by the Underwriters, to
prior sales and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the DECS will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1995.
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
SCHRODER WERTHEIM & CO.
The date of this Prospectus is , 1995.
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DECS AND THE
WYMAN-GORDON COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON NASDAQ OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE WYMAN-GORDON COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE
10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT"). SEE "PLAN OF DISTRIBUTION."
AVAILABLE INFORMATION
Cooper is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by Cooper can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices at Seven World Trade Center, Suite 1300, New York,
New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. In addition, material filed by Cooper can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
Cooper has filed with the Commission a Registration Statement on Form S-3
(together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities to be issued under this Prospectus. This
Prospectus omits certain of the information contained in the Registration
Statement and the exhibits and schedules thereto in accordance with the rules
and regulations of the Commission. For further information regarding Cooper and
the DECS offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed therewith, which may be inspected without charge at
the office of the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and copies of which may be obtained from the Commission at prescribed
rates. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Cooper with the Commission
pursuant to the Exchange Act and are incorporated herein by reference and made a
part of the Prospectus: (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1994; (ii) Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1994; (iii) Proxy Statement dated March 17, 1995 for the 1995
Annual Meeting of Shareholders; (iv) Current Report on Form 8-K dated April 28,
1995; (v) Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
dated May 12, 1995; (vi) Current Report on Form 8-K dated July 14, 1995; and
(vii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 dated
August 14, 1995.
All documents subsequently filed by Cooper pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the DECS hereunder shall be deemed to be incorporated herein by reference and
shall be a part hereof from the date of the filing of such documents. Any
statements contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or replaced,
to constitute a part of this Prospectus.
Cooper will provide without charge to each person, including any beneficial
owner, to whom a Prospectus is delivered, upon written or oral request of such
person, a copy of the documents incorporated by reference herein, other than
exhibits to such documents not specifically incorporated by reference. Such
requests should be directed to the principal executive office of Cooper
Industries, Inc., Suite 4000, First City Tower, 1001 Fannin, Houston, Texas
77002, Attention: Corporate Secretary, telephone number (713) 739-5400.
3
<PAGE> 5
RISK FACTORS
The National Association of Securities Dealers, Inc. may provide guidelines
to its members regarding compliance responsibilities and requirements when
handling transactions in the DECS.
As described in more detail below, the trading price of the DECS may vary
considerably prior to maturity (including by acceleration or otherwise,
"Maturity") due to, among other things, fluctuations in the price of
Wyman-Gordon Common Stock and other events that are difficult to predict and
beyond Cooper's control.
COMPARISON TO OTHER DEBT SECURITIES
The terms of the DECS differ from those of ordinary debt securities in that
the amount that a holder of the DECS will receive upon mandatory exchange of the
principal amount thereof at Maturity is not fixed, but is based on the price of
the Wyman-Gordon Common Stock as specified in the Exchange Rate (as defined
herein). There can be no assurance that such amount receivable by such holder
upon exchange at Maturity will be equal to or greater than the principal amount
of the DECS. For example, if the Maturity Price of the Wyman-Gordon Common Stock
is less than the Initial Price, such amount receivable upon exchange will be
less than the principal amount paid for the DECS, in which case an investment in
the DECS would result in a loss.
In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by an investment in the Wyman-Gordon Common Stock because the amount
receivable by holders of DECS upon exchange at Maturity will only exceed the
principal amount of such DECS if the Maturity Price exceeds the Threshold
Appreciation Price (as defined herein), which represents an appreciation of
percent of the Initial Price. Moreover, holders of the DECS will only be
entitled to receive upon exchange at Maturity percent of any appreciation of
the value of Wyman-Gordon Common Stock in excess of the Threshold Appreciation
Price. Because the price of the Wyman-Gordon Common Stock is subject to market
fluctuations, the value of the Wyman-Gordon Common Stock (or, to the extent
permitted by applicable law, at the option of Cooper, the amount of cash)
received by a holder of DECS upon exchange at Maturity, determined as described
herein, may be more or less than the principal amount of the DECS.
RELATIONSHIP OF THE DECS AND WYMAN-GORDON COMMON STOCK
The market price of the DECS at any time is affected primarily by changes
in the price of Wyman-Gordon Common Stock. It is impossible to predict whether
the price of Wyman-Gordon Common Stock will rise or fall. Trading prices of
Wyman-Gordon Common Stock will be influenced by Wyman-Gordon's operational
results and by complex and interrelated political, economic, financial and other
factors that can affect the capital markets generally, Nasdaq (on which the
Wyman-Gordon Common Stock is traded) and the market segment of which
Wyman-Gordon is a part. As of October 16, 1995, Cooper beneficially owned an
aggregate of 16,500,000 shares of Wyman-Gordon Common Stock, 15,000,000 shares
(16,500,000 shares if the Underwriters' over-allotment option is exercised in
full) of which Cooper may deliver to holders of the DECS at Maturity.
Holders of the DECS will not be entitled to any rights with respect to
Wyman-Gordon Common Stock (including, without limitation, voting rights and
rights to receive any dividends or other distributions in respect thereof) until
such time, if any, as Cooper shall have mandatorily exchanged the DECS at
Maturity for shares of Wyman-Gordon Common Stock and the applicable record date,
if any, for the exercise of such rights occurs after such date.
There can be no assurance that Wyman-Gordon will continue to be subject to
the reporting requirements of the Exchange Act and distribute reports, proxy
statements and other information required thereby to its stockholders. In the
event that Wyman-Gordon ceases to be subject to such reporting requirements and
the DECS continue to be outstanding, pricing information for the DECS may be
more difficult to obtain and the value and liquidity of the DECS may be
adversely affected.
4
<PAGE> 6
DILUTION OF WYMAN-GORDON COMMON STOCK
The amount that holders of the DECS are entitled to receive upon the
mandatory exchange at Maturity is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends and certain other
actions of Wyman-Gordon that modify its capital structure. See "Description of
the DECS -- Dilution Adjustments." The amount to be received by such holders
upon exchange at Maturity may not be adjusted for other events, such as
offerings of Wyman-Gordon Common Stock for cash or in connection with
acquisitions, that may adversely affect the price of Wyman-Gordon Common Stock
and, because of the relationship of such amount to be received upon exchange to
the price of Wyman-Gordon Common Stock, such other events may adversely affect
the trading price of the DECS. There can be no assurance that Wyman-Gordon will
not make offerings of Wyman-Gordon Common Stock or take such other action in the
future or as to the amount of such offerings, if any.
NO OBLIGATION ON PART OF WYMAN-GORDON WITH RESPECT TO THE DECS
Wyman-Gordon has no obligations with respect to the DECS, including any
obligation to take the needs of Cooper (other than pursuant to the Investment
Agreement (described below)) or of holders of the DECS into consideration for
any reason. Wyman-Gordon will not receive any of the proceeds of the offering of
the DECS made hereby and is not responsible for, and has not participated in,
the determination or calculation of the amount receivable by holders of the DECS
at Maturity. Wyman-Gordon is not involved with the administration or trading of
the DECS and has no obligations with respect to the amount receivable by holders
of the DECS at Maturity.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the DECS will trade in the secondary
market or whether such market will be liquid or illiquid. There is currently no
secondary market for the DECS. The Underwriters (as described under "Plan of
Distribution") currently intend, but are not obligated, to make a market in the
DECS. There can be no assurance that a secondary market will develop or, if a
secondary market does develop, that it will provide the holders of the DECS with
liquidity of investment or that it will continue for the life of the DECS. The
DECS will not be listed on any national securities exchange. Accordingly,
pricing information for the DECS may be difficult to obtain, and the liquidity
of the DECS may be adversely affected.
TAX UNCERTAINTIES
The Indenture (as defined herein) requires that any holder subject to U.S.
federal income tax include currently in income, for U.S. federal income tax
purposes, payments denominated as interest that are made with respect to the
DECS, in accordance with such holder's method of accounting, and the amount of
original issue discount ("OID"), if any, attributable to the DECS as it accrues.
The Indenture also requires holders to treat the DECS as a unit consisting of
(i) an exchange note, which is a debt obligation with a fixed principal amount
unconditionally payable at Maturity equal to the principal amount of the DECS,
and (ii) a forward purchase contract pursuant to which the holder agrees to use
the principal payment due on the exchange note to purchase at Maturity the
Wyman-Gordon Common Stock that the holder is entitled to receive at that time
(subject to Cooper's right to deliver cash in lieu of the Wyman-Gordon Common
Stock). It is contemplated that, upon a holder's sale or other disposition of
the DECS prior to Maturity, the amount realized will be allocated between these
two components of the DECS on the basis of their then relative fair market
values. Because of an absence of authority as to the proper characterization of
the DECS for tax purposes, these tax characterizations and results are
uncertain. This uncertainty extends to characterization of any gain or loss
recognized with respect to the DECS at Maturity as capital gain or loss or
ordinary income or loss and, in the event Cooper delivers Wyman-Gordon Common
Stock at Maturity, as to whether any gain or loss can be deferred until a sale
or disposition of such stock. As a result of these uncertainties, Cooper has not
received an opinion of counsel with respect to the specific tax consequences of
owning or disposing of the DECS. See "Certain United States Federal Income Tax
Considerations."
5
<PAGE> 7
RISK FACTORS RELATING TO WYMAN-GORDON
Investors in the DECS should carefully consider the information in the
Wyman-Gordon Prospectus attached hereto as Appendix A, including the information
contained under "Risk Factors."
COOPER INDUSTRIES, INC.
Cooper, which was incorporated in Ohio in 1919, is a diversified, worldwide
manufacturing company doing business in three primary business segments:
Electrical Products, Automotive Products and Tools & Hardware. Cooper has over
125 manufacturing facilities and approximately 39,700 employees in the United
States and more than 23 foreign countries.
Electrical Products Segment
The Electrical Products segment manufactures and markets electrical and
circuit protection products for use in residential, commercial and industrial
construction, maintenance and repair applications. In addition, the segment
produces and markets products for use by utilities and industries for primary
electrical power transmission and distribution. Some of the major products
include Buss(R) and Edison(R) fuses; Crouse-Hinds(R) electrical construction
materials; Crouse-Hinds(R), Fail-Safe(TM), Halo(R) and Metalux(R) lighting
fixtures; Kyle(R) distribution switchgear and McGraw-Edison(TM) and RTE(R) power
and distribution transformers and related products.
Automotive Products Segment
The Automotive Products segment manufactures and distributes spark plugs,
brake components, wiper blades, lighting products, heating and air conditioning
parts, steering and suspension components and other products for use by the
automotive aftermarket and in automobile assemblies. Products include Abex(R),
Lee(R), Gibson(R) and Wagner(R) brake components; Anco(R) windshield wiper
products; automotive wire and cable; Champion(R) spark plugs and igniters;
Everco(R) and Murray(R) heating and air conditioning parts; Moog(R) steering and
suspension products; Precision(R) universal joint products; and Wagner(R) and
Zanxx(R) lighting products.
Tools & Hardware Segment
The Tools & Hardware segment produces and markets tools and hardware items
for use in residential, commercial and industrial construction, maintenance and
repair applications, and for other general industrial and consumer uses. Some of
the well-known products include Campbell(R) chain; Crescent(R) wrenches;
Diamond(R) horseshoes and farrier tools; Lufkin(R) measuring tapes; Nicholson(R)
files and saws; Plumb(R) hammers; Weller(R) soldering equipment; Wiss(R)
scissors; Xcelite(R) screwdrivers; Buckeye(R), DGDTM and Dotco(R) power tools;
and Kirsch(R) drapery hardware and custom window coverings.
RECENT DEVELOPMENTS
On June 30, 1995, Cooper distributed 85.5 percent (21,375,000 shares) of
the common stock of its wholly-owned subsidiary Cooper Cameron Corporation
("Cooper Cameron") in exchange for 9,500,000 shares of Cooper common stock
pursuant to an offer made to Cooper's shareholders to exchange 2.25 shares of
common stock of Cooper Cameron for each share of Cooper common stock tendered,
up to a maximum of 9,500,000 shares of Cooper common stock. Cooper retained 14.5
percent (3,625,000 shares) of the common stock of Cooper Cameron. Cooper Cameron
was incorporated in Delaware on November 10, 1994. As of January 1, 1995, Cooper
transferred to Cooper Cameron the businesses that comprised Cooper's former
Petroleum & Industrial Equipment segment at September 30, 1994. These businesses
included the Cooper Oil Tool, Cooper Energy Services, Cooper Turbocompressor and
Wheeling Machine Products operations of Cooper.
For additional information with respect to Cooper, see the documents
specified under "Documents Incorporated by Reference."
6
<PAGE> 8
WYMAN-GORDON COMPANY
Wyman-Gordon, founded in 1883, is a leading producer of highly engineered,
technically advanced components primarily for the aerospace industry as well as
for other markets, including power generation. Wyman-Gordon uses forging,
casting and composites technologies to produce components to exacting customer
specifications for technically demanding applications such as jet turbine
engines, airframe structures, land-based gas turbines and extruded seamless
pipe. Components manufactured by Wyman-Gordon are utilized in most of the major
commercial and United States defense aerospace programs.
Attached hereto as Appendix A is the Wyman-Gordon Prospectus covering the
shares of Wyman-Gordon Common Stock offered, among other things, in connection
with the DECS.
RELATIONSHIP BETWEEN COOPER AND WYMAN-GORDON
Pursuant to the Stock Purchase Agreement, dated as of January 10, 1994 (the
"Stock Purchase Agreement"), between Cooper and Wyman-Gordon, Wyman-Gordon
acquired from Cooper on May 26, 1994 all of the outstanding shares of common
stock of Cameron Forged Products Company ("Cameron") in consideration for
16,500,000 shares of Wyman-Gordon Common Stock and $8.5 million, consisting of
$3.9 million in cash and a $4.6 million promissory note of Wyman-Gordon (the
"Note"). The Stock Purchase Agreement contains obligations of each of Cooper and
Wyman-Gordon which remain outstanding. These obligations include, among others,
payment by Wyman-Gordon of the Note, cross indemnification by Cooper and
Wyman-Gordon for certain tax obligations, liabilities arising out of the
business and operations of Cameron and inaccuracies in certain representations
and warranties made by each company, and indemnification of Wyman-Gordon by
Cooper for certain liabilities under the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), with respect to employee benefit plans.
In connection with the Stock Purchase Agreement, Cooper and Wyman-Gordon
entered into the Investment Agreement, dated as of January 10, 1994 (the
"Investment Agreement"), which governs Cooper's ownership of the 16,500,000
shares of Wyman-Gordon Common Stock that were issued to Cooper under the Stock
Purchase Agreement. The Investment Agreement, among other things, contains (i)
restrictions on Cooper's ability to sell or encumber its shares of Wyman-Gordon
Common Stock, (ii) provisions requiring generally that Cooper vote its shares of
Wyman-Gordon Common Stock either in the manner recommended by the Wyman-Gordon
Board of Directors or, at Cooper's election, in the same proportion as the vote
of the other Wyman-Gordon shareholders, (iii) customary standstill provisions,
(iv) provisions requiring Wyman-Gordon to use its best efforts to cause two
persons designated by Cooper to be elected to the Wyman-Gordon Board of
Directors and (v) provisions granting Cooper certain registration rights in
respect of its shares of Wyman-Gordon Common Stock. The voting, sale and
standstill restrictions set forth in the Investment Agreement terminate upon the
earlier of (i) May 26, 2004 and (ii) the first date on which Cooper beneficially
owns less than 5 percent of the outstanding Company Voting Securities (as
defined in the Investment Agreement).
In connection with the DECS Offering and the other transactions described
under "Plan of Distribution" in the Wyman-Gordon Prospectus attached hereto as
Appendix A, Cooper and Wyman-Gordon intend to enter into a letter agreement (the
"Letter Agreement") pursuant to which Wyman-Gordon will waive certain of the
provisions set forth in the Investment Agreement.
Except as provided above, neither the Stock Purchase Agreement nor the
Investment Agreement will be affected by the DECS offering.
See "Relationship Between Cooper and the Company" in the Wyman-Gordon
Prospectus attached hereto as Appendix A for a further description of the Stock
Purchase Agreement and the Investment Agreement.
7
<PAGE> 9
PRICE RANGE OF WYMAN-GORDON COMMON STOCK AND DIVIDEND POLICY
Wyman-Gordon Common Stock is listed on Nasdaq under the symbol "WYMN." The
following table sets forth the high and low sales prices of the Wyman-Gordon
Common Stock for the calendar periods listed below as reported on Nasdaq.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
1994
First Quarter............................................................. $ 7 1/8 $ 4 5/8
Second Quarter............................................................ 6 7/8 4 1/2
Third Quarter............................................................. 7 5 3/4
Fourth Quarter............................................................ 6 1/2 4 3/4
1995
First Quarter............................................................. 8 5 1/4
Second Quarter............................................................ 12 3/8 7 5/8
Third Quarter............................................................. 14 1/8 10 5/8
Fourth Quarter (through October 12, 1995)................................. 13 3/4 12 1/4
</TABLE>
As of , 1995, there were approximately holders of
record of Wyman-Gordon Common Stock. The number of record holders may not be
representative of the number of beneficial holders since many shares are held by
depositories, brokers or other nominees.
On , 1995, the last reported sale price of Wyman-Gordon
Common Stock on the Nasdaq was $ per share. Wyman-Gordon has paid no
dividends on the Wyman-Gordon Common Stock since the fourth quarter of 1991. See
"Price Range of Common Stock and Dividend Policy" in the Wyman-Gordon Prospectus
attached hereto as Appendix A.
Cooper makes no representation as to the amount of dividends, if any, that
Wyman-Gordon will pay in the future. In any event, holders of the DECS will not
be entitled to receive any dividends that may be payable on Wyman-Gordon Common
Stock until such time, if any, as Cooper shall have mandatorily exchanged the
DECS at Maturity for shares of Wyman-Gordon Common Stock and a record date, if
any, for such dividend occurs after such date. See "Description of the DECS."
USE OF PROCEEDS
The net proceeds to be received by Cooper from the sale of the DECS will be
used for general corporate purposes, including potential acquisitions,
refinancings of existing indebtedness, working capital and capital expenditures.
8
<PAGE> 10
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for
Cooper for each of the years in the five-year period ended December 31, 1994,
and selected unaudited historical financial data for the six-month periods ended
June 30, 1995 and 1994. The historical data for the five full years shown below
has been derived from the audited consolidated financial statements of Cooper.
The historical data for the six-month periods ended June 30, 1995 and 1994 has
been derived from Cooper's unaudited consolidated financial statements and
includes, in the opinion of Cooper's management, all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the data for
such periods. Financial information for the interim periods presented is not
necessarily indicative of the financial information for the full year. The
historical data set forth below should be read in conjunction with the
consolidated financial statements and notes thereto of Cooper incorporated by
reference herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------
1995(1)(2) 1994(1)(3) 1994(1) 1993(1)(3) 1992(1)(3) 1991(3) 1990(3)
---------- ---------- -------- ---------- ---------- -------- --------
(IN MILLIONS WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues.................................... $2,391.3 $2,211.7 $4,588.0 $4,776.4 $4,468.4 $4,307.6 $4,570.8
--------- -------- -------- -------- -------- -------- --------
Income from continuing operations before
cumulative effect of changes in accounting
principles................................ 138.1 131.5 292.8 299.0 239.6 231.2 265.3
Income from discontinued operations
net of taxes.............................. -- 0.5 0.3 68.1 121.7 162.0 96.1
Charge for discontinued operations.......... (186.6) -- (313.0) -- -- -- --
Cumulative effect on prior years of changes
in accounting principles.................. -- -- -- -- (590.0) -- --
--------- -------- -------- -------- -------- -------- --------
Net income (loss)......................... $ (48.5) $ 132.0 $ (19.9) $ 367.1 $ (228.7) $ 393.2 $ 361.4
========= ======== ======== ======== ======== ======== ========
Per Common Share Data:
Primary --
Income from continuing operations before
cumulative effect of changes in
accounting principles................... $ 1.19 $ 0.92 $ 2.10 $ 2.15 $ 1.64 $ 1.60 $ 1.94
Income (loss) from discontinued
operations.............................. (1.61) 0.01 (2.74) 0.60 1.07 1.44 0.87
Cumulative effect on prior years of
changes in accounting principles........ -- -- -- -- (5.19) -- --
--------- -------- -------- -------- -------- -------- --------
Net income (loss)......................... $ (0.42) $ 0.93 $ (0.64) $ 2.75 $ (2.48) $ 3.04 $ 2.81
========= ======== ======== ======== ======== ======== ========
Fully diluted --
Income from continuing operations before
cumulative effect of changes in
accounting principles................... $ 1.15 $ 0.92 $ 2.10 $ 2.15 $ 1.64 $ 1.60 $ 1.94
========= ======== ======== ======== ======== ======== ========
Net income (loss)......................... $ (0.42) $ 0.93 $ (0.64) $ 2.75 $ (2.48) $ 3.01 $ 2.81
========= ======== ======== ======== ======== ======== ========
Cash dividends.............................. $ 0.66 $ 0.66 $ 1.32 $ 1.32 $ 1.24 $ 1.16 $ 1.08
Book value.................................. 14.75 19.00 17.50 19.76 18.63 22.93 21.23
Balance Sheet Data (at the end of period):
Total assets................................ $5,811.6 $6,332.5 $6,400.7 $6,361.7 $6,551.4 $5,951.1 $6,019.1
Long-term debt.............................. 1,886.2 1,252.4 1,361.9 883.4 1,369.8 1,033.3 1,238.5
Stockholders' Equity........................ 1,579.2 2,959.0 2,741.1 3,009.6 2,862.6 3,319.0 3,042.0
Other Data (unaudited):
Ratio of earnings to fixed charges(4)....... 3.7x 6.4x 6.4x 6.0x 4.6x 3.8x 3.4x
</TABLE>
- ---------------
(1) Includes the results of Moog Automotive Group, Inc., which was acquired
effective October 1, 1992 from IFINT S.A. This transaction was accounted for
as a purchase.
(2) Includes the results of Abex Friction Products, which was acquired effective
December 30, 1994 from Abex, Inc. This transaction was accounted for as a
purchase.
(3) Restated to reflect discontinued operations.
(4) The ratio of earnings to fixed charges has been calculated by dividing fixed
charges into the sum of earnings before income tax expense and fixed
charges. Fixed charges consist of interest costs and estimated interest in
rentals.
9
<PAGE> 11
DESCRIPTION OF THE DECS
The DECS are a series of debt securities ("Debt Securities"), to be issued
under an Indenture dated as of , 1995, as supplemented by a First
Supplemental Indenture dated as of , 1995 between Cooper and the
Trustee (the indenture dated as of , 1995, as supplemented from time
to time, the "Indenture"), between Cooper and Texas Commerce Bank National
Association, as trustee (the "Trustee"). The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
GENERAL
The DECS will be unsecured and will rank on a parity with all other
unsecured and unsubordinated indebtedness of Cooper. The aggregate number of
DECS to be issued will be 15,000,000 plus such additional number of DECS as may
be issued pursuant to the over-allotment option granted by Cooper to the
Underwriters. The DECS will mature on , 1998. The Indenture does not
limit the amount of Debt Securities which may be issued thereunder. As a result,
Cooper may issue additional Debt Securities or other securities with terms
similar to those of the DECS in the future.
Each DECS, which will be issued with a principal amount of $ ,
will bear interest at the annual rate of percent of the principal amount per
annum (or $ per annum) from , 1995, or from the most recent
Interest Payment Date (as defined below) to which interest has been paid or
provided for until the principal amount thereof is exchanged at Maturity
pursuant to the terms of the DECS. Interest on the DECS will be payable
quarterly in arrears on , , , and
, commencing , 1996 (each, an "Interest Payment Date"),
to the persons in whose names the DECS are registered at the close of business
on the last day of the calendar month immediately preceding such Interest
Payment Date; provided that interest payable at Maturity shall be payable to the
person to whom the principal is payable. Interest on the DECS will be computed
on the basis of a 360-day year of twelve 30-day months. If an Interest Payment
Date falls on a day that is not a Business Day (as defined below), the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment. The DECs will be traded pursuant to rules and regulations
of any self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act) which are filed with the Commission pursuant to Section 19(b) of
the Exchange Act.
At Maturity (including as a result of acceleration or otherwise), the
principal amount of each DECS will be mandatorily exchanged by Cooper into a
number of shares of Wyman-Gordon Common Stock at the Exchange Rate, and,
accordingly, holders of the DECS will not necessarily receive an amount equal to
the principal amount thereof. The "Exchange Rate" is equal to, subject to
adjustment as a result of certain dilution events (see "-- Dilution Adjustments"
below), (a) if the Maturity Price (as defined below) per share of Wyman-Gordon
Common Stock is greater than or equal to $ per share of Wyman-Gordon
Common Stock (the "Threshold Appreciation Price"), shares of Wyman-
Gordon Common Stock per DECS, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, a fractional
share of Wyman-Gordon Common Stock per DECS so that the value thereof
(determined at the Maturity Price) is equal to the Initial Price and (c) if the
Maturity Price is less than or equal to the Initial Price, one share of
Wyman-Gordon Common Stock per DECS. No fractional shares of Wyman-Gordon Common
Stock will be issued at Maturity as provided under "-- Fractional Shares" below.
Cooper may at its option (in accordance with the terms of the Indenture) deliver
cash at Maturity, in lieu of delivering shares of Wyman-Gordon Common Stock, in
an amount equal to the product obtained by multiplying the value of the number
of shares of Wyman-Gordon Common Stock that would have been delivered at
Maturity by the Maturity Price. On or prior to the seventh Business Day prior to
, 1998, Cooper will notify The Depository Trust Company (the
"Depositary") and the Trustee and publish a notice in a daily newspaper of
national circulation stating whether the principal amount of each DECS will be
exchanged for shares of Wyman-Gordon Common
10
<PAGE> 12
Stock or cash. If Cooper elects to deliver shares of Wyman-Gordon Common Stock,
(i) the holders of the DECS will be responsible for the payment of any and all
brokerage costs upon the subsequent sale of such shares and (ii) the delivery of
such shares shall occur on the floor of, or pursuant to applicable rules and
regulations promulgated by, Nasdaq or, if the Wyman-Gordon Common Stock is not
listed for trading on Nasdaq on the date of any such exchange, the exchange,
board of trade or similar institution on which public market quotations or
prices of the Wyman-Gordon Common Stock are made at the time of such exchange.
The "Maturity Price" is defined as the average Closing Price per share of
Wyman-Gordon Common Stock on the 20 Trading Days immediately prior to (but not
including) the Maturity Date. The "Closing Price" of any security on any date of
determination means the closing sale price (or, if no closing price is reported,
the last reported sale price) of such security on Nasdaq on such date or, if
such security is not listed for trading on Nasdaq on any such date, as reported
in the composite transactions for the principal United States securities
exchange on which such security is so listed, or if such security is not so
listed on a United States national or regional securities exchange, as reported
by the National Association of Securities Dealers, Inc. Automated Quotation
System, or, if such security is not so reported, the last quoted bid price for
such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by Cooper. A "Trading Day" is defined as a day on which the security the
Closing Price of which is being determined (A) is not suspended from trading on
any national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the national
or regional securities exchange or association or over-the-counter market that
is the primary market for the trading of such security. "Business Day" means any
day that is not a Saturday, a Sunday or a day on which the New York Stock
Exchange, Nasdaq, banking institutions or trust companies in the City of New
York are authorized or obligated by law or executive order to close.
For illustrative purposes only, the following chart shows the number of
shares of Wyman-Gordon Common Stock or, where permitted by applicable law, the
amount of cash that a holder of DECS would receive for each DECS at various
Maturity Prices. The table assumes that there will be no adjustments to the
Exchange Rate described under "-- Dilution Adjustments" below. There can be no
assurance that the Maturity Price will be within the range set forth below.
Given the Initial Price of $ per DECS and the Threshold Appreciation
Price of $ , a DECS holder would receive at Maturity the following
number of shares of Wyman-Gordon Common Stock or amount of cash (if Cooper
elects to pay the DECS in cash):
<TABLE>
<CAPTION>
MATURITY PRICE NUMBER OF SHARES
OF WYMAN-GORDON OF WYMAN-GORDON
COMMON STOCK COMMON STOCK AMOUNT OF CASH
- --------------- --------------- --------------
<S> <C> <C>
</TABLE>
Although it is Cooper's current intention to deliver Wyman-Gordon Common
Stock at Maturity, Cooper may at its option deliver cash, in lieu of delivering
such shares of Wyman-Gordon Common Stock, except that under the Indenture Cooper
will not deliver cash, nor will there have been any offer by Cooper to deliver
cash, where such delivery would violate applicable law. In the event that Cooper
elects to deliver cash in lieu of shares at Maturity, it will be obligated to
deliver cash with respect to all, but not less than all, of the shares of
Wyman-Gordon Common Stock that would otherwise be deliverable, except that
Cooper may deliver shares of Wyman-Gordon Common Stock to any holders with
respect to whom it has determined the delivery of cash may violate applicable
law.
Interest on the DECS will be payable, and delivery of Wyman-Gordon Common
Stock (or, at the option of Cooper, its cash equivalent) in exchange for the
DECS at Maturity will be made upon surrender of such DECS, at the office or
agency of Cooper maintained for such purposes; provided that payment of
11
<PAGE> 13
interest may be made at the option of Cooper by check mailed to the persons in
whose names the DECS are registered at the close of business on ,
, and . See "-- Book-Entry System."
Initially, such office will be the principal corporate trust office of the
Trustee, which at the date hereof is located at 600 Travis, 8th Floor, Houston,
Texas 77002.
The DECS will be transferable on the books of Cooper at any time or from
time to time at the aforementioned office. No service charge will be made to the
holder for any such transfer except for any tax or governmental charge
incidental thereto.
The Indenture does not contain any restriction on the ability of Cooper to
sell all or any portion of the Wyman-Gordon Common Stock held by it or its
subsidiaries, and no such shares of Wyman-Gordon Common Stock will be pledged or
otherwise held in escrow for use at Maturity of the DECS. Consequently, in the
event of a bankruptcy, insolvency or liquidation of Cooper or its subsidiaries,
the Wyman-Gordon Common Stock, if any, owned by Cooper or its subsidiaries will
be subject to the claims of the creditors of Cooper or its subsidiaries,
respectively. In addition, as described herein, Cooper will have the option,
exercisable in its sole discretion, to satisfy its obligations pursuant to the
mandatory exchange for the principal amount of each DECS at Maturity by
delivering to holders of the DECS either the specified number of shares of
Wyman-Gordon Common Stock or, subject to applicable law, cash in an amount equal
to the value of such number of shares at the Maturity Price. In the event that
Cooper does sell all or a portion of the Wyman-Gordon Common Stock held by it or
its subsidiaries, Cooper may be more likely to deliver cash in lieu of
Wyman-Gordon Common Stock. As a result, there can be no assurance that Cooper
will elect at Maturity to deliver Wyman-Gordon Common Stock or, if it so elects,
that it will use all or any portion of its current holdings of Wyman-Gordon
Common Stock to make such delivery. Consequently, holders of the DECS will not
be entitled to any rights with respect to Wyman-Gordon Common Stock (including
without limitation voting rights and rights to receive any dividends or other
distributions in respect thereof) until such time, if any, as Cooper shall have
mandatorily exchanged the DECS at Maturity for shares of Wyman-Gordon Common
Stock and the applicable record date, if any, for the exercise of such rights
occurs after such date. See "Relationship Between Cooper and Wyman-Gordon" for a
discussion of restrictions on Cooper's ability to transfer its shares of
Wyman-Gordon Common Stock.
DILUTION ADJUSTMENTS
The Exchange Rate is subject to adjustment if Wyman-Gordon shall (i) pay a
stock dividend or make a distribution with respect to Wyman-Gordon Common Stock
in shares of such stock, (ii) subdivide or split its outstanding shares of
Wyman-Gordon Common Stock, (iii) combine its outstanding shares of Wyman-Gordon
Common Stock into a smaller number of shares, (iv) issue by reclassification of
its shares of Wyman-Gordon Common Stock any shares of common stock of
Wyman-Gordon, (v) issue rights or warrants to all holders of Wyman-Gordon Common
Stock entitling them to subscribe for or purchase shares of Wyman-Gordon Common
Stock at a price per share less than the market price of the Wyman-Gordon Common
Stock (other than rights to purchase Wyman-Gordon Common Stock pursuant to a
plan for the reinvestment of dividends or interest) or (vi) pay a dividend or
make a distribution to all holders of Wyman-Gordon Common Stock of evidences of
its indebtedness or other assets (excluding any dividends or distributions
referred to in clause (i) above or any cash dividends other than any
Extraordinary Cash Dividends as defined below) or issue to all holders of
Wyman-Gordon Common Stock rights or warrants to subscribe for or purchase any of
its securities (other than those referred to in clause (v) above). In the case
of the events referred to in clauses (i), (ii), (iii) and (iv) above, the
Exchange Rate in effect immediately prior to such event shall be adjusted so
that the holder of any DECS shall thereafter be entitled to receive, upon
mandatory exchange of the principal amount of such DECS at Maturity, the number
of shares of Wyman-Gordon Common Stock that such holder would have owned or been
entitled to receive immediately following any event described above had such
DECS been exchanged immediately prior to such event or any record date with
respect thereto. In the case of the event referred to in clause (v) above, the
Exchange Rate shall be adjusted by multiplying the Exchange Rate in effect
immediately prior to the date of issuance of the rights or warrants referred to
in clause
12
<PAGE> 14
(v) above, by a fraction, of which the numerator shall be the number of shares
of Wyman-Gordon Common Stock outstanding on the date of issuance of such rights
or warrants, immediately prior to such issuance, plus the number of additional
shares of Wyman-Gordon Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and of which the denominator shall be the
number of shares of Wyman-Gordon Common Stock outstanding on the date of
issuance of such rights or warrants, immediately prior to such issuance, plus
the number of additional shares of Wyman-Gordon Common Stock that the aggregate
offering price of the total number of shares of Wyman-Gordon Common Stock so
offered for subscription or purchase pursuant to such rights or warrants would
purchase at the market price (determined as the average Closing Price per share
of Wyman-Gordon Common Stock on the 20 Trading Days immediately prior to the
date such rights or warrants are issued), which shall be determined by
multiplying such total number of shares by the exercise price of such rights or
warrants and dividing the product so obtained by such market price. To the
extent that shares of Wyman-Gordon Common Stock are not delivered after the
expiration of such rights or warrants, the Exchange Rate shall be readjusted to
the Exchange Rate which would then be in effect had such adjustments for the
issuance of such rights or warrants been made upon the basis of delivery of only
the number of shares of Wyman-Gordon Common Stock actually delivered. In the
case of the event referred to in clause (vi) above, the Exchange Rate shall be
adjusted by multiplying the Exchange Rate in effect on the record date by a
fraction of which the numerator shall be the market price per share of the
Wyman-Gordon Common Stock on the record date for the determination of
stockholders entitled to receive the dividend or distribution referred to in
clause (vi) above (such market price being determined as the average Closing
Price per share of Wyman-Gordon Common Stock on the 20 Trading Days immediately
prior to such record date), and of which the denominator shall be such market
price per share of Wyman-Gordon Common Stock less the fair market value (as
determined by the Board of Directors of Cooper, whose determination shall be
conclusive, and described in a resolution adopted with respect thereto) as of
such record date of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights or warrants applicable to one share
of Wyman-Gordon Common Stock. An "Extraordinary Cash Dividend" means, with
respect to any one-year period, all cash dividends on the Wyman-Gordon Common
Stock during such period to the extent such dividends exceed on a per share
basis 10 percent of the average price of the Wyman-Gordon Common Stock over such
period (less any such dividends for which a prior adjustment to the Exchange
Rate was previously made). All adjustments to the Exchange Rate will be
calculated to the nearest 1/10,000th of a share of Wyman-Gordon Common Stock (or
if there is not a nearest 1/10,000th of a share to the next lower 1/10,000th of
a share). No adjustment in the Exchange Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
In the event of (A) any consolidation or merger of Wyman-Gordon, or any
surviving entity or subsequent surviving entity of Wyman-Gordon (a "Wyman-Gordon
Successor"), with or into another entity (other than a merger or consolidation
in which Wyman-Gordon is the continuing corporation and in which the
Wyman-Gordon Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of
Wyman-Gordon or another corporation), (B) any sale, transfer, lease or
conveyance to another corporation of the property of Wyman-Gordon or any
Wyman-Gordon Successor as an entirety or substantially as an entirety, (C) any
statutory exchange of securities of Wyman-Gordon or any Wyman-Gordon Successor
with another corporation (other than in connection with a merger or acquisition)
or (D) any liquidation, dissolution or winding up of Wyman-Gordon or any
Wyman-Gordon Successor (any such event, a "Reorganization Event"), the Exchange
Rate used to determine the amount payable upon exchange at Maturity for each
DECS will be adjusted to provide that each holder of DECS will receive at
Maturity cash in an amount equal to (a) if the Transaction Value (as defined
below) is greater than or equal to the Threshold Appreciation Price,
multiplied by the Transaction Value, (b) if the Transaction Value is
less than the Threshold Appreciation Price but greater than the Initial Price,
the Initial Price and (c) if the Transaction Value is less than or equal to the
Initial Price, the Transaction Value. "Transaction Value" means (i) for any cash
received in any such Reorganization Event, the amount of cash received per share
of Wyman-Gordon
13
<PAGE> 15
Common Stock, (ii) for any property other than cash or securities received in
any such Reorganization Event, an amount equal to the market value at Maturity
of such property received per share of Wyman-Gordon Common Stock as determined
by a nationally recognized independent investment banking firm retained for this
purpose by Cooper and (iii) for any securities received in any such
Reorganization Event, an amount equal to the average Closing Price per share of
such securities on the 20 Trading Days immediately prior to Maturity multiplied
by the number of such securities received for each share of Wyman-Gordon Common
Stock. Notwithstanding the foregoing, in lieu of delivering cash as provided
above, Cooper may at its option deliver an equivalent value of securities or
other property received in such Reorganization Event, determined in accordance
with clause (ii) or (iii) above, as applicable. If Cooper elects to deliver
securities or other property, holders of the DECS will be responsible for the
payment of any and all brokerage and other transaction costs upon the sale of
such securities or other property. The kind and amount of securities into which
the DECS shall be exchangeable after consummation of such transaction shall be
subject to adjustment as described in the immediately preceding paragraph
following the date of consummation of such transaction.
Cooper is required, within 10 Business Days following the occurrence of an
event that requires an adjustment to the Exchange Rate (or if Cooper is not
aware of such occurrence, as soon as practicable after becoming so aware), to
provide written notice to the Trustee of the occurrence of such event and a
statement in reasonable detail setting forth the method by which the adjustment
to the Exchange Rate was determined and setting forth the revised Exchange Rate.
FRACTIONAL SHARES
No fractional shares of Wyman-Gordon Common Stock will be issued if Cooper
exchanges the DECS for shares of Wyman-Gordon Common Stock. If more than one
DECS shall be surrendered for exchange at one time by the same holder, the
number of full shares of Wyman-Gordon Common Stock which shall be delivered upon
exchange, in whole or in part, as the case may be, shall be computed on the
basis of the aggregate number of DECS so surrendered at Maturity. In lieu of any
fractional share otherwise issuable in respect of all DECS of any holder which
are exchanged at Maturity, such holder shall be entitled to receive an amount in
cash equal to the value of such fractional share at the Maturity Price.
REDEMPTION
The DECS are not subject to redemption prior to Maturity.
BOOK-ENTRY SYSTEM
It is expected that the DECS will be issued in the form of one or more
global securities (the "Global Securities") deposited with the Depositary and
registered in the name of a nominee of the Depositary.
The Depositary has advised Cooper and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system also is
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective DECS represented by such Global Security to the accounts
of participants. The accounts to be credited shall be designated by the
Underwriters. Ownership of beneficial interests in the Global Securities will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests
14
<PAGE> 16
by participants in such Global Securities will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depositary or its nominee for such Global Securities. Ownership of
beneficial interests in such Global Securities by persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the DECS for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in such Global Securities will not be entitled to have the DECS
registered in their names, will not receive or be entitled to receive physical
delivery of the DECS in definitive form and will not be considered the owners or
holders thereof under the Indenture.
Payment of principal of and any interest on the DECS registered in the name
of or held by the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the registered owner or the holder of the
Global Security. None of Cooper, the Trustee, any paying agent or any securities
registrar for the DECS will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Cooper expects that the Depositary, upon receipt of any payment of
principal or interest in respect of a permanent Global Security, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security as shown on the records of the Depositary. Cooper also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the Depositary is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by Cooper within ninety days, Cooper will issue DECS
in definitive registered form in exchange for the Global Security representing
such DECS. In addition, Cooper may at any time and in its sole discretion
determine not to have any DECS represented by one or more Global Securities and,
in such event, will issue DECS in definitive form in exchange for all of the
Global Securities representing the DECS. Further, if Cooper so specifies with
respect to the DECS, an owner of a beneficial interest in a Global Security
representing DECS may, on terms acceptable to Cooper and the Depositary for such
Global Security, receive DECS in definitive form. Moreover, if there shall have
occurred and be continuing an Event of Default, or an event which, with the
giving of notice or lapse of time, or both, would constitute an Event of Default
with respect to any DECS represented by one or more Global Securities, such
Global Securities shall be exchangeable for DECS in definitive form. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of DECS represented by such
Global Security equal in number to that represented by such beneficial interest
and to have such DECS registered in its name.
COVENANTS
The Indenture contains the covenants generally summarized below, which are
applicable so long as any of the Debt Securities are outstanding.
Limitations on Secured Indebtedness. Neither Cooper nor any Restricted
Subsidiary (as defined below) will create, assume, guarantee, or incur any
Secured Indebtedness (as defined below), unless immediately thereafter the
aggregate amount of all Secured Indebtedness (exclusive of certain types of
permitted Secured Indebtedness generally described below), together with the
discounted present value
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<PAGE> 17
of all rentals (not otherwise excluded from the limitations on Sale and
Leaseback Transactions (as defined below) as described under
"Covenants -- Limitations on Sale and Leaseback Transactions") due in respect of
Sale and Leaseback Transactions would not exceed 10 percent of Shareholders'
Equity (as defined below). However, this limitation does not apply to Secured
Indebtedness in respect of: (a) any Lien (as defined below) on property as to
which the Debt Securities are equally and ratably secured with (or, at the
option of Cooper, prior to) such Secured Indebtedness, (b) Liens on property
(including shares or Indebtedness) which is not a Principal Property (as defined
below), (c) Liens on property (including shares or Indebtedness) of any
corporation existing at the time such corporation becomes a Restricted
Subsidiary, (d) Liens on property (including shares or Indebtedness) existing at
the time of acquisition of such property by Cooper or a Restricted Subsidiary,
(e) Liens to secure the payment of all or any part of the purchase price of
property (including shares or Indebtedness) created upon the acquisition of such
property by Cooper or a Restricted Subsidiary, and Liens to secure any Secured
Indebtedness incurred by Cooper or a Restricted Subsidiary prior to, at the time
of, or within one year after the later of the acquisition, the completion of
construction (including any improvements, alterations or repairs to existing
property) or the commencement of commercial operation of such property, which
Secured Indebtedness is incurred for the purpose of financing all or any part of
the purchase price thereof or construction or improvements, alterations or
repairs thereon, (f) Liens securing Secured Indebtedness of any Restricted
Subsidiary owing to Cooper or to another Restricted Subsidiary, (g) Liens on
property of a corporation existing at the time such corporation is merged or
consolidated with Cooper or a Restricted Subsidiary or at the time of a sale,
lease or other disposition of the properties of a corporation as an entirety or
substantially as an entirety to Cooper or a Restricted Subsidiary, (h) Liens on
property of Cooper or a Restricted Subsidiary in favor of governmental
authorities or any trustee or mortgagee acting on behalf, or for the benefit, of
any such governmental authorities to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any Indebtedness
incurred for the purpose of financing all or any part of the purchase price or
the cost of construction of the property subject to such Liens, and any other
Liens incurred or assumed in connection with the issuance of industrial revenue
bonds or private activity bonds the interest of which is exempt from federal
income taxation pursuant to Section 103(b) of the Internal Revenue Code of 1986,
as amended (the "Code"), (i) Liens existing on the first date on which a Debt
Security is authenticated by the Trustee under the Indenture, and (j) any
extension, renewal or replacement of any Lien referred to in clauses (a) through
(i) of this paragraph.
Limitations on Sale and Leaseback Transactions. Neither Cooper nor any
Restricted Subsidiary may enter into any Sale and Leaseback Transaction (as
defined below) covering any Principal Property of Cooper or any Restricted
Subsidiary unless (A) immediately thereafter the sum of (i) the discounted
present value of all rentals (determined in accordance with a method of
discounting which is consistent with generally accepted accounting principles)
due pursuant to the proposed Sale and Leaseback Transaction and all Sale and
Leaseback Transactions entered into after the first date on which a Debt
Security is authenticated by the Trustee under the Indenture (except any Sale
and Leaseback Transaction of a Restricted Subsidiary entered into prior to the
time such Restricted Subsidiary became a Restricted Subsidiary or entered into
by a corporation prior to the time such corporation merged or consolidated with
Cooper or a Restricted Subsidiary or prior to the time of a sale, lease or other
disposition of the properties of such corporation as an entirety or
substantially as an entirety to Cooper or a Restricted Subsidiary) and (ii) the
aggregate amount of all Secured Indebtedness (exclusive of Secured Indebtedness
permitted by clauses (a) through (j) of the second sentence under "Limitation on
Secured Indebtedness" above) does not exceed 10 percent of Shareholders' Equity
or (B) an amount equal to the greater of (i) the net proceeds of the sale of
property leased pursuant to the Sale and Leaseback Transaction or (ii) the fair
market value of the property so leased (in the case of clause (i) or (ii), after
repayment of, or otherwise taking into account, as the case may be, the amount
of any Secured Indebtedness secured by a Lien encumbering such property which
Secured Indebtedness existed immediately prior to such Sale and Leaseback
Transaction), is applied within one year to the retirement of Funded Debt (as
defined below). There is excluded from such limitation any Sale and Leaseback
Transaction (x) entered into in connection with the issuance of industrial
revenue or private
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<PAGE> 18
activity bonds the interest of which is exempt from federal income taxation
pursuant to Section 103(b) of the Code and (y) if Cooper or a Restricted
Subsidiary applies an amount equal to the net proceeds (after repayment of any
Secured Indebtedness encumbering such Principal Property which Secured
Indebtedness existed immediately before such Sale and Leaseback Transaction) of
the sale or transfer of the Principal Property leased pursuant to such Sale and
Leaseback Transaction to investment in another Principal Property within one
year prior or subsequent to such sale or transfer.
Limitation on Merger, Consolidation and Certain Sales of Assets. Cooper
will not merge into or consolidate with or convey or transfer its properties
substantially as an entirety to, any person unless (a) the successor corporation
is a corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia, (b) the successor corporation
assumes on the same terms and conditions the Debt Securities and (c) there is no
Event of Default under the Indenture.
Certain Definitions. The following summarize the definition of the terms
set forth below.
"Board of Directors" means the Board of Directors of Cooper or any
committee of such Board or any committee of officers of Cooper duly authorized
by the Board of Directors to take any action under the Indenture.
"Funded Debt" means (a) any Indebtedness maturing by its terms more than
one year from the date of the issuance thereof, including any Indebtedness
renewable or extendible at the option of the obligor to a date later than one
year from the date of the original issuance thereof, excluding any portion of
Indebtedness which is included in current liabilities and (b) any Indebtedness
which may be payable from the proceeds of Funded Debt as defined in clause (a)
hereof pursuant to the terms of such Funded Debt.
"Indebtedness" means with respect to any corporation all indebtedness for
money borrowed which is created, assumed, incurred or guaranteed in any manner
by such corporation or for which such corporation is otherwise responsible or
liable.
"Lien" means any mortgage, pledge, security interest, lien, charge or other
encumbrance.
"Principal Property" means (A) any manufacturing plant located in the
continental United States, or manufacturing equipment located in any such
manufacturing plant (together with the land on which such plant is erected and
fixtures comprising a part thereof), owned or leased on the first date on which
a Debt Security is authenticated by the Trustee under the Indenture, or
thereafter acquired or leased by Cooper or any Restricted Subsidiary, other than
(i) any property which the Board of Directors determines is not of material
importance to the total business conducted, or assets owned, by Cooper and its
Subsidiaries as an entirety or (ii) any portion of any such property which the
Board of Directors determines not to be of material importance to the use or
operation of such property and (B) any shares or Indebtedness issued by any
Restricted Subsidiary. Manufacturing plant does not include any plant in which
the aggregate interest of Cooper and its Restricted Subsidiaries does not exceed
50 percent. Manufacturing equipment means manufacturing equipment in such
manufacturing plants used directly in the production of Cooper's or any
Restricted Subsidiary's products and does not include office equipment, computer
equipment, rolling stock and other equipment not directly used in the production
of Cooper's or any Restricted Subsidiary's products.
"Restricted Subsidiary" means any Subsidiary substantially all the property
of which is located in the continental United States, other than (i) a
Subsidiary primarily engaged in financing, including, without limitation,
lending on the security of, purchasing or discounting (with or without recourse)
receivables, leases, obligations or other claims arising from or in connection
with the purchase or sale of products or services; (ii) a Subsidiary primarily
engaged in leasing or insurance; or (iii) a Subsidiary primarily engaged in
financing Cooper's or any Restricted Subsidiaries' operations outside the
continental United States.
"Sale and Leaseback Transaction" means any arrangement with any person
providing for the leasing by Cooper or any Restricted Subsidiary of any
Principal Property of Cooper or any Restricted
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<PAGE> 19
Subsidiary whether such property is now owned or hereafter acquired (except for
leases for a term of not more than three years, except for leases between Cooper
and a Restricted Subsidiary or between Restricted Subsidiaries and except for
leases of property executed prior to, at the time of, or within one year after
the later of, the acquisition, the completion of construction, including any
improvement or alterations on real property, or the commencement of commercial
operation or such property), which Principal Property has been or is to be sold
or transferred by Cooper or such Restricted Subsidiary to such person.
"Secured Indebtedness" of any corporation means Indebtedness secured by any
Lien upon property (including shares or Indebtedness issued by any Restricted
Subsidiary) owned by Cooper or any Restricted Subsidiary.
"Shareholders' Equity" means the total assets calculated from a
consolidated balance sheet of Cooper, prepared in accordance with generally
accepted accounting principles, less total liabilities shown on such balance
sheet.
"Subsidiary" means any corporation a majority of the voting shares of which
are at the time owned or controlled, directly or indirectly, by Cooper or by one
or more Subsidiaries, or by Cooper and one or more Subsidiaries and which is
consolidated in Cooper's latest consolidated financial statements filed with the
Commission or provided generally to Cooper's shareholders.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to
Debt Securities of any series: (i) default for 30 days in payment of any
interest installment when due; (ii) default in payment of principal of, or
premium, if any, on any of the Debt Securities of such series when due at its
stated maturity, when called for redemption, by declaration or otherwise; (iii)
default in the performance of any covenant in the Indenture with respect to Debt
Securities of such series for 90 days after notice to Cooper by the Trustee or
by holders of 25 percent in principal amount of the outstanding Debt Securities
of such series; (iv) default in the making of any payment for a sinking,
purchase or analogous fund provided for in respect of such series and
continuance of such default for a period of 30 days; and (v) certain events of
bankruptcy, insolvency and reorganization. No Event of Default with respect to a
single series of Debt Securities constitutes an Event of Default with respect to
any other series of Debt Securities. If an Event of Default described above
occurs and is continuing with respect to any series, either the Trustee or the
holders of not less than 25 percent in aggregate principal amount of the Debt
Securities of such series then outstanding (voting separately as a series) may
declare the principal of all outstanding Debt Securities of such series and the
interest accrued thereon, if any, to be due and payable immediately.
In certain cases, the holders of a majority in principal amount of the
outstanding Debt Securities of a series may on behalf of the holders of all Debt
Securities of such series waive any past default or Events of Default with
respect to the Debt Securities of such series or compliance with certain
provisions of the Indenture, except, among other things, a default not
theretofore cured in payment of the principal of, or premium, if any, or
interest, if any, on any of the Debt Securities of such series.
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default with respect to the Debt Securities of any series, give
to the holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it; provided that, except in the case of default in
the payment of principal of, or premium, if any, or interest, if any, on, any of
the Debt Securities of such series, the Trustee will be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the interest of the holders of the Debt Securities of such series. The
term "default" for the purpose of this provision means the happening of any of
the Events of Default specified above, except that any grace period or notice
requirement is eliminated. The Indenture contains provisions entitling the
Trustee, subject to the duty of the Trustee during an Event of Default to act
with the required standard of care, to be indemnified by the holders of Debt
Securities before proceeding to exercise any right or power under the Indenture
at the request of holders of the Debt Securities. The Indenture provides that
subject to the provisions of the Indenture the holders of a majority in
principal
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<PAGE> 20
amount of the outstanding Debt Securities of any series may direct the time,
method and place of conducting proceedings for remedies available to the Trustee
exercising any trust or power conferred on the Trustee in respect of such
series. The Indenture includes a covenant that Cooper will file annually with
the Trustee a certificate of no default or specifying any default that exists.
MODIFICATION OF THE INDENTURE
The Indenture provides that Cooper and the Trustee may, without the consent
of any holders of Debt Securities, enter into supplemental indentures for the
purposes, among other things, of adding to Cooper's covenants, adding additional
Events of Default, establishing the form or terms of Debt Securities, curing
ambiguities or inconsistencies in the Indenture or making such other provisions
in regard to matters or questions arising under the Indenture if such action
shall not adversely affect the interests of the holders of any affected series
of Debt Securities.
The Indenture also contains provisions permitting Cooper and the Trustee,
with the consent of the holders of a majority in principal amount of the
outstanding Debt Securities of each series to be affected, to execute
supplemental indentures adding any provisions to or changing or eliminating any
of the provisions of the Indenture or the Debt Securities of a series or
modifying any of the rights of the holders of the Debt Securities of such series
to be affected, provided that no supplemental indenture may, without the consent
of the holder of each Debt Security affected, among other things, change the
fixed maturity (which term for these purposes does not include payments due
pursuant to any sinking, purchase or analogous fund) of any Debt Securities, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof, or reduce the aforesaid percentage of Debt Securities of any series the
consent of the holders of which is required for any such supplemental indenture.
THE TRUSTEE
Texas Commerce Bank National Association will be the Trustee under the
Indenture. The Trustee performs certain services for, and transacts other
banking business with (including the extension of credit), Cooper from time to
time in the normal course of business.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences
that may be relevant to a citizen or resident of the United States, a
corporation, partnership or other entity created or organized under the laws of
the United States, or an estate or trust the income of which is subject to U.S.
federal income taxation regardless of its source (any of the foregoing, a "U.S.
Person") who is the beneficial owner of a DECS (a "U.S. Holder"). All references
to "holders" (including U.S. Holders) are to beneficial owners of the DECS. This
summary is based on current U.S. federal income tax law and is for general
information only. It is based upon the advice of Skadden, Arps, Slate, Meagher &
Flom, 919 Third Avenue, New York, New York 10022, tax counsel to Cooper.
This summary deals only with holders who are initial holders of the DECS
and who will hold the DECS as capital assets. It does not address tax
considerations applicable to investors that may be subject to special U.S.
federal income tax treatment, such as dealers in securities or persons holding
the DECS as a position in a "straddle" for U.S. federal income tax purposes or
as part of a "synthetic security" or other integrated investment, and does not
address the consequences under state, local or foreign law.
No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service (the "IRS") with respect to
the DECS and no assurance can be given that the IRS will agree with the
characterization and tax treatment of the DECS described herein. ACCORDINGLY, A
PROSPECTIVE INVESTOR (INCLUDING A TAX-EXEMPT
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INVESTOR) IN THE DECS SHOULD CONSULT ITS TAX ADVISOR IN DETERMINING THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE DECS, INCLUDING THE APPLICATION OF STATE,
LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER
TAX LAWS.
Pursuant to the terms of the Indenture, Cooper and all holders of the DECS
will be obligated to treat the DECS as a unit (the "Unit") consisting of (i) an
exchange note ("Exchange Note") which is a debt obligation with a fixed
principal amount unconditionally payable at Maturity equal to the principal
amount of the DECS, bearing interest at the stated interest rate on the DECS,
and (ii) a forward purchase contract (the "Purchase Contract") pursuant to which
the holder agrees to use the principal payment due on the Exchange Note to
purchase at Maturity the Wyman-Gordon Common Stock which the holder is entitled
to receive at that time (subject to Cooper's right to deliver cash in lieu of
the Wyman-Gordon Common Stock). The Indenture will require that a U.S. Holder
include currently in income payments denominated as interest that are made with
respect to the DECS, in accordance with such holder's method of accounting, and
the amount of OID, if any, attributable to the DECS.
Pursuant to the agreement to treat the DECS as a Unit, a holder will be
required to allocate the purchase price of the DECS between the two components
of the Unit (the Exchange Note and the Purchase Contract) on the basis of their
relative fair market values. The purchase price so allocated will generally
constitute the tax basis for each component. Pursuant to the terms of the
Indenture, Cooper and the holders agree to allocate the entire purchase price of
the DECS to the Exchange Note unless the stated interest on the DECS represents
a yield that is lower than Cooper's normal cost of issuing debt with a similar
term to the DECS ("Cooper's Mid-Term Borrowing Rate"). If the stated interest on
the DECS represents a yield that is lower than Cooper's Mid-Term Borrowing Rate
of percent, Cooper and the holders agree to allocate to the Exchange Note an
amount, less than the principal amount of the Exchange Note, calculated by
discounting the cash flows relating to the Exchange Note at a rate equal to
Cooper's Mid-Term Borrowing Rate, and to allocate to the Purchase Contract the
remainder of the purchase price of the DECS.
If the amount allocated to the Exchange Note (its deemed issue price) is
less than the stated principal amount of the DECS, the Exchange Note will be
treated as having OID. In that event, a U.S. Holder will be required to include
in income OID as it accrues, in accordance with a constant-yield method, in an
aggregate amount equal to the difference between the stated principal amount of
the DECS and the deemed issue price of the Exchange Note. However, if the amount
of OID relating to an Exchange Note is less than three-fourths of one percent of
the stated principal amount of the DECS, the amount of OID attributable to the
Exchange Note will constitute "de minimis OID," and a U.S. Holder generally will
include such de minimis OID in income at Maturity (and not over the term of the
DECS). A U.S. Holder's tax basis in the Exchange Note will increase over its
term by the amount of OID included in such holder's income with respect to the
DECS.
Upon the sale or other disposition of a DECS, a U.S. Holder generally will
be required to allocate the amount realized between the two components of the
DECS on the basis of their then relative fair market values. A U.S. Holder will
recognize gain or loss with respect to each component equal to the difference
between the amount realized on the sale or other disposition for each such
component and the U.S. Holder's tax basis in such component. Such gain or loss
generally will be long-term capital gain or loss if the U.S. Holder has held the
DECS for more than a year at the time of disposition.
At Maturity, pursuant to the agreement to treat the DECS as a Unit, on the
repayment of the Exchange Note a U.S. Holder will recognize capital gain or
loss, which will be long-term capital gain or loss unless Maturity occurs within
one year of issuance of the DECS (as a result of acceleration or otherwise)
equal to any difference between its tax basis and the principal amount of the
Exchange Note. If Cooper delivers Wyman-Gordon Common Stock at Maturity, a U.S.
Holder will recognize no additional gain or loss on the exchange, pursuant to
the Purchase Contract, of the principal payment due on the Exchange Note for the
Wyman-Gordon Common Stock. However, a U.S. Holder will recognize additional
capital gain or loss, which should be short-term capital gain or loss, equal to
the difference between the
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cash received in lieu of fractional shares and the portion of the principal
amount of the Exchange Note allocable to fractional shares. A U.S. Holder will
have a tax basis in such shares of Wyman-Gordon Common Stock equal to the
principal amount of the Exchange Note less the amount of the portion of the
principal amount of the Exchange Note allocable to any fractional shares. The
U.S. Holder will have a holding period for the Wyman-Gordon Common Stock that
begins on the day after the Maturity date, and will realize short- or long-term
capital gain or loss upon the subsequent sale or disposition of such stock.
Alternatively, at Maturity, if Cooper pays the DECS in cash, a U.S. Holder will
have additional gain or loss (which might be ordinary income or loss rather than
capital gain or loss) equal to the difference between the principal amount of
the Exchange Note and the amount of cash received from Cooper.
Due to the absence of authority as to the proper characterization of the
DECS, no assurance can be given that the IRS will accept or that a court will
uphold the characterization agreed to in the Indenture or the tax treatment
described above. Proposed Treasury regulations with respect to "contingent
payment" debt instruments (the "Proposed Regulations") would provide for a
different tax result under some circumstances for instruments having
characteristics similar to the DECS, but the Proposed Regulations would be
effective only for instruments issued 60 days or more after their publication as
final regulations. Under the Proposed Regulations, the amount of interest
included in a holder's taxable income for any year would generally be determined
by projecting the amounts of contingent payments (which might include the value
of the Wyman-Gordon Common Stock to be delivered at Maturity) and the yield on
the instrument. Taxable interest income would be measured with reference to the
projected yield, which might be less than or greater than the stated interest
rate under the instrument. In the event that the amount of an actual contingent
payment differed from the projected amount of that payment, the difference would
generally increase or reduce taxable interest income, or create a loss. Because
of their prospective effective date, the Proposed Regulations, if finalized in
their current form, would not apply to the DECs.
Even in the absence of regulations applicable to the DECS, the DECS may be
characterized under current law in a manner that results in tax consequences
different from those reflected in the agreement pursuant to the Indenture and as
described above. Under alternative characterizations of the DECS, it is
possible, for example, that (i) a U.S. Holder may be taxed upon the receipt of
Wyman-Gordon Common Stock with a value in excess of the principal amount of the
Exchange Note, rather than upon the sale of such stock, (ii) any gain recognized
at Maturity (whether a U.S. Holder receives Wyman-Gordon Common Stock or cash)
may be treated as ordinary income rather than capital gain, (iii) all or part of
the interest income on the Exchange Note may be treated as nontaxable,
increasing the gain (or decreasing the loss) at Maturity or upon disposition of
the DECS (or disposition of the Wyman-Gordon Common Stock) or (iv) if the stated
interest rate exceeds Cooper's Mid-Term Borrowing Rate, the Exchange Notes could
be considered as issued at a premium which, if amortized, would reduce the
amount of interest income currently includible in income by a holder and
increase the taxable gain (or decrease the loss) realized at Maturity or upon
disposition of the DECS (or disposition of the Wyman-Gordon Common Stock).
The Revenue Reconciliation Act of 1993 added Section 1258 to the Code,
which may require certain holders of the DECS who have entered into hedging
transactions or offsetting positions with respect to the DECS to recognize
ordinary income rather than capital gain upon the disposition of the DECS.
Holders should consult their tax advisors regarding the applicability of this
legislation to an investment in the DECS.
NON-UNITED STATES PERSONS
In the case of a holder of the DECS that is not a U.S. Person, payments
made with respect to the DECS should not be subject to U.S. withholding tax;
provided that such holder complies with applicable certification requirements.
Any capital gain realized upon the sale or other disposition of the DECS by a
holder that is not a U.S. Person will generally not be subject to U.S. federal
income tax if (i) such gain is not effectively connected with a U.S. trade or
business of such holder and (ii) in the case of an individual, such individual
is not present in the United States for 183 days or more in the taxable year of
the sale or
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other disposition and the gain is not attributable to a fixed place of business
maintained by such individual in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of the DECS may be subject to information reporting requirements
and to backup withholding at a rate of 31 percent of certain amounts paid to the
holder unless such holder provides proof of an applicable exemption or a correct
taxpayer identification number, and otherwise complies with applicable
requirements of the backup withholding rules.
PLAN OF DISTRIBUTION
The Underwriters have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from Cooper the aggregate
number of DECS set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS DECS
------------ -----------
<S> <C>
Salomon Brothers Inc ..........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................
Schroder Wertheim & Co. Incorporated...........................
---------
Total................................................ 15,000,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
DECS if any are purchased.
Cooper has been advised: that the Underwriters propose to offer the DECS to
the public initially at the offering price set forth on the cover of this
Prospectus and to certain dealers at such price less a selling concession of
$ per DECS; that the Underwriters may allow, and each such dealer may
reallow, to other dealers a concession not exceeding $ per DECS; and
that, after the initial public offering, such public offering price and such
concession and reallowance may be changed.
Cooper and Wyman-Gordon have agreed not to offer for sale, sell or
otherwise dispose of, without the prior written consent of the Underwriters, any
shares of Wyman-Gordon Common Stock or any securities convertible into or
exchangeable for, or warrants to acquire, Wyman-Gordon Common Stock for a period
of 90 days after the date of this Prospectus; provided, however, that such
restriction shall not affect the ability of Cooper or Wyman-Gordon or their
respective subsidiaries to take any such actions in connection with the offering
of the DECS made hereby or any exchange at Maturity pursuant to the terms of the
DECS.
Cooper has granted to the Underwriters an option, exercisable for 30 days
from the date of this Prospectus (or, if such 30th day shall not be a Business
Day, on the next Business Day thereafter), to purchase up to an additional
1,500,000 DECS, at the per DECS price to the public less the aggregate
underwriting discount set forth on the cover of this Prospectus. The
Underwriters may exercise such right of purchase only for the purpose of
covering over-allotments, if any, incurred in connection with the sale of DECS
offered hereby. To the extent that the Underwriters exercise such option, each
of the Underwriters will become obligated, subject to certain conditions, to
purchase a number of such additional DECS proportionate to such Underwriter's
initial commitment.
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In connection with the offering of the DECS, the Underwriters and selling
group members (if any) and their respective affiliates may engage in passive
market making transactions in the Wyman-Gordon Common Stock on Nasdaq in
accordance with Rule 10b-6A under the Exchange Act. The passive market making
transactions will comply with applicable volume and price limits and will be
identified as such.
Cooper and Wyman-Gordon have agreed in the Underwriting Agreement to
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.
The Underwriters will reimburse Cooper for certain expenses related to the
offering.
As of June 30, 1995, Schroder Wertheim & Co. Incorporated beneficially
owned 1,121,900 shares of Wyman-Gordon Common Stock (representing 3.2 percent of
the issued and outstanding shares of Wyman-Gordon Common Stock).
Salomon has provided financial advisory services to Wyman-Gordon in the
past, for which it has received customary fees. Merrill Lynch & Co. has provided
financial advisory services to Cooper in the past, for which it has received
customary fees.
ERISA MATTERS
Cooper, Wyman-Gordon or any of their affiliates may be considered a "party
in interest" or a "disqualified person" with respect to some employee benefit
plans ("Plans") that are subject to ERISA, or Section 4975 of the Code. The
purchase of DECS by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section 4975 of
the Code (including individual retirement arrangements and other plans described
in Section 4975(e)(1) of the Code) and with respect to which Cooper,
Wyman-Gordon or any of their affiliates is a "party in interest" within the
meaning of ERISA or a "disqualified person" within the meaning of Section 4975
of the Code may constitute or result in a prohibited transaction under ERISA or
the Code, unless such DECS are acquired pursuant to and in accordance with an
applicable exemption, such as Prohibited Transaction Class Exemption ("PTCE")
84-14 (an exemption for certain transactions determined by an independent
qualified professional asset manager), PTCE 91-38 (an exemption for certain
transactions involving bank collective investment funds) or PTCE 90-1 (an
exemption for certain transactions involving insurance company pooled separate
accounts). Any pension or other employee or other employee benefit plan
proposing to acquire DECS should consult with its counsel.
LEGAL MATTERS
The validity of the DECS will be passed upon for Cooper by Skadden, Arps,
Slate, Meagher & Flom, New York, New York and for the Underwriters by Cravath,
Swaine & Moore, New York, New York. Certain attorneys of Skadden, Arps, Slate,
Meagher & Flom and members of their immediate families have investment
discretion with respect to an aggregate of 1,300 shares of common stock of
Cooper.
EXPERTS
The consolidated financial statements of Cooper for the year ended December
31, 1994, incorporated by reference in Cooper's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph with respect to changes in methods of accounting for
postretirement benefits other than pensions, income taxes and postemployment
benefits as discussed in Note 4 to the consolidated financial statements)
incorporated therein and herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
23
<PAGE> 25
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
APPENDIX A
Subject to Completion,
October 17, 1995
PROSPECTUS
15,000,000 SHARES
LOGO WYMAN-GORDON COMPANY
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
This Prospectus relates to 15,000,000 shares of Common Stock, par value $1.00
per share (the "Common Stock"), of Wyman-Gordon Company (the "Company"), which
may be delivered by Cooper Industries, Inc. ("Cooper"), at its option, pursuant
to the terms of the % Exchangeable Notes Due , 1998 (the "Debt
Exchangeable for Common StockSM" or "DECSSM" ). This Prospectus is Appendix A to
a prospectus of Cooper (the "DECS Prospectus") covering the sale of 15,000,000
DECS (the "DECS Offering"). The Company will not receive any of the proceeds
from the offering contemplated hereby.
Cooper has granted the Underwriters of the DECS a 30-day option to purchase up
to an additional 1,500,000 DECS, which may be exchangeable at their maturity for
additional shares of Common Stock. Such option has been granted solely to cover
over-allotments, if any. To the extent that the over-allotment option is not
exercised by the Underwriters in full, Cooper may, subject to certain
limitations, sell up to 1,500,000 shares of Common Stock pursuant to this
Prospectus. See "Plan of Distribution."
PROSPECTIVE INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED UNDER "RISK FACTORS" ON PAGE 7.
The Common Stock is traded on The Nasdaq Stock Market's National Market
("Nasdaq") under the symbol WYMN. On , 1995, the last reported
sale price of Common Stock was $ per share. See "Price Range of Common
Stock and Dividend Policy."
The Company and Cooper have agreed not to sell, without the prior written
consent of the Underwriters, any shares of Common Stock or any securities
convertible into or exchangeable for Common Stock for a period of 90 days after
the date of this Prospectus. See "Plan of Distribution."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1995.
<PAGE> 26
THE COMPANY HAS BEEN ADVISED THAT IN CONNECTION WITH THE OFFERING BY COOPER
OF THE DECS, THE UNDERWRITERS OF THE DECS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DECS OR THE COMMON STOCK OF
THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON NASDAQ OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SEE "PLAN
OF DISTRIBUTION."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance with the Exchange Act files reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). The
Company has filed a registration statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with the SEC with respect to the Common Stock offered hereby. This Prospectus,
which constitutes part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and reference is made to the
Registration Statement and the exhibits thereto for further information with
respect to the Company and the Common Stock. Such reports, proxy statements,
Registration Statement and exhibits and other information omitted from this
Prospectus can be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at the SEC's Regional Offices located at Seven World Trade Center,
Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, IL 60661-2511. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. Such reports, proxy statements
and other information concerning the Company can also be inspected at The Nasdaq
Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended June 3,
1995, the Quarterly Report on Form 10-Q for the fiscal quarter ended September
2, 1995, the proxy statement dated August 30, 1995, and the Company's Current
Report on Form 8-K filed on June 9, 1994, including the financial statements of
Cameron (as defined herein) contained therein, are incorporated by reference in
this Prospectus. All documents filed by the Company pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby shall be
deemed to be incorporated by reference into this Prospectus and to be made a
part hereof from the respective dates of filing of such documents. Any statement
in any document incorporated or deemed to be incorporated by reference herein,
shall be deemed to be modified or superseded for purposes of the Registration
Statement and this Prospectus to the extent that a statement contained herein or
in any subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement or this Prospectus.
Copies of the above documents (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference in such documents) may
be obtained upon written or oral request without charge from the Company, 244
Worcester Street, Grafton, Massachusetts 01536, Attention: Clerk, telephone
(508) 839-4441.
2
<PAGE> 27
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the consolidated financial statements appearing
elsewhere in this Prospectus as well as the information incorporated herein by
reference.
THE COMPANY
Wyman-Gordon Company (the "Company"), founded in 1883, is a leading
producer of highly engineered, technically advanced components, primarily for
the aerospace industry as well as for other markets including power generation.
The Company uses forging, casting and composites technologies to produce
components to exacting customer specifications for technically demanding
applications such as jet turbine engines, airframe structures, land-based gas
turbines, and extruded seamless pipe. Components manufactured by the Company are
utilized in most of the major commercial and United States defense aerospace
programs. The Company believes that it is the only firm to provide the aerospace
industry with a combination of forging, casting and composites capabilities for
the production of high quality components and that it produces the broadest
offering of aerospace forgings available on the market.
The Company manufactures components from sophisticated titanium and
nickel-based superalloys for jet engines manufactured by General Electric
Company ("GE"), the Pratt & Whitney Division ("Pratt & Whitney") of United
Technologies Corporation ("United Technologies"), Rolls-Royce plc ("Rolls-
Royce") and CFM International S.A. The Company's airframe structural components,
such as landing gear, bulkheads and wing spars, are used on the entire fleet of
airplanes manufactured by The Boeing Company ("Boeing"), including the new 777,
as well as the McDonnell Douglas Corporation ("McDonnell Douglas") MD-11 and the
Airbus Industrie S.A. ("Airbus") A330 and A340, and on a number of military
aircraft and other defense-related applications including the McDonnell Douglas
C-17 transport and the new F-22 air superiority fighter being jointly developed
by Lockheed Martin Corporation ("Lockheed") and Boeing. Recently the Company has
expanded its product offerings by focusing on the land-based gas turbine market
through products sold primarily to GE and on the power generation markets
through pipe and valve bodies sold to a variety of customers.
In recent years the Company has experienced losses as a result of declines
in customer demand caused by a combination of defense spending cutbacks, reduced
orders for new commercial aircraft and reductions in customer inventory levels.
In response, the Company's senior management implemented a series of strategic
initiatives designed to (i) lower the Company's cost structure, (ii) consolidate
its forgings operations, (iii) lower inventory requirements, and (iv) solidify
customer relations.
In further response to the continuing overcapacity in the industry, the
Company acquired all of the stock of Cameron Forged Products Company ("Cameron")
from Cooper in May 1994 (the "Acquisition"). Prior to the Acquisition, Cameron
was the Company's principal competitor in the production of forgings for use in
critical aerospace applications. For the year ended December 31, 1993, Cameron
had revenues of $149.5 million, an operating loss of ($22.2) million and total
assets of $151.8 million. As part of the consideration for the Acquisition, the
Company issued 16.5 million shares of Common Stock to Cooper, which shares are
being registered in connection with the DECS Offering. Currently, these shares
represent approximately 47% of the outstanding Common Stock of the Company.
As a result of the Acquisition, the Company has achieved cost savings,
which total more than $26.0 million on an annualized basis to date. In addition,
the Company has achieved the following production efficiencies.
Focused Factories. The Company has substantially completed the
consolidation of the manufacture of rotating parts for jet engines from Grafton,
Massachusetts into Cameron's Houston, Texas facility. At the same time, the
Grafton facility has been focused on the production of large airframe structures
and large turbine parts such as components for the GE90 engine and land-based
gas turbines. The result has been the elimination of duplicative facilities,
improved throughput, and efficiencies of scale.
3
<PAGE> 28
Rationalization of Forging Operations. Subsequent to the Acquisition the
Company closed one of the two Cameron forging plants in Houston, Texas. In
addition, the Company has closed its ring-roll operations and is in the process
of closing its hammer forging operations at its Worcester, Massachusetts
facility. The result has been improved manufacturing efficiencies, higher
utilizations and better inventory management.
Best Practices. The Company is in the process of adopting the best
manufacturing practices of the Company and Cameron. The improved manufacturing
practices have resulted in cost reductions from lower material input weights on
certain forgings, improved machining practices and more efficient testing
procedures. Substantial raw material cost savings in certain of the Company's
forging processes have resulted from utilization of material produced in
Cameron's Brighton, Michigan powder metal facility and Cameron's Houston, Texas
vacuum arc remelting facility. From 1991 through 1995 average production cycle
times at Cameron's Houston facility were reduced from approximately 22 weeks to
seven weeks and the Company is seeking to achieve similar reductions at its
Grafton, Massachusetts facility.
As a result of these realized production efficiencies and cost savings the
Company's operating results improved in each quarter of fiscal year 1995 and
continued at improved levels in the first quarter of fiscal year 1996 as shown
by the following table.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
SEPTEMBER 3, DECEMBER 3, MARCH 4, JUNE 3, SEPTEMBER 3,
1994 1994 1995 1995 1995
------------ ----------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
(000'S, EXCEPT PERCENTAGE DATA)
Revenues................ $ 95,725 $94,974 $96,238 $109,702 $114,077
Gross profit............ 9,575 9,869 12,615 17,329 18,180
Gross margin............ 10.0% 10.4% 13.1% 15.8% 15.9%
Operating income........ $ 3 $ 768 $ 3,620 $ 9,327 8,083
Operating margin........ 0.0% 0.8% 3.8% 8.5% 7.1%
Annualized revenues per
employee.............. $ 129 $ 129 $ 130 $ 146 $ 151
</TABLE>
In addition to the benefits the Company has realized from the Acquisition
and expects to realize in the future, the Company has in place several programs
to strengthen its position in the aerospace market and to enter new markets
through its expertise in high performance materials.
Focus on Large Aerospace Components. The Company believes that its
extensive installed asset base, technological leadership in manufacturing
large-scale components and experience in producing and utilizing sophisticated
alloys will enable the Company to capitalize on the industry trend toward
widebody aircraft with larger and more sophisticated engines. These aircraft,
which include the new Boeing 777, require larger airframe structural parts and
their engines require high-purity alloys, both of which are particular strengths
of the Company.
Strategic Alliances with Key Customers. The Company has entered into joint
development programs with its two largest customers, GE and Pratt & Whitney, for
the production of (i) forged rotating parts for the new GE90 jet engine and (ii)
nickel-based superalloy ingots in Perth, Australia for use in forging and
casting applications (the "Australian Joint Venture"), respectively. Management
believes that alliances such as these strengthen existing relationships, and in
some cases allow the Company to become involved in the design phases for new
components and applications, thereby enhancing the Company's chances of
obtaining future orders.
New Applications and Markets. The Company believes that its expertise in
the manufacture of highly specialized metal components with enhanced fatigue and
temperature resistant properties gives it the ability to design new applications
for existing technologies in its current markets and to utilize existing
technologies in new markets. For example, the Company has been able to enter the
power generation market where the Company's knowledge of nickel-based
superalloys and manufacturing technology
4
<PAGE> 29
utilized for aircraft engines can be applied to manufacture energy efficient,
high strength, temperature resistant gas turbines.
Management believes that the combination of the Company's technological
capabilities, installed asset base and close customer relationships, together
with its improved cost structure, will allow the Company to operate profitably
in an environment of low commercial aircraft deliveries and to benefit from
increases in delivery rates. At the same time the Company seeks to expand into
new product and geographic markets.
THE OFFERING OF THE DECS
This Prospectus relates to 15.0 million shares of Common Stock, and up to
1.5 million additional shares of Common Stock to cover over-allotments, which
may be delivered by Cooper, at its option, pursuant to the terms of the DECS,
which are being offered by Cooper pursuant to the Cooper Prospectus. To the
extent that the over-allotment option is not exercised by the Underwriters,
Cooper may, subject to certain limitations, sell up to 1.5 million shares of
Common Stock pursuant to this Prospectus. The Company is registering the shares
of Common Stock pursuant to the Investment Agreement, dated January 10, 1994
(the "Investment Agreement"), between the Company and Cooper, which Investment
Agreement provides Cooper with certain rights to have the shares of Common Stock
held by Cooper registered by the Company under the Securities Act. The Company
has also agreed to indemnify Cooper and the Underwriters of the DECS against
certain liabilities, including civil liabilities under the Securities Act.
The Company and Cooper have agreed not to sell, without the prior written
consent of the Underwriters, any shares of Common Stock or any securities
convertible into or exchangeable for Common Stock for a period of 90 days after
the date of this Prospectus. See "Plan of Distribution."
5
<PAGE> 30
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables set forth summary consolidated financial and other data
for the Company for the respective periods indicated. The following tables
should be read in conjunction with the Consolidated Financial Statements,
related notes and other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
---------------------------- ------------------------------------------
SEPTEMBER 2, SEPTEMBER 3, JUNE 3, MAY 28, DECEMBER 31,
1995 1994 1995 1994 (1) 1993 (2)
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA (3):
Revenues............................... $ 114,077 $ 95,725 $396,639 $224,694 $239,761
Gross profit........................... 18,180 9,575 49,388 6,878 20,673
Other charges (credits) and
environmental charges (4)............ 900 -- (710) 35,003 2,453
Income (loss) from operations.......... 8,083 3 13,718 (63,657) (8,428)
Net income (loss) (5).................. 5,101 (3,321) 1,039 (72,403) (60,004)
PER SHARE DATA:
Income (loss) per share before taxes
and cumulative effect of changes in
accounting principles................ $ 0.14 $ (0.10) $ 0.03 $ (4.02) $ (0.95)
Net income (loss) per share (5)........ 0.14 (0.10) 0.03 (4.02) (3.34)
Dividends paid per share............... -- -- -- -- --
Shares used to compute income (loss)
per share............................ 35,889 34,715 35,148 17,992 17,965
BALANCE SHEET DATA:
(at end of period)(3):
Working capital........................ $ 103,943 $ 91,109 $ 93,062 $ 91,688 $ 90,685
Total assets........................... 370,619 368,868 369,064 394,747 286,634
Long-term debt......................... 90,308 90,385 90,308 90,385 90,461
Stockholders' equity................... 85,768 69,920 80,855 72,483 88,349
OTHER DATA:
Order backlog (at end of period)....... $ 476,944 $400,110 $468,761 $389,407 $256,259
EBITDA (6)............................. 11,816 3,649 30,188 (45,380) 9,388
<FN>
- ---------------
(1) On May 24, 1994, the Company's Board of Directors voted to change the
Company's fiscal year end from December 31 to the Saturday nearest to May
31. The Statement of Operations Data for the year ended May 28, 1994 is
unaudited.
The following table sets forth Summary Consolidated Statement of Operations
Data, which has been derived from the Company's audited financial
statements, for the five months ended May 28, 1994 (000's omitted, except
per share amounts):
<S> <C>
Revenues....................................................................... $ 86,976
Other charges (credits) and environmental charges.............................. 32,550
Income (loss) from operations.................................................. (55,805)
Net income (loss).............................................................. (61,370)
Per share data:
Net income (loss) per share.................................................. $ (3.32)
Dividends paid per share..................................................... --
(2) Including Cameron's financial results for fiscal year 1993, the Company's
pro forma unaudited revenues, loss before the cumulative effect of changes
in accounting principles and net loss would have been $389.3 million,
($39.3) million and ($82.3) million, respectively.
(3) On May 26, 1994, the Company acquired Cameron from Cooper. The Summary
Consolidated Financial and Other Data include the accounts of Cameron from
the date of the Acquisition. Cameron's operating results from May 26, 1994
to May 28, 1994 are not material to the consolidated statement of operations
for the year and five months ended May 28, 1994.
(4) In November 1993, the Company sold substantially all of the net assets and
business operations of Wyman-Gordon Composites, Inc. and recorded a non-cash
charge on the sale of $2.5 million.
In May 1994, the Company recorded charges of $6.5 million related to the
closing of a castings facility, $24.1 million related to restructuring and
integration of Cameron and $2.0 million for environmental investigation and
remediation costs.
During the first quarter of fiscal year 1996, the Company provided $0.8
million in order to recognize its 25.0% share of the net losses of the
Australian Joint Venture and to reserve for amounts loaned to the Australian
Joint Venture during the first quarter of fiscal year 1996. Additionally,
the Company provided $0.1 million relating to expenditures for an investment
in an additional joint venture.
(5) Includes a charge of $43.0 million or $2.39 per share in fiscal year 1993
related to the Company's adoption of SFAS 106, "Employers' Accounting for
Postretirement Benefits other than Pensions" ("SFAS 106") and SFAS 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 106 requires postretirement
benefits obligations to be accounted for on an accrual basis rather than the
"expense as incurred" basis formerly used. The Company elected to recognize
the cumulative effect of these accounting changes in fiscal year 1993.
(6) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization and changes in accounting principles.
</TABLE>
6
<PAGE> 31
RISK FACTORS
Prospective investors should carefully consider the specific risk factors
set forth below as well as the other information contained in this Prospectus
and the information incorporated herein by reference.
HISTORY OF RECENT LOSSES
Although the Company reported net income of $1.0 million for fiscal year
1995, the Company reported a net loss for the five months ended May 28, 1994,
and for two of the three previous fiscal years. For the year ended December 31,
1993, the Company reported a net loss (before the cumulative effect of changes
in accounting principles) of ($17.0) million. Cameron reported a net loss of
($20.1) million for the same period, its last fiscal year prior to the
Acquisition. The Company has implemented structural changes designed to improve
its cost structure and increase efficiency and productivity at its Houston
facilities. The Company is now implementing similar changes at its Grafton
facility, which has been operating at a loss in recent years. If these
objectives cannot be successfully achieved, the Company may implement further
restructuring measures which could result in write-offs and reduced earnings or
losses. There can be no assurance that the Company's operations will be
profitable in the future. See the Consolidated Financial Statements.
VOLATILITY IN THE COMMERCIAL AEROSPACE INDUSTRY
Approximately 52% of the Company's revenues during fiscal year 1995 was
derived from the commercial aerospace industry, an industry that is cyclical in
nature and subject to changes based on general economic conditions and airline
profitability. Although the United States economy entered a period of slow
growth in 1989 and 1990, the aerospace industry made record deliveries of
commercial aircraft, based on revenue, during those years, and aircraft
deliveries continued to grow through 1991 and decreased only slightly in 1992.
In 1990 through 1992, domestic airlines suffered significant operating losses.
As a result of these losses, the high levels of debt incurred to purchase new
aircraft and the excess capacity within the commercial airline sector, the
commercial aerospace industry has since experienced reduced new orders for
commercial aircraft and related spare parts as well as deferrals, and in some
cases cancellations, of deliveries of previously ordered aircraft. While the
Company's customers are now reporting increased orders for spare parts, aircraft
deliveries continue at historically low rates. Although it appears that the
health of the airline industry is improving, based on profitability, there can
be no assurance that any improvement in the commercial aerospace market will be
substantial or that improved conditions would be sustained. See "Business --
Markets" and "Business -- Customers."
REDUCTIONS IN DEFENSE SPENDING
Approximately 24% of the Company's revenues during fiscal year 1995 was
derived from the defense aerospace industry, an industry that is dependent upon
government defense budgets and, in particular, the United States' defense
budget. In general, defense budgets in the United States have been declining in
recent years, resulting in reduced demand for new aircraft and spare parts.
While the effect of United States defense budget reductions may be offset in
part by foreign military sales, such sales are affected by United States
governmental regulation, regulation by the purchasing government and political
uncertainties in the United States and abroad. There can be no assurance that
United States defense budgets and the related demand for defense equipment will
not continue to decline or that sales of defense equipment to foreign
governments will continue at present levels.
DEPENDENCE ON MAJOR CUSTOMERS
The Company is dependent upon a few large aerospace contractors for a
significant percentage of its revenue. Five customers accounted for
approximately 50% of the Company's revenues during the Company's fiscal year
1995, and two of the five, GE and United Technologies, accounted for 26% and 15%
of total revenues, respectively. In addition, many of the Company's sales to its
smaller customers are eventually incorporated into components sold to its major
customers. The loss of, or significant reduction
7
<PAGE> 32
in, purchases by any of the Company's major customers would adversely affect the
Company. In addition, because of the relatively small number of customers for
some of the Company's principal products, those customers exercise significant
influence over the Company's prices and other terms of trade. See "Business --
Customers."
COMPETITION
The Company is subject to intense competition for supplying its customers
with products. Many of the Company's products are sold under long-term contracts
which are bid upon by several suppliers. Because of reductions in demand for
aerospace products in recent years, there exists excess productive capacity in
the market for a number of the Company's principal products which results in
intense price competition for orders. There can be no assurance that the Company
can maintain its share of the market for any of its products. See "Business --
Competition."
RISK OF FLUCTUATIONS IN PRICE AND AVAILABILITY OF RAW MATERIALS
The Company's results of operations are affected by significant
fluctuations in the prices of raw materials used by the Company. Many of the
Company's customer contracts have fixed prices for extended time periods and do
not provide complete price adjustments for changes in the prices of raw
materials such as metals. The Company attempts to reduce its risk with respect
to its customer contracts by procuring long-term contracts with suppliers of
metal alloys, but the Company's supply contracts typically do not completely
insulate the Company from fluctuations in the price of raw materials. In
addition, during periods of increasing raw materials prices, metals suppliers,
who are subject to increased raw materials costs, may be unable to make timely
deliveries or may experience quality problems. Due to these and other factors,
significant increases in the prices of raw materials used by the Company may
well have an adverse impact on the Company's results of operations. See
"Business -- Raw Materials."
LIQUIDITY
The Company anticipates making cash expenditures during fiscal year 1996 of
approximately $35 to $38 million of which approximately $25 million will be for
ongoing capital expenditures, and the balance will be for expenditures relating
to the consolidation of the Company's forging operations with Cameron, for costs
associated with prior restructuring activities, and for environmental management
and remediation projects. The Company expects that its cash expenditures will
continue at close to the same level for fiscal years 1997 and 1998. There can be
no assurances that the Company will be able to generate the cash flow from its
operations and from improved inventory management necessary to meet its
anticipated cash requirements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
COMPLIANCE WITH ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS
The Company's operations are subject to extensive environmental, health and
safety laws and regulations promulgated by federal, state and local governments.
Many of these laws and regulations provide for substantial fines and criminal
sanctions for violations. The nature of the Company's business exposes the
Company to risks of liability due to the use and storage of materials that can
cause contamination or personal injury if released into the environment. In
addition, environmental laws may have a significant effect on the nature, scope
and cost of cleanup of contamination at operating facilities. It is difficult to
predict the future development of such laws and regulations or their impact on
future earnings and operations, but the Company anticipates that these standards
will continue to require increased capital expenditures. There can be no
assurance that material costs or liabilities will not be incurred.
Based upon information presently available, the Company does not expect
that costs for future environmental compliance and remediation will have a
material adverse effect on its competitive or financial position or its ongoing
results of operations. However, it is not possible to predict accurately the
8
<PAGE> 33
amount or timing of costs of any future environmental remediation requirements.
Such costs could be material to future quarterly or annual results of
operations. In addition, the "Superfund" statutes may impose joint and several
liability for the costs of remedial investigations and actions on the entities
that arranged for disposal of the wastes, the waste transporters that delivered
materials to the disposal sites and the past and present owners and operators of
such sites; responsible parties (or any one of them, including the Company) may
be required to bear all of such costs regardless of fault, legality of the
original disposal or ownership of the disposal site. In such event, the amount
owed by the Company for liabilities at Superfund sites could be significantly
greater. See "Business -- Environmental Regulations" and Footnote G to the
Consolidated Financial Statements.
PRODUCT LIABILITY EXPOSURE
The Company produces many critical engine and structural parts for
commercial and military aircraft. As a result, the Company has an inherent risk
of exposure to product liability claims. The Company maintains product liability
insurance, but there can be no assurance that such coverage will continue to be
available on terms acceptable to the Company or that such coverage will be
adequate for liabilities incurred. See "Business -- Product Liability Exposure."
ANTI-TAKEOVER PROVISIONS; POSSIBLE ADVERSE EFFECTS OF ISSUANCE OF PREFERRED
STOCK
The Company's Restated Articles of Organization (the "Articles"), By-Laws
and Rights Agreement (as defined herein), as well as Massachusetts law, contain
provisions that could discourage a proxy contest, make more difficult the
acquisition of a substantial block of the Common Stock, which could make the
payment of a premium to shareholders in connection with a change in control less
likely, and increase the difficulty of removing incumbent management and board
members. In addition, such provisions could limit the price that investors might
be willing to pay in the future for shares of the Common Stock. The Board of
Directors of the Company is authorized to issue, without stockholder approval,
Preferred Stock with voting, conversion and other rights and preferences that
could adversely affect the voting power or other rights of the holders of Common
Stock. The issuance of Preferred Stock or rights to purchase Preferred Stock
could be used to discourage an unsolicited acquisition proposal. The Board of
Directors is divided into three "staggered" classes, with each class serving for
a term of three years. Dividing the Board of Directors in this manner could
increase the difficulty of removing incumbent members and could discourage a
proxy contest or the acquisition of a substantial block of the Common Stock. The
Articles also contain a "fair price provision" that could impede certain
business combinations involving the Company. Massachusetts law contains certain
anti-takeover provisions, including Chapter 110F of the Massachusetts General
Laws (the "MGL"), a so-called "Business Combination Statute" that restricts
certain stockholders that own (together with their affiliates) 5% or more of the
outstanding voting stock of a Massachusetts corporation from engaging in certain
business combinations with such corporation ("Chapter 110F"), and Chapter 110D
of the MGL, a so-called "Control Share Statute" that limits any person or entity
that has acquired 20% or more of a corporation's stock from voting such shares
unless the corporation's stockholders, other than such acquiring person or
entity, authorize such voting rights by a vote of the holders of the majority of
stock of the corporation entitled to vote on such matters ("Chapter 110D").
Although the Company has presently selected to "opt-out" of Chapter 110D, the
Company remains subject to Chapter 110F. Such provisions of Massachusetts law
could have the effect of discouraging a potential acquiror from making an offer
for the Common Stock, which would make the payment of a premium to stockholders
in connection with a change in control less likely, and could increase the
difficulty of removing incumbent management and board members. See "Description
of the Company's Capital Stock."
In addition, the Investment Agreement with Cooper, which relates to
Cooper's ownership of 16.5 million shares of Common Stock or 47% of the Common
Stock outstanding, creates certain obstacles to a takeover of the Company,
including Cooper's agreement to certain "standstill" provisions, including
Cooper's agreement (i) to vote its shares of Common Stock as directed by the
Company's Board of Directors or at Cooper's option in proportion to votes of the
other shareholders, (ii) not to sell shares except in a broadly disseminated
public distribution, (iii) not to join in any proxy contest, (iv) not to make
any proposal for, or to participate in any group with respect to, the
acquisition of any securities or
9
<PAGE> 34
assets of the Company, (v) not to initiate or participate in any shareholder
proposals, and (vi) not to tender shares of Common Stock that Cooper owns in a
tender offer unless the Company's Board of Directors approves such tender or
takes a neutral position on the offer. See "Relationship Between the Company and
Cooper -- Investment Agreement."
IMPACT OF THE DECS ON THE MARKET FOR THE COMPANY'S COMMON STOCK
It is not possible to predict accurately how or whether the DECS will trade
in the secondary market or whether such market will be liquid. Any market that
develops for the DECS is likely to influence and be influenced by, the market
for the Common Stock. For example, the price of the Common Stock could become
more volatile and could be depressed by investors' anticipation of the potential
distribution into the market of substantial additional amounts of Common Stock
at the maturity of the DECS, by possible sales of Common Stock by investors who
view the DECS as a more attractive means of equity participation in the Company
and by hedging or arbitrage trading activity that may develop involving the DECS
and the Common Stock.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock of the Company is listed on Nasdaq under the symbol WYMN.
The following table sets forth the high and low sales price of the Common Stock
for the calendar periods listed below as reported on Nasdaq.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1994
First Quarter.......................................................... $7 1/8 $4 5/8
Second Quarter......................................................... 6 7/8 4 1/2
Third Quarter.......................................................... 7 5 3/4
Fourth Quarter......................................................... 6 1/2 4 3/4
1995
First Quarter.......................................................... 8 5 1/4
Second Quarter......................................................... 12 3/8 7 5/8
Third Quarter.......................................................... 14 1/8 10 5/8
Fourth Quarter (through October 12, 1995).............................. 13 3/4 12 1/4
</TABLE>
On October , 1995, the last reported sale price of the Common Stock was
per share.
The Company discontinued dividends on the Common Stock beginning in the
fourth quarter of 1991. While it is the intention of the Board of Directors to
consider the resumption of dividends on the Common Stock from time to time, the
declaration of future dividends will be dependent upon the Company's earnings,
financial condition, and other relevant factors.
The Company is limited in the amount of dividends it may pay under the
terms of the indenture dated March 16, 1993, pursuant to which it issued $90.0
million principal amount of 10 3/4% Senior Notes due 2003 (the "Senior Note
Indenture"). Such limitation is provided by the Senior Note Indenture's
limitation on restricted payments, including dividends. The Senior Note
Indenture provides that the Company will not, and will not permit any of its
subsidiaries to, pay dividends or make any other restricted payment if, after
giving effect thereto, the aggregate amount of all restricted payments made from
and after the date of the Senior Note Indenture would exceed the sum of (a) 50%
of consolidated net income of the Company accrued for the period (taken as one
accounting period) commencing with March 29, 1993, to and including the date of
such calculation (or, in the event consolidated net income is a deficit, then
minus 100% of such deficit); (b) the aggregate net proceeds, including the fair
market value of property other than cash, received by the Company from the
issuance or sale of its capital stock, including the issuance of its capital
stock upon conversion of securities other than its capital stock, and options,
10
<PAGE> 35
warrants and rights to purchase its capital stock (other than redeemable stock)
from and after the date of the Senior Note Indenture; and (c) $5.0 million. As
of June 3, 1995, the Company was not eligible to pay dividends under the terms
of the Senior Note Indenture. The Senior Note Indenture also contains certain
other covenants including limitations on indebtedness, liens, and disposition of
assets.
As of , 1995, the Common Stock was held by holders
of record. The number of record holders may not be representative of the number
of beneficial holders because many shares are held by depositories, brokers, or
other nominees.
11
<PAGE> 36
CAPITALIZATION
The following table sets forth as of September 2, 1995 and June 3, 1995,
the capitalization of the Company. The Company will receive no proceeds from the
sale of the DECS or from sales of Common Stock by Cooper pursuant to this
Prospectus, if any. This table should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto
appearing elsewhere in this Prospectus. See "Selected Consolidated Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
SEPTEMBER 2, JUNE 3,
1995 1995
------------ ---------
(000'S OMITTED)
<S> <C> <C>
Borrowings Due Within One Year.................................... $ 4,812 $ 3,915
=========== =========
Long-Term Debt:
10 3/4% Senior Notes Due 2003................................... $ 90,000 $ 90,000
Other........................................................... 308 308
----------- ---------
Total Long-Term Debt............................................ 90,308 90,308
----------- ---------
Stockholders' Equity:
Preferred Stock, No Par Value:
Authorized 5,000,000 Shares; None Issued..................... -- --
Common Stock, Par Value $1.00
Authorized 70,000,000 Shares; Issued 37,052,720.............. 37,053 37,053
Capital in Excess of Par Value.................................. 38,699 40,118
Retained Earnings............................................... 44,801 39,700
Equity Adjustments.............................................. (714) 63
----------- ---------
119,839 116,934
Less Treasury Stock at Cost..................................... (34,071) (36,079)
----------- ---------
Total Stockholders' Equity................................... 85,768 80,855
----------- ---------
Total Capitalization.............................................. $ 176,076 $ 171,163
=========== =========
</TABLE>
12
<PAGE> 37
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated balance sheet data as of June 3, 1995, May 28, 1994 and
December 31, 1993, 1992, 1991 and 1990 and consolidated statement of operations
data for the year ended June 3, 1995, five months ended May 28, 1994 and years
ended December 31, 1993, 1992, 1991 and 1990 have been derived from the
Company's audited consolidated financial statements. The consolidated balance
sheet data as of September 2, 1995 and September 3, 1994 and the consolidated
statement of operations data for the three months ended September 2, 1995 and
September 3, 1994 and for the year ended May 28, 1994, have been derived from
the Company's unaudited consolidated financial statements. The financial data
set forth below should be read in conjunction with the Consolidated Financial
Statements of the Company and related notes thereto, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------- ---------------------------------------------------------------------------------------
SEPTEMBER 2, SEPTEMBER 3, JUNE 3, MAY 28, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994(1) 1993(2) 1992 1991(3) 1990(3)
-------------- -------------- --------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
STATEMENT
OF
OPERATIONS
DATA(4):
Revenues... $114,077 $ 95,725 $396,639 $224,694 $239,761 $298,881 $355,390 $405,381
Gross
profit... 18,180 9,575 49,388 6,878 20,673 55,590 28,362 56,295
Other
charges
(credits)
and
environmental
charges(5)... 900 -- (710) 35,003 2,453 -- 106,464 --
Income
(loss)
from
operations... 8,083 3 13,718 (63,657) (8,428) 27,275 (115,160) 21,319
Net
income
(loss)(6)... 5,101 (3,321) 1,039 (72,403) (60,004) 21,795 (99,681) 8,696
PER
SHARE
DATA:
Income
(loss)
per
share
before
cumulative
effect
of
changes
in
accounting
principles... $ 0.14 $(0.10) $ 0.03 $ (4.02) $ (0.95) $ 1.21 $ (5.59) $ 0.49
Net
income
(loss)
per
share(6)... 0.14 (0.10) 0.03 (4.02) (3.34) 1.21 (5.59) 0.49
Dividends
paid per
share.. -- -- -- -- -- -- 0.30 0.80
Shares
used
to
compute
income
(loss)
per
share... 35,889 34,715 35,148 17,992 17,965 18,078 17,831 17,831
BALANCE
SHEET
DATA
(at
end
of
period)(4):
Working
capital... $103,943 $ 91,109 $ 93,062 $ 91,688 $ 90,685 $ 96,057 $110,859 $124,030
Total
assets... 370,619 368,868 369,064 394,747 286,634 295,156 339,154 421,886
Long-term
debt... 90,308 90,385 90,308 90,385 90,461 70,538 90,615 73,892
Stockholders'
equity... 85,768 69,920 80,855 72,483 88,349 149,516 128,088 232,157
OTHER
DATA:
Order
backlog
(at
end of
period)... $476,944 $400,110 $468,761 $389,407 $256,259 $309,679 $386,905 $392,857
EBITDA(7)... 11,816 3,649 30,188 (45,380) 9,388 45,191 (89,960) 50,599
</TABLE>
13
<PAGE> 38
- ---------------
(1) On May 24, 1994, the Company's Board of Directors voted to change the
Company's fiscal year end from one which ended on December 31 to the
Saturday nearest to May 31. The Statement of Operations Data for the year
ended May 28, 1994 is unaudited.
The following table sets forth Summary Consolidated Statement of Operations
Data, which has been derived from the Company's audited financial
statements, for the five months ended May 28, 1994 (000's omitted, except
per share amounts):
<TABLE>
<S> <C>
Revenues..................................................... $ 86,976
Other charges (credits) and environmental charges............ 32,550
Income (loss) from operations................................ (55,805)
Net income (loss)............................................ (61,370)
Per share data:
Net income (loss) per share................................ $ (3.32)
Dividends paid per share................................... --
</TABLE>
(2) Including Cameron's financial results for fiscal year 1993, the Company's
pro forma unaudited revenues, loss before the cumulative effect of changes
in accounting principles and net loss would have been $389.3 million,
($39.3) million and ($82.3) million, respectively.
(3) In fiscal year 1991, the Company divested its automotive crankshaft
operations. Revenues pro forma for the exclusion of such operations are
$306.6 million and $344.0 million for fiscal years 1991 and 1990,
respectively, assuming the divestiture of the automotive crankshaft
operations had taken place as of the beginning of each of the periods.
(4) On May 26, 1994, the Company acquired Cameron from Cooper. The Selected
Consolidated Financial Data include the accounts of Cameron from the date
of the Acquisition. Cameron's operating results from May 26, 1994 to May
28, 1994 are not material to the consolidated statement of operations for
the year and five months ended May 28, 1994.
(5) During fiscal year 1991 the Company incurred charges of approximately $88.0
million and $11.5 million in connection with a restructuring program
primarily at its forging operations and disposition of its automotive
crankshaft forging division, respectively. Additionally, $7.0 million was
provided with respect to environmental investigation and remediation costs
at one of the Company's facilities.
In November 1993, the Company sold substantially all of the net assets and
business operations of Wyman-Gordon Composites, Inc. and recorded a
non-cash charge on the sale of $2.5 million.
In May 1994, the Company recorded charges of $6.5 million related to the
closing of a castings facility, $24.1 million related to restructuring and
integration of Cameron and $2.0 million for environmental investigation and
remediation costs.
During the first quarter of fiscal year 1996, the Company provided $0.8
million in order to recognize its 25.0% share of the net losses of the
Australian Joint Venture and to reserve for amounts loaned to the
Australian Joint Venture during the first quarter of fiscal year 1996.
Additionally, the Company provided $0.1 million relating to expenditures
for an investment in an additional joint venture.
(6) Includes a charge of $43.0 million or $2.39 per share in fiscal year 1993
relating to the Company's adoption of SFAS 106, "Employers' Accounting for
Postretirement Benefits other than Pensions" ("SFAS 106") and SFAS 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 106 requires
postretirement benefits obligations to be accounted for on an accrual basis
rather than the "expense as incurred" basis formerly used. The Company
elected to recognize the cumulative effect of these accounting charges in
fiscal year 1993.
(7) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization and changes in accounting principles.
14
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis presents management's assessment of
material developments affecting the Company's results of operations, liquidity
and capital resources during the first quarter of fiscal year 1996 and the first
quarter of fiscal year 1995, and during fiscal years 1995, 1994 and 1993. These
discussions should be read in conjunction with the Company's Consolidated
Financial Statements and the Notes thereto. Comparisons of fiscal 1995 results
with results prior to the Acquisition of Cameron may not be meaningful.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED SEPTEMBER 2, 1995 ("FIRST QUARTER OF FISCAL YEAR 1996")
COMPARED TO THREE MONTHS ENDED SEPTEMBER 3, 1994 ("FIRST QUARTER OF FISCAL YEAR
1995")
The Company's revenues increased 19.2% to $114.1 million in the first
quarter fiscal year 1996 from $95.7 million in the first quarter fiscal year
1995 due to higher sales volume at the Company's Forgings and Castings
Divisions. These sales volume increases during the first quarter of fiscal year
1996 as compared to the first quarter of fiscal year 1995 are reflected by
market as follows: a $9.3 million (12.8%) increase in aerospace, a $8.3 million
(57.2%) increase in power generation and a $0.8 million (9.1%) increase in
other. Revenues in the first quarters of fiscal years 1996 and 1995 were limited
by raw material shortages and production delays caused by capacity constraints
of the Company's suppliers. While the severity of the raw material shortages was
not as extensive in the first quarter of fiscal year 1996 as compared to the
first quarter of fiscal year 1995, the Company is seeking to improve upon its
ability to receive raw material such that there is no disruption to its
production schedule. The revenue increases mentioned above have occurred while
the Company's backlog has grown steadily to $477.0 million at September 2, 1995
from $400.1 million at September 3, 1994.
The Company's gross margins were 15.9% in the first quarter of fiscal year
1996 as compared to 10.0% in the first quarter of fiscal year 1995. This
improvement resulted from higher production volumes and productivity gains
resulting from the Company's efforts toward focusing forging production of
rotating parts for jet engines in its Houston, Texas facility and forging
production of airframe structures and large turbine parts in its Grafton,
Massachusetts facility. Additionally, continuing realization of cost reductions
from synergies associated with the integration of Cameron contributed to this
higher ratio. Gross margins benefitted from LIFO credits of $1.1 million during
the first quarter of fiscal year 1995. There were no LIFO credits recorded
during the first quarter of fiscal year 1996.
Selling, general and administrative expenses decreased 3.9% to $9.2 million
during the first quarter of fiscal year 1996 from $9.6 million during the first
quarter of fiscal year 1995. Selling, general and administrative expenses as
percentage of revenues improved to 8.1% in the first quarter of fiscal year 1996
from 10.0% in the first quarter of fiscal year 1995. The improvement as a
percent of revenues is the result of cost reductions associated with the
integration of Cameron with the Company's Forgings operations and higher
revenues.
During the first quarter of fiscal year 1996, the Company provided $0.8
million in order to recognize its 25.0% share of the net losses of the
Australian Joint Venture and to reserve for amounts loaned to the Australian
Joint Venture during the first quarter of fiscal year 1996. Additionally, the
Company provided $0.1 million relating to expenditures for an investment in an
additional joint venture.
Interest expense was $2.9 million in both the first quarter of fiscal year
1996 and the first quarter of fiscal year 1995.
Miscellaneous, net was an expense of $0.1 million in the first quarter of
fiscal year 1996 as compared to an expense of $0.4 million in the first quarter
of fiscal year 1995. Miscellaneous, net in the first quarter of fiscal year 1996
includes a $0.2 million gain on the sale of marketable securities.
15
<PAGE> 40
The Company recorded no provision for income taxes in the first quarter of
fiscal years 1996 and 1995.
Net income was $5.1 million, or $.14 per share, in the first quarter of
fiscal year 1996 and net loss was $(3.3) million, or $(.10) per share in the
first quarter of fiscal year 1995. The $8.4 million improvement results from the
items described above.
YEAR ENDED JUNE 3, 1995 ("FISCAL YEAR 1995") COMPARED TO
YEAR ENDED MAY 28, 1994 ("FISCAL YEAR 1994")
The Company's results of operations for fiscal year 1995 include the
results of Cameron which the Company acquired from Cooper in May 1994. As a
result of the Acquisition, the Company has broadened its revenue base and
expanded into new markets. The Company is also realizing substantial operating
and processing efficiencies through the consolidation of systems and facilities
and the reduction of personnel performing duplicate functions.
The Company's revenues increased 76.5% to $396.6 million in fiscal year
1995 from $224.7 million in fiscal year 1994. Approximately $151.0 million of
this increase was due to the Acquisition of Cameron, which provides a broader
revenue base in the Company's traditional markets of commercial and defense
aerospace and provides diversification into the power generation market. The
remainder of the revenue increase was due to higher sales volume at the
Company's forgings and castings divisions. The increase in revenues was limited
by raw material shortages and production delays caused by capacity constraints
of the Company's suppliers. Although this situation improved during the second
half of fiscal year 1995, it had a negative impact on overall revenues.
Additionally, fiscal year 1994 contained $4.7 million of revenues from
Wyman-Gordon Composites, Inc. which was sold by the Company during November
1993.
The Company's gross margins were 12.5% in fiscal year 1995, as compared to
3.1% in fiscal year 1994. Higher production volumes, particularly in the
Company's castings division, productivity gains in factory operations and
realization of certain synergies associated with the integration of Cameron with
the Company's forgings operations contributed to this higher ratio. In addition,
the gross margins at the Company's composites divisions for fiscal year 1995
were well above fiscal year 1994 levels. These favorable trends were offset
somewhat by production delays resulting from raw material shortages experienced
most significantly in the first half of fiscal year 1995. Gross margins
benefited from LIFO credits of $6.2 million in fiscal 1995 as compared to $8.1
million in fiscal year 1994. Gross margin in fiscal year 1994 was negatively
impacted by significant charges totaling $8.7 million related mainly to a change
in accounting estimate for workers' compensation of $4.2 million and excess
inventories of $2.8 million.
Selling, general and administrative expenses increased 2.4% to $36.4
million in fiscal year 1995 from $35.5 million in fiscal year 1994. Selling,
general and administrative expenses improved as a percentage of revenues to 9.2%
in fiscal year 1995 from 15.8% in fiscal year 1994. Fiscal year 1994 selling,
general and administrative expenses include $7.6 million of significant charges.
Absent the significant charges, fiscal year 1994 selling, general and
administrative expenses were 12.4% of revenues. The improvement as a percent of
revenues is the result of certain savings associated with the integration of
Cameron with the Company's forgings operations, and higher revenues.
During fiscal year 1995, the Company recognized $1.4 million of other
charges for its 25.0% equity share of the losses of its Australian Joint Venture
for the production of nickel-based superalloy.
In fiscal year 1994, the Company recognized other charges of $35.0 million,
which included $24.1 million for Cameron integration costs, $6.5 million for
castings division restructuring costs, $2.0 million for anticipated
environmental charges, and $2.4 million related to the disposition of production
facilities. The Company recognized a $2.1 million credit in fiscal year 1995
after determining that Cameron integration costs, including severance and other
personnel costs, were lower than originally estimated. The Company believes that
most of the integration activities have been completed or adequate reserves have
been provided. As of June 3, 1995, unused reserves for Cameron integration costs
amount to $8.6 million.
Interest expense decreased 1.0% to $11.0 million in fiscal year 1995 from
$11.1 million in fiscal year 1994. Fiscal year 1995 interest expense includes
higher financing fees associated with the establishment
16
<PAGE> 41
in May 1994 of a receivables backed credit facility. Fiscal year 1994 interest
expense includes the write-off of financing fees relating to the Company's prior
credit facility amounting to $1.2 million.
Miscellaneous, net was an expense of $1.7 million in fiscal year 1995 and
income of $2.4 million in fiscal year 1994. Miscellaneous, net in fiscal year
1994 includes a $3.3 million gain on the sale of marketable securities.
The Company recorded no provision for income taxes in fiscal years 1995 and
1994. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
Net income was $1.0 million, or $.03 per share, in fiscal year 1995
compared to a net loss of ($72.4) million, or ($4.02) per share, in fiscal year
1994. The $73.4 million improvement results from the items described above.
YEAR ENDED DECEMBER 31, 1993 ("FISCAL YEAR 1993") COMPARED TO
YEAR ENDED DECEMBER 31, 1992 ("FISCAL YEAR 1992")
The Company's revenues decreased 19.8% to $239.8 million in fiscal year
1993 from $298.9 million in fiscal year 1992. This decline in revenues was
primarily attributable to continued sluggishness in the commercial aerospace
industry during fiscal year 1993.
The Company's gross margins were 8.6% in fiscal year 1993 as compared to
18.6% in fiscal year 1992. The decline in gross margins was a result of (1)
lower production volume, (2) lower LIFO credits recorded in fiscal year 1993 as
compared to fiscal year 1992 and (3) competitive pricing which continued to
place pressure on the Company's gross margins. LIFO credits, which include both
LIFO liquidation and deflation effects, of $7.9 million and $22.8 million were
recognized in fiscal year 1993 and fiscal year 1992, respectively.
Selling, general and administrative expenses decreased 5.9% to $26.6
million in fiscal year 1993 from $28.3 million in fiscal year 1992. The decrease
in selling, general and administrative expenses is mainly due to lower payroll
costs from reductions in personnel. Selling, general and administrative expenses
increased as a percent of revenues to 11.1% in fiscal year 1993 from 9.4% in
fiscal year 1992 as a result of the revenue decline.
In November 1993, the Company sold substantially all of the net assets and
business operations of its Wyman-Gordon Composites, Inc. operations. The Company
recorded a non-cash charge on the sale in fiscal year 1993 of $2.5 million.
Interest expense increased 43.9% to $10.8 million in fiscal year 1993 from
$7.5 million in fiscal year 1992 primarily as a result of higher interest rates
on the 10 3/4% Senior Notes due 2003 as compared to that on the debt retired
with the proceeds of the 10 3/4% Senior Notes. The average debt balance was
$87.7 million and $84.8 million in fiscal year 1993 and fiscal year 1992,
respectively. Additionally, the Company wrote off financing fees relating to a
prior credit facility amounting to $1.7 million in fiscal year 1993.
Miscellaneous income was $2.2 million in fiscal year 1993 as compared to
$2.0 million in fiscal year 1992. Miscellaneous income in fiscal year 1993
reflects primarily the gain of $3.3 million on the sale of marketable
securities. Miscellaneous income in fiscal year 1992 reflects primarily the gain
of $0.9 million on the sale of marketable securities and a gain of $0.6 million
from a settlement of an overfunded pension plan terminated in a prior year.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("SFAS 106"), and No. 109, "Accounting for Income Taxes"
("SFAS 109"). The Company elected to recognize the cumulative effect of these
accounting changes, resulting in a noncash reduction in earnings in 1993 of
$43.0 million or $2.39 per share.
17
<PAGE> 42
Net loss was ($60.0) million, or ($3.34) per share, in fiscal year 1993 and
net income was $21.8 million, or $1.21 per share, in fiscal year 1992. The
change results from the items described above.
LIQUIDITY AND CAPITAL RESOURCES
The increase in the Company's cash of $7.5 million to $21.4 million as of
September 2, 1995 from $13.9 million as of June 3, 1995 resulted primarily from
cash provided by operating activities of $6.6 million.
During fiscal year 1994, the Company recognized costs to be incurred for
the integration of Cameron totalling $24.1 million of which $12.7 million were
estimated to require cash outlays. Additionally, the Company estimated $12.2
million in cash outlays from direct costs associated with the Acquisition and
integration. Therefore, combined reserves for Cameron integration costs totalled
$36.3 million of which $24.9 million were estimated to require cash. During May
1994, $11.4 million of non-cash asset write-offs were charged to these reserves.
During fiscal year 1995, the Company incurred $11.1 million in charges on the
integration of Cameron which were charged to these reserves, $6.7 million of
which required the use of cash. Additionally, the Company reduced its estimates
of costs to be incurred for the integration of Cameron and direct costs
associated with the acquisition by a total of $7.3 million. Such reduction is
reflected by an adjustment in the purchase price of $5.2 million and a credit to
income of $2.1 million on the fiscal year 1995 Statement of Operations. See
Footnote F to the Consolidated Financial Statements for a summary of cash
outlays relating to restructuring charges.
As of June 3, 1995, the Company estimates the remaining cash requirements
for the integration of Cameron and direct costs associated with the Acquisition
to be $8.6 million, and expects to spend approximately $6.5 million during its
fiscal year ending June 1, 1996 ("fiscal year 1996") and $2.1 million
thereafter. In the first quarter of fiscal year 1996, spending related to the
integration of Cameron and associated direct costs amounted to $1.5 million.
The 1991 restructuring plan is substantially complete. See Footnote F to
the Consolidated Financial Statements. The Company incurred cash charges of $2.7
million related to the 1991 restructuring plan during fiscal year 1995 and
expects to expend an additional $3.8 million over the next several years,
approximately $1.9 million in fiscal year 1996 and $1.9 million thereafter. For
fiscal year 1996 and thereafter, these expenditures are anticipated to include
payments for consolidation and reconfiguration of existing facilities of $1.7
million in fiscal year 1996 and $0.6 million thereafter, and payments under a
deferred compensation agreement of approximately $1.5 million. In the first
quarter of fiscal year 1996, spending related to the 1991 restructure plan
amounted to $0.4 million.
As of June 3, 1995, the Company expects to spend $1.8 million in fiscal
year 1996 and $15.1 million thereafter on non-capitalizable environmental
activities. In the first quarter of fiscal year 1996, no amounts were expended
for non-capitalizable environmental projects. The Company has completed all
environmental projects within established timetables and is continuing to do so
at the present time.
The Company from time to time expends cash on capital expenditures for more
cost effective operations, environmental projects and joint development programs
with customers. Capital expenditures amounted to $18.7 million, $2.4 million,
$13.9 million and $11.2 million in fiscal year 1995 the five months ended May
28, 1994 and fiscal years 1993 and 1992, respectively. Capital expenditures in
the foreseeable future are expected to increase from fiscal year 1995 levels. In
the first quarter of fiscal year 1996, capital expenditures amounted to $1.8
million.
As of June 3, 1995, the Company had invested $4.1 million in cash towards
its share of the capital requirements of the Australian Joint Venture for the
production of nickel-based superalloy. The Company is committed to invest an
additional $3.4 million in the Joint Venture. The Australian Joint Venture has
entered into a credit agreement with an Australian bank under which it has $17.3
million in borrowings outstanding. The Company has guaranteed 25.0% of the
Australian Joint Venture's obligations under the credit agreement. This
guarantee expires at such time as the Australian Joint Venture demonstrates its
ability to produce commercially acceptable products. The Australian Joint
Venture has not generated
18
<PAGE> 43
sufficient cash flow to service its debt, and if the operations do not become
profitable in the future, the Company may be required to write off all or a
portion of the remaining book value of its investment and repay up to 25.0% of
the Joint Venture's $17.3 million debt, which is guaranteed by the Company. The
book value of the Company's investment in the Australian Joint Venture as of
September 2, 1995 is approximately $2.3 million.
On May 20, 1994, the Company entered into a revolving receivables-backed
credit facility (the "Receivables Financing Program") among the Company, certain
subsidiaries and Wyman-Gordon Receivables Company ("WGRC") and a Revolving
Credit Agreement dated as of May 20, 1994 among WGRC and the financial
institutions party thereto. The aggregate maximum borrowing capacity under the
Receivables Financing Program is $65.0 million, with a letter of credit
sub-limit of $35.0 million. The term of the Receivables Financing Program is
five years, with an evergreen feature. As of June 3, 1995, under this credit
facility, the total availability based on eligible receivables was $44.8
million, there were no borrowings and letters of credit amounting to $10.0
million were outstanding. As of September 2, 1995, under the credit facility,
the total availability based on eligible receivables was $42.0 million, there
were no borrowings and letters of credit amounting to $9.7 million were
outstanding.
Wyman-Gordon Limited, the Company's subsidiary located in Livingston,
Scotland, entered into a credit agreement effective November 28, 1994 (the "U.K.
Credit Agreement"). The maximum borrowing capacity under the U.K. Credit
Agreement is L3.0 million with a separate letter of credit or guarantee limit of
L1.0 million. The term of the U.K. Credit Agreement is one year with an
evergreen feature. There were L2.4 million or $3.8 million of borrowings
outstanding at June 3, 1995 and the Company had issued L0.4 million or $0.6
million of letters of credit or guarantees under the U.K. Credit Agreement.
There were L3.0 million or $4.7 million of borrowings outstanding as of
September 2, 1995 and the Company had issued L0.9 million or $1.5 million of
letters of credit or guarantees under the U.K. Credit Agreement.
The primary sources of liquidity available to the Company in fiscal year
1996 to fund operations, anticipated expenditures in connection with the
integration of Cameron, planned capital expenditures and planned environmental
expenditures include available cash ($21.4 million as of September 2, 1995 and
$13.9 million as of June 3, 1995), borrowing availability under the Company's
Receivables Financing Program, cash generated by operations and reductions in
working capital requirements through planned inventory reductions and accounts
receivable management.
Cash from operations and debt are expected to be the Company's primary
sources of liquidity beyond fiscal year 1996. The Company believes that it has
adequate resources to provide for its operations and the funding of
restructuring, integration, capital and environmental expenditures.
The Company's current plans to improve operating results include completing
the integration of Cameron, further reductions of personnel and various other
cost reduction measures. Programs to expand the Company's revenue base include
participation in new aerospace programs and expansion of participation in the
land-based gas turbine and extruded pipe markets and other markets in which the
Company has not traditionally participated. The Company anticipates that, in
addition to the growth in commercial aviation, the aging current commercial
airline fleet will require future orders for its replacement.
IMPACT OF INFLATION
The Company's earnings may be affected by changes in price levels and in
particular, changes in the price of basic metals. The Company's contracts
generally provide for fixed prices for finished products with limited protection
against cost increases. The Company would therefore be affected by changes in
prices of the raw materials during the term of any such contract. The Company
attempts to minimize this risk by entering into fixed price arrangements with
raw material suppliers.
19
<PAGE> 44
ACCOUNTING, TAX AND OTHER MATTERS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("SFAS 121") which must be adopted by the Company no
later than fiscal year 1997. SFAS 121 prescribes the accounting for the
impairment of long-lived assets that are to be held and used in the business and
similar assets to be disposed of. The Company has not determined the impact of
adopting SFAS 121 on its financial position or results of operations.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). This standard provides that the Company follow an
accrual method of accounting, rather than the as-incurred basis formerly used
for benefits payable to employees when they leave the Company for reasons other
than retirement. The adoption, including the cumulative effect, has not had a
material affect on earnings or the financial position of the Company.
As of June 3, 1995, the Company had net operating loss carryforwards
("NOLs") of approximately $67.0 million, which begin expiring in year 2006. The
Company is seeking to utilize a substantial portion of such NOLs to obtain a
refund in excess of $20.0 million of prior years' taxes. To the extent that the
Company is not successful in recovering a refund of prior years' taxes, the NOLs
will be available to offset future taxable income, if any. A reasonable
estimation of the potential recovery cannot be made at this time and,
accordingly, no adjustment has been made in the financial statements with
respect to the claim for such refund.
The Company's ability to utilize its NOLs in the future may be affected by
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), which
generally limits the use of a corporation's NOLs following a more than 50
percentage point change in the ownership of the corporation's equity within any
three-year period (an "ownership change"). An ownership change could result in
the imposition of limitations on the Company's ability to offset future taxable
income with the Company's NOL's.
The Australian Joint Venture has reported continued operating losses and
has not generated sufficient cash flow to service its debt. In fiscal year 1995,
the Company provided $1.4 million to recognize the Company's 25.0% share of the
net losses of this Joint Venture. The Company provided an additional $0.8
million in the first quarter of fiscal year 1996. The book value of the
Company's investment in the Australian Joint Venture as of September 2, 1995 is
approximately $2.3 million. If the Joint Venture's operations do not become
profitable in the future, the Company may be required to make further provisions
or to write off all or a portion of the remaining book value of its investment
and repay up to 25.0% of the Joint Venture's $17.3 million debt, which is
guaranteed by the Company.
As of September 2, 1995 the Company has purchased and is named as
beneficiary on approximately 1,650 life insurance policies with an aggregate
cash surrender value of approximately $9.0 million, issued by Confederation Life
Insurance Company (U.S.), which is currently in rehabilitation. Confederation
Life Insurance Company is continuing to pay benefits under the policies but has
ceased to redeem cash surrender values. No assurances can be given regarding to
what extent the Company will be able to realize such cash surrender values in
the future.
20
<PAGE> 45
BUSINESS
GENERAL
Wyman-Gordon Company is a leading producer of highly engineered,
technically advanced components for both the commercial and defense aerospace
market and the commercial power generation market. The Company uses die forging,
extrusion and investment casting processes to produce metal components to
exacting customer specifications for technically demanding applications such as
jet turbine engines, airframes and land-based gas turbine engines. The Company
also extrudes seamless heavy-wall steel pipe for use primarily in commercial
power generation plants, and designs and produces prototype aircraft using
composite technologies. The Company produces components for most of the major
commercial and U.S. defense aerospace programs. Metallurgical skills, an unique
asset base and a broad offering of capabilities allow the Company to serve
competing customers effectively and to lead the development and use of new metal
technologies for its customers' uses.
The Company is the leading producer of rotating components for use in
turbine aircraft engines. These parts are forged from purchased ingots converted
to billet in the Company's cogging presses and from superalloy metal powders
which are produced, consolidated and extruded into billet entirely at the
Company's facilities. Forging is conducted in Massachusetts, Texas and Scotland
on a number of hydraulic presses with capacities ranging from 8,000 to 55,000
tons. The Company forges these engine components primarily from alloys of
high-temperature nickel. Additionally, the Company uses modern, automated,
high-volume production equipment and both air-melt and vacuum-melt furnaces in
its investment casting operations to produce complex non-rotating jet engine
parts from high-temperature nickel-based alloys.
Structural airframe components are produced from alloys of steel, aluminum
and titanium on the Company's forging presses and by its investment casting
process. The Company uses its metallurgical and manufacturing capabilities to
design new products to accommodate its customers' needs for larger, stronger
structural parts forged from new superalloy metals. The Company produces
smaller, near net-shape structural parts for aircraft through its investment
castings business.
The Company produces a variety of mechanical and structural tubular forged
products, primarily in the form of extruded seamless pipe, for the domestic and
international power generation markets, which include nuclear and fossil fueled
power plants, cogeneration projects and retrofit and life extension
applications. These tubular forged products also have ordnance and other
military applications. Aluminum, steel, titanium and superalloy products are
manufactured at the Company's Houston, Texas forging facility where one of the
world's largest vertical extrusion presses extrudes pipe up to 48 inches in
diameter and 7 inches in wall thickness and bar stock from 6 to 32 inches in
diameter. Lengths of pipe and bar stock vary from 10 to 45 feet with a maximum
forged weight of 20 tons. Similar equipment and capabilities are in operation at
the Company's Livingston, Scotland forging facility. Additionally, the Houston
press extrudes powder billets for use in aircraft turbine engine forgings.
The Company's composite operation, Scaled Composites, Inc., plans, designs,
fabricates and tests composite airframe structures for the aerospace market.
The Company's acquisition of Cameron from Cooper in May 1994 united two of
the country's largest and most technically advanced forging companies and had a
pervasive impact on the Company. As a result of the Acquisition, the Company has
broadened its revenue base and expanded into new markets. The Company is also
realizing substantial operating and processing efficiencies through the
consolidation of systems and facilities and the reduction of personnel
performing duplicate functions.
BUSINESS STRATEGY
In recent years the Company experienced losses as a result of declines in
customer demand caused by a combination of defense spending cutbacks, reduced
orders for new commercial aircraft and reductions in customer inventory levels.
In response the Company's senior management implemented a
21
<PAGE> 46
series of strategic initiatives designed to (i) lower the Company's cost
structure, (ii) consolidate its forging operations, (iii) lower inventory
requirements, and (iv) solidify customer relations.
In further response to the continuing overcapacity in the industry, the
Company acquired all of the stock of Cameron from Cooper in May 1994. Prior to
the Acquisition, Cameron was the Company's principal competitor in the
production of forgings for use in critical aerospace applications. For the year
ended December 31, 1993, Cameron had revenues of $149.5 million, an operating
loss of ($22.2) million and total assets of $151.8 million. As part of the
consideration for the Acquisition, the Company issued 16.5 million shares of
Common Stock to Cooper, which shares are being registered in connection with the
DECS Offering. Currently, these shares represent approximately 47% of the
outstanding Common Stock of the Company.
As a result of the Acquisition, the Company has achieved cost savings,
which total more than $26.0 million on an annualized basis to date. In addition,
the Company has achieved the following production efficiencies.
Focused Factories. The Company has substantially completed the
consolidation of the manufacture of rotating parts for jet engines from Grafton,
Massachusetts into Cameron's Houston, Texas facility. At the same time, the
Grafton facility has been focused on the production of large airframe structures
and large turbine parts such as components for the GE90 engine and land-based
gas turbines. The results have been the elimination of duplicative facilities,
improved throughput, and efficiencies of scale.
Rationalization of Forging Operations. Subsequent to the Acquisition the
Company closed one of the two Cameron forging plants in Houston, Texas. In
addition, the Company has closed its ring-roll operations and is in the process
of closing its hammer forging operations at its Worcester, Massachusetts
facility. The result has been improved manufacturing efficiencies, higher
utilizations and better inventory management.
Best Practices. The Company is in the process of adopting the best
manufacturing practices of the Company and Cameron. The improved manufacturing
practices have resulted in cost reductions from lower material input weights on
certain forgings, improved machining practices and more efficient testing
procedures. Substantial raw material cost savings in certain of the Company's
forgings processes have resulted from utilization of material produced in
Cameron's Brighton, Michigan powder metal facility and Cameron's Houston, Texas
vacuum arc remelting facility. From 1991 through 1995 average production cycle
times at Cameron's Houston facility were reduced from approximately 22 weeks to
seven weeks and the Company is seeking to achieve similar reductions at its
Grafton, Massachusetts facility.
In addition to the benefits the Company has realized from the Acquisition
and expects to realize in the future, the Company has in place several programs
to strengthen its position in the aerospace market and to enter new markets
utilizing its expertise in high performance materials.
Focus on Large Aerospace Components. The Company believes that its
extensive installed asset base, technological leadership in manufacturing
large-scale components and experience in producing and utilizing sophisticated
alloys will enable the Company to capitalize on the industry trend toward
widebody aircraft with larger and more sophisticated engines. These aircraft,
which include the new Boeing 777, require larger airframe structural parts and
their engines require high-purity alloys, both of which are particular strengths
of the Company.
Strategic Alliances with Key Customers. The Company has entered into joint
development programs with its two largest customers, GE and Pratt & Whitney, for
the production of (i) forged rotating parts for the new GE90 jet engine and (ii)
nickel-based superalloy ingots through the Australian Joint Venture,
respectively. Management believes that alliances such as these strengthen
existing relationships, and in some cases allow the Company to become involved
in the design phases for new components and applications, thereby enhancing the
Company's chances of obtaining future orders.
New Applications and Markets. The Company believes that its expertise in
the manufacture of highly specialized metal components with enhanced fatigue and
temperature resistant properties gives it
22
<PAGE> 47
the ability to design new applications for existing technologies in its current
markets and to utilize existing technologies in new markets. For example, the
Company has been able to enter the power generation market where the Company's
knowledge of nickel-based superalloys and manufacturing technology utilized for
aircraft engines can be applied to manufacture energy efficient, high strength,
temperature resistant gas turbines.
Management believes that the combination of the Company's technological
capabilities, installed asset base and close customer relationships, together
with its improved cost structure, will allow the Company to operate profitably
in an environment of low commercial aircraft deliveries and to benefit from
increases in delivery rates. At the same time the Company seeks to expand into
new product and geographic markets.
MARKETS AND PRODUCTS
The principal markets served by the Company are aerospace and power
generation. Revenue by market for the respective periods were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
------------------- ----------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31,
SEPTEMBER 2, 1995 JUNE 3, 1995 MAY 28, 1994 1993 1992
------------------- ---------------- ---------------- ---------------- ----------------
% OF % OF % OF % OF % OF
REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL
--------- ------- -------- ----- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(000'S OMITTED, EXCEPT PERCENTAGES)
Aerospace........... $ 82,211 72% $300,143 76 % $188,518 84 % $205,077 85 % $263,961 88 %
Power generation.... 22,823 20 66,892 17 15,616 7 14,719 6 17,401 6
Other............... 9,043 8 29,604 7 20,560 9 19,965 9 17,519 6
--
--------- -------- ----- -------- ----- -------- ----- -------- -----
Total.............. $114,077 100% $396,639 100 % $224,694 100 % $239,761 100 % $298,881 100 %
============ ========= ========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
AEROSPACE
The Company manufactures products utilized in general aviation, defense and
business jet aircraft. The Company manufactures numerous forged and cast
components for jet engines produced by all of the major manufacturers, including
GE, Pratt & Whitney and Rolls-Royce. The Company's forged engine parts include
fan discs, compressor discs, turbine discs, seals, spacers, shafts, hubs and
cases. Cast engine parts include thrust reversers, valves and fuel system parts
such as combustion chamber swirl guides. Jet engines may produce in excess of
100,000 pounds of thrust and may subject parts produced by the Company to
temperatures reaching 1,350 degrees Fahrenheit. Components for such extreme
conditions require precision manufacturing and expertise with high-purity
titanium and nickel-based superalloys. Rotating parts such as fan, compressor
and turbine discs must be manufactured to precise quality specifications.
The Company manufactures forged and cast structural parts for fixed-wing
aircraft and helicopters. These products include wing spars, engine mounts,
struts, landing gear beams, landing gear, wing hinges, wing and tail flaps,
housings, and bulkheads. These parts may be made of titanium, steel, aluminum
and other alloys, as well as composite materials. The Company also produces
dynamic rotor forgings for helicopters. Forging is particularly well-suited for
airframe parts because of its ability to impart greater proportional strength to
metal than other manufacturing processes. Investment casting can produce complex
shapes to precise, repeatable dimensions.
The Company has been a major supplier of the beams that support the main
landing gear assemblies on the Boeing 747 for many years and has recently begun
shipping main landing gear beams for the new Boeing 777 widebody. The Company
forges landing gear and other airframe structural components for the Boeing 737,
747, 757, 767 and 777, the McDonnell Douglas MD-11 and the Airbus A330 and A340.
The Company produces structural forgings for the F-15, F-16 and F-18 fighter
aircraft and the Black Hawk helicopter produced by the Sikorsky Division of
United Technologies ("Sikorsky"). The Company also produces large, one-piece
bulkheads for Lockheed/Boeing for the F-22 next generation air superiority
fighter aircraft.
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<PAGE> 48
POWER GENERATION
The Company is a major supplier of extruded seamless heavy wall pipe for
the critical piping systems in both fossil fuel and nuclear commercial power
plants worldwide, as well as offshore petroleum exploration applications. The
Company believes it is a leading supplier in the U.S. and the U.K. of large
diameter, seamless heavy wall pipe. The Company produces components for steam
turbine and gas turbine generators and forged valves for land-based power
generation applications. The Company also manufactures shafts, cases, and
compressor and turbine discs for marine gas turbines.
OTHER PRODUCTS
The Company supplies products to builders of military missiles. Examples of
these products include breech block and breech rings for large cannon and forged
steel casings for bombs, rockets and expendable launch vehicles. The Company
participates in a variety of U.S. Government programs including the Standard,
Harm, Patriot and Aegis programs. For naval defense applications, the Company
supplies components for propulsion systems for nuclear submarine and aircraft
carriers as well as pump, valve, structural and non nuclear propulsion forgings.
The Company also manufactures extruded missile, rocket and bomb cases and
supplies extruded products for nuclear submarines and aircraft carriers
including heavy wall piping for nuclear propulsion systems, torpedo tubes and
catapult launch tubes.
The Company's investment castings operations produce products for
commercial applications such as: components for golf clubs, pistol frames,
bicycles, food processing equipment, diesel turbo-chargers, land-based military
equipment such as tanks, and various other applications.
The Company also supplies extruded powders for other superalloy powder
manufacturers. The Company is actively seeking to identify alternative
applications for its capabilities, such as in the automotive and other
commercial markets.
CUSTOMERS
The Company has approximately 150 active customers that purchase forgings,
approximately 550 active customers that purchase investment castings and
approximately 20 active customers that purchase composite structures. The
Company's principal customers are similar across all of these production
processes. Five customers accounted for 52% of the Company's revenues for the
three months ended September 2, 1995, 50% of the Company's revenues for the year
ended June 3, 1995, 51% for the year ended May 28, 1994, and 56% and 53% for the
years ended December 31, 1993 and 1992, respectively. GE and United Technologies
(primarily Pratt & Whitney and Sikorsky) each accounted for more than 10% of
revenues for the year ended June 3, 1995, the year ended May 28, 1994, and the
years ended December 31, 1993 and 1992, respectively, as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
------------------ -------------------------------------------------------------------------------------
SEPTEMBER 2, 1995 JUNE 3, 1995 MAY 28, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
------------------ ------------------- ------------------ ------------------ ------------------
% OF % OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL TOTAL
REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE
------- ------- -------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(000'S OMITTED, EXCEPT PERCENTAGES)
GE.............. $32,106 28% $101,261 26% $48,286 22% $55,585 23% $62,740 21%
United
Technologies... 12,953 11 58,873 15 39,100 17 37,060 16 48,920 17
</TABLE>
Boeing, McDonnell Douglas and Rolls-Royce are also significant customers of
the Company.
The Company has organized its operations into product groups which focus on
specific customers or groups of customers with similar needs. The Company has
become actively involved with its aerospace customers through joint development
relationships and cooperative research and development, engineer-
24
<PAGE> 49
ing, quality control, just-in-time inventory control and computerized design
programs. This involvement begins with the design of the tooling and processes
to manufacture the customer's components to its precise specifications.
MARKETING AND SALES
The Company markets its products principally through its own sales
engineers and makes only limited use of manufacturers' representatives.
Substantially all sales are made directly to original equipment manufacturers.
The Company's sales are not subject to significant seasonal fluctuations.
A substantial portion of the Company's revenues are derived from long-term,
fixed price contracts with major engine and aircraft manufacturers. These
contracts are typically "requirements" contracts under which the purchaser
commits to purchase a given portion of its requirements of a particular
component from the Company. Actual purchase quantities are typically not
determined until shortly before the year in which products are to be delivered.
BACKLOG
The Company's firm backlog includes the sales price of all undelivered
units covered by customers' orders for which the Company has production
authorization.
The Company's firm backlog in the various markets served by the Company has
been as follows:
<TABLE>
<CAPTION>
SEPTEMBER 2, 1995 JUNE 3, 1995 MAY 28, 1994
------------------- ------------------- -------------------
% OF % OF % OF
BACKLOG TOTAL BACKLOG TOTAL BACKLOG TOTAL
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
(000'S OMITTED, EXCEPT PERCENTAGES)
Aerospace....................... $ 385,625 81 % $ 382,982 82 % $ 342,007 88 %
Power generation................ 59,234 13 57,248 12 33,700 9
Other........................... 28,549 6 28,531 6 13,700 3
--------- ----- --------- ----- --------- -----
Total......................... $ 476,950 100 % $ 468,761 100 % $ 389,407 100 %
========= ==== ========= ==== ========= ====
</TABLE>
At June 3, 1995 approximately $365.0 million of total firm backlog was
scheduled to be shipped within one year and the remainder in subsequent years.
(Sales during any period include sales which were not part of backlog at the end
of the prior period.) Customer orders in firm backlog are subject to
rescheduling or termination for customer convenience and due to market
fluctuations in the commercial aerospace industry. However, in certain cases the
Company is entitled to an adjustment in contract amounts.
MANUFACTURING PROCESSES
The Company employs three manufacturing processes: forging, investment
casting and composites production.
Forging
Forging is the process by which desired shapes, metallurgical
characteristics, and mechanical properties are imparted to metal by heating and
shaping it through pressing or extrusion. The Company forges alloys of titanium,
aluminum and steel as well as high temperature nickel-based superalloys.
The Company manufactures most of its forgings at its facilities in Grafton
and Worcester, Massachusetts; Houston, Texas and Livingston, Scotland. The
Company also operates a superalloy powder metal facility in Brighton, Michigan
and vacuum arc remelting facilities in Houston, Texas and Millbury,
Massachusetts which produce steel, nickel and titanium ingots, and a plasma arc
melting facility for the production of high quality titanium ingots and nickel
powder in Millbury, Massachusetts. The Company
25
<PAGE> 50
has six large closed die hydraulic forging presses rated as follows: 18,000
tons, 35,000 tons and 50,000 tons in Grafton Massachusetts; 29,000 tons and
35,000 tons in Houston, Texas and 30,000 tons in Livingston, Scotland. The
35,000 ton vertical extrusion press in Houston can be modified to a 55,000 ton
hydraulic forging press. The Company also operates an open die cogging press
rated at 2,000 tons at its Grafton, Massachusetts location and a hydraulic
isothermal forging press rated at 8,000 tons at its Worcester, Massachusetts
location.
The Company employs all major forging processes, including the following:
Open-Die Forging. In this process, the metal is forged between dies that
never completely surround the metal, thus allowing the metal to be observed
during the process. Typically, open-die forging is used to create relatively
simple, preliminary shapes to be further processed by closed-die forging.
Closed-Die Forging. Closed-die forging involves pressing heated metal into
the required shapes and size determined by machined impressions in specially
prepared dies which exert three dimensional control on the metal. In hot-die
forging, a type of closed-die process, the dies are heated to a temperature
approaching the transformation temperature of the materials being forged so as
to allow the metal to flow more easily within the die cavity which produces
forgings with superior surface conditions, metallurgical structures, tighter
tolerances, enhanced repeatability of the part shapes and greater metallurgical
control. Both titanium and nickel-based superalloys are forged using this
process, in which the dies are heated to a temperature of approximately 1,300
degrees Fahrenheit.
Conventional/Multi-Ram. The closed-die, multiple-ram process featured on
the Company's 30,000 ton press enables the Company to produce extremely complex
forgings with multiple cavities in a single heating and pressing cycle. Dies may
be split either on a vertical or a horizontal plane and shaped punches may be
operated by side rams, piercing rams, or both. Multi-ram forging enables the
Company to produce a wide variety of shapes, sizes, and configurations utilizing
less input weight. The process also optimizes grain flow and uniformity of
deformation, reduces machining requirements, and minimizes overall costs.
Isothermal Forging. Isothermal forging is a closed-die process in which
the dies are heated to the same temperature as the metal being forged, typically
in excess of 1,900 degrees Fahrenheit. The forged material typically consists of
nickel-based superalloy powders. Because of the extreme temperatures necessary
for forming these alloys, the dies must be made of refractory metal (such as
molybdenum) so that the die retains its strength and shape during the forging
process. Because the dies may oxidize at these elevated temperatures, the
forging process is carried on in a vacuum or inert gas atmosphere. The Company's
isothermal press also allows it to produce near-net shape components (requiring
less machining by the customer) made from titanium alloys, which can be an
important competitive advantage in times of high titanium prices. The Company
carries on this process in its 8,000-ton isothermal press.
Extrusion. The Company's 35,000 ton vertical extrusion press is one of the
largest and most advanced presses in the world. Extrusions are produced for
applications in the oil and gas industry, including tension leg platforms, riser
systems and production manifolds. The extrusion process is facilitated by
manipulators capable of handling work pieces weighing up to 20 tons, rotary
hearth furnaces and a 14,000 ton blocking press. It is capable of producing
heavy wall seamless pipe with outside diameters up to 48 inches and wall
thicknesses from 1/2 inch up to 7 inches or more. Solid extrusions can be
manufactured from 6 to 32 inches in diameter. Typical lengths vary from 10 to 45
feet. Powder materials can also be compacted and extruded into forging billets
utilizing this press. The 30,000 ton press has similar extrusion capabilities in
addition to its multi-ram forging capabilities.
Titanium and Superalloy Production. The Company utilizes vacuum arc
remelting technology to produce titanium alloy suitable for structural and
turbine aerospace applications. Titanium produced in this manner is utilized in
both the Company's forging and castings operations.
26
<PAGE> 51
The Company's Brighton, Michigan powder metal facility has the capability
to atomize, process, and consolidate (by hot isostatic pressing) superalloy
metal powders for use in aerospace, medical implant, petrochemical, hostile
environment oil and gas drilling and production, and other high technology
applications. This facility has an annual production capacity of up to 500,000
pounds of superalloy powder. In addition, the Company has the capacity to
consolidate powdered metals by extrusion using its 30,000 ton and 35,000 ton
presses. Extruded billets are further processed and either sold to other forge
shops or forged into critical jet engine components on the Company's 8,000 ton
isothermal press.
The Company's Plasma Arc Melting "PAM" facility in Millbury, Massachusetts
is capable of producing high quality titanium ingot and nickel-based superalloy
powder. The Company is currently pursuing certifications by certain customers
for use of this technology in high performance jet engines.
The Company's vacuum arc remelt ("VAR") shop in Houston, Texas has five
computer-controlled VAR furnaces which process electrodes up to 42 inches in
diameter that weigh up to 40,000 pounds. The Houston VAR furnaces are used to
remelt purchased electrodes into high purity alloys for internal use in severe
applications. In addition, the VAR furnaces are used for toll melting. These
vacuum metallurgy techniques provide consistently high levels of purity, low gas
content, and precise control over the solidification process. This minimizes
segregation in complex alloys and results in improved mechanical properties, as
well as hot and cold workability.
The Company has entered into the Australian Joint Venture with Pratt &
Whitney and certain Australian investors to produce nickel-based superalloy
ingots in Perth, Australia. These ingots will be utilized as raw materials for
the Company's forging and casting products.
Support Operations. The Company manufactures its own forging dies out of
high-strength steel and molybdenum. These dies can weigh in excess of 100 tons
and can be up to 25 feet in length. In manufacturing its dies, the Company
utilizes its customers' drawings and engineers the dies using CAD/CAM equipment
and sophisticated metal flow computer models that simulate metal flow during the
forging process. This activity improves die design and process control and
permits the Company to enhance the metallurgical characteristics of the forging.
The Company also has at its three major forging locations machine shops
with computer aided profiling equipment, vertical turret lathes and other
equipment that it employs to rough machine products to a shape allowing
inspection of the products. The Company also operates rotary and car-bottom heat
treating furnaces that enhance the performance characteristics of the forgings.
These furnaces have sufficient capacity to handle all the Company's forged
products. The Company subjects its products to extensive quality inspection and
contract qualification procedures involving zyglo, chemical etching, ultrasonic,
red dye, and electrical conductivity testing facilities.
Testing. Because the Company's products are for high performance end uses,
rigorous testing is necessary and is performed internally by Company engineers.
Throughout the manufacturing process, numerous tests and inspections are
performed to insure the final quality of each product; statistical process
control ("SPC") techniques are also applied throughout the entire manufacturing
process.
Investment Casting
The Company's investment castings operations use modern, automated, high
volume production equipment and both air-melt and vacuum-melt furnaces to
produce a wide variety of complex investment castings. Castings are made of a
range of metal alloys including aluminum, magnesium, steel, titanium and
nickel-based superalloys.
The Company's castings operations are conducted in facilities located in
Connecticut, New Hampshire, Nevada and California. These plants house air and
vacuum-melt furnaces, wax injection machines and investment dipping tanks.
Because of the growth in demand for the Company's high quality titanium
castings, the Company is in the process of restarting its Franklin, New
Hampshire facility which it closed in 1993. The Company has ordered a new
state-of-the-art titanium melting furnace for installation in the
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<PAGE> 52
Franklin plant. Additionally, the Company has expanded its Groton, Connecticut
facility for the production of high quality titanium castings.
Investment castings are produced in four major stages. First, molten wax is
injected into an aluminum mold, known as a "tool," in the shape of the ultimate
component to be produced. These tools are produced to the specifications of the
customer and are primarily purchased from outside die makers, although the
Company maintains internal tool-making capabilities. In the second stage, the
wax patterns are mechanically coated with a sand and silicate-bonded slurry in a
process known as investment. This forms a ceramic shell which is subsequently
air-dried under controlled environmental conditions. The wax inside this shell
is then melted and removed in a high temperature steam autoclave and the molten
wax is recycled. In the third, or foundry stage, metal is melted in an electric
furnace in either an air or vacuum environment and poured into the ceramic
shell. After cooling, the ceramic shells are removed by vibration. The metal
parts are then cleaned in a high temperature caustic bath, followed by water
rinsing. In the fourth, or finishing stage, the castings are finished to remove
excess metal. The final product then undergoes a lengthy series of testing
(radiography, fluorescent penetrant, magnetic particle and dimensional) to
ensure quality and consistency.
Composites
The Company's composites operation, Scaled Composites, Inc., plans,
designs, fabricates and tests composite airframe structures for the aerospace
market. Customers include Lawrence Livermore Laboratories and Orbital Sciences
Corp.
FACILITIES
The following table sets forth certain information with respect to the
Company's major facilities at June 3, 1995, all of which are owned. The Company
believes that its facilities are well-maintained, are suitable to support the
Company's business and are adequate for the Company's present and anticipated
needs. On average during the Company's fiscal year 1995, the Company's forging,
investment castings and composites facilities were operating at approximately
60%, 70% and 90% of their total productive capacity, respectively.
<TABLE>
<CAPTION>
APPROX.
SQUARE
LOCATION FOOTAGE PRIMARY FUNCTION
- --------------------------------------------------- --------- ----------------------------
<S> <C> <C>
FORGINGS:
Brighton, Michigan................................. 34,500 Superalloy Powder Production
Grafton, Massachusetts............................. 85,420 Administrative Offices
Grafton, Massachusetts............................. 843,200 Forging
Houston, Texas..................................... 1,283,800 Forging
Livingston, Scotland............................... 405,200 Forging
Livingston, Scotland............................... 112,000 Currently idle
Millbury, Massachusetts............................ 104,125 Research and Development,
Metals Production
Worcester, Massachusetts........................... 43,200 Currently idle
Worcester, Massachusetts........................... 22,300 Forging
Worcester, Massachusetts........................... 301,400 Closing 1995
</TABLE>
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<PAGE> 53
<TABLE>
<CAPTION>
APPROX.
SQUARE
LOCATION FOOTAGE PRIMARY FUNCTION
- ---------------------------------------------------------------- --------- ----------------
<S> <C> <C>
CASTINGS:
Carson City, Nevada............................................. 46,000 Casting
Franklin, New Hampshire......................................... 43,200 Casting
Groton, Connecticut (2 plants).................................. 162,550 Casting
San Leandro, California......................................... 45,000 Casting
Tilton, New Hampshire........................................... 94,000 Casting
COMPOSITES:
Mojave, California.............................................. 67,000 Composites
</TABLE>
RAW MATERIALS
Raw materials used by the Company in its forgings and castings include
alloys of titanium, nickel, steel, aluminum, magnesium and other
high-temperature alloys. The composites operation uses high strength fibers such
as fiberglass or graphite, as well as materials such as foam and epoxy, to
fabricate composite structures. The major portion of metal requirements for
forged and cast products are purchased from major metal suppliers producing
forging and casting quality material as needed to fill customer orders. The
Company has two or more sources of supply for all significant raw materials. The
Company satisfies some of its nickel and titanium requirements internally by
producing titanium alloy from titanium scrap and "sponge." The Company's powder
metal facility and PAM units produce nickel-based superalloy powder and high
quality titanium ingot. The Company has experienced delays in the delivery of
its raw materials.
The titanium and nickel-based superalloys utilized by the Company have a
relatively high dollar value. Accordingly, the Company attempts to recover and
recycle scrap materials such as machine turnings, forging flash, scrapped
forgings, test pieces and casting sprues, risers and gates.
In the event of customer cancellation, the Company may, under certain
circumstances, obtain reimbursement from the customer if the material cannot be
diverted to other uses. Costs of material already on hand, along with any
conversion costs incurred, are generally billed to the customer unless
transferable to another order. As demand for the Company's products grew during
fiscal year 1995, and prices of raw materials rose, the Company experienced
certain raw material shortages and production delays. Although this situation
improved during the second half of fiscal year 1995, it had a negative impact on
overall revenues.
ENERGY USAGE
The Company is a large consumer of energy. Energy is required primarily for
heating metals to be forged and melting metals to be cast, melting of ingots,
heat-treating materials after forging and casting, operating forging presses,
melting furnaces, die-sinking, mechanical manipulation and pollution control
equipment and space heating. The Company uses natural gas, oil and electricity
in varying amounts at its manufacturing facilities. Supplies of natural gas, oil
and electricity have been sufficient and there is no anticipated shortage for
the future.
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<PAGE> 54
EMPLOYEES
As of June 3, 1995, the Company had approximately 3,100 employees of whom
850 were executive, administrative, engineering, research, sales and clerical
and 2,250 were production and craft. Approximately 61% of the production and
craft employees, consisting of employees in the forging business, are
represented by unions. The Company has entered into collective bargaining
agreements with these union employees as follows:
<TABLE>
<CAPTION>
NUMBER OF
EMPLOYEES
COVERED BY
BARGAINING INITIATION EXPIRATION
LOCATION AGREEMENTS DATE DATE
- --------------------------------------- ---------- ---------------- -----------------
<S> <C> <C> <C>
Grafton and Worcester, Massachusetts... 562 March 27, 1995 March 30, 1997
Houston, Texas......................... 505 August 7, 1995 August 9, 1998
32 August 7, 1995 Sept. 27, 1998
Livingston, Scotland................... 200 December 1, 1993 November 30, 1995
55 February 1, 1994 January 31, 1996
----------
Total.................................. 1,354
==========
</TABLE>
The Company believes it has good relations with its employees although it
experienced a one week strike in August 1995 in connection with the negotiation
of its current collective bargaining agreement with the union representing most
of its factory workforce in Houston, Texas.
RESEARCH AND PATENTS
The Company maintains research and development departments at both
Millbury, Massachusetts and Houston, Texas which are engaged in applied research
and development work primarily relating to the Company's forging operations. The
Company works closely with customers, universities and government technical
agencies in developing advanced forging and casting materials and processes. The
Company's composites operation conducts research and development related to
aerospace composite structures at the Mojave, California facility. The Company
spent approximately $2.2 million, $0.7 million, $2.8 million, and $3.0 million
on applied research and development work during fiscal year 1995, the five
months ended May 28, 1994, and fiscal years 1993 and 1992, respectively.
Although the Company owns patents covering certain of its processes, the Company
does not consider that these patents are of material importance to the Company's
business as a whole. Most of the Company's products are manufactured to customer
specifications and, consequently, the Company has few proprietary products.
COMPETITION
Most of the Company's production capabilities are possessed in varying
degrees by other companies in the industry, including both domestic and foreign
manufacturers. Competition is intense among the companies currently involved in
the industry. Competitive advantages are afforded to those with high quality
products, low cost manufacturing, excellent customer service and delivery and
engineering and production expertise. The Company considers that it is in a
leading position in these areas.
ENVIRONMENTAL REGULATIONS
The Company is subject to extensive, stringent and changing federal, state
and local environmental laws and regulations, including those regulating the
use, handling, storage, discharge and disposal of hazardous substances and the
remediation of alleged environmental contamination. Accordingly, the
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<PAGE> 55
Company is involved from time to time in administrative and judicial inquiries
and proceedings regarding environmental matters. Nevertheless, the Company
believes that compliance with these laws and regulations will not have a
material adverse effect on the Company's operations as a whole. The Company
continues to design and implement a system of programs and facilities for the
management of its raw materials, production processes and industrial waste to
promote compliance with environmental requirements. In the fourth quarter of
1991, the Company recorded a pre-tax charge of $7.0 million with respect to
environmental investigation and remediation costs at the Grafton facility and a
pre-tax charge of $5.0 million against potential environmental remediation costs
upon the eventual sale of the Worcester facility. During the five-month fiscal
period ended May 28, 1994 the Company provided an additional $2.0 million for
potential environmental investigation and remediation costs and established a
$3.5 million purchase accounting reserve related to environmental issues at
Cameron.
Pursuant to an agreement entered into with the U.S. Air Force upon the
acquisition of the Grafton facility from the federal government in 1982, the
Company agreed to make expenditures totaling $20.8 million for environmental
management and remediation at the site during the period 1982 through 1999, of
which $6.1 million remained as of June 3, 1995. These expenditures will not
resolve the Company's obligations to federal and state regulatory authorities,
who are not parties to the agreement, however, and the Company expects to incur
an additional amount, currently estimated at $3.5 million, to comply with
current federal and state environmental requirements governing the investigation
and remediation of contamination at the site. In connection with these
requirements, the Company is evaluating and planning for closure of 46 solid
waste management units on the site. In addition, the Company is subject to an
administrative consent order issued by the Environmental Protection Agency in
1991 that requires the Company to close several wastewater and water treatment
facilities and construct a Runoff Management Facility to treat process water and
stormwater, which was completed in January 1995 at a cost of $5.5 million.
The Company's Grafton facility is included in the U.S. Nuclear Regulatory
Commission's ("NRC") May 1992 Site Decommissioning Management Plan for low-level
radioactive waste. In a draft 1992 long-range dose assessment the NRC determined
that the site should be remediated, but the Company has challenged the draft
assessment, believing it to be flawed. The Company has provided $1.5 million for
the estimated cost of remediation and disposal. The Company may be required to
dispose of the wastes at a more expensive disposal facility, which could
increase the remediation and disposal costs beyond the provision that the
Company has established. The Company believes that it may have meritorious
claims for contribution from the U.S. Air Force in respect of any liabilities it
may have for such remediation.
The Company, together with numerous other parties, has been named a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") for the cleanup of the
following four Superfund sites: Operating Industries, Monterey Park, California;
Cedartown Municipal Landfill, Cedartown, Georgia; PSC Resources, Palmer,
Massachusetts; and the Gemme site, Leicester, Massachusetts. The Company
believes that any liability it may incur with respect to these sites will not be
material.
At the Gemme site, a proposed agreement would allocate 33% of the cleanup
costs to the Company. In September 1995, a consulting firm retained by the PRP
group made a preliminary remediation cost estimate of $1.4 million to $2.8
million. The Company's insurance company is defending the Company's interests,
and the Company believes that any recovery against the Company would be offset
by recovery of insurance proceeds.
The Company expects to incur between $6 and $7 million in cleanup expenses
upon the planned sale of its Worcester, Massachusetts facility to remedy certain
contamination discovered on-site.
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<PAGE> 56
PRODUCT LIABILITY EXPOSURE
The Company produces many critical engine and structural parts for
commercial and military aircraft. As a result, the Company faces an inherent
business risk of exposure to product liability claims. The Company maintains
insurance against product liability claims, but there can be no assurance that
such coverage will continue to be available on terms acceptable to the Company
or that such coverage will be adequate for liabilities actually incurred. The
Company has not experienced any material loss from product liability claims and
believes that its insurance coverage is adequate to protect it against any
claims to which it may be subject.
LEGAL PROCEEDINGS
At June 3, 1995, the Company was involved in certain legal proceedings
arising in the normal course of its business. The Company believes the outcome
of these matters will not have a material adverse effect on the Company.
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<PAGE> 57
MANAGEMENT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- ---- -----------------------------------------------
<S> <C> <C>
John M. Nelson....................... 64 Chairman of the Board
David P. Gruber...................... 53 President, Chief Executive Officer and Director
Andrew C. Genor...................... 53 Vice President, Chief Financial Officer and
Treasurer
Sanjay N. Shah....................... 44 Vice President, Corporate Strategy Planning and
Business Development
J. Douglas Whelan.................... 56 President, Forging Division
Wallace F. Whitney, Jr. ............. 52 Vice President, General Counsel and Clerk
Frank J. Zugel....................... 50 President, Investment Castings Division
E. Paul Casey........................ 65 Director
Dewain K. Cross...................... 57 Director
Warner S. Fletcher................... 50 Director
Robert G. Foster..................... 57 Director
Russell E. Fuller.................... 69 Director
M Howard Jacobson.................... 62 Director
Judith S. King....................... 60 Director
George S. Mumford, Jr. .............. 66 Director
H. John Riley, Jr. .................. 54 Director
Jon C. Strauss....................... 55 Director
Charles A. Zraket.................... 71 Director
</TABLE>
JOHN M. NELSON was elected Chairman of the Company in May 1994 having
previously served as the Company's Chairman of the Board and Chief Executive
Officer since May 1991. Prior to that time he served for many years in a series
of executive positions with Norton Company, a manufacturer of abrasives and
ceramics based in Worcester, Massachusetts, and was Norton's Chairman and Chief
Executive Officer from 1988 to 1990 and its President and Chief Operating
Officer from 1986 to 1988. Mr. Nelson is also Chairman of the Board of Directors
of the TJX Companies, Inc., a Director of Brown & Sharpe Manufacturing Company,
Cambridge Biotechnology, Inc., Commerce Holdings, Inc. and Stocker & Yale, Inc.
He is also Chairman of the Board of Trustees of Worcester Polytechnic Institute
and Vice President of the Worcester Art Museum.
DAVID P. GRUBER was elected President and Chief Executive Officer of the
Company in May 1994 having previously served as President and Chief Operating
Officer since he joined the Company in October 1991. Prior to joining the
Company, Mr. Gruber served as Vice President, Advanced Ceramics, of Compagnie de
Saint Gobain (which acquired Norton Company in 1990), a position he held with
Norton Company since 1987. Mr. Gruber previously held various executive and
technical positions with Norton Company since 1978. He is a Trustee of the
Manufacturers' Alliance for Productivity and Innovation, and is a member of the
Mechanical Engineering Advisory Committee of Worcester Polytechnic Institute.
ANDREW C. GENOR joined the Company as Vice President, Chief Financial
Officer and Treasurer in January 1995. Prior to joining the Company, Mr. Genor
was Chief Financial and Operating Officer of HNSX Supercomputers, Inc., a
company he co-founded in 1987 to provide support to supercomputer users and
vendors. Prior to that time, he spent 20 years at Honeywell, Inc., including
service as Vice President and Corporate Treasurer and Vice President, Finance,
Administration and Business Development for Honeywell Europe.
SANJAY N. SHAH was elected Vice President, Corporate Strategy Planning and
Business Development in May 1994 having previously served as Vice President and
Assistant General Manager of the Company's Aerospace Forgings Division. He has
held a number of executive, research, engineering and manufacturing positions at
the Company since joining the Company in 1975.
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<PAGE> 58
J. DOUGLAS WHELAN joined the Company in March 1994 and was elected
President, Forgings in May 1994. Prior to joining the Company he had served for
a short time as the President of Ladish Co., Inc., a forging company in Cudahy,
Wisconsin, and prior thereto had been Vice President, Operations of Cameron with
which company and its predecessors he had been employed since 1965 in various
executive capacities.
WALLACE F. WHITNEY, JR. joined the Company in 1991. Prior to that time, he
had been Vice President, General Counsel and Secretary of Norton Company since
1988, where he had been employed in various legal capacities since 1973.
FRANK J. ZUGEL joined the Company in June 1993 when he was elected Vice
President -- General Manager, Investment Castings. Prior to that time he had
served as President of Stainless Steel Products, Inc., a metal fabricator for
aerospace applications, since 1992 and before then as Vice President of Pacific
Scientific Company, a supplier of components to the aerospace industry, since
1988.
E. PAUL CASEY, Chairman and General Partner, Metapoint Partners, Peabody,
Massachusetts (an investment partnership which he established in 1988) has been
a Director of the Company since 1993. He served as Vice Chairman of Textron,
Inc. from 1986 to 1987 and as Chief Executive Officer and President of Ex-Cell-O
Corporation during 1978 to 1986. Mr. Casey is a Director of Comerica, Inc. and
Hood Enterprises, Inc., a Trustee of Henry Ford Health Care System, and
President of the Hobe Sound, Florida Community Chest.
DEWAIN K. CROSS, Retired Senior Vice President, Finance of Cooper, has been
a Director of the Company since 1994. He is a former member of the Financial
Council II of the Manufacturers' Alliance for Productivity and Innovation and is
a member of the American Institute of Certified Public Accountants.
WARNER S. FLETCHER, Attorney and Director of the law firm of Fletcher,
Tilton & Whipple, P.C., Worcester, Massachusetts has been a Director of the
Company since 1987. Mr. Fletcher is an Advisory Director of Bank of Boston,
Worcester. He is also Chairman of The Stoddard Charitable Trust, a Trustee of
The Fletcher Foundation, the George I. Alden Trust, Worcester Polytechnic
Institute, Worcester Foundation for Experimental Biology, Bancroft School and
the Worcester Art Museum.
ROBERT G. FOSTER, President, Chief Executive Officer and Chairman of the
Board of Commonwealth BioVentures, Inc., (a venture capital company engaged in
biotechnology) has been a Director of the Company since 1989. Mr. Foster was
President and Chairman of Ventrex Laboratories, Inc. from 1976 to 1987 when he
assumed his present position. He is also a Director of United Timber Corp., Carr
Separations, Phytera, Neptune Pharmeuticals, ActiMed Laboratories, Inc.,
Brunswick Biomedical Corp. and Watson Technologies. He is also a member of the
Science & Technology Board for the State of Maine.
RUSSELL E. FULLER, Chairman of REFCO, Inc., (a supplier of specialty
industrial products), has been a Director of the Company since 1988. Mr. Fuller
is Chairman and Treasurer of The George F. and Sybil H. Fuller Foundation and a
Trustee of The Medical Center of Central Massachusetts. He is also Trustee of
the Massachusetts Biotechnology Research Institute and the Worcester County
Horticultural Society.
M HOWARD JACOBSON, Senior Advisor, Bankers Trust, New York, has been a
Director of the Company since 1993. Mr. Jacobson was for many years Chief
Executive Officer, President and Treasurer and a Director of Idle Wild Foods,
Inc. until that company was sold in 1986. From 1989 to 1991 he was a Senior
Advisor to Prudential Bache Capital Funding. Mr. Jacobson is a Director of
Allmerica Property & Casualty Cos., Inc., ImmuLogic Pharmaceutical Corporation,
Stoneyfield Farm, Inc. and Boston Chicken, Inc. He is Vice Chairman of the Board
of Trustees of the Medical Center of Central Massachusetts, Chairman of the
Overseers of WGBH/National Public Broadcasting, a Trustee of the Worcester
Foundation for Experimental Biology, a Trustee of the Worcester Polytechnic
Institute, and a member of the Harvard University Overseers' Committee on
University Resources.
JUDITH S. KING, Trustee and Treasurer of The Stoddard Charitable Trust, has
been a Director of the Company since 1990.
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<PAGE> 59
GEORGE S. MUMFORD, JR., Professor, Department of Physics and Astronomy,
Tufts University, has been a Director of the Company since 1968. Mr. Mumford
formerly served as Dean of the Graduate School of Arts and Sciences at Tufts
University. He is a former member of the Board of Directors of the Council of
Graduate Schools in the United States and Past President of the Northeast
Association of Graduate Schools. He is a Director of the Charles River Watershed
Association.
H. JOHN RILEY, JR., President and Chief Executive Officer of Cooper, has
been a Director of the Company since 1994. Mr. Riley was elected Chief Executive
Officer of Cooper effective September 1, 1995, having previously served as
President and Chief Operating Officer since 1992 and as Executive Vice
President, Operations of Cooper since 1982. Prior to that time he held various
executive positions at Crouse-Hinds Company, which was acquired by Cooper in
1982. He is also Director and Chairman of Junior Achievement of Southeast Texas,
a Director of Central Houston, Inc., a Director of Houston Symphony, a member of
the Corporate Advisory Council of Syracuse University School of Management, and
a Trustee of the Manufacturers' Alliance for Productivity and Innovation.
JON C. STRAUSS, Vice President and Chief Financial Officer of Howard Hughes
Medical Institute, Chevy Chase, Maryland (a medical research institute and the
largest private philanthropic organization in the United States) has been a
Director of the Company since 1989. Prior to assuming his current position in
1994, Dr. Strauss served as President of Worcester Polytechnic Institute,
Worcester, Massachusetts since 1985 and, before then, as Chief Administrative
Officer at the University of Southern California. He is a Director of
Computervision Corporation.
CHARLES A. ZRAKET, Trustee and Former President and Chief Executive Officer
of MITRE Corporation, (a not-for-profit corporation engaged in systems
engineering and research primarily for the United States government), has been a
Director of the Company since 1990. Mr. Zraket is a Director of Aspect Medical
Systems, and a Trustee of Northeastern University, Beth Israel Hospital and the
Hudson Institute.
RELATIONSHIP BETWEEN THE COMPANY AND COOPER
STOCK PURCHASE AGREEMENT
Pursuant to a Stock Purchase Agreement dated as of January 10, 1994 (the
"Stock Purchase Agreement"), between the Company and Cooper, the Company
acquired from Cooper on May 26, 1994 (the "Closing Date"), all of the
outstanding shares of common stock of Cameron Forged Products Company
("Cameron") in consideration for 16.5 million shares of the Company's Common
Stock and $5.0 million (the "Cash Purchase Price").
The Cash Purchase Price consisted of (1) $400,000 in cash paid by the
Company to Cooper on the Closing Date and (2) a promissory note in the principal
amount of $4.6 million (the "Note") executed and delivered to Cooper by the
Company on the Closing Date. The principal amount of the Note is payable in
annual installments, beginning on June 30, 1997 and on each June 30 thereafter
until paid in full, in an amount equal to the lesser of (a) $2.3 million, (b) 25
percent of the Company's Free Cash Flow (as defined in the Note) for the
12-month period ending on the April 30 immediately preceding such June 30 and
(c) the unpaid principal balance of the Note. The Note will not bear interest
until May 1, 1998, from which date it will bear interest at a floating rate
equal to the 90-day commercial paper rate for high grade unsecured notes sold
through dealers by major corporations, as published by The Wall Street Journal
on that portion of the principal amount of the Note equal to the sum of all
amounts of unpaid principal that would have been payable but for mandatory debt
payments by the Company. The Company may from time to time prepay all or any
portion of the outstanding balance of the Note without penalty or premium.
Cooper may declare the Note to be immediately due and payable in the event that
(i) the Company does not pay any portion of the principal or interest on the
Note within 10 days after such payment becomes due or (ii) a Trigger Event (as
defined below in the discussion of the Investment Agreement) occurs.
In the Stock Purchase Agreement the parties agreed to a cash adjustment in
the Cash Purchase Price based on certain changes in the balance sheet of Cameron
between September 26, 1993, and the
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<PAGE> 60
Closing Date. Since there was an increase in the Net Asset Value of Cameron (as
defined in the Stock Purchase Agreement) during that period, the Company paid
Cooper $3.6 million in full satisfaction of this adjustment on September 19,
1994.
Pursuant to the Stock Purchase Agreement, (i) Cooper agreed to indemnify
the Company and its subsidiaries against all taxes of Cameron and its
subsidiaries for any taxable year or taxable period ending on or before the
Closing Date. The Stock Purchase Agreement further provides that any taxes for a
taxable period beginning before the Closing Date and ending after the Closing
Date with respect to Cameron or any of its subsidiaries will be apportioned
between the Company and Cooper based on the actual operations of Cameron or the
subsidiary, as the case may be, during the portion of such period ending on the
Closing Date and the portion of such period following the Closing Date.
Pursuant to the Stock Purchase Agreement, Cooper agreed to retain and
indemnify the Company and its affiliates against (i) certain liabilities under
ERISA with respect to employee benefit plans or arrangements, other than
employee benefit plans or arrangements maintained for the benefit of employees
and former employees of the Business (as defined below), and (ii) pension
benefits under designated plans for periods prior to the Closing Date.
Pursuant to the Stock Purchase Agreement, Cameron assumed Cooper's Cameron
Obligations (as defined below), effective on the Closing Date. For purposes of
the Stock Purchase Agreement, "Cooper's Cameron Obligations" means any
obligation, commitment, liability or responsibility of Cooper, its affiliates or
their predecessors (whether or not also an obligation, commitment, liability, or
responsibility of or claim against, in whole or in part, Cameron or its
subsidiaries C.F.P., Ltd. (the "U.K. Sub") or Cameron Pipeline Inc. (the
"Pipeline Sub")), arising, undertaken or created before the Closing Date in
connection with, on behalf of or for the benefit of any of certain entities, to
the extent that such entities conducted all or part of the Business (as defined
below) (the "Cameron Entities"), or arising from the conduct of the Business,
including without limitation (i) any consulting, employment or severance
agreements, guarantees, letters of credit, performance bonds, or indemnities, or
obligations or indemnities to officers or directors of any Cameron Entity, (ii)
any agreements with any transferors to Cooper, its affiliates, or their
predecessors, of any assets of any Cameron Entity or of the Business, (iii) any
labor or collective bargaining agreements relating to any Cameron Entity, (iv)
any governmental contracts relating to any Cameron Entity, (v) any sales or
purchase agreements relating to any Cameron Entity, (vi) any leases of real or
personal property relating to any Cameron Entity, and (vii) any other agreements
or commitments relating to any Cameron Entity under which Cooper, its affiliates
or predecessors will have any liability after the Closing Date, except that
Cooper's Cameron Obligations exclude the matters that Cooper is required to
indemnify as described herein. "Business" means research, development,
engineering, melting, refining, remelting, forging, extrusion, machining,
manufacturing, distribution, sales, marketing, service or repair operations
associated with the Products. "Products" means closed die forgings (including
rotating parts for aircraft engines or industrial turbines, aircraft landing
gear, structural airframe parts, ordnance and related parts, military and power
plant nuclear forgings, valves, heavy wall pipe and fittings, power generation
forgings and oil field equipment forgings), extrusions (including for aircraft
engines, pipe, oil field equipment, bar stock and ordnance), super alloy powder
products, thermal rail products for steel support member in push slab furnaces
and custom-shaped insulators, other forged products, skid rail reheat systems,
and high velocity burners.
In the Stock Purchase Agreement, the Company and Cooper made customary
representations and warranties to each other. Each of the Company and Cooper
represented to the other that to its knowledge, its representations and
warranties were, subject in certain cases to materiality and supplemental
disclosure schedules, true and correct as of the Closing Date (except for those
representations and warranties that expressly relate only to some other time)
(the "Accuracy Representations"). The parties' representations and warranties
expired at the Closing except that the Accuracy Representations remain in full
force and effect until November 28, 1995. Any claim for indemnification with
respect to the Accuracy Representations not asserted by notice by that date may
not be pursued and will be irrevocably waived and released.
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Subject to certain terms and conditions set forth in the Stock Purchase
Agreement, (i) Cooper agreed to indemnify the Company, its affiliates, and their
directors, officers or employees (collectively, the "Company's Group") against
all Losses (as defined in the Stock Purchase Agreement) resulting from (a) any
inaccuracy in the Accuracy Representations given by Cooper or (b) any breach of
Cooper's covenants in the Stock Purchase Agreement and (ii) the Company agreed
to indemnify Cooper, its affiliates, and their directors, officers or employees
(collectively, the "Cooper Group") against all Losses resulting from (a) any
inaccuracy in the Accuracy Representations given by the Company, (b) any breach
of the Company's covenants in the Stock Purchase Agreement and (c) Cooper's
Cameron Obligations.
In addition, the Company agreed in the Stock Purchase Agreement to
indemnify the Cooper Group against all Losses resulting from any liabilities or
obligations of or relating to, or claims against, any Cameron Entity or the
Business (other than the Losses that Cooper is required to indemnify) on, before
or after the Closing Date, including without limitation (i) all Losses resulting
from any Product Liability Claims (as defined in the Stock Purchase Agreement)
arising out of or resulting from Products sold or furnished by Cooper, any of
its affiliates or any Cameron Entity (including without limitation any product
liability assumed in connection with the acquisition of any business or product
line) on, before or after the Closing Date; (ii) all Losses resulting from (A)
any noncompliance of the operations, properties or business activities of any
Cameron Entity or the Business with any environmental law on, before or after
the Closing Date or (B) any liabilities or obligations of or relating to, or
claims against, any Cameron Entity or the Business based upon any environmental
law, or arising from the disposal of any regulated materials, on, before, or
after the Closing Date; and (iii) all Losses resulting from (A)any workers'
compensation claim filed against any Cameron Entity on, before or after the
Closing Date, and (B) any employment or severance agreements entered into by
Cooper or Cameron relating to employees of Cameron on, before or after the
Closing Date, other than severance payments under a specified employment
agreement.
Cooper agreed in the Stock Purchase Agreement, other than losses that the
Company is required to indemnify, (i) to indemnify the Company's Group against
all Losses resulting from any liabilities or obligations of or relating to, or
claims against, Cooper or Cooper's subsidiaries to the extent that such
liabilities, obligations or claims (x) do not relate to the Business and (y)
arise from the activity of (a) any Cameron Entity (other than the Company or the
Pipeline Sub) before the Closing Date, or (b) Cooper or any of Cooper's
subsidiaries other than the Cameron Entities, (ii) except to the extent the
actions of the Company, Cameron or their affiliates may cause or increase any
such Losses after the Closing Date, to indemnify the Company's Group against all
Losses resulting from any regulated materials disposed of on, or discharged into
the environment at, a specified manufacturing facility of Cooper or at a
specified Superfund location on or before the Closing Date; and (iii) to
indemnify the Company's Group against all Losses resulting from severance
payments under a specified employment agreement.
Notwithstanding any contrary provision of the Stock Purchase Agreement, no
claim by either party against the other for indemnification will be valid unless
the aggregate amount of Losses associated with such claim exceeds $100,000.
Further, any claims by the indemnified party will be determined net of any tax
benefit actually recognized and utilized to offset or reduce the tax liability
of the indemnified party or the other members of its group.
Cooper agreed in the Stock Purchase Agreement that, until the later to
occur of (i) Cooper's ceasing to own at least 10 percent of the outstanding
shares of the Company's Common Stock and (ii) May 26, 1997, Cooper will not, and
Cooper will not permit any of its subsidiaries (regardless of whether such
person is a subsidiary of Cooper on the date hereof) to, engage in the
manufacturing or marketing of the Products currently manufactured or marketed by
Cameron or the U.K. Sub in competition with the Company or any subsidiary of the
Company (a "Competing Business"), except that (i) Cooper or any affiliate of
Cooper (other than Cameron and the Cameron Subsidiaries) may continue any
existing nonaerospace forging operations and may make any reasonable
maintenance, improvements and refinements thereto and (ii) Cooper or any
affiliate of Cooper may acquire any business that includes ancillary forging
operations in support of its main business. In addition, this
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noncompetition provision will not prevent Cooper or its affiliates from
acquiring shares in or the business or assets of any company, business or entity
(the "Target") having a Competing Business (i) if no more than $10.0 million of
the Target's sales revenue (as recorded in the then-latest available audited
accounts) arises from the Competing Business or (ii) if the sales revenue of the
Competing Business is greater than $10.0 million of the Target's sales revenue,
if Cooper uses its reasonable commercial efforts to dispose of the Competing
Business within a two-year period from the date of acquisition of the Target. If
Cooper cannot dispose of the Competing Business on terms reasonably acceptable
to it during such two-year period, Cooper will be free to retain and operate the
Competing Business without any restriction of the Stock Purchase Agreement.
INVESTMENT AGREEMENT
In connection with the Stock Purchase Agreement the Company and Cooper
entered into an Investment Agreement dated as of January 10, 1994, which governs
Cooper's ownership of the 16.5 million shares of the Company Common Stock that
were issued to Cooper under the Stock Purchase Agreement. The Investment
Agreement is unaffected by the DECS offering.
In the Investment Agreement, Cooper agreed that, so long as the Investment
Agreement remains in effect, Cooper will not sell or otherwise dispose of or
encumber any Company Voting Securities (as hereinafter defined), except: (a) to
any wholly-owned subsidiary of Cooper which agrees to be bound by the Investment
Agreement; (b) pursuant to a bona fide underwritten offering or other
distribution of such Company Voting Securities registered under the Securities
Act; (c) pursuant to a bona fide underwritten offering or other distribution of
securities of Cooper convertible into or exercisable or exchangeable for Company
Voting Securities registered under the Securities Act; (d) pursuant to Rule 144
of the General Rules and Regulations under the Securities Act, or any successor
rule of similar effect ("Rule 144"); or (e) pursuant to a tender offer or
exchange offer if the board of directors of the Company has (i) recommended that
the shareholders of the Company accept such offer and such recommendation has
not been withdrawn or (ii) expressed no opinion and remains neutral toward such
offer; (f) pursuant to a merger or consolidation in which the Company is
acquired, or a sale of all or substantially all of the Company's assets to
another corporation or any other transaction approved by the board of directors
of the Company. For purposes of the Investment Agreement "Company Voting
Securities" means (i) shares of Common Stock, (ii) any other Company securities
entitled to vote generally for the election of directors of the Company, or
(iii) any securities of the Company convertible into or exchangeable for or
exercisable for the Company Common Stock or any Company securities entitled to
vote generally for the election of directors of the Company.
In any registered offering or Rule 144 transaction, the seller of Company
Voting Securities or securities of Cooper convertible into or exercisable or
exchangeable for Company Voting Securities will be required under the Investment
Agreement to use its reasonable best efforts to effect the sale or transfer of
such securities in a manner which will effect the broadest possible
distribution. Such seller of Company Voting Securities will also be required to
use its reasonable best efforts to avoid making any sales or transfers of such
Company Voting Securities to any one person or group within the meaning of the
Exchange Act who or which after such transfer will own Company Voting Securities
representing more than 4 percent of the voting power for the election of
directors represented by all of the then-outstanding Company Voting Securities
(whether directly or indirectly).
In the Investment Agreement, Cooper agreed to cause all Company Voting
Securities beneficially owned by it or any wholly-owned subsidiary to which it
has transferred any Company Voting Securities, and agrees to use reasonable
efforts to cause all Company Voting Securities known by the Cooper to be
beneficially owned by "affiliates" (as defined in Rule 12b-2 promulgated under
the Exchange Act) of Cooper over which Cooper has control, to be present at all
shareholder meetings of the Company at which the vote of common shareholders is
sought so that they may be counted for the purpose of determining the presence
of a quorum at such meetings.
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Cooper also agreed in the Investment Agreement to vote or cause to be voted
all Company Voting Securities beneficially owned by it or any wholly-owned
subsidiary to which it has transferred any Company Voting Securities, and agrees
to use reasonable efforts to cause to be voted all Company Voting Securities
known by Cooper to be beneficially owned by its affiliates over which it has
control, on all matters (including the election of directors) either in the
manner recommended to shareholders by the board of directors of the Company, or,
at Cooper's election, in the same proportion as the vote of the other
shareholders of the Company. Notwithstanding the foregoing, Cooper, such
wholly-owned subsidiaries of Cooper and such affiliates of Cooper over which it
has control will not be obligated so to vote if the matter being voted on by the
shareholders of the Company would, if approved, result in a breach of the
Investment Agreement.
Pursuant to the Investment Agreement, so long as the Investment Agreement
remains in effect, Cooper and its controlled affiliates will not, directly or
indirectly, acting alone or in concert with others, unless specifically
requested or approved in advance by the board of directors of the Company:
(1) in any manner acquire or agree, attempt, seek or propose to acquire (or
make any request for permission with respect thereto), by purchase, merger,
through the acquisition of control of another person, by joining a partnership,
limited partnership, syndicate or other "group" (within the meaning of Section
13(d)(3) of the Exchange Act), or otherwise, ownership (including, but not
limited to, beneficial ownership as defined in Rule 13d-3 under the Exchange
Act) of any of the assets or businesses of the Company or any securities issued
by the Company (the "Company Securities"), or any rights or options to acquire
such ownership (including from a third party), except (i) as expressly permitted
by the Investment Agreement or the Stock Purchase Agreement, or (ii) pursuant to
customary business transactions in the ordinary course of the Company's and
Cooper's business or (iii) in the case of Company Securities, in connection with
(A) a stock split or reverse stock split or other reclassification affecting
outstanding Company Securities, or (B) a stock dividend or other pro rata
distribution by the Company to holders of outstanding Company Securities;
(2) make, or cause to be made any proposal for the acquisition of the
Company or any assets or business of the Company or Company Securities or for
any other extraordinary transaction involving the Company, including, without
limitation, any merger, or other business combination, restructuring,
recapitalization, liquidation or similar transaction, except (i) as expressly
permitted by the Investment Agreement or the Stock Purchase Agreement or (ii)
proposals pursuant to customary business transactions in the ordinary course of
the Company's and Cooper's business;
(3) form, join or in any way participate in a "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) with respect to any Company Securities;
(4) make, or in any way cause or participate in, any "solicitation" of
"proxies" to vote (as such terms are defined in Regulation 14A under the
Exchange Act) with respect to the Company, or communicate with, seek to advise,
encourage or influence any person or entity, in any manner, with respect to the
voting of, any Company Securities, or become a "participant" in any "election
contest" (as such terms are defined or used in Rule 14a-11 under the Exchange
Act) with respect to the Company, or execute any written consent with respect to
the Company;
(5) initiate, propose or otherwise solicit shareholders for the approval of
one or more shareholder proposals with respect to the Company or induce or
attempt to induce any other person to initiate any shareholder proposal, or
(except as expressly permitted by the Investment Agreement) seek election to or
seek to place a representative on the board of directors of the Company or seek
the removal of any member of the board of directors of the Company;
(6) in any manner, agree, attempt, seek or propose (or make any request for
permission with respect thereto) to deposit any Company Securities, directly or
indirectly, in any voting trust or similar arrangement or to subject any Company
Voting Securities to any other voting or proxy agreement, arrangement or
understanding;
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(7) disclose any intention, plan or arrangement, or make any public
announcement (or request permission to make any such announcement), or induce
any third party to take any action, inconsistent with the foregoing;
(8) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing; or
(9) advise, assist or encourage or finance (or assist or arrange financing
to or for) any other person in connection with any of the foregoing.
Pursuant to the Investment Agreement, the Company agreed that it will use
its best efforts to cause two persons designated by Cooper and reasonably
acceptable to the Company to be elected to the board of directors of the Company
and to serve as directors of the Company until their successors are duly elected
and qualified. Cooper has designated H. John Riley, Jr., its President and Chief
Executive Officer, and Dewain K. Cross, its retired Senior Vice President,
Finance, as its current representatives on the Company's board. In the event
that any such designee will cease to serve as a director for any reason, the
Company agreed in the Investment Agreement that it will use its best efforts to
cause such vacancy resulting thereby to be filled by a designee of Cooper
reasonably acceptable to the Company. The Investment Agreement provides that the
Company will vote all shares for which the Company's management or board of
directors holds proxies or is otherwise entitled to vote in favor of the
election of the designees of Cooper except as may otherwise be provided by
shareholders submitting such proxies.
The Investment Agreement provides that the Company will not amend (i)
Article 6(e)(2) (the "Fair Price Provision") of its Articles (except pursuant to
the Fair Price Amendment as defined below) in any manner that adversely affects
Cooper or any other person to whom any of the Common Stock acquired by Cooper
under the Stock Purchase Agreement has been transferred in accordance with the
terms of the Investment Agreement or (ii) the provision of its By-Laws pursuant
to which it has opted out of Chapter 110D of the MGL. Under the Fair Price
Provision, a Business Combination (as defined in the Company's Articles) between
the Company or a subsidiary of the Company and an Interested Stockholder (as
defined in the Company's Articles) requires the approval of at least 85 percent
of the outstanding voting stock of the Company, unless either (i) the Business
Combination has been approved by at least two-thirds of the Company's Continuing
Directors (as defined in the Company's Articles) or (ii) certain minimum price
requirements are satisfied. The Fair Price Amendment exempts Cooper and its
affiliates and associates for so long as such group beneficially owns at least
10 percent or more of the outstanding shares of Company Common Stock
continuously from and after May 26, 1995, unless such group acquires beneficial
ownership of additional shares of Company Common Stock in breach of the
Investment Agreement. The Investment Agreement also provides that the Company
will not amend its Rights Agreement (described below under "Description of the
Company's Capital Stock") or adopt any other rights or similar agreement, except
that following prior consultation with Cooper, the Company may amend the Rights
Agreement in accordance with the terms thereof if such amendment does not
adversely affect Cooper or any other person to whom any of the Common Stock
acquired by Cooper under the Stock Purchase Agreement has been transferred in
accordance with the terms of the Investment Agreement.
The Investment Agreement provides that, among others, the limitations on
Cooper and its affiliates described above with respect to restrictions on sales
of shares by Cooper, voting, ownership and certain other matters and the
limitations on the Company described above with respect to amendments to the
Company's Articles and By-Laws will terminate immediately and be of no further
force and effect on the date that a Trigger Event (as defined below) occurs. For
these purposes, "Trigger Event" means the occurrence of one or more of the
following events, without Cooper's prior written consent:
(1) in connection with the issuance of Company Voting Securities (other
than (x) issuances pursuant to the Company's current employee benefit plans or
other customary employee benefit plans of the Company or (y) issuances in
connection with bona fide capital raising programs pursuant to which the
securities are sold for fair value, as approved by the board of directors of the
Company, and the proceeds of which are invested in the businesses in which the
Company or one or more of its subsidiaries are then engaged or (z) issuances for
fair value, as determined by the board of directors of the
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Company, in connection with acquisitions by the Company or one of its
wholly-owned subsidiaries primarily involving one or more Similar Businesses (as
defined below)), the failure to provide Cooper with the right to purchase, at
the same price as Company Voting Securities are being issued, that number or
amount of Company Voting Securities which would enable Cooper to maintain its
proportionate interest in the Company following such issuance;
(2) a Change in Control of the Company (as defined below);
(3) a material acquisition or investment by the Company or one of its
subsidiaries, other than an acquisition or investment by the Company or one of
its wholly-owned subsidiaries primarily involving one or more Similar
Businesses;
(4) a decline of at least 35% in the Consolidated Net Worth of the Company
(as defined in the Investment Agreement) from the Consolidated Net Worth of the
Company immediately following the consummation of the Acquisition after giving
effect to the Acquisition (including the issuance of 16.5 million shares of the
Company's Common Stock to Cooper), but not taking into account (A) any reduction
in the Company's Consolidated Net Worth attributable to or taken in connection
with or as a result of the Acquisition or the combination of the business
acquired from Cooper with the Company's business and recorded in the Company's
financial statements for any period ending on (and including) the end of the
first full fiscal year of the Company after the consummation of the Acquisition
or (B) any adjustments following the date of consummation of the Acquisition as
a result of any changes in generally accepted accounting principles (including
the implementation of SFAS 106) or any other regulatory changes or requirements
applicable to the Company or its financial statements or (C) any adjustment
resulting from any liability arising from or growing out of any matter or
circumstance existing as of the time of the consummation of the Acquisition and
relating to the business or assets acquired by the Company from Cooper but not
reflected on the balance sheet of such business and assets or (D) any change in
the translation component of shareholders' equity or (E) adjustments as a result
of sales of the Company's accounts receivables pursuant to a bona fide
receivables securitization program pursuant to which fair value is received for
receivables so sold (as determined by the Company's board of directors, taking
into account, among other things, any discount or credit enhancement features
required by any securities rating agency) or (F) any adjustment resulting from a
SFAS 109 valuation allowance recorded or reserved by the Company with respect to
deferred tax assets that were included in or excluded from the Company's final
Accounting Principles Bulletin No. 16, "Business Combinations," acquisition date
balance sheet;
(5) any default or defaults by the Company or one of its subsidiaries under
any indebtedness of the Company or its subsidiaries for money borrowed with a
principal amount then outstanding, individually or in the aggregate, in excess
of $5.0 million, which default will constitute a failure to pay any portion of
the principal of each indebtedness at final maturity or will have resulted in
such indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable without such
indebtedness having been discharged, or such acceleration having been rescinded
or annulled within a period of 30 days after maturity or acceleration;
(6) an Event of Bankruptcy (as defined in the Investment Agreement); or
(7) the failure of the board of directors of the Company to nominate at
least two of Cooper's representatives for election to the Company's board of
directors.
The Investment Agreement further provides that the Company may not issue
any securities having more than one vote per share (other than pursuant to the
Company's Rights Agreement) without the prior written consent of Cooper.
For purposes of the Investment Agreement, (1) a "Change in Control of the
Company means (A) a merger or consolidation involving the Company or a sale of
all or substantially all of the assets of the Company, in each case except for a
transaction in which the Company's shareholders receive at least 50 percent of
the stock of the surviving, resulting or acquiring corporation, (B) the
acquisition by an individual, entity or group (excluding the Company or an
employee benefit plan of the Company or a corporation controlled by the
Company's shareholders) of shares of capital stock of the Company entitled to
cast a majority of the votes entitled to be cast on matters submitted to the
shareholders of the
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Company, or (C) a change in a majority of the members of any class of the
Company's board of directors in connection with an "election contest" (as used
in Rule 14a-11 under the Exchange Act); and (2) "Similar Businesses" means (A)
businesses in which the Company or one or more of its subsidiaries are engaged,
(B) any businesses involving products related to or complementary to the
products of the Company or one or more of its subsidiaries or (C) any similar
businesses providing customers of the Company or one or more of its subsidiaries
with products or services similar to those provided by the Company or one or
more of its subsidiaries.
Pursuant to the Investment Agreement, Cooper and certain of its transferees
have the right to require the Company to file under the Securities Act up to
three demand registrations of the shares of Company Common Stock acquired by
Cooper under the Stock Purchase Agreement (and any other of the Company's
securities issued in respect thereof) at the Company's expense (except that the
Company will not be responsible for underwriting discounts and commissions or
transfer taxes). Cooper also has the right to an unlimited number of additional
demand registrations under the Securities Act at Cooper's expense. Cooper also
has the right, under certain circumstances, to "piggyback" registrations in the
event that the Company registers securities for its own account or for the
account of third parties. Cooper's demand and piggyback registration rights are
subject to customary restrictions and limitations. In connection with any
registration statement filed pursuant to these registrations rights, Cooper and
the Company will indemnify each other against certain liabilities, including
certain liabilities under the Securities Act.
This summary description of the Stock Purchase Agreement and the Investment
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Stock Purchase Agreement and the Investment Agreement, which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
In connection with the offering of DECS by Cooper and the other
transactions described under "Plan of Distribution," Cooper and the Company
intend to enter into a letter agreement pursuant to which the Company will waive
certain provisions set forth in the Investment Agreement.
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
GENERAL
The Company has the authority to issue 70,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock, no par value (the "Preferred Stock").
The Company's Board of Directors has authority (without action by shareholders)
to issue the authorized and unissued shares of Preferred Stock in one or more
series and, within certain limitations, to determine the voting rights
(including the right to vote as a series on particular matters), preference as
to dividends and in liquidation, conversion, redemption and other rights of each
such series. The ability of the Board of Directors to issue Preferred Stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. There are no shares of
Preferred Stock issued or outstanding and the Company has no present plans to
issue any of the Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by shareholders, including the election of directors.
Shareholders are not entitled to cumulative voting rights, and, accordingly, the
holders of a majority of the shares voting for the election of directors can
elect the entire Board if they choose to do so and, in that event, the holders
of the remaining shares of Common Stock will not be able to elect any person to
the Board of Directors. Pursuant to the Company's By-Laws, the number of
directors of the Company may be not less than seven nor more than 13, as
determined from time to time by the directors. The number of directors is
currently 13. The By-Laws provide that the
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Board of Directors is divided into three classes in respect of term of office,
each class to contain as near as may be one-third of the whole number of the
Board. At each annual meeting of shareholders, one class of directors is elected
to serve until the annual meeting of shareholders held three years next
following and until their successors are elected and qualify. In the event any
vacancy occurs on the Board of Directors, the bylaws give the remaining
directors the power to fill the vacancy for the balance of the term of office,
except that any vacancy occurring because of an increase in the number of
directors may be filled only until the next annual meeting of shareholders, at
which time the vacancy shall be filled by vote of the shareholders.
The holders of shares of Common Stock are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors, in its discretion, from funds legally available therefor and subject
to the prior dividend rights of holders of any shares of Preferred Stock which
may be outstanding. Upon liquidation or dissolution of the Company, subject to
prior liquidation rights of the holders of Preferred Stock, the holders of
shares of Common Stock are entitled to receive on a pro rata basis the remaining
assets of the Company available for distribution. Holders of shares of Common
Stock have no preemptive or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to such
shares.
RIGHTS AGREEMENT
On October 19, 1988, the Board of Directors of the Company declared a
dividend distribution of one right (a "Right") for each outstanding share of
Common Stock to shareholders of record at the close of business on November 30,
1988 (the "Rights Record Date") pursuant to a Rights Agreement dated as of
October 19, 1988 between the Company and The First National Bank of Boston (the
"Original Rights Agreement"). On January 10, 1994, in connection with the Stock
Purchase Agreement, the Original Rights Agreement was amended and restated. The
description and terms of the Rights are set forth in an Amended and Restated
Rights Agreement, dated as of January 10, 1994 (the "Rights Agreement"), between
the Company and State Street Bank & Trust Company, as Rights Agent ("Rights
Agent"). Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock,
no par value (the "Series A Shares"), of the Company at a price of $50 per one
one-hundredth of a Series A Share (the "Exercise Price"), subject to adjustment.
Until the earlier to occur of (i) ten days following a public announcement
that a person or group of affiliated or associated persons has become an
Acquiring Person (as defined below) or (ii) ten business days (or such later
date as may be determined by action of the Board of Directors prior to such time
as any person or group of affiliated persons becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in a person or
group becoming an Acquiring Person (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced by the certificates
representing the shares of Common Stock, with either a copy of the Summary of
Rights that was sent to shareholders in connection with the original issuance of
the Rights (the "Summary of Rights") attached thereto or a notation
incorporating the Rights Agreement by reference. For purposes of the Rights
Agreement, an "Acquiring Person" generally means a person or group of affiliated
or associated persons who have acquired beneficial ownership of 20% or more of
the outstanding shares of Common Stock. For purposes of the Rights Agreement, a
person shall generally (subject to certain exceptions) be deemed the "beneficial
owner" of, and shall be deemed to "beneficially own," any Common Stock which
such person or any of such person's affiliates or associates, directly or
indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options or otherwise.
However, Cooper and its affiliates and associates (together the "Cooper Group")
will not be deemed to be an Acquiring Person for so long as (A) the Cooper Group
beneficially owns at least 10% or more of the outstanding shares of Common Stock
continuously from and after the Closing Date and (B) the Cooper Group does not
acquire beneficial ownership of any shares in breach of the Investment Agreement
(other than an inadvertent breach which is remedied as promptly as
43
<PAGE> 68
practicable by a transfer of the Shares so acquired to a person which is not a
member of the Cooper Group). In addition, for purposes of applying certain
provisions of the Rights Agreement, no person or entity owning more than 5% of
the shares of Common Stock as of October 19, 1988 will be deemed to be the
beneficial owner of, or to beneficially own, any shares of Common Stock in
excess of 5% of the shares of Common Stock owned by such person or entity as of
October 19, 1988.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the shares of Common Stock. Until the Distribution Date (or earlier
redemption or expiration of the Rights), share certificates issued after the
Rights Record Date upon transfer or new issuance of shares of Common Stock will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock
outstanding as of the Rights Record Date, even without such notation or a copy
of the Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the shares of Common Stock represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the shares of Common Stock as of the close of
business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on November 30, 1998 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Exercise Price payable, and the number of Series A Shares or other
securities or property issuable, upon the exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Series A
Shares, (ii) upon the grant to holders of the Series A Shares of certain rights
or warrants to subscribe for or purchase Series A Shares at a price, or
securities convertible into Series A Shares with a conversion price, less than
the then-current market price of the Series A Shares or (iii) upon the
distribution to holders of the Series A Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Series A Shares) or subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
Series A Shares issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the shares of Common Stock or a
stock dividend on the shares of Common Stock payable in shares or subdivisions,
consolidations or combinations of the shares of Common Stock occurring, in any
case, prior to the Distribution Date.
Series A Shares purchasable upon exercise of the Rights will not be
redeemable. Each Series A Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per share of Common Stock. In the
event of liquidation, the holders of the Series A Shares will be entitled to a
minimum preferential liquidation payment of $100 per share but will be entitled
to an aggregate payment of 100 times the payment made per share of Common Stock.
Each Series A Share will have 100 votes, voting together with the shares of
Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which Shares are exchanged, each Series A Share will be entitled
to receive 100 times the amount received per share of Common Stock. These rights
are protected by customary antidilution provisions.
Because of the nature of the Series A Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Series A Share
purchasable upon exercise of each Right should approximate the value of one
share of Common Stock.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
44
<PAGE> 69
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of Common Stock of the acquiring company
which at the time of such transaction will have a market value of two times the
Exercise Price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
shares of Common Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such person or group which will have become
void), in whole or in part, at an exchange ratio of one share of Common Stock,
or one one-hundredth of a Series A Share (or of a share of a class or series of
the Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Exercise Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Exercise Price. No fractional Series A Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Series A Share,
which may, at the election of the Company, be evidenced by depository receipts)
and in lieu thereof, an adjustment in cash will be made based on the market
price of the Series A Shares on the last trading day prior to the date of
exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Shares, the Board of Directors of the company may redeem the Rights in whole,
but not in part, at a price of $.02 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time on such basis with
such conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain thresholds described above to not less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding Shares then known
to the Company to be beneficially owned by any person or group of affiliated or
associated persons (other than the Cooper Group for so long as the Cooper Group
is deemed not to be an Acquiring Person) and (ii) 10% except that from and after
such time as any person or group of affiliated or associated persons becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of the Rights. Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company, including without
limitation, the right to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors, except pursuant to an
offer conditioned on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors since the Rights may be redeemed by the Company at the
Redemption Price prior to the time that a person or group has become an
Acquiring Person.
A copy of the Rights Agreement has been filed with the SEC as an exhibit to
a Registration Statement on Form 8-A/A dated January 21, 1994. A copy of the
Rights Agreement is available to any holder of Common Stock free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
MASSACHUSETTS LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS;
ANTI-TAKEOVER EFFECTS
The Company is subject to Chapter 110F of the MGL, an anti-takeover law.
Under Chapter 110F, a Massachusetts corporation with more than 200 stockholders
may not engage in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which
45
<PAGE> 70
the person becomes an interested stockholder, unless (i) the interested
stockholder obtains the approval of the Board of Directors prior to becoming an
interested stockholder, (ii) the interested stockholder acquires 90% of the
outstanding voting stock of the corporation (excluding shares held by certain
affiliates of the corporation) at the time it becomes an interested stockholder
or (iii) the business combination is approved by both the Board of Directors and
the holders of two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder). An "interested
stockholder" is a person who, together with affiliates and associates, owns (or,
in certain cases, at any time within the prior three years did own) 5% or more
of the outstanding voting stock of the corporation. A "business combination"
includes a merger, certain stock or asset sales, and certain other specified
transactions resulting in a financial benefit to the interested stockholder.
The By-Laws of the Company include a provision excluding the Company from
the applicability of Chapter 110D of the MGL, which regulates the acquisition of
so-called "control shares." A control share acquisition is the acquisition of
shares which, when added to shares already owned, would (but for the statute)
entitle the acquiring person to vote at least 20% of a corporation's stock.
Shares acquired in such a transaction would, under the statute, have no voting
rights unless a majority of noninterested stockholders voted to grant such
voting rights. In general, the person acquiring such shares, officers of the
Company and those directors of the Company who are also employees, are not
permitted to vote on whether such voting rights shall be granted. The Board of
Directors may amend the By-Laws at any time to subject the Company to this
statute prospectively.
MGL Chapter 156B, Section 50A requires that a publicly held Massachusetts
corporation have a classified board of directors consisting of three classes as
nearly equal in size as possible, unless the corporation elects not to be
covered by Section 50A. The Company's By-Laws contain provisions which give
effect to Section 50A.
The By-Laws also provide that the directors and officers of the Company
generally shall be indemnified by the Company to the fullest extent authorized
by Massachusetts law, as it now exists or may in the future be amended, against
all expenses and liabilities reasonably incurred in connection with service for
or on behalf of the Company. In addition, the Articles provide that the
directors of the Company will not be personally liable to the Company or its
stockholders for monetary damages for certain breaches of their fiduciary duty
as directors, unless they violated their duty of loyalty to the Company or its
stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions, approved certain loans to insiders
or derived an improper benefit from their action as directors.
The Company's By-Laws further provide that special meetings of stockholders
may be called only by the Chief Executive Officer, by the Board of Directors or
by the Clerk upon the written request of the holders of at least 10% of the
Company's outstanding Common Stock.
In addition, under the fair price provision of the Articles, a Business
Combination (as defined in the Articles) between the Company or a subsidiary of
the Company and an Interested Stockholder (as defined in the Articles) requires
the approval of at least 85% of the outstanding voting stock of the Company,
unless either (i) the Business Combination has been approved by at least
two-thirds of the Company's Continuing Directors (as defined in the Articles) or
(ii) certain minimum price requirements are satisfied. See "Relationship Between
the Company and Cooper -- Investment Agreement."
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Stock is State Street Bank
& Trust Company, 2 Heritage Drive, North Quincy, Massachusetts, telephone number
(617) 985-3024.
46
<PAGE> 71
COMMON STOCK OWNERSHIP OF COOPER
Cooper beneficially owns 16.5 million shares of Common Stock, representing
approximately 47% of the outstanding shares of Common Stock. Immediately
following the sale of the DECS pursuant to the DECS Prospectus, the ownership
interest of Cooper will remain at approximately 47% of the outstanding shares of
Common Stock. Pursuant to the terms of the DECS, Cooper may, at its option,
consummate the mandatory exchange at maturity thereof by delivering to holders
thereof shares of Common Stock. Cooper's ownership interest after maturity of
the DECS could remain at 47% of the presently outstanding number of shares of
Common Stock if it elects to deliver cash or could be reduced to less than one
percent of the presently outstanding shares of Common Stock if (a) at maturity
of the DECS the Maturity Price is less than or equal to the Initial Price (each
as defined in the DECS Prospectus), (b) the Underwriters elect to exercise their
over-allotment option in full and (c) Cooper elects to deliver its shares of
Common Stock instead of cash and does not acquire any additional shares of
Common Stock. However, Cooper is under no obligation to, and there can be no
assurance that Cooper will, elect to exercise its option to deliver Common Stock
pursuant to the terms of the DECS or, if it so elects, that it will use all or
any portion of its current holdings of Common Stock to make such delivery.
PLAN OF DISTRIBUTION
The Underwriters have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from Cooper the aggregate
number of DECS set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS DECS
------------------------------------------------------------ -----------
<S> <C>
Salomon Brothers Inc .......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................
Schroder Wertheim & Co. Incorporated........................
-----------
Total.................................................. 15,000,000
==========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
DECS if any are purchased.
The Company has been advised that the Underwriters propose to offer the
DECS to the public initially at the offering price set forth on the cover of the
Cooper Prospectus and to certain dealers at such price less a selling concession
of $ per DECS; that the Underwriters may allow, and each such dealer
may reallow, to other dealers a concession not exceeding $ per DECS;
and that, after the initial public offering, such public offering price and such
concession and reallowance may be changed.
The Company and Cooper have agreed not to offer for sale, sell or otherwise
dispose of, without the prior written consent of the Underwriters, any shares of
the Company's Common Stock or any securities convertible into or exchangeable
for, or warrants to acquire the Company's Common Stock for a period of 90 days
after the date of this Prospectus; provided, however, that such restriction
shall not affect the ability of the Company or Cooper or their respective
subsidiaries to take any such actions in connection with the offering of the
DECS made hereby or any exchange at Maturity pursuant to the terms of the DECS.
Cooper has granted to the Underwriters an option, exercisable for 30 days
from the date of this Prospectus (or, if such 30th day shall not be a Business
Day, on the next Business Day thereafter), to purchase up to an additional
1,500,000 DECS, at the per DECS price to the public less the aggregate
underwriting discount set forth on the cover of the Cooper Prospectus. The
Underwriters may exercise such right of purchase only for the purpose of
covering overallotments, if any, incurred in connection with the sale of DECS
being offered. To the extent that the Underwriters exercise such option, each of
the
47
<PAGE> 72
Underwriters will become obligated, subject to certain conditions, to purchase a
number of such additional DECS proportionate to such Underwriter's initial
commitment.
The Company and Cooper have agreed in the Underwriting Agreement to
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.
In connection with the offering of the DECS, the Underwriters and selling
group members (if any) and their respective affiliates may engage in passive
market making transactions in the Common Stock on Nasdaq in accordance with Rule
10b-6A under the Exchange Act. The passive market making transactions will
comply with applicable volume and price limits and will be identified as such.
As of June 30, 1995, Schroder Wertheim & Co. Incorporated beneficially
owned 1,121,900 shares of Common Stock (representing 3.2% of the issued and
outstanding shares of such Common Stock).
Salomon has provided financial advisory services to the Company in the
past, for which it has received customary fees. Merrill Lynch & Co. has provided
financial advisory services to Cooper in the past, for which it has received
customary fees.
To the extent that the over-allotment option is not exercised by the
Underwriters, Cooper may, subject to the Investment Agreement and Underwriting
Agreement, sell up to 1.5 million shares of Common Stock pursuant to this
Prospectus. Any such distribution hereunder of the Common Stock by Cooper may be
effected from time to time in one or more of the following transactions: (a)
through brokers, acting as agent in transactions (which may involve block
transactions), in special offerings, in the over-the-counter market, or
otherwise, at market prices obtainable at the time of sale, at prices related to
such prevailing market prices, at negotiated prices or at fixed prices, (b) to
underwriters who will acquire the shares of Common Stock for their own account
and resell them in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time of
sale (any public offering price and any discount or concessions allowed or
reallowed or paid to dealers may be changed from time to time), (c) directly or
through brokers or agents in private sales at negotiated prices, (d) to lenders
pledged as collateral to secure loans, credit or other financing arrangements
and any subsequent foreclosure, if any, thereunder, or, (e) by any other legally
available means. Also, offers to purchase Common Stock may be solicited by
agents designated by Cooper from time to time. Underwriters or other agents
participating in an offering made pursuant to this Prospectus (as amended or
supplemented from time to time) may receive underwriting discounts or
commissions under the Securities Act and discounts or concessions may be allowed
or reallowed or paid to dealers, and brokers or agents participating in such
transactions may receive brokerage or agent's commissions or fees.
At the time a particular offering of any share of Common Stock is made by
Cooper hereunder, to the extent required by law, a Prospectus Supplement will be
distributed which will set forth the amount of Common Stock being offered and
the terms of the offering, including the purchase price or public offering
price, the name or names of any underwriters, dealers or agents, the purchase
price paid by any underwriter for any Common Stock purchased from Cooper, any
discounts, commissions and other items constituting compensation from Cooper and
any discounts, commission or concessions allowed or filed or paid to dealers.
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by Wallace F.
Whitney, Jr., Vice President, General Counsel and Clerk of the Company. As of
October 12, 1995, Mr. Whitney was the beneficial owner of 3,000 shares of Common
Stock of the Company and held options to purchase 95,000 shares of Common Stock.
The Underwriters have been represented by Cravath, Swaine & Moore.
48
<PAGE> 73
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in its Annual Report (Form 10-K) for the year ended June 3, 1995 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The combined financial statements of Cameron Forged Products Division (a
division of Cooper Industries, Inc.) included in the Company's Current Report
(Form 8-K) dated May 26, 1994 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such combined financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
49
<PAGE> 74
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.......................................................... F-1
Consolidated Statements of Operations for the years ended June 3, 1995, May 28, 1994
(unaudited), December 31, 1993 and December 31, 1992 and the five months ended May 28,
1994.................................................................................. F-2
Consolidated Balance Sheets at June 3, 1995 and May 28, 1994............................ F-3
Consolidated Statement of Cash Flows for the Years ended June 3, 1995, May 28, 1994
(unaudited), December 31, 1993 and December 31, 1992 and the five months ended May 28,
1994.................................................................................. F-4
Consolidated Statement of Stockholders' Equity for the year ended June 3, 1995, the five
months ended May 28, 1994 and the two years ended December 31, 1993 and 1992.......... F-5
Notes to Consolidated Financial Statements.............................................. F-6
</TABLE>
50
<PAGE> 75
WYMAN-GORDON COMPANY
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of Wyman-Gordon Company:
We have audited the accompanying consolidated balance sheets of
Wyman-Gordon Company and Subsidiaries as of June 3, 1995 and May 28, 1994, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended June 3, 1995, for the five months ended May 28, 1994,
and for each of the two years in the period ended December 31, 1993. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Wyman-Gordon
Company and Subsidiaries at June 3, 1995 and May 28, 1994, and the consolidated
results of their operations and their cash flows for the year ended June 3,
1995, for the five months ended May 28, 1994, and for each of the two years in
the period ended December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Notes I and J to the consolidated financial statements, in
1993 the company changed its method of accounting for postretirement benefits
other than pensions and income taxes.
ERNST & YOUNG LLP
Boston, Massachusetts
June 26, 1995
F-1
<PAGE> 76
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS YEAR ENDED
---------------------- ENDED DECEMBER 31,
JUNE 3, MAY 28, MAY 28, -------------------
1995 1994 1994 1993 1992
-------- ----------- ----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(000'S OMITTED, EXCEPT PER SHARE DATA)
Revenue............................. $396,639 $ 224,694 $ 86,976 $239,761 $298,881
-------- -------- -------- -------- --------
Cost of goods sold.................. 347,251 217,816 91,907 219,088 243,291
Selling, general and administrative
expenses.......................... 36,380 35,532 18,324 26,648 28,315
Other charges (credits)............. (710) 33,003 30,550 2,453 --
Environmental charge................ -- 2,000 2,000 -- --
-------- -------- -------- -------- --------
382,921 288,351 142,781 248,189 271,606
-------- -------- -------- -------- --------
Income (loss) from operations....... 13,718 (63,657) (55,805) (8,428) 27,275
-------- -------- -------- -------- --------
Other deductions (income):
Interest expense.................. 11,027 11,135 5,383 10,823 7,521
Miscellaneous, net................ 1,652 (2,389) 182 (2,247) (2,041)
-------- -------- -------- -------- --------
12,679 8,746 5,565 8,576 5,480
-------- -------- -------- -------- --------
Income (loss) before cumulative
effect of changes in accounting
principles........................ 1,039 (72,403) (61,370) (17,004) 21,795
Cumulative effect of changes in
accounting principles............. -- -- -- (43,000) --
-------- -------- -------- -------- --------
Net income (loss)................... $ 1,039 $ (72,403) $ (61,370) $(60,004) $ 21,795
======== ======== ======== ======== ========
INFORMATION PER SHARE
Income (loss) before cumulative
effect of changes in accounting
principles........................ $ .03 $ (4.02) $ (3.32) $ (.95) $ 1.21
Cumulative effect of changes in
accounting principles............. -- -- -- (2.39) --
-------- -------- -------- -------- --------
Net income (loss)................... $ .03 $ (4.02) $ (3.32) $ (3.34) $ 1.21
======== ======== ======== ======== ========
Shares used to compute earnings per
share............................. 35,148 17,992 18,490 17,965 18,078
======== ======== ======== ======== ========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
F-2
<PAGE> 77
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 3, MAY 28,
1995 1994
--------- ---------
(000'S OMITTED)
<S> <C> <C>
ASSETS
Cash and cash equivalents......................................... $ 13,856 $ 42,179
Accounts receivable............................................... 79,219 77,019
Inventories....................................................... 78,813 65,737
Prepaid expenses.................................................. 15,671 15,192
-------- --------
Total current assets........................................... 187,559 200,127
-------- --------
Property, plant and equipment, net................................ 141,397 139,689
Intangible assets................................................. 25,295 27,759
Other assets...................................................... 14,813 27,172
-------- --------
Total assets................................................... $ 369,064 $ 394,747
======== ========
LIABILITIES
Borrowings due within one year.................................... $ 3,915 $ 77
Obligation to Cooper Industries................................... -- 20,561
Accounts payable.................................................. 34,729 27,650
Accrued liabilities and other..................................... 55,853 60,151
-------- --------
Total current liabilities...................................... 94,497 108,439
-------- --------
Restructuring, integration, disposal and environmental............ 19,648 26,201
Long-term debt.................................................... 90,308 90,385
Pension liability................................................. 9,589 14,462
Deferred income taxes and other................................... 21,699 30,929
Postretirement benefits........................................... 52,468 51,848
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, no par value:
Authorized 5,000,000 shares; none issued....................... -- --
Common stock, par value $1.00 per share:
Authorized 70,000,000 shares; issued 37,052,720 and 36,902,720
shares at June 3, 1995 and May 28, 1994....................... 37,053 36,903
Capital in excess of par value.................................... 40,118 43,884
Retained earnings................................................. 39,700 38,661
Equity adjustments................................................ 63 (5,408)
Treasury stock, 2,044,178 shares at June 3, 1995 and 2,354,540
shares at May 28, 1994......................................... (36,079) (41,557)
-------- --------
Total stockholders' equity..................................... 80,855 72,483
-------- --------
Total liabilities and stockholders' equity..................... $ 369,064 $ 394,747
======== ========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
F-3
<PAGE> 78
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS YEAR ENDED
---------------------- ENDED DECEMBER 31,
JUNE 3, MAY 28, MAY 28, -------------------
1995 1994 1994 1993 1992
-------- ----------- ----------- -------- --------
(UNAUDITED)
(000'S OMITTED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)..................................... $ 1,039 $ (72,403) $ (61,370) $(60,004) $ 21,795
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization....................... 18,122 15,888 6,782 15,569 15,875
Loss from disposal of production facilities......... -- 2,453 -- 2,453 --
Environmental and other charges (credits)........... (2,100) 32,550 32,550 -- --
Losses of equity investment......................... 1,390 -- -- -- --
Cumulative effect of changes in accounting
principles........................................ -- -- -- 43,000 --
Changes in assets and liabilities net of purchase
price activity:
Accounts receivable................................. (2,200) 9,545 3,228 15,139 14,699
Inventories......................................... (13,076) 16,219 4,215 8,474 16,345
Prepaid expenses and other assets................... 11,542 5,078 2,255 (7,114) 986
Accrued restructuring, integration, disposal and
environmental..................................... (14,646) (8,224) (1,352) (9,653) (25,735)
Income and other taxes.............................. 628 (623) 585 (940) 2,789
Accounts payable and accrued liabilities............ 7,073 5,515 6,429 311 (15,951)
Deferred income taxes............................... -- 1,009 1,009 (58) --
-------- -------- -------- -------- --------
Net cash provided (used) by operating
activities...................................... 7,772 7,007 (5,669) 7,177 30,803
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Investment in acquired subsidiaries................. (3,591) (3,450) (3,450) -- (3,700)
Capital expenditures................................ (18,714) (11,888) (2,404) (13,866) (11,156)
Deferred program costs.............................. -- 16,408 16,063 (22) (2,086)
Proceeds from disposal of production
facilities........................................ -- 4,345 -- 4,345 451
Proceeds from sale of fixed assets.................. 1,563 62 -- 393 2,282
Other, net.......................................... (415) 4,071 2,137 1,650 742
-------- -------- -------- -------- --------
Net cash provided (used) by investing
activities...................................... (21,157) 9,548 12,346 (7,500) (13,467)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Cash received from Cooper Industries for factored
accounts receivable............................... -- 20,561 20,561 -- --
Cash paid to Cooper Industries for factored accounts
receivable........................................ (20,561) -- -- -- --
Payment of debt..................................... (77) (77) (77) (70,077) (22,077)
Issuance of debt.................................... 3,838 -- -- 84,680 --
Net proceeds from issuance of common stock.......... 1,862 572 201 537 220
-------- -------- -------- -------- --------
Net cash provided (used) by financing
activities...................................... (14,938) 21,056 20,685 15,140 (21,857)
-------- -------- -------- -------- --------
Increase (decrease) in cash........................... (28,323) 37,611 27,362 14,817 (4,521)
Cash, beginning of period............................. 42,179 4,568 14,817 -- 4,521
-------- -------- -------- -------- --------
Cash, end of period................................... $ 13,856 $ 42,179 $ 42,179 $ 14,817 $ --
======== ======== ======== ======== ========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
F-4
<PAGE> 79
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
---------------- IN EXCESS
SHARES PAR OF PAR RETAINED EQUITY TREASURY
ISSUED VALUE VALUE EARNINGS ADJUSTMENTS STOCK
------ ------- --------- -------- ----------- --------
(000'S OMITTED)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991....... 20,403 $20,403 $ 16,616 $138,240 $(1,788) $(45,383)
Net income..................... 21,795
Stock plans.................... (567 ) 735
Pension equity adjustment...... (535)
------ ------- ------- --------
Balance, December 31, 1992....... 20,403 20,403 16,049 160,035 (2,323) (44,648)
Net loss....................... (60,004)
Stock plans.................... (984 ) 1,250
Savings/Investment Plan
match....................... (769 ) 1,040
Pension equity adjustment...... (1,700)
------ ------- ------- --------
Balance, December 31, 1993....... 20,403 20,403 14,296 100,031 (4,023) (42,358)
Net loss....................... (61,370)
Stock plans.................... (429 ) 546
Savings/Investment Plan
match....................... (171 ) 255
Pension equity adjustment...... (1,385)
Issuance of common stock....... 16,500 16,500 30,188
------ ------- ------- --------
Balance, May 28, 1994............ 36,903 36,903 43,884 38,661 (5,408) (41,557)
Net income..................... 1,039
Stock plans.................... 150 150 (2,354 ) 3,355
Savings/Investment Plan
match....................... (1,412 ) 2,123
Pension equity adjustment...... 3,952
Currency translation........... 1,519
------ ------- ------- --------
Balance, June 3, 1995............ 37,053 $37,053 $ 40,118 $ 39,700 $ 63 $(36,079)
====== ======= ======= ========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
F-5
<PAGE> 80
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The company is engaged principally in the design, engineering, production
and marketing of high-technology forged and investment cast metal and composite
components used for a wide variety of aerospace and power generation
applications.
On May 24, 1994, the company's Board of Directors voted to change the
company's fiscal year end from one which ended on December 31 to one which ends
on the Saturday nearest to May 31.
On May 26, 1994, the Company acquired Cameron Forged Products Company
("Cameron") from Cooper Industries. The accompanying consolidated financial
statements include the accounts of Cameron from the date of the acquisition.
Cameron's operating results from May 26, 1994 to May 28, 1994 are not material
to the consolidated statement of operations for the five month period ended May
28, 1994. The unaudited statement of operations and cash flows for the year
ended May 28, 1994 are presented for comparative purposes only.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the company and all subsidiaries. All intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION: Sales and income are recognized at the time products are
shipped.
RECLASSIFICATIONS: Where appropriate, prior year amounts have been reclassified
to permit comparison.
CASH AND CASH EQUIVALENTS: Cash equivalents include short-term investments with
maturities of less than three months at the time of investment.
INVENTORIES: Inventories are valued at both the lower of first-in, first-out
(FIFO) cost or market, or for certain forgings and castings raw material and
work-in-process inventories, the last-in, first-out (LIFO) method. On certain
orders, usually involving lengthy raw material procurement and production
cycles, progress payments are reflected as a reduction of inventories. Product
repair costs are expensed as incurred.
LONG-TERM, FIXED PRICE CONTRACTS: A substantial portion of the company's
revenues is derived from long-term, fixed price contracts with major engine and
aircraft manufacturers. These contracts are typically "requirements" contracts
under which the purchaser commits to purchase a given portion of its
requirements of a particular component from the company. Actual purchase
quantities are typically not determined until shortly before the year in which
products are to be delivered. Losses on such contracts are provided when
available information indicates that the sales price is less than a fully
allocated cost projection. As part of the company's acquisition of Cameron on
May 26, 1994, loss reserves on backlog and long-term pricing agreements are
included on the balance sheet (see Footnote C).
DEPRECIABLE ASSETS: Property, plant and equipment, including significant
renewals and betterments, are capitalized at cost and are depreciated on the
straight-line method. Generally, depreciable lives range from 10 to 20 years for
land improvements, 10 to 40 years for buildings and 5 to 15 years for machinery
and equipment. Tooling production costs are primarily classified as machinery
and equipment and are capitalized at cost less associated revenue and
depreciated over 5 years.
BANK FEES: Bank fees and related costs of obtaining credit facilities are
recorded as other assets and amortized over the term of the facilities.
EARNINGS (LOSS) PER SHARE: Per-share data are computed based on the weighted
average number of common shares outstanding during each year. Common stock
equivalents related to outstanding stock options are included in per-share
computations unless their inclusion would be antidilutive.
F-6
<PAGE> 81
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONCENTRATION OF CREDIT RISK: Financial instruments that potentially subject the
company to concentration of credit risk consist primarily of temporary cash
investments and trade receivables. The company restricts investment of temporary
cash investments to financial institutions with high credit standing.
The company has approximately 550 active customers. However, the company's
accounts receivable are concentrated with a small number of Fortune 500
companies with whom the company has long-standing relationships. Accordingly,
management considers credit risk to be low. Five customers accounted for 50.0%
of the company's revenues during the year ended June 3, 1995, 50.6% for the five
months ended May 28, 1994, 55.6% for the year ended December 31, 1993 and 52.7%
for the year ended December 31, 1992. General Electric Company ("GE") and United
Technologies Corporation ("UT") each accounted for more than 10% of the
company's revenues as follows:
<TABLE>
<CAPTION>
FIVE MONTHS
YEAR ENDED ENDED MAY YEAR ENDED DECEMBER 31,
JUNE 3, 28, ----------------------------------
1995 % 1994 % 1993 % 1992 %
---------- --- ----------- --- -------- --- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
($000'S OMITTED)
GE........................... $ 101,261 26 $ 17,226 20 $ 55,585 23 $ 62,740 21
UT........................... 58,873 15 13,930 16 37,060 16 48,920 17
</TABLE>
CURRENCY TRANSLATION: For foreign operations, the local currency is the
functional currency. Assets and liabilities are translated at year-end exchange
rates, and statement of operations items are translated at the average exchange
rates for the year. Translation adjustments are reported in equity adjustments
as a separate component of stockholders' equity which also includes exchange
gains and losses on certain intercompany balances of a long-term investment
nature.
RESEARCH AND DEVELOPMENT: Research and development expenses, including related
depreciation, amounted to $2,213,000, $733,000, $2,778,000 and $3,013,000 for
the year ended June 3, 1995, five months ended May 28, 1994 and for the years
ended December 31, 1993 and 1992, respectively.
INTANGIBLE ASSETS: Intangible assets consists primarily of costs of acquired
businesses in excess of net assets acquired and are amortized on a straightline
basis over periods up to 35 years.
B. ACQUISITION
On May 26, 1994, the company acquired all of the outstanding stock of
Cameron from Cooper Industries Inc. for 16,500,000 shares of the company's
common stock valued at $46,687,000, direct costs of $3,050,000, a note payable
to Cooper Industries, Inc. of $3,186,000 net of discount of $1,414,000, $400,000
in cash at closing and a final cash settlement of $3,591,000. Cameron and its
subsidiaries operate forging facilities in Houston, Texas and Livingston,
Scotland, as well as a powder metal operation in Brighton, Michigan. The
integration of Cameron's operations with the company's is progressing
substantially as planned. The acquisition was accounted for as a purchase
transaction. The company's results of operations for fiscal 1995 include the
accounts of Cameron. The final allocation of the purchase price of this
transaction is reflected in the May 28, 1994 balance sheet as follows:
F-7
<PAGE> 82
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
(000'S OMITTED)
<S> <C>
Cost of acquisition:
Issuance of 16,500 shares of common stock to Cooper, direct expenses of
$3,050 and $3,591 final price adjustment................................ $ 53,328
Note payable to Cooper net of discount of $1,414 (included in other
long-term liabilities on the balance sheet)............................. 3,186
Cash paid to Cooper at closing............................................. 400
---------------
56,914
Estimated costs to integrate Cameron into the company........................ 6,993
---------------
$ 63,907
============
Allocation of cost of acquisition:
Fair value of property, plant and equipment................................ $ 81,183
Less excess of fair value of net assets acquired over purchase price....... (30,712)
---------------
50,471
Other assets acquired and liabilities assumed.............................. 13,436
---------------
$ 63,907
============
</TABLE>
The allocation of the cost of the acquisition has been made on the basis of
the fair market value of the individual assets and liabilities acquired. Direct
costs of the acquisition of Cameron and liabilities assumed are $5,200,000 and
$900,000, respectively, lower than originally estimated at May 28, 1994.
The Unaudited Pro Forma Combined financial data of the company with Cameron
as though Cameron had been acquired as of the beginning of each period presented
are as follows:
<TABLE>
<CAPTION>
FIVE MONTHS
ENDED YEAR ENDED
MAY 28, DECEMBER 31,
1994 1993
----------- ------------
<S> <C> <C>
(000'S OMITTED,
EXCEPT PER-SHARE DATA)
Revenue....................................................... $ 151,834 $ 389,295
=========== ============
Income (loss) before cumulative effect of changes in
accounting principles....................................... $ (71,525) $ (39,271)
=========== ============
Net income (loss)............................................. $ (71,525) $ (82,271)
=========== ============
Income (loss) per share before cumulative effect of changes in
accounting principles....................................... $ (2.07) $ (1.14)
=========== ============
Net income (loss) per share................................... $ (2.07) $ (2.38)
=========== ============
</TABLE>
F-8
<PAGE> 83
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C. BALANCE SHEET INFORMATION
Components of selected captions in the consolidated balance sheets follow:
<TABLE>
<CAPTION>
JUNE 3, MAY 28,
1995 1994
--------- ---------
<S> <C> <C>
(000'S OMITTED)
PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and improvements.................................... $ 100,399 $ 92,150
Machinery and equipment............................................. 278,691 272,429
Under construction.................................................. 6,282 4,722
--------- ---------
385,372 369,301
Less accumulated depreciation....................................... 243,975 229,612
--------- ---------
$ 141,397 $ 139,689
========= =========
INTANGIBLE ASSETS:
Pension intangible.................................................. $ 5,568 $ 6,527
Costs in excess of net assets acquired.............................. 28,786 29,586
Less: Accumulated amortization...................................... (9,059) (8,354)
--------- ---------
$ 25,295 $ 27,759
========= =========
OTHER ASSETS:
Cash surrender value of company-owned life insurance policies....... $ 7,974 $ 12,341
Other............................................................... 6,839 14,831
--------- ---------
$ 14,813 $ 27,172
========= =========
ACCRUED LIABILITIES AND OTHER:
Accrued payroll and benefits........................................ $ 11,511 $ 9,900
Restructuring, integration, disposal and environmental reserves..... 10,219 19,082
Payroll and other taxes............................................. 3,139 2,511
Loss on long-term contracts......................................... 7,407 8,334
Other............................................................... 23,577 20,324
--------- ---------
$ 55,853 $ 60,151
========= =========
DEFERRED INCOME TAXES AND OTHER:
Deferred income taxes............................................... $ 2,623 $ 2,623
Loss on long-term contracts......................................... 3,413 12,000
Other long-term liabilities......................................... 15,663 16,306
--------- ---------
$ 21,699 $ 30,929
========= =========
</TABLE>
F-9
<PAGE> 84
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
D. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 3, MAY 28,
1995 1994
-------- --------
(000'S OMITTED)
<S> <C> <C>
Raw material........................................................ $ 26,440 $ 13,706
Work-in-process..................................................... 54,310 54,570
Other............................................................... 3,228 2,286
83,978 70,562
Less progress payments.............................................. 5,165 4,825
$ 78,813 $ 65,737
</TABLE>
If all inventories valued at LIFO cost had been valued at FIFO cost or
market which approximates current replacement cost, inventories would have been
$21,584,000 and $27,758,000 higher than reported at June 3, 1995 and May 28,
1994, respectively.
LIFO inventory quantities were reduced in each of the periods presented
below, resulting in the liquidation of LIFO inventories carried at the lower
costs prevailing in prior years compared with the cost of current purchases
which has a favorable effect on income from operations. Inflation and deflation
have negative and positive effects on income from operations, respectively. The
effects of lower quantities, inflation or deflation were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
YEAR ENDED FIVE MONTHS 31,
JUNE 3, ENDED MAY ---------------------
1995 28, 1994 1993 1992
---------- ----------- -------- --------
(000'S OMITTED)
<S> <C> <C> <C> <C>
Lower quantities.......................... $ 7,567 $ 2,050 $ 5,469 $ 18,388
(Inflation) deflation..................... (1,393) 1,085 4,450 2,448
---------- ----------- -------- --------
Net increase to income from operations.... $ 6,174 $ 3,135 $ 9,919 $ 20,836
=========== =========== ======== ========
</TABLE>
E. SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consisted of the following:
<TABLE>
<CAPTION>
JUNE 3, MAY 28,
1995 1994
-------- --------
(000'S OMITTED)
<S> <C> <C>
Borrowings due within one year:
Current portion of long-term debt................................. $ 77 $ 77
Borrowings under U.K. Credit Agreement............................ 3,838 --
------- -------
Total borrowings due within one year........................... $ 3,915 $ 77
======= =======
Long-term debt:
Senior Notes...................................................... $ 90,000 $ 90,000
Other............................................................. 308 385
------- -------
Total long-term debt........................................... $ 90,308 $ 90,385
======= =======
</TABLE>
F-10
<PAGE> 85
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1993, the company issued $90,000,000 of 10 3/4% Senior Notes due
March 2003 (the "Senior Notes") under an indenture between the company and a
bank as trustee. The Senior Notes pay interest semi-annually. The Senior Notes
are general unsecured obligations of the company, are non-callable for a five
year period, and are senior to any future subordinated indebtedness of the
company. The indenture contains certain covenants including limitations on
indebtedness, restrictive payments including dividends, liens, and disposition
of assets.
The estimated fair value of the Senior Notes was $86,400,000 and
$88,200,000 at June 3, 1995 and May 28, 1994 based on third party valuations.
On May 20, 1994, the company initiated, through a new subsidiary,
Wyman-Gordon Receivables Corporation ("WGRC"), a revolving credit agreement with
a group of five banks ("Receivables Financing Program"). WGRC is a separate
corporate entity from Wyman-Gordon Company and its other subsidiaries, with its
own separate creditors. WGRC's business is the purchase of accounts receivable
from Wyman-Gordon Company and certain of its subsidiaries ("Sellers"), and
neither WGRC on the one hand nor the Sellers (or subsidiaries or affiliates of
the Sellers) on the other have agreed to pay or make their assets available to
pay creditors of others. WGRC's creditors have a claim on its assets prior to
those assets becoming available to any creditors of any of the Sellers. The
facility provides for a total commitment by the banks of up to $65,000,000,
including a letter of credit subfacility of up to $35,000,000.
There were no borrowings outstanding at June 3, 1995 and May 28, 1994, but
the company had issued $10,009,000 and $5,139,000 of letters of credit under the
Receivables Financing Program, respectively. As of June 3, 1995 and May 28,
1994, total availability based on eligible receivables was $44,816,000 and
$15,418,000, respectively. Cameron's accounts receivable became eligible on
October 21, 1994.
Wyman-Gordon Limited, the company's subsidiary located in Livingston,
Scotland, entered into a credit agreement ("U.K. Credit Agreement") with a bank
("the Bank") effective November 28, 1994. The maximum borrowing capacity under
the U.K. Credit Agreement is 3,000,000 pound sterling with a separate letter of
credit or guarantee limit of 1,000,000 pound sterling. Borrowings bear interest
at 1% over the Bank's base rate. In the event that borrowings by way of
overdraft are allowed to exceed the agreed limit, interest on the excess
borrowings will be charged at the rate of 2% over the Bank's base rate. The
company is obligated to pay a commitment fee of .75% on letters of credit issued
under the U.K. Credit Agreement. The U.K. Credit Agreement is secured by a
debenture from Wyman-Gordon Limited and is senior to any intercompany loans. The
term of the U.K. Credit Agreement is one year with an evergreen feature. There
were 2,415,000 pound sterling or $3,838,000 borrowings outstanding at June 3,
1995 and the company had issued pound sterling 380,000 or $604,000 of letters of
credit or guarantees under the U.K. Credit Agreement.
For the year ended June 3, 1995, the weighted average interest rate on
short-term borrowings was 7.3%.
F-11
<PAGE> 86
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Annual maturities of long-term debt in the next five years amount to
$77,000 per year and $90,000,000 thereafter. The company's promissory note to
Cooper Industries, Inc. in the principal amount of $4,600,000, will be payable
in annual installments beginning on June 30, 1997 and each June 30 thereafter
until paid in full in amounts provided under the terms of the "Stock Purchase
Agreement" with Cooper Industries, Inc.
<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
JUNE 3, MAY 28, ---------------------
1995 1994 1993 1992
---------- ----------- -------- --------
(000'S OMITTED)
<S> <C> <C> <C> <C>
Interest on debt.......................... $ 9,929 $ 3,973 $ 8,741 $ 5,171
Capitalized interest...................... (397) (152) (544) (218)
Amortization of financing fees and
other................................... 1,495 1,562 2,626 2,568
------- ------ ------- ------
Interest expense.......................... $ 11,027 $ 5,383 $ 10,823 $ 7,521
======= ====== ======= ======
</TABLE>
Total interest paid approximates "Interest on debt" stated in the table
above.
F. RESTRUCTURING OF OPERATIONS
1991 RESTRUCTURING:
During 1991, the company incurred charges of $87,966,000 and $11,498,000 in
connection with a restructuring program primarily at its forging operations and
disposition of its automotive crankshaft forging division, respectively.
A significant portion of this charge related to the consolidation of
forging operations, including severance and other personnel costs. The company
has nearly completed its 1991 restructuring plan. Some consolidation activities
still remain to be completed requiring cash outlays of approximately $1,700,000
and $600,000 in fiscal 1996 and 1997, respectively. Deferred compensation of
approximately $1,500,000 will be payable over the next several years under the
terms of a severance agreement. The divestiture of the company's automotive
crankshaft forging division is virtually complete with minor costs remaining.
1993 DISPOSITION:
In 1993, the company sold substantially all of the net assets and business
operations of Wyman-Gordon Composites, Inc. and recorded a non-cash charge on
the sale in the fourth quarter of 1993 of $2,453,000.
1994 RESTRUCTURING:
The company recorded a charge of $6,450,000 in May 1994, $5,200,000 for
closing a castings facility, of which $1,100,000 required cash, and $1,250,000
to write-down castings fixed assets to their net realizable value. The non-cash
items amounting to $5,350,000 were charged against the reserve in May 1994. A
$600,000 cash charge was made against the reserve in fiscal 1995 and cash
charges of $500,000 are expected to be incurred in fiscal 1996.
1994 CAMERON INTEGRATION COSTS:
Based on the company's plans for the integration of Cameron, in May 1994,
the company recorded an integration restructuring charge totalling $24,100,000
which consisted of estimated cash costs of
F-12
<PAGE> 87
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$12,700,000 and estimated non-cash charges of $11,400,000 for asset
revaluations. Cash costs include relocating machinery, equipment, tooling and
dies of the company as well as relocation and severance costs related to
personnel of the company. Non-cash charges included the write-down of certain
assets of the company, including portions of metal production facilities and
certain forging, machining and testing equipment to net realizable value as a
result of consolidating certain systems and facilities, idling certain machinery
and equipment, and eliminating certain processes, departments and operations as
a result of the acquisition.
In the fourth quarter of fiscal 1995, after a year of evaluating the
combined forgings operations and concluding that most of its integration
activities had been completed or were adequately provided for within the
remaining integration restructuring reserves, the company determined that
severance and other personnel costs were $1,900,000 lower and movement of
machinery, equipment and tooling and dies costs were $2,500,000 lower than
originally estimated. Additionally, the company had originally identified
certain machinery and equipment expected to become redundant as a result of the
integration of Cameron's operations with those of the company's. These
redundancies were $2,300,000 higher than the company's original estimates. As a
result, the company took into income from operations, an integration
restructuring credit in the amount of $2,100,000. At June 3, 1995, the company
estimates the remaining integration activities will require cash outlays of
approximately $4,100,000 in fiscal 1996 and $1,600,000 thereafter. Most of these
future expenditures represent costs associated with consolidation and
reconfiguration of production facilities and relocation or severance costs.
CAMERON PURCHASE CASH COSTS:
Included as part of the Cameron purchase price allocation the company
recorded $12,200,000 for direct cash costs related to the acquisition and
integration of Cameron for relocation of Cameron machinery and dies, severance
of Cameron personnel and other costs. At June 3, 1995, it was determined that
the cash costs of the acquisition were $5,200,000 lower than originally
estimated. The company made $4,100,000 of cash charges against these reserves in
fiscal 1995, and the remaining activities will require estimated cash outlays of
$2,900,000.
F-13
<PAGE> 88
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of charges made or estimated to be made against restructuring,
integration and disposal reserves is as follows:
<TABLE>
<CAPTION>
FIVE
YEAR ENDED MONTHS YEAR ENDED
DECEMBER 31, ENDED -----------------
------------------------------ MAY 28, JUNE 3, JUNE 1, THERE-
TOTAL 1991 1992 1993 1994 1995 1996 AFTER
------- -------- -------- -------- ------- ------- ------- ------
(000'S OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1991 RESTRUCTURING:
CASH:
Consolidation and reconfiguration of
facilities................................... $32,600 $ 700 $21,100 $4,800 $1,400 $ 2,300 $1,700 $ 600
Severance and deferred compensation............ 6,400 -- 2,200 2,000 300 400 200 1,300
------- -------- -------- -------- ------- ------- ------- ------
Total cash charges........................... 39,000 700 23,300 6,800 1,700 2,700 1,900 1,900
------- -------- -------- -------- ------- ------- ------- ------
NON-CASH:
Asset revaluation.............................. 56,000 51,900 2,400 $1,700 $ -- $ -- $ -- $ --
------- -------- -------- -------- ------- ------- ------- ------
Total 1991 Other Charges..................... $95,000 $52,600 $25,700 $8,500 $1,700 $ -- $1,900 $1,900
========= ========== ========== ========== ========== ========= ========= ========
1993 DISPOSITION:
NON-CASH:
Disposition of production facilities........... $ 2,453 $ -- $ -- $2,453 $ -- $ -- $ -- $ --
------- -------- -------- -------- ------- ------- ------- ------
Total 1993 Other Charges..................... $ 2,453 $ -- $ -- $2,453 $ -- $ -- $ -- $ --
========= ========== ========== ========== ========== ========= ========= ========
1994 RESTRUCTURING:
CASH:
Casting facility closure....................... $ 1,100 $ -- -- $ -- $ -- $ 600 $ 500 $ --
------- -------- -------- -------- ------- ------- ------- ------
NON-CASH:
Casting facility closure....................... 4,100 -- -- -- 4,100 -- -- --
Other.......................................... 1,250 -- -- -- 1,250 -- -- --
------- -------- -------- -------- ------- ------- ------- ------
Total non-cash charges....................... 5,350 -- -- -- 5,350 -- -- --
------- -------- -------- -------- ------- ------- ------- ------
Total 1994 Restructuring..................... 6,450 -- -- -- 5,350 600 500 --
1994 CAMERON INTEGRATION COSTS:
CASH:
Movement of machinery, equipment and tooling
and dies..................................... 4,300 -- -- -- -- 800 2,100 1,400
Severance and other personnel costs............ 4,000 -- -- -- -- 1,800 2,000 200
------- -------- -------- -------- ------- ------- ------- ------
Total cash charges........................... 8,300 -- -- -- -- 2,600 4,100 1,600
------- -------- -------- -------- ------- ------- ------- ------
NON-CASH:
Asset revaluation.............................. 13,700 -- -- -- 11,400 2,300 -- --
Credits to reserves............................ 2,100 -- -- -- -- 2,100 -- --
------- -------- -------- -------- ------- ------- ------- ------
Total non-cash charges....................... 15,800 -- -- -- 11,400 4,400 -- --
------- -------- -------- -------- ------- ------- ------- ------
Total 1994 Cameron integration costs......... 24,100 -- -- -- 11,400 7,000 4,100 1,600
------- -------- -------- -------- ------- ------- ------- ------
Total 1994 Other Charges..................... $30,550 $ -- $ -- $ -- $16,750 $ 7,600 $4,600 $1,600
========= ========== ========== ========== ========== ========= ========= ========
CAMERON PURCHASE CASH COSTS:
Cost of relocating Cameron's machinery and
equipment and tooling and dies............... $ 3,200 $ -- $ -- $ -- $ -- $ 1,700 $1,100 $ 400
Severance of Cameron personnel................. 3,800 -- -- -- -- 2,400 1,300 100
------- -------- -------- -------- ------- ------- ------- ------
Total Cameron Purchase Cash Costs............ $ 7,000 $ -- $ -- $ -- $ -- $ 4,100 $2,400 $ 500
========= ========== ========== ========== ========== ========= ========= ========
1995 OTHER CHARGES:
NON-CASH:
Credits to 1994 Cameron integration costs...... $(2,100) $ -- $ -- $ -- $ -- $(2,100) $ -- $ --
------- -------- -------- -------- ------- ------- ------- ------
Total 1995 Other Charges..................... $(2,100) $ -- $ -- $ -- $ -- $(2,100) $ -- $ --
------- -------- -------- -------- ------- ------- ------- ------
Total Cash..................................... $55,400 $ 700 $23,300 $6,800 $1,700 $10,000 $8,900 $4,000
------- -------- -------- -------- ------- ------- ------- ------
Total Non-cash................................. $77,503 $51,900 $ 2,400 $4,153 $16,750 $ 2,300 $ -- $ --
========= ========== ========== ========== ========== ========= ========= ========
</TABLE>
F-14
<PAGE> 89
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
G. ENVIRONMENTAL MATTERS
The company is subject to extensive, stringent and changing federal, state
and local environmental laws and regulations, including those regulating the
use, handling, storage, discharge and disposal of hazardous substances and the
remediation of alleged environmental contamination. Nevertheless, the company
believes that compliance with these laws and regulations will not have a
material adverse effect on the company's operations as a whole. In 1991, the
company recorded a charge of $7,000,000 with respect to environmental
investigation and remediation costs at one of the company's facilities. During
the five months ended May 28, 1994, the company provided an additional
$2,000,000 to the current estimated cost of remediation. Additionally, a charge
of $5,000,000 against potential environmental remediation costs upon the
eventual sale of another facility was included in the 1991 restructuring charge.
Pursuant to an agreement entered into with the U.S. Air Force upon the
acquisition of a facility from the federal government in 1982, the company
agreed to make additional expenditures for environmental management and
remediation projects at that site during the period 1982 through 1999.
Approximately $6,100,000 of future expenditures remain as of June 3, 1995. The
company, together with numerous other parties, has also been alleged to be a
potentially responsible party at four federal or state Superfund sites. The
company does not believe that liabilities related to such sites will be material
in the aggregate.
The company's Grafton, Massachusetts plant location is included in the U.S.
Nuclear Regulatory Commission's ("NRC") May 1992 Site Decommissioning Management
Plan for low-level radioactive waste as a "Priority C" (lowest priority) site.
The NRC conducted a long range dose assessment in 1992, and concluded that the
site should be remediated. However, the company believes the NRC's draft
assessment was flawed and has challenged that draft assessment. The company has
provided $1,500,000 for the estimated cost of the remediation. The company
believes that it may have meritorious claims for reimbursement from the U.S. Air
Force in respect of any liabilities it may have for such remediation.
The company has been named in a suit which relates to the clean-up of a
privately owned site in Massachusetts formerly used as an impoundment lagoon
from which hazardous material is alleged to have spilled. A proposed agreement
would allocate 33% of the clean-up costs to the company. An insurance company is
defending the company's interests, and the company believes that any recovery
against the company would be covered by insurance. A consulting firm retained by
the PRP group has recently made a preliminary remediation cost estimate of
$300,000 to $9,900,000, depending on the level of toxicity found and the method
of remediation ultimately used.
H. BENEFIT PLANS
The company and its subsidiaries have pension plans covering substantially
all employees. Benefits are generally based on years of service and a fixed
monthly rate or average earnings during the last years of employment. Pension
plan assets are invested in equity and fixed income securities, pooled funds
including real estate funds and annuities. Company contributions are determined
based upon the funding requirements of U.S. and other governmental laws and
regulations.
F-15
<PAGE> 90
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation between the amounts recorded on the consolidated balance
sheets and the summary tables of the funding status of the pension plans are as
follows:
<TABLE>
<CAPTION>
JUNE 3, MAY 28,
1995 1994
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Pension liability per balance sheet................................. $ (9,589) $ (14,462)
Prepaid pension expense included in prepaid expenses in the balance
sheet............................................................. 1,639 2,769
UK pension liability................................................ 789 750
--------- ---------
Net pension liability............................................... $ (7,161) $ (10,943)
========= =========
</TABLE>
U.S. PENSION PLANS
Pension expense for the U.S. pension plans included the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
YEAR ENDED FIVE MONTHS 31,
JUNE 3, ENDED MAY ---------------------
1995 28, 1994 1993 1992
---------- ----------- -------- --------
(000'S OMITTED)
<S> <C> <C> <C> <C>
Service cost.............................. $ 2,938 $ 917 $ 1,720 $ 1,937
Interest cost on projected benefit
obligation.............................. 10,842 4,373 10,955 11,083
Actual return on assets................... (8,205) (2,248) (18,107) (6,849)
Net amortization and deferral of actuarial
gains (losses).......................... (1,385) (1,798) 8,208 (3,403)
---------- ----------- -------- --------
Net pension expense....................... $ 4,190 $ 1,244 $ 2,776 $ 2,768
=========== =========== ======== ========
Assumed long-term rate of return on plan
assets.................................. 9.0% 9.0% 9.0% 9.0%
=========== =========== ======== ========
</TABLE>
F-16
<PAGE> 91
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the funding status of the U.S. pension plans and a
reconciliation to the amounts recorded in the consolidated balance sheets are as
follows:
<TABLE>
<CAPTION>
JUNE 3, 1995
-----------------------------------------
ASSETS ACCUMULATED
EXCEEDING BENEFITS
ACCUMULATED EXCEEDING
BENEFITS ASSETS TOTAL
----------- ----------- ---------
(000'S OMITTED)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested......................................... $ 82,042 $ 46,202 $ 128,244
Nonvested...................................... 349 324 673
-------- -------- --------
Accumulated benefit obligation................. 82,391 46,526 128,917
Impact of forecasted salary increases during
future periods.............................. 5,737 339 6,076
-------- -------- --------
Projected benefit obligation for employee
service to date............................. 88,128 46,865 134,993
Current fair market value of plan assets......... 101,933 30,967 132,900
-------- -------- --------
Excess (shortfall) of plan assets over (under)
projected benefit obligation................... 13,805 (15,898) (2,093)
Unrecognized net (gain) loss..................... (10,261) 1,771 (8,490)
Unrecognized net (asset) obligation at
transition..................................... (455) 4,912 4,457
Unrecognized prior service cost.................. 5,290 2,456 7,746
Adjustment required to recognize minimum
liability...................................... -- (8,800) (8,800)
Net periodic pension cost April 1, 1995 to June
3, 1995........................................ (48) (650) (698)
Contributions April 1, 1995 to June 3, 1995...... -- 717 717
-------- -------- --------
Net prepaid pension expense (pension
liability)..................................... $ 8,331 $ (15,492) $ (7,161)
======== ======== ========
Estimated annual increase in future salaries..... 3-5%
Weighted average discount rate................... 9.0%
--------
</TABLE>
F-17
<PAGE> 92
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
MAY 28, 1994
-----------------------------------------
ASSETS ACCUMULATED
EXCEEDING BENEFITS
ACCUMULATED EXCEEDING
BENEFITS ASSETS TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
(000'S OMITTED)
Actuarial present value of benefit obligations:
Vested......................................... $ 91,533 $ 50,639 $ 142,172
Nonvested...................................... 341 398 739
----------- ----------- ---------
Accumulated benefit obligation................. 91,874 51,037 142,911
Impact of forecasted salary increases during
future periods.............................. 6,798 235 7,033
----------- ----------- ---------
Projected benefit obligation for employee
service to date............................. 98,672 51,272 149,944
Current fair market value of plan assets......... 103,349 31,390 134,739
----------- ----------- ---------
Excess (shortfall) of plan assets over (under)
projected benefit obligation................... 4,677 (19,882) (15,205)
Unrecognized net (gain) loss..................... (1,274) 5,121 3,847
Unrecognized net (asset) obligation at
transition..................................... (522) 5,965 5,443
Unrecognized prior service cost.................. 5,706 2,860 8,566
Adjustment required to recognize minimum
liability...................................... -- (13,712) (13,712)
Net periodic pension cost April 1, 1994 to May
28, 1994....................................... 34 (507) (473)
Contributions April 1, 1994 to May 28, 1994...... -- 591 591
----------- ----------- ---------
Net prepaid pension expense (pension
liability)..................................... $ 8,621 $ (19,564) $ (10,943)
============= ============= =========
Estimated annual increase in future salaries..... 3-5%
Weighted average discount rate................... 7.5%
---------
</TABLE>
A measurement date of March 31 has been used for determining the disclosure
information. Expense recognition and contributions received during the period
April 1 through fiscal year-end are then recognized to bring the accrued or
prepaid expense to June 3, 1995 and May 28, 1994 balances.
U.K. PENSION PLAN
Pension expense for the U.K. pension plan included the following:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 3, 1995
---------------
<S> <C>
(000'S OMITTED)
Service cost.............................................. $ 692
Interest cost............................................. 1,189
Expected return on assets................................. (1,084)
-------
Net pension expense..................................... $ 797
=======
</TABLE>
F-18
<PAGE> 93
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The U.K. pension plan's assets and liabilities were rolled over from the
former Cameron plan during fiscal 1995. The funded status of the U.K. pension
plan is as follows:
<TABLE>
<CAPTION>
JUNE 3, 1995
---------------
<S> <C>
(000'S OMITTED)
Fair value of plan assets................................. $ 14,682
Projected benefit obligation.............................. 15,247
-------
Plan assets less than projected benefit obligation........ (565)
Unrecognized net gain loss................................ 498
-------
Accrued pension cost...................................... $ (67)
=======
Accumulated benefits...................................... $ 13,472
=======
Vested benefits........................................... $ 13,472
=======
Assumed long-term rate of return on plan assets........... 9.0%
Weighted average discount rate............................ 9.0%
Rate of salary increase................................... 6.0%
</TABLE>
The company also maintains a 401K plan for most full-time salaried
employees. Employer contributions to the defined contribution plan are made at
the company's discretion and are reviewed periodically. Such contributions
amounted to $136,000 for the year ended June 3, 1995, $591,000 for the five
months ended May 28, 1994, and $134,000 and $375,000 for the years ended
December 31, 1993 and 1992, respectively. Additionally, for the year ended June
3, 1995, the five months ended May 28, 1994 and the years ended December 31,
1993 and 1992, the company contributed 120,261; 14,432; 58,927 and 0 shares of
common stock from Treasury to its defined contribution plan, respectively, and
recorded expense relating thereto of $711,000, $84,000, $271,000 and $0,
respectively.
I. OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits, the company and its subsidiaries
provide most retired employees with health care and life insurance benefits. The
majority of these health care and life insurance benefits are provided through
insurance companies, some of whose premiums are computed on a cost plus basis.
The annual cost of these benefits on the expense-as-incurred basis amounted to
$4,849,000 in 1992.
Effective January 1, 1993, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This standard
requires companies to accrue postretirement benefits during the years the
employees are working and earning benefits for retirement, as contrasted to the
expense-as-incurred basis that the company followed in 1992 and prior years. The
company elected to recognize the cumulative effect of the accounting change,
resulting in a non-cash reduction in earnings in 1993 of $43,000,000 or $2.39
per share.
Most of the Forgings Division and Corporate retirees and full-time
employees are or become eligible for these postretirement health care and life
insurance benefits if they meet minimum age and service requirements. There are
certain retirees for which company cost and liability are affected by future
increases in health care cost. The liabilities have been developed assuming a
medical trend rate for growth in future health care claim levels from the
assumed 1994 level. The change to the accumulated postretirement benefit
obligation for each 1.0% change in these assumptions is $850,000. The change in
the annual SFAS 106 expense for each 1.0% change in these assumptions is
$78,000. The weighted average discount rate used in determining the amortization
of the accumulated postretirement benefit
F-19
<PAGE> 94
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
obligation was 9.0% and 7.5% at June 3, 1995 and May 28, 1994, respectively, and
the average remaining service life was 20 years.
Net periodic benefit expense consists of the following components:
<TABLE>
<CAPTION>
FIVE MONTHS
YEAR ENDED ENDED YEAR ENDED
JUNE 3, MAY 28, DECEMBER 31,
1995 1994 1993
---------- ----------- ------------
<S> <C> <C> <C>
(000'S OMITTED)
Service cost.................................... $ 350 $ 85 $ 170
Interest on the accumulated benefit
obligation.................................... 3,990 1,540 3,660
------ ------ ------
Total postretirement benefit expense.......... $4,340 $1,625 $3,830
====== ====== ======
</TABLE>
The company has no plans for funding the liability and will continue to pay
for retiree medical costs as they occur. The components of the accumulated
postretirement benefit obligation are as follows:
<TABLE>
<CAPTION>
JUNE 3, MAY 28,
1995 1994
-------- --------
<S> <C> <C>
(000'S OMITTED)
Accumulated postretirement benefit obligation:
Retirees............................................................ $ 41,323 $ 43,285
Fully eligible active plan participants............................. 5,180 5,239
Other active plan participants...................................... 7,023 6,778
-------- --------
53,526 55,302
Plan assets at fair value............................................. -- --
-------- --------
Accumulated postretirement benefit obligation in excess of plan
assets.............................................................. 53,526 55,302
Unrecognized net gain (loss) from past experience different from that
assumed and from changes in assumptions............................. 901 (3,454)
Prior service cost not yet recognized in net periodic postretirement
benefit cost........................................................ (2,000) --
------- -------
Accrued postretirement benefit cost................................... $52,427 $51,848
======= =======
</TABLE>
J. FEDERAL, FOREIGN AND STATE INCOME TAXES
As of January 1, 1993, the company adopted financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes" ("SFAS 109"). As
permitted under SFAS 109, the company has elected not to restate the financial
statements of prior years. The impact of this change on the results of
operations for the year ended December 31, 1993 was immaterial.
The company has not recognized an income tax benefit (provision) during the
year ended June 3, 1995, the five months ended May 28, 1994, or the years ended
December 31, 1993 and 1992, respectively.
The company received income tax refunds of $0, $138,000, $282,000 and
$3,725,000 during the years ended June 3, 1995, the five months ended May 28,
1994, and the years ended December 31, 1993 and 1992, respectively.
F-20
<PAGE> 95
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The benefit (provision) for income taxes is at a rate other than the
federal statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
YEAR ENDED FIVE MONTHS 31,
JUNE 3, ENDED MAY ---------------------
1995 28, 1994 1993 1992
---------- ----------- -------- --------
<S> <C> <C> <C> <C>
(000'S OMITTED)
U.S. federal statutory tax rate........... $ (363) $ 21,480 $ 5,781 $ (7,410)
Recognition of previously unrecognized
deferred tax assets..................... 1,749 -- -- 7,410
Tax carryforwards without current tax
benefits (foreign in 1995 and U.S.
federal in 1994 and 1993)............... (1,386) (21,480) (5,781) --
---------- ----------- -------- --------
Income tax benefit (provision)............ $ -- $ -- $ -- $ --
=========== =========== ======== ========
</TABLE>
Tax net operating loss carryforwards of $67,000,000 begin expiring in the
year 2006. The company has experienced significant operating losses and there is
no assurance that the net operating loss carryforwards will be utilized,
therefore, a valuation allowance of $67,731,000 and $69,716,000 at June 3, 1995
and May 28, 1994 has been recognized, respectively.
The principal components of deferred tax assets and liabilities were as
follows:
<TABLE>
<CAPTION>
JUNE 3, 1995 MAY 28, 1994
------------ ------------
<S> <C> <C>
(000'S OMITTED)
DEFERRED TAX ASSETS
Provision for postretirement benefits......................... $ 21,512 $ 21,228
Net operating loss carryforwards.............................. 23,585 19,230
Restructuring provisions...................................... 26,602 35,804
Other......................................................... 6,496 5,768
------------ ------------
78,195 82,030
Valuation allowance........................................... (67,731) (69,716)
------------ ------------
10,464 12,314
------------ ------------
DEFERRED TAX LIABILITIES
Accelerated depreciation...................................... 9,393 10,069
Other......................................................... 3,694 4,868
------------ ------------
13,087 14,937
------------ ------------
Net deferred tax liability...................................... $ 2,623 $ 2,623
=========== ===========
</TABLE>
The net deferred tax liability is included in "Deferred income taxes and
other" on the accompanying consolidated balance sheets.
The company is seeking refunds of prior year's federal taxes paid, which,
if fully realized, could have a material favorable impact on the company's
financial position. A reasonable estimation of the potential recovery cannot be
made at this time and, accordingly, no adjustment has been made in the financial
statements with respect to the claim.
F-21
<PAGE> 96
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
K. STOCK OPTION PLANS
The company's Long-Term Incentive Plan (the "Plan") is administered by the
Management Resources and Compensation Committee of the Board (the "Committee"),
which has plenary authority to interpret the Plan and to adopt rules relating
thereto. The Committee may also determine the number, frequency and timing of
awards, as well as the type of award and its exercise price, if any, prescribe
any performance criteria to be met and any restrictions on exercise and
determine any other terms or conditions, including schedules for vesting and
exercisability and the conditions under which vesting and exercisability may be
accelerated, such as in the event of a change in control of the company.
The Committee may grant awards in the form of non-qualified stock options
or incentive stock options to those key employees of the company and its
subsidiaries, including executive officers, it selects to purchase in the
aggregate up to 1,750,000 shares of newly issued or treasury common stock. The
exercise price of non-qualified stock options may not be less than 50% of the
fair market value of such shares on the date of grant or, in the case of
incentive stock options, 100% of the fair market value on the date of grant.
Awards of stock appreciation rights ("SAR's") may also be granted, either in
tandem with grants of stock options (and exercisable as an alternative to the
exercise of stock options) or separately.
In addition, the Committee may grant other awards that consist of or are
denominated in or payable in shares or that are valued by reference to shares,
including, for example, restricted shares, phantom shares, performance units,
performance bonus awards or other awards payable in cash, shares or a
combination thereof at the Committee's discretion. During fiscal 1995, awards of
150,000 shares of the company's common stock were made subject to restrictions
based upon continued employment for a period of five years and the performance
of the company. Compensation expense totalling $330,000 relating to the awards
was recorded during the year ended June 3, 1995.
The 1975 Executive Long-Term Incentive Program (the "Program"), as amended,
provided for the granting of stock options, alternative common stock
appreciation rights and performance bonus award units to key employees of the
company and its subsidiaries. The 1975 program expired on December 31, 1992,
except as to outstanding grants.
F-22
<PAGE> 97
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Option activity under the 1975 Program and the 1991 Plan in the year ended
June 3, 1995, the five months ended May 28, 1994 and the years ended December
31, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
OPTION
PRICE RANGE SHARES
----------- ---------
<S> <C> <C>
Outstanding at December 31, 1991................................. 3.75-29.00 1,839,246
Granted........................................................ 5.00 321,502
Terminated..................................................... 3.75 (185,001)
Exercised...................................................... 3.75 (16,666)
Cancelled...................................................... 3.75-29.00 (65,895)
---------
Outstanding at December 31, 1992................................. 3.75-29.00 1,893,186
Granted........................................................ 5.00- 6.00 285,500
Terminated..................................................... 3.75-29.00 (372,480)
Exercised...................................................... 3.75 (70,831)
---------
Outstanding at December 31, 1993................................. 1,735,375
Granted........................................................ 5.13- 5.63 88,008
Terminated..................................................... 3.75-19.00 (28,185)
Exercised...................................................... 3.75- 5.00 (30,943)
---------
Outstanding at May 28, 1994...................................... 1,764,255
Granted........................................................ 5.63-10.63 365,000
Terminated..................................................... 3.75-21.50 (103,922)
Exercised...................................................... 3.75- 6.25 (190,098)
---------
Outstanding at June 3, 1995...................................... 1,835,235
=========
</TABLE>
Options for 1,203,000; 930,000; 867,000 and 677,000 shares, were
exercisable at June 3, 1995, May 28, 1994 and December 31, 1993 and 1992,
respectively. At June 3, 1995, 105,000 shares were available for future grants.
L. STOCK PURCHASE RIGHTS
In August 1988, the company adopted a Rights Agreement (the "Rights
Agreement"), and in October 1988, the company declared a dividend distribution
of one common stock purchase Right on each outstanding share of common stock.
The Rights will become exercisable at a purchase price of $50 each on the
distribution date which occurs if a person or group acquires or makes an offer
to acquire 20% or more of the company's common stock.
In the event that at any time following the distribution date, (i) a person
or group becomes the beneficial owner of 20% or more of the then outstanding
shares of common stock (except pursuant to an offer for all outstanding shares
of common stock which the continuing Directors determine to be fair to and
otherwise in the best interests of the company and its stockholders), (ii) the
company is not the surviving corporation in a merger and its common stock is not
changed or exchanged, (iii) an acquiring person engages in one or more
self-dealing transactions as set forth in the Rights Agreement, or (iv) during
such time as there is an acquiring person, an event occurs which results in such
person's ownership interest being increased by more than 1%, each holder of a
Right will thereafter have the right to receive, upon exercise of the Right and
payment of the purchase price, common stock or a
F-23
<PAGE> 98
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
combination of common stock, cash, preferred stock or debt having a value equal
to two times the purchase price of the Right. Alternatively, in such event and
with the approval of the continuing Directors, each holder of a Right will have
the right, or may be permitted only, to receive shares of common stock having a
value equal to the purchase price upon surrender of the Right to the company and
without payment of the purchase price. Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are beneficially owned by the acquiring person will be null and
void. However, Rights are not exercisable following the occurrence of any of the
events set forth above until such time as the Rights are no longer redeemable by
the company.
In the event that, at any time following the date on which a person or
group acquires 20% or more of the company's outstanding shares (i) the company
is acquired in a merger or other business combination transaction in which the
company is not the surviving corporation (other than certain exceptions
mentioned in the Rights agreement) or (ii) 50% or more of the company's assets
or earning power is sold or transferred, each holder of a Right which has not
been previously voided shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the purchase price of the Right. The Rights may generally be redeemed by
the company at a price of $.02 per Right and they expire in November 1998.
M. COMMITMENTS AND CONTINGENCIES
At June 3, 1995, certain lawsuits arising in the normal course of business
were pending. The company denies all material allegations of these complaints.
In the opinion of management, the outcome of legal matters will not have a
material adverse effect on the company's financial position, results of
operations or liquidity.
As of June 3, 1995, the company had invested $4,100,000 in cash towards its
share of the capital requirements of its Australian joint venture for the
production of nickel-based superalloy. The company is committed to an additional
investment of $3,400,000 to the joint venture. The joint venture has entered
into a credit agreement with an Australian bank. The company has guaranteed 25%
of the joint venture's obligations under the credit agreement totalling
$17,300,000. This guarantee expires at such time as the joint venture
demonstrates its ability to produce commercially acceptable products.
The company had foreign exchange contracts totalling $11,600,000 at June 3,
1995. These contracts hedge certain normal operating purchase and sales
transactions. The exchange contracts generally mature within six months and
require the company to exchange U.K. pounds for non-U.K. currencies or non-U.K.
currencies for U.K. pounds. Translation and transaction gains and losses
included in fiscal 1995's Consolidated Statements of Operations were not
significant.
N. GEOGRAPHIC AND OTHER INFORMATION
Prior to May 28, 1994 the company operated solely in the United States.
Transfers between U.S. and international operations, principally inventory
transfers, are charged to the receiving organization at prices sufficient to
recover manufacturing costs and provide a reasonable return.
F-24
<PAGE> 99
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Certain information on a geographic basis follows:
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS
JUNE 3, ENDED MAY
1995 28, 1994
---------- -----------
(000'S OMITTED)
<S> <C> <C>
REVENUES FROM UNAFFILIATED CUSTOMERS:
United States (including direct export sales)................... $ 365,666 $ 86,976
United Kingdom.................................................. 30,973 --
---------- -----------
$ 396,639 $ 86,976
=========== ===========
INTER AREA TRANSFERS:
United States................................................... $ 373 $ --
United Kingdom.................................................. 2,528 --
---------- -----------
$ 2,901 $ --
=========== ===========
EXPORT SALES:
United States direct export sales............................... $ 81,208 $ 13,254
=========== ===========
INCOME (LOSS) FROM OPERATIONS:
United States................................................... $ 14,931 $ (55,805)
United Kingdom.................................................. (1,213 ) --
---------- -----------
$ 13,718 $ (55,805)
=========== ===========
IDENTIFIABLE ASSETS (EXCLUDING INTERCOMPANY):
United States................................................... $ 289,649 $ 312,462
United Kingdom.................................................. 47,547 39,457
General corporate............................................... 31,868 42,828
---------- -----------
$ 369,064 $ 394,747
=========== ===========
</TABLE>
F-25
<PAGE> 100
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for fiscal 1995 and fiscal 1994 were as
follows:
<TABLE>
<CAPTION>
QUARTER FIRST SECOND THIRD FOURTH
- --------------------------------------------- --------- --------- --------- ---------
(000'S OMITTED, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 3, 1995
Revenue...................................... $ 95,725 $ 94,974 $ 96,238 $ 109,702
Cost of goods sold........................... 86,150 85,105 83,623 92,373
Other charges (credits) and environmental
charges.................................... -- -- -- (710)
Income (loss) from operations................ 3 768 3,620 9,327
Net income (loss)............................ (3,321) (2,021) 556 5,825
Net income (loss) per share.................. (.10) (.06) .02 .17
YEAR ENDED MAY 28, 1994
Revenue...................................... $ 58,452 $ 56,233 $ 50,896 $ 59,113
Cost of goods sold........................... 50,433 53,014 50,375 63,994
Other charges (credits) and environmental
charges.................................... -- 2,366 87 32,550
Income (loss) from operations................ 1,886 (6,298) (8,447) (50,798)
Net income (loss)............................ (816) (5,642) (11,282) (54,663)
Net income (loss) per share.................. (.05) (.31) (.63) (3.02)
</TABLE>
- ---------------
(a) Income (loss) from operations during the third quarter of the year ended May
28, 1994 reflects charges of $2,400 resulting from a change in estimated
cash surrender values provided by the company's insurance actuaries on
company-owned life insurance policies.
(b) Income (loss) from operations during the fourth quarter of the year ended
May 28, 1994 reflects significant charges amounting to $17,450,000.
F-26
<PAGE> 101
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Prospectus Summary................... 3
Risk Factors......................... 7
Price Range of Common Stock and
Dividend Policy.................... 10
Capitalization....................... 12
Selected Consolidated Financial
Data............................... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 15
Business............................. 21
Management........................... 33
Relationship between the Company and
Cooper............................. 35
Description of the Company's Capital
Stock.............................. 42
Common Stock Ownership of Cooper..... 47
Plan of Distribution................. 47
Legal Matters........................ 48
Experts.............................. 49
Index to Consolidated Financial
Statements......................... 50
</TABLE>
15,000,000 SHARES
WYMAN-GORDON COMPANY
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
LOGO
PROSPECTUS
DATED , 1995
<PAGE> 102
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY COOPER OR
THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF COOPER SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 3
Risk Factors........................... 4
Cooper Industries, Inc................. 6
Wyman-Gordon Company................... 7
Relationship between Cooper and
Wyman-Gordon......................... 7
Price Range of Wyman-Gordon Common
Stock and Dividend Policy............ 8
Use of Proceeds........................ 8
Selected Financial Data................ 9
Description of the DECS................ 10
Certain United States Federal Income
Tax Considerations................... 19
Plan of Distribution................... 22
ERISA Matters.......................... 23
Legal Matters.......................... 23
Experts................................ 23
Prospectus Relating to Common Stock of
Wyman-Gordon Company............Appendix A
</TABLE>
15,000,000 DECS(SM)
(DEBT EXCHANGEABLE FOR
COMMON STOCK(SM))
COOPER INDUSTRIES, INC.
% EXCHANGEABLE NOTES
DUE , 1998
[COOPER LOGO]
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
SCHRODER WERTHEIM & CO.
PROSPECTUS
DATED 1995
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses other than
underwriting discounts and commissions, incurred in connection with the sale of
the DECS being registered (all amounts are estimated except the Commission
registration fee and the National Association of Securities Dealers, Inc. Fee).
<TABLE>
<S> <C>
Commission Registration Fee....................................... $71,121
National Association of Securities Dealers, Inc. Fee.............. $21,125
Printing and Engraving............................................ $ *
Legal Fees and Expenses........................................... $ *
Accounting Fees and Expenses...................................... $ *
Trustee Fees...................................................... $ *
Rating Agency Fees................................................ $ *
Depository Trust Company Fees..................................... $ *
Blue Sky Fees and Expenses........................................ $ *
Transfer Agent Fees............................................... $ *
Miscellaneous..................................................... $ *
--------
Total................................................... $ *
========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1701.13 of the Ohio General Corporation Law contains detailed
provisions for indemnification of directors and officers of Ohio corporations
against expenses, judgments, fines and settlements in connection with
litigation. Cooper's Articles of Incorporation and its Directors' and Officers'
Liability Insurance Policy provide for indemnification and insurance,
respectively, of the directors and officers of Cooper against certain
liabilities.
In addition, on February 17, 1987 the Board of Directors of Cooper
authorized Cooper to enter into indemnification agreements with the directors
and certain officers that may be designated from time to time by the Board of
Directors. The Board's action was approved by the shareholders at their Annual
Meeting on April 28, 1987. The indemnification agreements contain provisions for
indemnification against expenses, judgments, fines and settlements in connection
with threatened or pending litigation, inquiries or investigations that arise
out of the director's or officer's acts or omissions in his or her capacity as a
director or officer of Cooper.
Reference is made to the form of the Underwriting Agreement filed as
Exhibit 1.1 hereto, which contains provisions for indemnification of Cooper, its
directors, officers and any controlling persons by the Underwriters against
certain liabilities for information furnished by the Underwriters.
II-1
<PAGE> 104
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- -------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.*
4.1 -- Form of Indenture, between Cooper Industries, Inc. and Texas Commerce
Bank National Association, as Trustee.
4.2 -- Form of First Supplemental Indenture between Cooper Industries, Inc.
and Texas Commerce Bank National Association, as Trustee.
4.3 -- Form of DECS (included as Exhibit A to Exhibit 4.2).
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom.*
12.1 -- Calculation of Ratios of Earnings to Fixed Charges (incorporated by
reference to Cooper's Form 10-Q for the quarter ended June 30, 1995).
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit
5.1).*
24.1 -- Powers of Attorney (included on pages II-3 and II-4 hereof).
25.1 -- Statement of Eligibility and Qualification on Form T-1 of Texas
Commerce Bank National Association.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to any existing provision or arrangement or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 105
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on October 13, 1995.
COOPER INDUSTRIES, INC.
By /s/ H. JOHN RILEY, JR.
--------------------------------------
H. John Riley, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby authorizes Diane K. Schumacher and Karen E. Herbert and each of them,
with full power of substitution, to execute in the name and on behalf of such
person any amendment (including any post-effective amendment) to this
Registration Statement, to file the same with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary fully to
all intents and purposes as such person might or could do in person thereby
ratifying and confirming all that said attorneys-in-fact or either of them, or
their respective substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
<TABLE>
<C> <S> <C>
/s/ ROBERT CIZIK Director and Chairman October 13, 1995
- --------------------------------------------- of the Board
Robert Cizik
/s/ H. JOHN RILEY, JR. Director, President and October 13, 1995
- --------------------------------------------- Chief Executive Officer
H. John Riley, Jr.
/s/ D. BRADLEY MCWILLIAMS Senior Vice President, October 13, 1995
- --------------------------------------------- Finance (Chief Financial
D. Bradley McWilliams Officer)
/s/ TERRY A. KLEBE Vice President and October 13, 1995
- --------------------------------------------- Controller (Chief
Terry A. Klebe Accounting Officer)
Director October 13, 1995
- ---------------------------------------------
Warren L. Batts
/s/ CLIFFORD J. GRUM Director October 13, 1995
- ---------------------------------------------
Clifford J. Grum
/s/ LINDA A. HILL Director September 25, 1995
- ---------------------------------------------
Linda A. Hill
</TABLE>
II-3
<PAGE> 106
<TABLE>
<S> <C> <C>
Director October 13, 1995
- ---------------------------------------------
Harold S. Hook
Director October 13, 1995
- ---------------------------------------------
Constantine S. Nicandros
/s/ FRANK A. OLSON Director September 25, 1995
- ---------------------------------------------
Frank A. Olson
/s/ JOHN D. ONG Director October 13, 1995
- ---------------------------------------------
John D. Ong
/s/ SIR RALPH H. ROBINS Director October 13, 1995
- ---------------------------------------------
Sir Ralph H. Robins
Director October 13, 1995
- ---------------------------------------------
A. Thomas Young
</TABLE>
II-4
<PAGE> 1
EXHIBIT 4.1
================================================================================
COOPER INDUSTRIES, INC.
TO
TEXAS COMMERCE
BANK NATIONAL ASSOCIATION
as Trustee
______________________
INDENTURE
Dated as of [ ], 1995
Providing for issuance of Debt Securities in Series
================================================================================
<PAGE> 2
<TABLE>
COOPER INDUSTRIES, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE DATED AS OF [ ], 1995
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03, 8.09
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.09
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.08
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.13(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.13(b)
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04(a)(2)
6.04(b)
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
6.02(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04(a), 6.04(c)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04(d)
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.03
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.05
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.05
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.05
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08
6.04(a)(6)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01(a)
(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01(b)
(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09
Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.01
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
7.07
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.04
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02
</TABLE>
<PAGE> 3
2
<TABLE>
<S> <C> <C>
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.07
- ----------
<FN>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
</TABLE>
<PAGE> 4
<TABLE>
TABLE OF CONTENTS*/
<CAPTION>
Page
----
<S> <C>
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purpose of and Consideration for Indenture . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS.
SECTION 1.01. Certain terms defined; other terms
defined in Trust Indenture Act of
1939 or by reference therein in
Securities Act of 1933 to have
meanings therein assigned . . . . . . . . . . . . . . . . . . . 2
Agent Member . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Applicable Debt Securities . . . . . . . . . . . . . . . . . . . 3
Attributable Debt . . . . . . . . . . . . . . . . . . . . . . . . 3
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 4
Certified Resolutions or Board
Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Security or Debt Securities; Outstanding . . . . . . . . . 4
Debt Securityholder or Holder . . . . . . . . . . . . . . . . . . 6
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Eligible Obligations . . . . . . . . . . . . . . . . . . . . . . 6
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 6
Funded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Global Debt Security . . . . . . . . . . . . . . . . . . . . . . 7
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . 8
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . 9
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Principal Office of the Trustee . . . . . . . . . . . . . . . . . 9
Principal Property . . . . . . . . . . . . . . . . . . . . . . . 9
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . 10
__________________________________
<FN>
*/ The table of contents, comprising pages (i) to (vi) inclusive, is not a part of the Indenture.
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
ii
Page
----
<S> <C> <C>
Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . 11
Sale and Leaseback Transaction . . . . . . . . . . . . . . . . . 12
Secured Indebtedness . . . . . . . . . . . . . . . . . . . . . . 12
Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . 13
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . 14
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . 14
Voting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF DEBT SECURITIES.
SECTION 2.01. Issuable in Series; Unlimited
Aggregate Principal Amount . . . . . . . . . . . . . . . . . . 15
SECTION 2.02. Documents Required for Issuance of
Each Series of Debt Securities . . . . . . . . . . . . . . . . 16
SECTION 2.03. Denominations; Certificate of
Authentication . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.04. Execution of Debt Securities . . . . . . . . . . . . . . . . . . 26
SECTION 2.05. Exchange and Registration of Transfer
of Debt Securities . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen
Debt Securities . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.07. Temporary Debt Securities . . . . . . . . . . . . . . . . . . . 31
SECTION 2.08. Cancellation of Debt Securities Paid, Etc. . . . . . . . . . . . 33
SECTION 2.09. Debt Securities to Be Treated Equally . . . . . . . . . . . . . 33
SECTION 2.10. Computation of Interest . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.11. Global Debt Securities; Depositary . . . . . . . . . . . . . . . 34
ARTICLE THREE
SINKING FUNDS.
SECTION 3.01. Applicability of Article . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.02. Satisfaction of Sinking Fund Payments
with Debt Securities . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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SECTION 3.03. Redemption of Debt Securities for Sinking
Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE FOUR
REDEMPTION OF DEBT SECURITIES.
SECTION 4.01. Applicability of Article . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.02. Notice of Redemption; Selection of
Debt Securities . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.03. Payment of Debt Securities Called for
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY.
SECTION 5.01. Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.02. Office for Notices and Payments, Etc. . . . . . . . . . . . . . . 47
SECTION 5.03. Appointments to Fill Vacancies in
Trustee's Office . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.04. Provision as to Paying Agent . . . . . . . . . . . . . . . . . . 48
SECTION 5.05. Secured Indebtedness of the Company
and Restricted Subsidiaries . . . . . . . . . . . . . . . . . . 50
SECTION 5.06. Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . 55
SECTION 5.07. Waiver of Covenants . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.08. Certificate to Trustee . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE SIX
DEBT SECURITYHOLDERS' LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE.
SECTION 6.01. Debt Securityholders' Lists . . . . . . . . . . . . . . . . . . . 60
SECTION 6.02. Preservation and Disclosure of Lists . . . . . . . . . . . . . . 61
SECTION 6.03. Reports by the Company . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.04. Reports by the Trustee . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
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ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
DEBT SECURITYHOLDERS ON EVENT OF DEFAULT.
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.02. Payment of Applicable Debt Securities on
Default; Suit Therefor . . . . . . . . . . . . . . . . . . . . 74
SECTION 7.03. Application of Money Collected by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 7.04. Proceedings by Debt Securityholders . . . . . . . . . . . . . . . 81
SECTION 7.05. Proceedings by Trustee . . . . . . . . . . . . . . . . . . . . . 83
SECTION 7.06. Remedies Cumulative and Continuing . . . . . . . . . . . . . . . 83
SECTION 7.07. Direction of Proceedings and Waiver
of Defaults by Majority of
Debt Securityholders . . . . . . . . . . . . . . . . . . . . . 84
SECTION 7.08. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 7.09. Undertaking to Pay Costs . . . . . . . . . . . . . . . . . . . . 87
SECTION 7.10. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . 87
ARTICLE EIGHT
CONCERNING THE TRUSTEE.
SECTION 8.01. Duties and Responsibilities of
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 8.02. Reliance on Dcouemnts, Opinions, Etc. . . . . . . . . . . . . . . 91
SECTION 8.03. Responsibility for Recitals, Etc. . . . . . . . . . . . . . . . . 94
SECTION 8.04. Trustee, Paying Agent or Debt Security
Registrar May Own Debt Securities . . . . . . . . . . . . . . . 94
SECTION 8.05. Money to Be Held in Trust . . . . . . . . . . . . . . . . . . . . 94
SECTION 8.06. Compensation and Expenses of Trustee . . . . . . . . . . . . . . 95
SECTION 8.07. Officers' Certificate as Evidence . . . . . . . . . . . . . . . . 96
SECTION 8.08. Conflicting Interest of Trustee . . . . . . . . . . . . . . . . . 96
SECTION 8.09. Eligibility of Trustee . . . . . . . . . . . . . . . . . . . . . 110
SECTION 8.10. Resignation or Removal of Trustee . . . . . . . . . . . . . . . . 110
SECTION 8.11. Acceptance by Successor Trustee . . . . . . . . . . . . . . . . . 114
SECTION 8.12. Succession by Merger, Etc. . . . . . . . . . . . . . . . . . . . 117
SECTION 8.13. Limitation on Rights of Trustee as a
Creditor . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
</TABLE>
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ARTICLE NINE
CONCERNING THE DEBT SECURITYHOLDERS.
SECTION 9.01. Action by Debt Securityholders . . . . . . . . . . . . . . . . . 127
SECTION 9.02. Proof of Execution by
Debt Securityholders . . . . . . . . . . . . . . . . . . . . . 128
SECTION 9.03. Who Deemed Absolute Owners . . . . . . . . . . . . . . . . . . . 128
SECTION 9.04. Company-Owned Debt Securities Disregarded . . . . . . . . . . . 129
SECTION 9.05. Revocation of Consents; Future
Holders Bound . . . . . . . . . . . . . . . . . . . . . . . . . 130
ARTICLE TEN
DEBT SECURITYHOLDERS' MEETINGS.
SECTION 10.01. Purposes of Meetings . . . . . . . . . . . . . . . . . . . . . . 131
SECTION 10.02. Call of Meetings by Trustee . . . . . . . . . . . . . . . . . . 132
SECTION 10.03. Call of Meetings by Company or
Debt Securityholders . . . . . . . . . . . . . . . . . . . . . 132
SECTION 10.04. Qualifications for Voting . . . . . . . . . . . . . . . . . . . 133
SECTION 10.05. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . 134
SECTION 10.06. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 11.01. Supplemental Indentures Without
Consent of Debt Securityholders . . . . . . . . . . . . . . . . 136
SECTION 11.02. Supplemental Indentures with Consent
of Debt Securityholders . . . . . . . . . . . . . . . . . . . 140
SECTION 11.03. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . 142
SECTION 11.04. Notation on Debt Securities . . . . . . . . . . . . . . . . . . . 142
SECTION 11.05. Evidence of Compliance of
Supplemental Indenture to Be
Furnished Trustee . . . . . . . . . . . . . . . . . . . . . . 143
</TABLE>
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ARTICLE TWELVE
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER.
SECTION 12.01. Company May Consolidate, Etc., Only
on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . 143
SECTION 12.02. Successor Corporation Substituted . . . . . . . . . . . . . . . . 145
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF
INDENTURE OR CERTAIN COVENANTS.
SECTION 13.01. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
SECTION 13.02. Defeasance upon Deposit of Money,
U.S. Government Obligations or
Eligible Obligations . . . . . . . . . . . . . . . . . . . . . 148
SECTION 13.03. Deposited Money, U.S. Government
Obligations and Eligible
Obligations to Be Held in Trust by 151
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 13.04. Paying Agent to Repay Money Held . . . . . . . . . . . . . . . . 152
SECTION 13.05. Return of Unclaimed Amounts . . . . . . . . . . . . . . . . . . 152
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS.
SECTION 14.01. Indenture and Debt Securities Solely
Corporate Obligations . . . . . . . . . . . . . . . . . . . . . 154
ARTICLE FIFTEEN
Miscellaneous Provisions
------------------------
SECTION 15.01. Provisions Binding on Company's
Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 155
SECTION 15.02. Official Acts by Successor
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 155
SECTION 15.03. Addresses for Notices, Etc. . . . . . . . . . . . . . . . . . . 155
</TABLE>
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SECTION 15.04. New York Contract . . . . . . . . . . . . . . . . . . . . . . . 156
SECTION 15.05. Evidence of Compliance with
Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 156
SECTION 15.06. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . 157
SECTION 15.07. Trust Indenture Act to Control . . . . . . . . . . . . . . . . . 158
SECTION 15.08. Debt Securities Controlling in the Event
of Inconsistencies Between
Indenture and Debt Securities . . . . . . . . . . . . . . . . . 158
SECTION 15.09. Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . 158
SECTION 15.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . 158
ACCEPTANCE OF TRUST BY TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
</TABLE>
<PAGE> 11
THIS INDENTURE, dated as of [ ], 1995 from COOPER INDUSTRIES,
INC., a corporation duly organized and existing under the laws of the State of
Ohio (hereinafter called the "Company"), to TEXAS COMMERCE BANK National
Association, a national banking association existing under the laws of the
United States of America, as trustee (hereinafter called the "Trustee"),
WITNESSETH:
WHEREAS, the Company is empowered to borrow money for its corporate
purposes and to issue its debentures, notes, bonds or other evidences of
indebtedness (hereinafter called the "Debt Securities");
WHEREAS, the Company deems it necessary to issue from time to time for
its lawful purposes Debt Securities, unlimited as to principal amount, and has
duly authorized the execution and delivery of this Indenture to provide for the
issuance of the Debt Securities in one or more series, bearing such rates of
interest, if any, maturing at such time or times and having such other
provisions as shall be fixed as hereinafter provided; and
WHEREAS, the Company by due corporate action has determined to execute
and deliver an indenture in the form of this Indenture, and all things
necessary to make this
<PAGE> 12
Indenture a legal, valid, binding and enforceable agreement, have been done
and performed;
NOW, THEREFORE, THIS INDENTURE WITNESSETH that in consideration of the
premises and of the acceptance and purchase of the Debt Securities by the
holders thereof, the Company covenants and agrees with the Trustee, for the
benefit of all the present and future holders of the Debt Securities or series
thereof, as follows:
ARTICLE ONE
DEFINITIONS.
SECTION 1.01. DEFINITIONS. The terms defined in this Section 1.01
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.01. All
other terms used in this Indenture which are defined in the Trust Indenture Act
of 1939 or which are by reference therein defined in the Securities Act of 1933
(except as herein otherwise expressly provided or unless the context otherwise
requires) shall have the meanings assigned to such terms in said Trust
Indenture Act and in said Securities Act as in force at the date this Indenture
is originally executed. All accounting terms used herein and not expressly
defined shall have the meanings assigned to
<PAGE> 13
3
such terms in accordance with generally accepted accounting principles in the
United States of America at the time of determination of such terms.
Agent Member:
The term "Agent Member" shall have the meaning specified in Section
2.11.
Applicable Debt Securities:
The term "Applicable Debt Securities" shall have the meaning specified
in Section 7.01.
Attributable Debt:
The term "Attributable Debt" shall mean the present value (discounted
in accordance with a method of discounting which for financial reporting
purposes is consistent with generally accepted accounting principles) of the
rental payments during the remaining term of any Sale and Leaseback Transaction
for which the lessee is obligated (including any period for which such lease
has been extended), such rental payments not to include amounts payable by the
lessee for maintenance and repairs, insurance, taxes, assessments and similar
charges and for contingent rents (such as those based on sales). In case of
any Sale and Leaseback Transaction which is terminable by the lessee upon the
payment of a penalty, such rental payments shall also
<PAGE> 14
4
include such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
Board of Directors:
The term "Board of Directors" shall mean the Board of Directors of the
Company or any committee of such Board or any committee of officers of the
Company duly authorized to take any action hereunder.
Certified Resolutions or Board Resolutions:
The terms "Certified Resolutions" or "Board Resolutions" shall mean a
copy delivered to the Trustee of a resolution of the Board of Directors
certified by the Secretary or Assistant Secretary of the Company to have been
duly adopted and to be in full force and effect on the date of such
certification.
Company:
The term "Company" shall mean COOPER INDUSTRIES, INC., an Ohio
corporation, and, subject to the provisions of Article Twelve, shall mean its
successors and assigns.
Debt Security or Debt Securities; Outstanding:
The term "Debt Security" or "Debt Securities" shall mean any note or
notes, bond or bonds, debenture or debentures, or
<PAGE> 15
5
any other evidences of indebtedness, as the case may be, of any series
authenticated and delivered from time to time under this Indenture.
The term "outstanding" or "Outstanding", when used with reference to
Debt Securities, shall, subject to the provisions of Section 9.04, mean all
Debt Securities theretofore authenticated and delivered by the Trustee under
this Indenture, except:
(a) Debt Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(b) Debt Securities, or portions thereof, for the payment or
redemption of which money in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent (other
than the Company) or shall have been set aside and segregated in
trust by the Company (if the Company shall act as its own paying
agent), provided that if such Debt Securities are to be redeemed
prior to the maturity thereof, notice of such redemption shall have
been given as provided in Article Four, or provision satisfactory
to the Trustee shall have been made for giving such notice; and
(c) Debt Securities in lieu of or in exchange and
substitution for which other Debt Securities shall have been
authenticated and delivered, or which have been paid, pursuant to
the terms of Section 2.06.
<PAGE> 16
6
Debtholder or Holder:
The terms "Debtholder", "Holder", "holder of Debt Securities", or
other similar terms, shall mean any Person in whose name at the time a
particular Debt Security is registered on the register kept for that purpose in
accordance with the terms hereof.
Depositary:
The term "Depositary" shall have the meaning specified in Section 2.11.
Eligible Obligations:
The term "Eligible Obligations" shall mean obligations as a result of
the deposit of which (along with the simultaneous deposit, if any, of money
and/or U.S. Government Obligations) the relevant series of Debt Securities are
rated in the highest generic long-term debt rating category assigned to legally
defeased debt by one or more nationally recognized rating agencies.
Event of Default:
The term "Event of Default" shall have the meaning specified in
Section 7.01.
<PAGE> 17
7
Funded Debt:
The term "Funded Debt" shall mean (a) any Indebtedness maturing by its
terms more than one year from the date of the issuance thereof, including any
Indebtedness renewable or extendible at the option of the obliger to a date
later than one year from the date of the original issuance thereof, excluding
any portion of Indebtedness which is included in current liabilities and (b)
any Indebtedness which may be payable from the proceeds of Funded Debt as
defined in clause (a) of this definition pursuant to the terms of such Funded
Debt.
Global Debt Security:
The term "Global Debt Security" shall have the meaning specified in
Section 2.11.
Indebtedness:
The term "Indebtedness" of any corporation shall mean all indebtedness
for money borrowed which is created, assumed, incurred or guaranteed in any
manner by such corporation or for which such corporation is otherwise
responsible or liable.
<PAGE> 18
8
Indenture:
The term "Indenture" shall mean this instrument as originally executed
or, if amended or supplemented as herein provided, as so amended or
supplemented.
Lien:
The term "Lien" shall mean any mortgage, pledge, security interest,
lien, charge or other encumbrance.
Officers' Certificate:
The term "Officers' Certificate" shall mean a certificate signed by
the Chairman of the Board, the President, any Vice President or the Chief
Financial Officer, and by the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
the Company, and delivered to the Trustee. Wherever this Indenture requires
that an Officers' Certificate be signed also by an accountant or other expert,
such accountant or other expert (except as otherwise expressly provided in this
Indenture) may be in the employ of the Company. Each such certificate shall
include the statements provided for in Section 15.05 if and to the extent
required by the provisions of such Section.
<PAGE> 19
9
Opinion of Counsel:
The term "Opinion of Counsel" shall mean a written opinion of counsel,
who may be an employee of or counsel to the Company. Each such opinion shall
include the statements provided for in Section 15.05 if and to the extent
required by the provisions of such Section.
Person:
The term "Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
Principal Office of the Trustee:
The term "principal office of the Trustee", or other similar term,
shall mean the principal office of the Trustee at which at any particular time
its corporate trust business shall be administered.
Principal Property:
The term "Principal Property" shall mean (A) any manufacturing plant
located in the continental United States, or manufacturing equipment located in
any such manufacturing plant (together with the land on which such plant is
erected and fixtures comprising a part thereof), owned or leased on the first
date on which a Debt Security is
<PAGE> 20
10
authenticated by the Trustee or thereafter acquired or leased by the Company or
any Restricted Subsidiary, other than (i) any property which the Board of
Directors determines is not of material importance to the total business
conducted, or assets owned, by the Company and its Subsidiaries, as an
entirety, or (ii) any portion of any such property which the Board of Directors
determines not to be of material importance to the use of operation of such
property and (B) any Shares or Indebtedness issued by any Restricted
Subsidiary. "Manufacturing plant" does not include any plant owned or leased
jointly or in common with one or more Persons other than the Company and its
Restricted Subsidiaries in which the aggregate interest of the Company and its
Restricted Subsidiaries does not exceed fifty percent (50%). "Manufacturing
equipment" means manufacturing equipment in such manufacturing plants used
directly in the production of the Company's or any Restricted Subsidiary's
products and does not include office equipment, computer equipment, rolling
stock and other equipment not directly used in the production of the Company's
or any Restricted Subsidiary's products.
Responsible Officer:
The term "Responsible Officer", when used with respect to the Trustee,
shall mean the chairman and any vice
<PAGE> 21
11
chairman of the board of directors, the chairman and any vice chairman of the
executive committee of the board of directors, the president, any vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, any trust officer, any assistant trust officer, or any other officer
or assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at the time shall be such officers,
respectively, or to whom corporate trust matters are referred because of his
knowledge of and familiarity with the particular subject.
Restricted Subsidiary:
The term "Restricted Subsidiary" shall mean any Subsidiary
substantially all the property of which is located within the continental
United States, other than (i) a Subsidiary primarily engaged in financing,
including, without limitation, lending on the security of, purchasing or
discounting (with or without recourse) receivables, leases, obligations or
other claims arising from or in connection with the purchase or sale of
products or services, (ii) a Subsidiary primarily engaged in leasing or
insurance, or (iii) a Subsidiary primarily engaged in financing the Company's
or any Restricted Subsidiary's operations outside the continental United
States.
<PAGE> 22
12
Sale and Leaseback Transaction:
The term "Sale and Leaseback Transaction shall mean any arrangement
with any Person providing for the leasing by the Company or any Restricted
Subsidiary of any Principal Property of the Company or any Restricted
Subsidiary whether such Principal Property is now owned or hereafter acquired
(except for leases for a term of not more than three years and except for
leases between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries and except for leases of property executed prior to, at the time
of, or within one year after the later of, the acquisition, the completion of
construction, including any improvements or alterations on real property, or
the commencement of commercial operation of such property), which Principal
Property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person.
Secured Indebtedness:
The term "Secured Indebtedness" of any corporation shall mean
Indebtedness secured by any Lien upon property (including Shares or
Indebtedness issued by any Restricted Subsidiary) owned by the Company or any
Restricted Subsidiary.
<PAGE> 23
13
Shareholders' Equity:
The term "Shareholders' Equity" shall mean the total assets calculated
from a consolidated balance sheet of the Company, prepared in accordance with
generally accepted accounting principles, less total liabilities shown on such
balance sheet.
Shares:
The term "Shares" shall mean as to any corporation all the issued and
outstanding equity shares (except for directors' qualifying shares) of such
corporation.
Subsidiary:
The term "Subsidiary" shall mean any corporation a majority of the
Voting Shares of which are at the time owned or controlled, directly or
indirectly, by the Company or by one or more Subsidiaries, or by the Company
and one or more Subsidiaries and which is consolidated in the Company's latest
consolidated financial statements filed with the Securities and Exchange
Commission or provided generally to the Company's shareholders.
Trustee:
The term "Trustee" shall mean Texas Commerce Bank National
Association, a national banking association, and,
<PAGE> 24
14
subject to the provisions of Article Eight hereof, shall mean its successors
and assigns as Trustee hereunder.
Trust Indenture Act of 1939:
The term "Trust Indenture Act of 1939" shall mean the Trust Indenture
Act of 1939 as it was in force at the date of execution of this Indenture,
except as provided in Article Eleven.
U.S. Government Obligations:
The term "U.S. Government Obligations" shall mean securities that are
(i) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United
States of America, the timely payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of America, which, in
either case under clause (i) or (ii) are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository
<PAGE> 25
15
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
Voting Shares:
The term "Voting Shares" shall mean, as to Shares of a particular
corporation, outstanding Shares of any class of such corporation entitled to
vote in the election of directors, excluding Shares entitled so to vote only
upon the happening of some contingency.
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF DEBT SECURITIES
SECTION 2.01. Issuable in Series; Unlimited Aggregate Principal
Amount. The aggregate principal amount of Debt Securities that may be issued by
the Company and authenticated and delivered under this Indenture is unlimited.
The Debt Securities may, at the election of and as authorized by the Board of
Directors to be evidenced by a Board Resolution, be issued in one or more
series, and shall be designated generally as debentures, notes, bonds and
<PAGE> 26
16
other evidences of indebtedness, as the case may be, with such further
particular designations added or incorporated in such title for the Debt
Securities of any particular series as the Board of Directors may determine as
provided in Section 2.02. Each Debt Security shall bear upon the face thereof
the designation so selected for the series to which it belongs and shall be
dated the date of its authentication. All Debt Securities of any one series
shall be substantially identical except as to denomination and except as may
otherwise be provided in the Certified Resolution or in an indenture
supplemental hereto provided to the Trustee pursuant to Section 2.02(A).
SECTION 2.02. Documents Required for Issuance of Each Series of Debt
Securities. At any time, and from time to time, after the execution of this
Indenture, Debt Securities of each of the series created pursuant to the
provisions hereof may be executed by the Company and delivered to the Trustee
and shall be authenticated by the Trustee and delivered to, or upon the order
of, the Company upon receipt by the Trustee of:
(A) a Certified Resolution, or an indenture supplemental hereto, setting forth
<PAGE> 27
17
(i) the following terms with respect to the
particular series of Debt Securities to be authenticated and
delivered by the Trustee:
(a) designation;
(b) date;
(c) date or dates of maturity; or the method
by which such date or dates to be determined;
(d) interest rate or rates or the method of
determining such rate or rates, if any, and
modifications to Section 2.10 hereof, if any;
(e) interest payment dates, if any;
(f) the place or places for the payment of
principal and for the payment of interest, if
any;
(g) denominations;
(h) limitation upon the aggregate principal
amount of Debt Securities of the particular series
which may be issued, if any (except for Debt
Securities issued pursuant to Sections 2.05, 2.06,
2.07 and 4.03); (i) provisions, if any, for the
payment of principal, premium or interest, without
<PAGE> 28
18
deduction for taxes, assessments or governmental
charges, or for reimbursement of taxes, assessments
or governmental charges in case of payment by the
holders;
(j) provisions, if any, reserving to the
Company the right, or obligating the Company at the
option of the holder thereof, to redeem all or any part
of the Debt Securities of the particular series before
maturity at such time or times, upon such notice, at
such redemption price or prices (together with accrued
interest to the date of redemption) and upon such other
terms (which terms may be in addition to, in
substitution for, in subtraction from or in
modification of (or any combination of the foregoing)
the provisions of this Indenture with respect to
redemption of Debt Securities) as may be specified in
the respective forms of Debt Securities;
(k) provisions, if any, for any sinking,
purchase or analogous fund with respect to the Debt
Securities of the particular series, which provisions
may be in addition to, in substitution for, in
subtraction from or in
<PAGE> 29
19
modification of (or any combination of the foregoing)
the provisions of this Indenture with respect to
sinking, purchase or analogous funds;
(l) provisions, if any, for the issuance of
Debt Securities bearing no interest rate or to be sold
at a premium or with an original issue discount and
provisions, if any, for the determination of the
portion or portions of any Debt Securities sold at a
discount that shall be required for any request,
demand, authorization, notice, direction, consent or
waiver;
(m) Events of Default with respect to the Debt
Securities of a particular series which Events of
Default may be in addition to, in substitution for, in
subtraction from or in modification of (or any
combination of the foregoing) the Events of Default
provided in Section 7.01, and the remedies with respect
thereto;
(n) provisions, if any, for the Debt Securities
of a particular series to be denominated, and payments
thereon to be made,
<PAGE> 30
20
in currencies other than the U.S. dollar or in units
based on or relating to such other currencies
(including European currency units);
(o) provisions, if any, for the defeasance of
Debt Securities of a particular series (including
provisions permitting defeasance of less than all Debt
Securities of a particular series), which provisions
may be in addition to, in substitution for, in
subtraction from, or in modification of (or any
combination of the foregoing) the provisions of Article
Thirteen;
(p) covenants, if any, with respect to the Debt
Securities of a particular series, which covenants may
be in addition to, in substitution for, in subtraction
from or modification of (or any combination of the
foregoing) the covenants set forth in Sections 5.05 and
5.06;
(q) whether the Debt Securities of a particular
series shall be issued in whole or in part in the form
of one or more Global Debt Securities and, in any such
case, (i) the
<PAGE> 31
21
Depositary for such Global Debt Security or Global Debt
Securities and (ii) the circumstances under which any
such Global Debt Security may be registered in the name
of, and under which any transfer of such Global Debt
Security may be registered in the name of, any Person
other than such Depositary or its nominee, if other
than as set forth in Section 2.11; and
(r) any other provisions expressing or
referring to the terms and conditions upon which the
Debt Securities of that series are to be issued under
this Indenture which are permitted to be set forth in a
Certified Resolution pursuant to this Section 2.02(a)
or an indenture supplement hereto or which are not in
conflict with the provisions of this Indenture; and
(ii) the form of such series of Debt Securities;
(B) an Officers' Certificate dated the date of authentication
and delivery of such series of Debt Securities stating that the
resolutions of the Board of Directors authorizing the execution,
authentication and delivery of this Indenture and the Debt
Securities are in full force and effect as of the date hereof;
<PAGE> 32
22
(C) either (i) a certificate or other official document
evidencing the due authorization, approval or consent of any
governmental body or bodies, at the time having jurisdiction in the
premises, together with an Opinion of Counsel that the Trustee is
entitled to rely thereon and that the authorization, approval or
consent of no other governmental body is required, or (ii) an
Opinion of Counsel that no authorization, approval or consent of
any government body is required;
(D) an Opinion of Counsel that all instruments furnished the
Trustee conform to the requirements of this Indenture and
constitute sufficient authority hereunder for the Trustee to
authenticate and deliver the Debt Securities then applied for; that
all conditions precedent provided for in this Indenture relating to
the authentication and delivery of the Debt Securities applied for
have been complied with and the Company is duly entitled to the
authentication and delivery of such Debt Securities in accordance
with the provisions of this Indenture; that all laws and
requirements with respect to the form and execution by the Company
of the supplemental indenture, if any, and the execution and
delivery by the Company of the Debt Securities then applied for
have been complied with; that the Company has
<PAGE> 33
23
corporate power to issue such Debt Securities and has duly taken all
necessary corporate action for those purposes; that the Debt
Securities then applied for, when issued, will be the legal, valid
and binding obligations of the Company; and that the Debt Securities
of the series then applied for, when issued, will be entitled to the
benefits of this Indenture, equally and ratably with all other
Debt Securities of such series theretofore issued and then
Outstanding;
(E) an Officer's Certificate stating that the Company is not in
default under the Indenture and that the issuance of the additional
Debt Securities applied for will not result in any breach of any of
the terms, conditions or provisions of, a constitute a default under,
the Company's articles of incorporation or code of regulations or any
indenture, mortgage, deed of trust or other agreement or instrument
to which the Company is a party or by which it is bound, or any order
of any court or administrative agency entered in any proceeding to
which the Company is a party or by which it may be bound or to which
it may be subject; and that all conditions precedent provided in this
Indenture relating to the authentication and delivery
<PAGE> 34
24
of the additional Debt Securities applied for having been complied
with; and
(F) a written order of the Company, signed by the President or
any Vice President and the Secretary or any Assistant Secretary of
the Company, directing the Trustee to authenticate and deliver Debt
Securities as provided therein. If all of the Debt Securities of a
series are not to be issued at one time and if the Certified
Resolution or indenture supplemental hereto establishing such
series shall so permit, an Officers' Certificate may set forth
procedures acceptable to the Trustee for the issuance of such Debt
Securities and determining the terms of particular Debt Securities
of such series, such as interest rate, maturity date, date of
issuance and date from which interest shall accrue.
If all Debt Securities of a series are not to be issued at any one
time, it shall not be necessary to deliver the Certified Resolution, Officers'
Certificates and Opinions of Counsel provided for in this Section 2.02 at the
time of issuance of each Debt Security of such series if instead such documents
are delivered at or prior to the time of issuance of the first Debt Security of
such series.
<PAGE> 35
25
SECTION 2.03. DENOMINATIONS; CERTIFICATE OF AUTHENTICATION. The Debt
Securities shall be issuable only as registered securities without coupons
(subject to Section 11.01(d)) in such denominations as shall be specified as
contemplated by Section 2.02, provided that in the absence of such
specifications with regard to any series of the Debt Securities, the Debt
Securities of such series shall be issuable in denominations of $1,000 or any
integral multiple thereof.
<PAGE> 36
26
The Trustee's certificate of authentication on all Debt Securities
shall be in substantially the following form:
This [note, bond, debenture or other evidence of indebtedness] is one
of the series of Debt Securities referred to in the within-mentioned Indenture.
TEXAS COMMERCE BANK
National Association,
as Trustee
By
---------------------
Authorized Signature
SECTION 2.04. EXECUTION OF DEBT SECURITIES. The Debt Securities
shall be signed manually or in facsimile in the name and on behalf of the
Company by the Chairman of the Board, the President, any Vice President, the
Chief Financial Officer or the Treasurer, under its corporate seal reproduced
thereon and attested manually or in facsimile by its Secretary or one of its
Assistant Secretaries. Only such Debt Securities as shall bear a certificate of
authentication substantially in the form provided in Section 2.03, executed
manually by the Trustee, shall be entitled to the benefits of this Indenture or
be valid or obligatory for any purpose. Such certificate by the Trustee upon
any Debt Security executed by the Company shall be conclusive evidence that the
<PAGE> 37
27
Debt Security so authenticated has been duly authenticated and delivered
hereunder.
In case any officer of the Company who shall have signed any of the
Debt Securities shall cease to be such officer before the Debt Securities so
signed shall have been authenticated and delivered by the Trustee, or disposed
of by the Company, such Debt Securities nevertheless may be authenticated
and delivered or disposed of as though the Person who signed such Debt
Securities had not ceased to be such officer of the Company; and any Debt
Security may be signed on behalf of the Company by such Persons as, at the
actual date of the execution of such Debt Security, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
Person was not such an officer.
SECTION 2.05. EXCHANGE AND REGISTRATION OF TRANSFER OF DEBT
SECURITIES. Debt Securities may be exchanged for an equal aggregate principal
amount of Debt Securities of the same series and date of maturity of other
authorized denominations. Debt Securities to be exchanged shall be surrendered
at the office or agency to be maintained by the Company for such purpose in the
City and State of New York, as provided in Section 5.02, and the Company shall
execute, and the Trustee shall authenticate and deliver in exchange therefor,
the
<PAGE> 38
28
Debt Security or Debt Securities that the Debt Securityholder making the
exchange shall be entitled to receive.
The Company or any Debt Security registrar appointed by the Company
shall keep, at said office or agency, a register in which, subject to such
reasonable regulations as it may prescribe, the Company, or any Debt Security
registrar appointed by the Company, shall register Debt Securities and shall
register the transfer of Debt Securities as in this Article Two provided. Such
Debt Security register shall be in written form or in any other form capable of
being converted into written form within a reasonable time. If the Debt
Security register is not kept by the Trustee it shall at all reasonable times be
open for inspection by the Trustee. Upon due presentment for registration of
transfer of any Debt Security at such office or agency, the Company shall
execute, and the Trustee shall authenticate and deliver in the name of the
transferee or transferees, a new Debt Security or Debt Securities of the same
series and date of maturity for an equal aggregate principal amount. The
Company hereby appoints the Trustee to be Debt Security registrar, but reserves
the right to change the Debt Security registrar or to itself act as Debt
Security registrar.
All Debt Securities presented for registration of transfer, exchange,
redemption or payment shall (if so required by the Company or any Debt Security
registrar appointed by the Company)
<PAGE> 39
29
be duly endorsed, or be accompanied by a written instrument or instruments of
transfer (in form satisfactory to the Company or any Debt Security registrar
appointed by the Company) duly executed, by the holder or his attorney duly
authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Debt Securities, but the Company or any Debt Security registrar
appointed by the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
The Company or any Debt Security registrar appointed by the Company
shall not be required to exchange or register the transfer of (a) any Debt
Securities for a period of fifteen days next preceding any selection of Debt
Securities to be redeemed, or (b) any Debt Securities selected, called or being
called for redemption.
SECTION 2.06. MUTILATED, DESTROYED, LOST OR STOLEN DEBT SECURITIES.
In case any temporary or definitive Debt Security shall become mutilated or be
destroyed, lost or stolen, the Company in its discretion may execute, and upon
its request the Trustee shall authenticate and deliver, a new Debt Security of
the same series and date of maturity in the same principal amount, bearing a
number not contemporaneously
<PAGE> 40
30
outstanding, in exchange and substitution for the mutilated Debt Security, or
in lieu of and in substitution for the Debt Security so destroyed, lost or
stolen. In every case the applicant for a substituted Debt Security shall
furnish to the Company and to the Trustee such security or indemnity as may be
required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company
and to the Trustee evidence to their satisfaction of the destruction, loss or
theft of such Debt Security and of the ownership thereof.
The Trustee shall authenticate any such substituted Debt Security and
deliver the same upon the written request or authorization of any officer of
the Company. Upon the issuance of any substituted Debt Security, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. In case any
Debt Security which has matured or is about to mature shall become mutilated or
be destroyed, lost or stolen, the Company may, instead of issuing a substituted
Debt Security, pay or authorize the payment of the same (upon surrender thereof
in the case of a mutilated Debt Security) if the applicant for such payment
shall furnish to the Company and to the Trustee such security or indemnity as
may be required by them to save each of them harmless, and, in the
<PAGE> 41
31
case of destruction, loss or theft, evidence satisfactory to the Company and
the Trustee of the destruction, loss or theft of such Debt Security and of the
ownership thereof.
Every substituted Debt Security of any series issued pursuant to the
provisions of this Section 2.06 by virtue of the fact that any Debt Security of
such series is destroyed, lost or stolen shall constitute an additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debt Security of such series shall be found at any time, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Debt Securities of such series duly issued hereunder. All
Debt Securities of any series shall be held and owned upon the express
condition that, to the extent permitted by law, the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Debt Securities of such series and shall preclude any and all
other rights or remedies notwithstanding (to the extent permitted by applicable
law) any law or statute existing or hereafter enacted to the contrary with
respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
SECTION 2.07. TEMPORARY DEBT SECURITIES. Pending the preparation of
definitive Debt Securities of any series, the
<PAGE> 42
32
Company may execute and the Trustee shall authenticate and deliver temporary
Debt Securities of such series (printed, lithographed or otherwise produced).
Temporary Debt Securities shall be issuable in any authorized denomination and
substantially in the form of the definitive Debt Securities, but with such
omissions, insertions and variations as may be appropriate for temporary Debt
Securities, all as may be determined by the Company and the Trustee. Every
such temporary Debt Security shall be authenticated by the Trustee upon the
same conditions, in substantially the same manner and with the same effect as
the definitive Debt Securities. Without unreasonable delay the Company will
cause to be prepared, and will execute and deliver to the Trustee, definitive
Debt Securities of such series, whereupon any or all temporary Debt Securities
of such series may be surrendered in exchange therefor at the office or agency
of the Company, and the Trustee shall authenticate and deliver in exchange for
such temporary Debt Securities an equal aggregate principal amount of
definitive Debt Securities of the same series and date of maturity. Such
exchange shall be made by the Company at its own expense and without any charge
therefor except that the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith. Until so exchanged, the temporary
<PAGE> 43
33
Debt Securities of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Debt Securities of such series
authenticated and delivered hereunder.
SECTION 2.08. CANCELLATION OF DEBT SECURITIES PAID, ETC. All Debt
Securities surrendered for the purpose of payment, redemption, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Debt Security registrar, be surrendered to the Trustee for
cancellation and promptly cancelled by it, or, if surrendered to the Trustee,
shall be promptly cancelled by it, and no Debt Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture. The Trustee may destroy cancelled Debt Securities and deliver a
certificate of such destruction to the Company. If the Company shall acquire
any of the Debt Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debt
Securities unless and until the same are surrendered to the Trustee for
cancellation.
SECTION 2.09. DEBT SECURITIES TO BE TREATED EQUALLY. All Debt
Securities of each series issued under this Indenture shall in all respects be
equally and ratably entitled to the benefits hereof with respect to such
series without
<PAGE> 44
34
preference, priority or distinction on account of the actual time or times of
the authentication and delivery of maturity of the Debt Securities of such
series.
SECTION 2.10. COMPUTATION OF INTEREST. Unless otherwise provided in
the Certified Resolution or one or more indentures supplemental hereto setting
forth the terms on any series of Debt Securities, interest on the Debt
Securities of such series shall be computed on the basis of a 360-day year of
twelve 30-day months.
SECTION 2.11. GLOBAL DEBT SECURITIES; DEPOSITARY. For the purposes of
this Indenture, the term "Agent Member" shall mean a member of, or participant
in, a Depositary; the term "Depositary" shall mean, with respect to Debt
Securities issuable or issued in whole or in part in the form of one or more
Global Debt Securities, the clearing agency registered under the Securities
Exchange Act of 1934 designated as Depositary in a Certified Resolution, or in
an indenture supplemental hereto, pursuant to Section 2.02, and if at any time
there is more than one such agency, "Depositary" as used with respect to the
Debt Securities shall mean the respective Depositary with respect to a
particular series of Debt Securities; and the term "Global Debt Security"
shall mean a global certificate evidencing all or part of the series of Debt
Securities, executed by the Company, authenticated by the
<PAGE> 45
35
Trustee and issued to the Depositary for the series or such portion of the
series, and registered in the name of such Depositary or its nominee.
If a particular series of Debt Securities are to be issued in whole or
in part in the form of one or more Global Debt Securities, as specified in a
Certified Resolution, or in an indenture supplemental hereto, pursuant to
Section 2.02, then the Company shall execute and the Trustee shall, in
accordance with Section 2.03 with respect to such series, authenticate and
deliver each such Global Debt Security, which (i) shall represent and shall be
denominated in a principal amount equal to the aggregate principal amount of the
Debt Securities of such series to be represented by such Global Debt Security,
(ii) shall be registered in the name of the Depositary for such Global Debt
Security or its nominee, (iii) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instruction and (iv) unless
otherwise specified in such Certified Resolution or indenture supplemental
hereto, shall bear a legend substantially to the following effect: "THIS
SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME
OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY.
<PAGE> 46
36
Notwithstanding Section 2.05, except as otherwise specified in a
Certified Resolution, or in an indenture supplemental hereto, as contemplated by
Section 2.02, any Global Debt Security shall be exchangeable only as provided in
this paragraph. A Global Debt Security shall be exchangeable pursuant to this
Section if (x)(i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Debt Security or if at any time
the Depositary ceases to be a clearing agency registered under the Securities
Exchange Act of 1934 and the (ii) Company is unable to arrange for a qualified
successor, (y) the Company in its sole discretion determines that all Global
Debt Securities of any series then outstanding shall be exchangeable for
definitive Debt Securities of such series in registered form or (z) an Event of
Default, or an event which, with the giving of notice or lapse of time, or both,
would constitute an Event of Default, with respect to the Debt Securities of the
series represented by such Global Debt Security has occurred and is
continuing. Any Global Debt Securities of such series that is exchangeable
pursuant to the preceding sentence shall be
<PAGE> 47
37
exchangeable for definitive Debt Securities of such series in registered form,
bearing interest (if any) at the same rate or pursuant to the same formula,
having the same date of issuance, redemption provisions, if any, currency of
payment, date of maturity and other terms and of differing denominations
aggregating a like amount. Such definitive Debt Securities of such series shall
be registered in the names of the owners of the beneficial interests in such
Global Debt Securities of such series as such names are from time to time
provided by the relevant participants in the Depositary holding such Global Debt
Securities (as such participants are identified from time to time by such
Depositary).
No Global Debt Security may be transferred except as a whole (i) by the
Depositary to a nominee of the Depositary or (ii) by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or (iii) by
the Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary. Except as provided above, owners solely of
beneficial interests in a Global Debt Security shall not be entitled to receive
physical delivery of Debt Securities of such series in definitive form and will
not be considered the Holders thereof for any purpose under this Indenture.
<PAGE> 48
38
In the event that a Global Debt Security is surrendered for redemption
in part pursuant to Article Three or Four, the Company shall execute, and the
Trustee shall authenticate and deliver to the Depositary for such Global Debt
Security, without service charge, a new Global Debt Security in a denomination
and tenor equal to and in exchange for the unredeemed portion of the principal
for the Global Debt Security so surrendered.
Neither the Company nor the Trustee nor any agent of the Company or the
Trustee shall have any responsibility or liability for any aspect of the
records relating to or payments made on account of any beneficial ownership
interest in any Global Debt Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest. The
Agent Members shall have no rights under this Indenture with respect to any
Global Debt Security held on their behalf by a Depositary, and such Depositary
may be treated by the Company, the Trustee, and any agent of the Company or the
Trustee as the owner of such Global Debt Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee, or any agent of the Company or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by a Depositary
or
<PAGE> 49
39
impair, as between a Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of a Debt
Security of any series, including without limitation the granting of proxies or
other authorization of participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a Holder
is entitled to give or take under this Indenture.
ARTICLE THREE
SINKING FUNDS.
SECTION 3.01. Applicability of Article. The provisions of this
Article Three shall be applicable to any sinking fund established in or pursuant
to a Certified Resolution under Section 2.02 or one or more indentures
supplemental hereto for the retirement of Debt Securities of any series, except
as otherwise specified in such Certified Resolution or supplemental indenture.
The sinking fund payment required to be made under the terms
of the Debt Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any sinking fund payment that is not required to be
made but is permitted by the terms of the Debt Securities of any series is
herein referred to as an "optional sinking fund payment". Unless otherwise
provided for by the terms of the Debt Securities
<PAGE> 50
40
of any series, the cash amount of any sinking fund payment may be subject to
reduction as provided in Section 3.02. Each sinking fund payment shall be
applied to the redemption of the Debt Securities of any series as provided for
by the terms of the Debt Securities of such series.
SECTION 3.02. SATISFACTION OF SINKING FUND PAYMENTS WITH DEBT
SECURITIES. The Company may, at its option, as specified by it in an Officer's
Certificate delivered to the Trustee pursuant to Section 3.03 reduce and satisfy
the obligation to make a mandatory sinking fund payment in the amount of the
redemption price, together with accrued interest to the redemption date on Debt
Securities otherwise to be redeemed, of any Debt Securities (a) acquired by the
Company and delivered by it to the Trustee for cancellation or (b) redeemed
otherwise than through the operation of the mandatory sinking fund, and in each
case under clauses (a) and (b) delivered or redeemed on or prior to the date of
delivery of such Officers' Certificate and not theretofore made the basis for a
reduction of a mandatory sinking fund payment.
SECTION 3.03. REDEMPTION OF DEBT SECURITIES FOR SINKING FUND. Not
less than sixty days prior to each sinking fund payment date for any series of
Debt Securities (or such later date as shall be satisfactory to the Trustee),
the Company
<PAGE> 51
41
will deliver to the Trustee an Officers' Certificate specifying the amount of
the next succeeding sinking fund payment for that series pursuant to the terms
of that series, the portion thereof, if any, which is to be satisfied by payment
of cash and the portion thereof, if any, which is to be satisfied by delivering
and crediting Debt Securities of that series pursuant to Section 3.02 and will
also deliver to the Trustee any Debt Securities to be so credited which have not
theretofore been delivered. Not less than thirty days before each such sinking
fund payment date, the Trustee shall select the Debt Securities of such series
to be redeemed upon such sinking fund payment date in the manner specified in
Article Four and cause notice of the redemption thereof to be given in the name
of and at the expense of the Company in the manner provided in Article Four.
Such notice having been duly given, the redemption of such Debt Securities shall
be made upon the terms and in the manner stated in Article Four. In the case of
the failure of the Company to deliver such Officers' Certificate when due (or
to deliver the Debt Securities specified in this Section 3.03) the sinking fund
payment due on the next succeeding sinking fund payment date for that series
shall be paid entirely in cash and shall be sufficient to redeem the principal
amount of such Debt Securities subject to a mandatory sinking fund payment
<PAGE> 52
42
without the option to deliver or credit Debt Securities as provided in Section
3.02 and without the right to make any optional sinking fund payment with
respect to such series.
Any sinking fund payment or payments (mandatory or optional)
made in cash plus any unused balance of any preceding sinking fund payments
made in cash which shall equal or exceed $100,000 (or a lesser sum if the
Company shall so request) with respect to the Debt Securities of any particular
series shall be applied by the Trustee on the sinking fund payment date on which
such payment is made (or, if such payment is made before a sinking fund payment
date, on the sinking fund payment date next succeeding the date of such payment)
to the redemption of such Debt Securities at the redemption price specified in
such Debt Securities for operation of the sinking fund, together with accrued
interest, if any, to the date fixed for redemption. Subject to the provisions
of Section 13.05, any sinking fund payment not so applied or allocated by the
Trustee to the redemption of Debt Securities shall be added to the next cash
sinking fund payment received by the Trustee for such series and, together with
such payment, shall be applied in accordance with the provisions of this Section
3.03. Subject to the provisions of Section 13.05, any and all sinking fund
payments with respect to the Debt Securities of any particular series held by
<PAGE> 53
43
the Trustee on the last sinking fund payment date with respect to Debt
Securities of such series shall be applied by the Trustee, together with other
moneys, if necessary, to be deposited sufficient for the purpose, to the payment
of the principal of the Debt Securities of such series at maturity.
ARTICLE FOUR
REDEMPTION OF DEBENTURES.
SECTION 4.01. APPLICABILITY OF ARTICLE. The provisions of this
Article Four shall be applicable to any redemption provisions established in or
pursuant to a Certified Resolution under Section 2.02 or one or more indentures
supplemental hereto with respect to any series of Debt Securities, except as
otherwise provided in such Certified Resolution under Section 2.02 or
supplemental indenture.
SECTION 4.02. NOTICE OF REDEMPTION; SELECTION OF DEBT SECURITIES.
In case the Company shall desire to exercise the right to redeem all, or, as the
case may be, any part of the Debt Securities of any series, as evidenced by a
Board Resolution, it shall fix a date for redemption and give notice of such
redemption by first class mail postage prepaid at least thirty and not more than
sixty days prior to the date fixed for redemption to the holders of Debt
Securities so to be redeemed as a whole or in part at their last addresses as
the same appear on the Debt Security register.
<PAGE> 54
44
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the Holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to the Holder of any Debt Security designated for redemption as a whole
or in part shall not affect the validity of the proceedings for the redemption
of any other Debt Security.
Each such notice of redemption shall specify the date fixed for
redemption, the redemption price at which such Debt Securities are to be
redeemed, whether the redemption is through operation of a sinking, purchase or
analogous fund, the place of payment, that payment will be made upon
presentation and surrender of such Debt Securities, that interest accrued (if
any) to the date fixed for redemption will be paid as specified in said notice,
and that on and after said date interest thereon or on the portions thereof to
be redeemed will cease to accrue. If fewer than all the Debt Securities of a
series are to be redeemed, the notice of redemption shall specify the Debt
Securities to be redeemed. In case any Debt Security is to be redeemed in part
only, the notice of redemption shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Debt Security, a new Debt Security or Debt
Securities of the same
<PAGE> 55
45
series, of authorized denominations, in principal amount equal to the
unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section 4.02, the Company will deposit with the
Trustee or with one or more paying agents (or, if the Company is acting as its
own paying agent, segregate and hold in trust as provided in Section 5.04) an
amount of money sufficient to redeem on the redemption date all the Debt
Securities so called for redemption at the applicable redemption price, together
with accrued interest (if any) to the date fixed for redemption.
If fewer than all the Debt Securities of a series are to be redeemed the
Company will give the Trustee notice not less than sixty days prior to the
redemption date as to the aggregate principal amount of Debt Securities of such
series to be redeemed and the Trustee shall select, in such manner as in its
sole discretion it shall deem appropriate and fair, the Debt Securities of such
series or portions thereof to be redeemed.
SECTION 4.03. PAYMENT OF DEBT SECURITIES CALLED FOR REDEMPTION. If
notice of redemption has been given as provided in Section 4.02, the Debt
Securities or portions of Debt Securities so to be redeemed shall become due and
payable on the date and at the place stated in such notice at the
<PAGE> 56
46
applicable redemption price, together with interest accrued (if any) to the date
fixed for redemption, and on and after said date (unless the Company shall
default in the payment of such Debt Securities at the redemption price, together
with interest accrued (if any) to said date) interest on such Debt Securities or
such portions of Debt Securities shall cease to accrue. Upon presentation and
surrender of such Debt Securities at the place of payment in said notice
specified, the said Debt Securities or the specified portions thereof shall
be paid and redeemed by the Company at the applicable redemption price, together
with interest accrued thereon (if any) to the date fixed for redemption.
If any Debt Security or portion thereof called for redemption shall not
be so paid upon surrender thereof for redemption, the principal and premium, if
any, shall, until paid, bear interest from the date fixed for redemption at the
rate borne by such Debt Security or such portion thereof, or at such other rate
provided in the Certified Resolution relating to such Debt Security or the
supplemental indenture under which such Debt Security is issued. Upon
presentation and surrender of any Debt Security redeemed in part only, the
Company shall execute and the Trustee shall authenticate and deliver to the
holder thereof, at the expense of the Company, a new Debt Security or Debt
Securities of the same series,
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47
of authorized denominations, in principal amount equal to the unredeemed
portion of the Debt Security so presented and surrendered.
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY.
SECTION 5.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. With
respect to each series of Debt Securities, the Company covenants and agrees
that it will duly and punctually pay or cause to be paid the principal of,
premium, if any, and interest, if any, on the Debt Securities of such series at
the place, at the respective times and in the manner provided in the Debt
Securities of such series.
SECTION 5.02. OFFICE FOR NOTICES AND PAYMENTS, ETC. So long as any of
the Debt Securities remains outstanding, the Company will maintain in the City
and State of New York, an office or agency (which office or agency may differ
for different series of Debt Securities), initially to be located at the
principal office of the Trustee, where the Debt Securities may be presented and
surrendered for registration of transfer and for exchange as in this Indenture
provided, where notices and demands to or upon the Company in respect of Debt
Securities or of this Indenture may be served and where Debt Securities may be
presented and surrendered for payment, provided that the Company may maintain in
such City a
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separate office or agency for one or more of the foregoing purposes. The
Company will give to the Trustee written notice of the change in the location
of such office or agency. In case the Company shall fail to maintain any such
office or agency or shall fail to give such notice of the location or of any
change in the location thereof, presentations and surrenders may be made and
notices and demands may be served at the principal office of the Trustee.
SECTION 5.03. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 8.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 5.04. PROVISION AS TO PAYING AGENT. (a) If the Company
shall appoint a paying agent other than the Trustee with respect to any series
of Debt Securities, it will cause such paying agent to execute and deliver to
the Trustee an instrument in which such agent shall agree with the Trustee,
subject to the provisions of this Section 5.04, that:
(1) it will hold all sums held by it as such agent for the
payment of the principal of, premium, if any, or interest, if any, on
the Debt Securities of such series
<PAGE> 59
49
(whether such sums have been paid to it by the Company or by any other
obligor on the Debt Securities of such series) in trust for the
benefit of the holders of the Debt Securities of such series; and
(2) it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Debt Securities of such
series) to make any payment of the principal of, premium, if any, or
interest, if any, on any of the Debt Securities of such series when
the same shall be due and payable.
(b) If the Company shall act as its own paying agent with
respect to any series of Debt Securities, it will, on or before each due date
for the payment of the principal of, premium, if any, or interest, if any,
on any of the Debt Securities of a series, set aside, segregate and hold in
trust for the benefit of such holders of the Debt Securities of such series a
sum sufficient to pay such principal, premium, if any, or interest, if any, so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Company (or by any other obligor on such Debt Securities
of such series) to make any payment of the principal of, premium, if any, or
interest, if any, on any of the Debt Securities of such series when the same
shall become due and payable.
<PAGE> 60
50
(c) Anything in this Section 5.04 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge of this Indenture in accordance with Sections 13.01
and 13.02, or for any other reason, pay or cause to be paid to the Trustee all
sums held in trust by it, or any paying agent hereunder, as required by this
Section 5.04, such sums to be held by the Trustee upon the trusts herein
contained.
(d) Anything in this Section 5.04 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this
Section 5.04 is subject to Sections 13.03 through 13.05.
(e) The Company hereby appoints the Trustee to act as paying
agent for all series of Debt Securities, but reserves the right to change the
paying agent or to itself act as paying agent.
SECTION 5.05. SECURED INDEBTEDNESS OF THE COMPANY AND RESTRICTED
SUBSIDIARIES. So long as any of the Debt Securities remains outstanding, the
Company will not, and the Company will not permit any Restricted Subsidiary to,
create, assume, guarantee or incur any Secured Indebtedness of the Company or
any Restricted Subsidiary without in any such case effectively providing
concurrently with the creation, assumption, guarantee or incurrence of any such
Secured
<PAGE> 61
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Indebtedness that the Debt Securities (together with, if the Company shall so
determine, any other indebtedness of or guarantee by the Company or such
Restricted Subsidiary ranking equally with the Debt Securities and then
existing or thereafter created) shall be secured equally and ratably with (or,
at the option of the Company, prior to) such Secured Indebtedness but only for
so long and during such time as (i) such Secured Indebtedness shall exist and
be secured by a Lien and (ii) the aggregate of all Secured Indebtedness not
secured solely by Liens described in clauses (a) through (h) of this Section
5.05 and all Attributable Debt outstanding pursuant to, and not excluded from
this calculation by, Section 5.06, exceeds 10% of Shareholders' Equity;
PROVIDED, HOWEVER, that the foregoing restrictions shall not apply to Secured
Indebtedness secured by:
(a) Liens on property (including any Shares or Indebtedness)
of any corporation existing at the time such corporation becomes a
Restricted Subsidiary or arising thereafter pursuant to contractual
commitments entered into prior to and not in contemplation of such
corporation's becoming a Restricted Subsidiary;
(b) Liens on property (including any Shares or Indebtedness)
existing at the time of acquisition of
<PAGE> 62
52
such property by the Company or a Restricted Subsidiary, or Liens to
secure the payment of all or any part of the purchase price of such
property created upon the acquisition of such property by the Company
or a Restricted Subsidiary, or Liens to secure any Secured
Indebtedness incurred by the Company or a Restricted Subsidiary prior
to, at the time of, or within one year after the later of the
acquisition, the completion of construction (including any
improvements, alterations or repairs to existing property) or the
commencement of commercial operation of such property, which Secured
Indebtedness is incurred for the purpose of financing all or any part
of the purchase price thereof or construction or improvements,
alterations or repairs thereon; PROVIDED, HOWEVER, that in the case of
any such acquisition, construction or improvement, alteration or
repair, the Lien shall not apply to any property theretofore owned by
the Company or a Restricted Subsidiary, other than, in the case of any
such construction or improvement, any theretofore unimproved real
property or portion thereof on which the property so constructed, or
the improvement, is located and any other property not then
constituting a Principal Property;
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(c) Liens securing Secured Indebtedness of any Restricted
Subsidiary owing to the Company or to another Restricted Subsidiary;
(d) Liens on property of a corporation existing at the time
such corporation is merged or consolidated with the Company or a
Restricted Subsidiary or at the time of a sale, lease or other
disposition of the properties of a corporation as an entirety or
substantially as an entirety to the Company or a Restricted Subsidiary
or arising thereafter pursuant to contractual commitments entered into
by such corporation prior to and not in contemplation of such merger,
consolidation, sale, lease or other disposition;
(e) Liens on property of the Company or a Restricted
Subsidiary in favor of the United States of American or any State
thereof, or any department, agency or instrumentality or political
subdivision of the United States of America or any State thereof, or
in favor of any other country, or any political subdivision thereof,
or in favor of any trustee or mortgagee acting on behalf, or for the
benefit of, any of the foregoing, to secured partial, progress,
advance or other payments pursuant to any contract or statute
<PAGE> 64
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or to secure any Indebtedness incurred for the purpose of financing
all or any part of the purchase price or the cost of construction of
the property subject to such Liens (including without limitation Liens
incurred in connection with pollution control, industrial revenue or
similar financings) and any other Liens incurred or assumed in
connection with the issuance of industrial revenue or private activity
bonds the interest on which is exempt from Federal income taxation
pursuant to Section 103(b) of the Internal Revenue Code of 1986, as
amended;
(f) Liens existing on the first date on which a Debt Security
is authenticated by the Trustee; (g) Liens on any property
(including any Shares or Indebtedness) not constituting a
Principal Property; (h) any extension, renewal or replacement
(or successive extensions, renewals or replacements) in whole
or in part of any Lien referred to in the foregoing clauses
(a) to (g), inclusive; PROVIDED, HOWEVER, that the principal
amount of Secured Indebtedness secured thereby shall not exceed
the principal amount of Secured Indebtedness secured thereby
at the time of such extension, renewal or replacement, and
that such extension, renewal or
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replacement shall be limited to all or a part of the property which
secured the Lien so extended, renewed or replaced (plus improvements,
alterations and repairs on or to such property) and any other
property not then constituting a Principal Property.
Notwithstanding the foregoing provisions, the Company and any one or
more Restricted Subsidiaries may create, assume, guarantee or incur Secured
Indebtedness which would otherwise be subject to the foregoing restrictions in
an aggregate amount which, together with (i) all other Secured Indebtedness of
the Company and its Restricted Subsidiaries which would otherwise be subject to
the foregoing restrictions (not including Secured Indebtedness secured by Liens
permitted under clauses (a) through (h) above) and (ii) all Attributable Debt
outstanding pursuant to, and not excluded from this calculation by, Section
5.06, does not at the time exceed 10% of Shareholders' Equity.
SECTION 5.06. SALE AND LEASEBACK TRANSACTIONS. The Company will not,
and will not permit any Restricted Subsidiary to, enter into any Sale and
Leaseback Transaction unless (A) the sum of (i) the Attributable Debt
outstanding pursuant to such Sale and Leaseback Transaction, (ii) all
Attributable Debt outstanding pursuant to all other Sale and Leaseback
Transactions entered into by the Company and any
<PAGE> 66
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Restricted Subsidiary after the first date on which a Debt Security is
authenticated by the Trustee, and (iii) the aggregate of all Secured
Indebtedness outstanding (computed without regard to the Secured Indebtedness
excluded from the operation of Section 5.05 pursuant to clauses (a) through (h)
thereof and further without regard to Secured Indebtedness of the Company or
any Restricted Subsidiary if the Debt Securities are secured equally and ratably
with (or prior to) such Secured Indebtedness) does not exceed 10% of
Shareholders' Equity or (B) an amount equal to the greater of (i) the amount of
the net proceeds to the Company or the Restricted Subsidiary entering into such
Sale and Leaseback Transaction or (ii) the fair market value of such property,
as determined by the Board of Directors (in the case of (i) or (ii), after
repayment of, or otherwise taking into account, as the case may be, the amount
of any Secured Indebtedness secured by a Lien encumbering such property which
Secured Indebtedness existed immediately prior to such Sale and Leaseback
Transaction) is applied to retirement of Funded Debt within one year after the
consummation of such Sale and Leaseback Transaction; PROVIDED, HOWEVER, that
the covenant contained in this Section 5.06 shall not apply to, and there shall
be excluded from Attributable Debt in any computation under Section 5.05 or
this Section 5.06,
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Attributable Debt with respect to any Sale and Leaseback Transaction if:
(1) the Sale and Leaseback Transaction is entered into in
connection with the issuance of industrial revenue or private activity
bonds the interest on which is exempt from Federal income taxation
pursuant to Section 103(b) of the Internal Revenue Code of 1986, as
amended;
(2) the Company or a Restricted Subsidiary applies an amount
equal to the net proceeds (after repayment of any Secured Indebtedness
secured by a Lien encumbering such Principal Property which Secured
Indebtedness existed immediately before such Sale and Leaseback
Transaction) of the sale or transfer of the Principal Property leased
pursuant to such Sale and Leaseback Transaction to investment (whether
for acquisition, improvement, repair, alteration or construction
costs) in another Principal Property within one year prior or
subsequent to such sale or transfer;
(3) such Sale and Leaseback Transaction was entered into by a
corporation prior to the date on which such corporation became a
Restricted Subsidiary or arises thereafter pursuant to contractual
commitments entered into by such corporation prior to
<PAGE> 68
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and not in contemplation of such corporation's becoming a Restricted
Subsidiary; or
(4) such Sale and Leaseback Transaction was entered into by a
corporation prior to the time such corporation was merged or
consolidated with the Company or a Restricted Subsidiary or prior to
the time of a sale, lease or other disposition of the properties of
such corporation as an entirety or substantially as an entirety to the
Company or a Restricted Subsidiary or arises thereafter pursuant to
contractual commitments entered into by such corporation prior to and
not in contemplation of such merger, consolidation, sale, lease or
other disposition.
SECTION 5.07. WAIVER OF COVENANTS. The Company may omit in any
particular instance to comply with any covenant or condition set forth in
Section 5.05 or 5.06 hereof or provided in a Certified Resolution delivered to
the Trustee pursuant to Section 2.02(A) hereof or in any indenture supplemental
hereto with respect to the Debt Securities of any series, if before or after
the time for such compliance the Holders of a majority in aggregate principal
amount of the Debt Securities of such series at the time Outstanding shall, by
action of such Debt Securityholders as provided in Section 9.01, either waive
such compliance in such instance or generally
<PAGE> 69
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waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.
SECTION 5.08. CERTIFICATE TO TRUSTEE. The Company will deliver to
the Trustee within 120 days after the end of each fiscal year of the Company
(which on the date hereof ends on December 31) ending after the date any series
of Debt Securities is first issued hereunder, an Officers' Certificate (which
need not contain the statements provided for in Section 15.05), stating whether
or not to the best knowledge of the signer thereof the Company is in default in
the performance and observance of the terms, provisions and conditions of
Section 5.01, 5.02, 5.05 or 5.06 and any other covenant provided in a Certified
Resolution delivered to the Trustee pursuant to Section 2.02(A) hereof or an
indenture supplemental hereto, and if the Company shall be in default,
specifying all such defaults and the nature and status thereof of which they may
have knowledge; PROVIDED, HOWEVER, that the Company shall not be obligated to
make any such statement with respect to any term, provision or condition
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specified in this Section 5.08 if such term, provision or condition, as the case
may be, is applicable only to a series of Debt Securities none of the Debt
Securities of which are outstanding or with respect to which series the Company
has been discharged pursuant to Article Thirteen.
ARTICLE SIX
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE.
SECTION 6.01. DEBT SECURITYHOLDERS' LISTS. The Company agrees that it
will furnish or cause to be furnished to the Trustee, semi-annually, not more
than fifteen days after each record date relating to any series of Debt
Securities, or if any series has no record date, not more than fifteen days
after January 1 and July 1 in each year, and at such other times as the Trustee
may request in writing within thirty days after receipt by the Company of any
such request, a list in such form as the Trustee may reasonably require of the
names and addresses of the holders of the applicable series of Debt Securities,
as of a date not more than fifteen days prior to the time such information is
furnished; PROVIDED, HOWEVER, that so long as the Trustee shall be Debt
Security registrar for a series, no such list for a series need be furnished.
<PAGE> 71
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SECTION 6.02. PRESERVATION AND DISCLOSURE OF LISTS. (a) The
Trustee shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the holders of Debt Securities
contained in the most recent list furnished to it as provided in Section 6.01
and received by the Trustee in its capacity as Debt Securities registrar. The
Trustee may destroy any list furnished to it as provided in Section 6.01 upon
receipt of a new list so furnished.
(b) In case three or more holders of Debt Securities of a
series (hereinafter referred to as "applicants") apply in writing to the
Trustee and furnish to the Trustee reasonable proof that each such applicant
has owned a Debt Security of such series for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other holders of Debt Securities of
such series with respect to their rights under this Indenture or under the Debt
Securities of such series and is accompanied by a copy of the form of proxy or
other communication which such applicants propose to transmit, then the Trustee
shall, within five business days after the receipt of such application, at its
election, either:
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(1) afford such applicants access to the information preserved
at the time of the Trustee in accordance with the provisions of
subsection (a) of this Section 6.02, or
(2) inform such applicants as to the approximate number of
holders of Debt Securities of such series whose names and addresses
appear in the information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this Section 6.02,
and as to the approximate cost of mailing to such Debt Securityholders
the form of proxy or other communication, if any, specified in such
application.
If the Trustee shall elect not to afford such applicants
access to such information, the Trustee shall, upon the written request of such
applicants, mail to each holder of Debt Securities of such series whose name and
address appear in the information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this Section 6.02 a copy of
the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender, the Trustee shall mail
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to such applicants and file with the Securities and Exchange Commission,
together with a copy of the material to be mailed, a written statement to the
effect that, in the opinion of the Trustee, such mailing wold be contrary to
the best interests of the holders of Debt Securities of such series or would be
in violation of applicable law. Such written statement shall specify the basis
of such opinion. If said Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections, or, if after the entry of an order
sustaining one or more objections, said Commission shall find, after notice and
opportunity for hearing, that all the objections so sustained have been met and
shall enter an order so declaring, the Trustee shall mail copies of such
material to all such Debt Securityholders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise the Trustee shall
be relieved of any obligation or duty to such applicants respecting their
application.
(c) Each and every holder of the Debt Securities, by
receiving and holding the same, agrees with the Company and the Trustee that
neither the Company nor the Trustee, nor any paying agent, nor any paying
agent, nor any Debt Security registrar shall be held accountable by reason of
the
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disclosure of any such information as to the names and addresses of the holders
of Debt Securities in accordance with the provisions of subsection (b) of this
Section 6.02, regardless of the source from which such formation was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
SECTION 6.03. REPORTS BY THE COMPANY. (a) The Company
agrees to file with the Trustee, within thirty days after the Company is
required to file the same with the Securities and Exchange Commission, copies
of the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as said Commission may from
time to time by rules and regulations prescribe) which the Company may be
required to file with said Commission pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934; or, if the Company is not required to
file information, documents or reports pursuant to either of such Sections,
then to file with the Trustee and said Commission, in accordance with rules and
regulations prescribed from time to time by said Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect
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of a security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations.
(b) The Company agrees to file with the Trustee and the
Securities and Exchange Commission, in accordance with the rules and
regulations prescribed from time to time by said Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants provided for in this Indenture as may be
required from time to time by such rules and regulations.
(c) The Company agrees to transmit by mail to all holders of
Debt Securities, as the names and addresses of such holders appear upon the
Debt Security register, within thirty days after the filing thereof with the
Trustee, such summaries of any information, documents and reports required to
be filed by the Company pursuant to subsection (a) and (b) of this Section 6.03
as may be required by rules and regulations prescribed form time to time by the
Securities and Exchange Commission.
SECTION 6.04. REPORTS BY THE TRUSTEE. (a) On or before
October 15, 1990, and on or before October 15 in every year thereafter, so long
as any Debt Securities are outstanding hereunder, the Trustee shall transmit
to the
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Debt Securityholders, as hereinafter in this Section 6.04 provided, a brief
report dated as of the preceding August 15 with respect to:
(1) its eligibility under Section 8.09 and its qualification
under Section 8.08 or in lieu thereof, if to the best of its knowledge it has
continued to be eligible and qualified undersuch Sections, a written statement
to such effect;
(2) the character and amount of any advances (and if
the Trustee elects so to state, the circumstances surrounding
the making thereof) made by the Trustee (as such) which
remain unpaid on the date of such report, and for the
reimbursement of which it claims or may claim a lien or charge
prior to that of the Debt Securities on any property or funds
held or collected by it as Trustee, except that the Trustee
shall not be required (buy may elect to state such advances
if such advances so remaining unpaid aggregate not more than
one-half of one percent of the principal amount of the Debt
Securities outstanding on the date of such report;
(3) the amount, interest rate, and maturity date of
all other indebtedness owing by the Company (or by any other obligor
on the Debt Securities) to the Trustee
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in its individual capacity, on the date of such report, with a brief
description of any property held as collateral security therefor,
except any indebtedness based upon a creditor relationship arising in
any manner described in Paragraph (2), (3), (4) or (6) or Subsection
(b) of Section 8.13;
(4) the property and funds, if any, physically in the
possession of the Trustee, as such, on the date of such
report;
(5) any additional issue of Debt Securities which the
Trustee has not previously reported; and
(6) any action taken by the Trustee in the
performance of its duties under this Indenture which it has
not previously reported and which in its opinion materially
affects the Debt Securities, except action in respect of a
default, notice of which has been or is to be withheld by it
in accordance with the provisions of Section 7.08.
(b) The Trustee shall transmit to the Debt Securityholder,
as hereinafter provided, a brief report with respect to the character
and amount of any advances (and if the Trustee elects so to state,
the circumstances surrounding the making thereof) made by the Trustee
(as such), since the date of the last
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report transmitted pursuant to the provisions of subsection (a) of
this Section 6.04 (or, if no report has yet been so transmitted, since
the date of execution of this Indenture), for the reimbursement of
which it claims or may claim a lien or charge prior to that of the
Debt Securities on property or funds held or collected by it as
Trustee, and which it has not previously reported pursuant to this
subsection, except that the Trustee shall not be required (but may
elect) to report such advances if such advances remaining unpaid at
any time aggregate ten percent or less of the principal amount of
Debt Securities outstanding at such time, such report to be
transmitted within ninety days after such time.
(c) Reports pursuant to this Section 6.04 shall be
transmitted by mail to all Debt Securityholder as the names and
addresses of such Debt Securityholder appear upon the Debt Security
register.
(d) A copy of each such report shall, at the time of such
transmission to Debt Securityholder, be filed by the Trustee with each
stock exchange upon which the Debt Securities of any series are
listed and also with the Securities and Exchange Commission. The
Company will
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notify the Trustee when and as the Debt Securities of any series become
listed on any stock exchange.
ARTICLE SEVEN
Remedies of the Trustee and
---------------------------
Debt Securityholder on Event of Default
---------------------------------------
SECTION 7.01. EVENTS OF DEFAULT. "Event of Default" with
respect to any series of Debt Securities means each one of the event specified
below in this Section 7.01, unless it is either inapplicable to a particular
series or is specifically deleted or modified in the Certified Resolution under
which such series of Debt Securities is issued, and any other events as may
be specified in the Certified Resolution under Section 2.02 relating to such
series or any supplemental indenture under which such series of Debt Securities
is issued. In case one or more of the following Events of Default shall have
occurred and be continuing:
(a) default in the payment of any installment of interest upon
any of the Debt Securities of such series, as and when the same shall
become due and payable, and continuance of such default for a period
of thirty days; or
(b) default in the payment of the principal of or premium, if
any, on any of the Debt Securities of such series, as and when the same
shall become due and
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70
payable (subject to subsection (c) below) either at maturity, upon
redemption, by declaration or otherwise; or
(c) default in the making of any payment for a sinking,
purchase or analogous fund provided for in respect of any of the Debt
Securities of such series as and when the same shall become due and
payable, and continuance of such default for a period of thirty
days; or
(d) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in respect of the Debt Securities of such series, or in this
Indenture contained with respect to such series, for a period of
ninety days after the date on which written notice of such failure,
requiring the Company to remedy the same, shall have been given to the
Company by the Trustee, or to the Company and the Trustee by the
holders of at least twenty-five percent in aggregate principal amount
of the Debt Securities of such series at the time Outstanding; or
(e) entry of a decree or order for relief in respect of the
Company by a court having jurisdiction in the premises in an
involuntary case under any
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applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of the
Company or for any substantial part of its property, or ordering the
winding-up or liquidation of its affairs and the continuance of such
decree or order unstayed and in effect for a period of ninety
consecutive days; or
(f) commencement by the Company of a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent by the Company to the entry of an
order for relief in an involuntary case under any such law, or consent
by the Company to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Company or for any substantial part of
its property, or any general assignment by the Company for the benefit
of creditors, or failure by the Company generally to pay its debts as
they become due, or the taking by the Company of any corporate action
in furtherance of any of the foregoing;
the and in each and every such case in which an Event of Default shall have
occurred and shall be continuing, unless
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72
the principal of all of the Applicable Debt Securities (as hereinafter defined)
shall have already become due and payable, either the Trustee or the holders of
not less than twenty-five percent in aggregate principal amount of the
Applicable Debt Securities then Outstanding hereunder, by notice in writing to
the Company (and to the Trustee if given by holders of the Applicable Debt
Securities), may declare the principal of all the Applicable Debt Securities
(or such portion thereof as may be provided in the Certified Resolution under
Section 2.02 relating to such series or any supplemental indenture under which
such Applicable Debt Securities are issued) to be due and payable immediately
and upon any such declaration the same shall become and shall be immediately
due and payable, anything contained in the Indenture or in the Applicable Debt
Securities to the contrary notwithstanding. The term "Applicable Debt
Securities" shall mean the Debt Securities of a series with respect to which an
Event of Default shall have occurred and be continuing and unless otherwise
specifically provided with respect to a particular series of Debt Securities in
the Certified Resolutions under Section 2.02 relating to such series or any
indentures supplemental to this Indenture under which such series of Debt
Securities are issued shall refer to Debt Securities on a series by series
basis such that the provisions hereof shall be applied separately
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73
to each series of Debt Securities affected by such Event of Default. Any
declaration pursuant to this Section 7.01 is, however, subject to the condition
that if, at any time after the principal of the Applicable Debt Securities
shall have been so declared due and payable, and before any judgment or decree
for the payment of the money due shall have been obtained or entered as
hereinafter provided, the Company shall pay or shall deposit with the Trustee a
sum sufficient to pay all matured installments of interest upon all the
Applicable Debt Securities and the principal of and premium, if any, on any and
all Applicable Debt Securities which shall have become due otherwise than by
acceleration, with interest on overdue installments of interest (to the extent
that payment of such interest is enforceable under applicable law) and on such
principal and premium, if any, at the rate borne by the Applicable Debt
Securities, or at such other rate as may be provided in the Certified
Resolution under Section 2.02 relating to such series or any supplemental
indenture under which such Applicable Debt Securities are issued, to the date
of such payment or deposit, and all sums paid or advances made by the Trustee
hereunder and all amounts owing the Trustee under Section 8.06, and any and all
Events of Default under this Indenture with respect to the Applicable Debt
Securities, other than the nonpayment of principal of and accrued
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74
interest on Applicable Debt Securities which shall have become due by
acceleration, shall have been remedied, cured or waived, then and in every such
case the holders of a majority in aggregate principal amount of the Applicable
Debt Securities then Outstanding, by written notice to the Company and to the
Trustee, may waive all defaults related to such Applicable Debt Securities and
rescind and annul such declaration and its consequences; but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
In case the Trustee or any of the Debt Securityholder shall
have proceeded to enforce any right under this Indenture and such proceedings
shall have been discontinued or abandoned because of such rescission or
annulment or for any other reason or shall have been determined adversely to
the Trustee or such Debt Securityholder, then and in every such case the
Company and the Trustee and such Debt Securityholder shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company and the Trustee and such Debt Securityholder
shall continue as though no such proceedings had been taken.
SECTION 7.02. PAYMENT OF APPLICABLE DEBT SECURITIES ON
DEFAULT; SUIT THEREFOR. The Company covenants that (a) in
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75
case default shall be made in the payment of any installment of interest upon
any of the Applicable Debt Securities as and when the same shall become due and
payable, and such default shall have continued for a period of thirty days, or
(b) in case default shall be made in the payment of the principal of and
premium, if any, on any of the Applicable Debt Securities as and when the same
shall have become due and payable (subject to subsection (c) below), whether at
maturity of the Applicable Debt Securities or upon redemption or by declaration
or otherwise, or (c) in case default shall be made in the payment for any
sinking, purchase or analogous find provided for in respect of any of the
Applicable Debt Securities as and when the same shall become due and payable,
and such default shall have continued for a period of thirty days, then, upon
demand of the Trustee, the Company will pay to the Trustee, for the benefit of
the holders of the Applicable Debt Securities, the whole amount that then shall
have become due and payable on all such Applicable Debt Securities for
principal and premium, if any, or interest, or both, as the case may be,
with interest upon the overdue principal and premium, if any, and (to the
extent that payment of such interest at the rate borne by the Applicable Debt
Securities or at such other rate as may be provided in the Certified Resolution
under Section 2.02
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relating to such series or any supplemental indenture under which such
Applicable Debt Securities are issued; and, in addition thereto, such further
amount as shall be sufficient to cover all amounts owing the Trustee under
Section 8.06.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on the Applicable Debt Securities and collect in the manner provided by
law out of the property of the Company or any other obligor on the Applicable
Debt Securities wherever situated the money adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company or any other obligor on the Debt
Securities under the Federal Bankruptcy Code or any other applicable law,
or in case a receiver or trustee shall have been appointed for the property of
the Company or such other obligor, or in the case of any similar judicial
proceedings relative to the Company or other obligor upon the Debt Securities,
or to the creditors or property
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77
of the Company or such other obligor, the Trustee irrespective of whether the
principal of the Debt Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand pursuant to the provisions of this Section
7.02, shall be entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount of
principal, premium and interest owing and unpaid in respect of the Debt
Securities, and to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any amounts owing the Trustee under Section 8.06) and of the holders
of Debt Securities allowed in such judicial proceedings relative to the Company
or any other obligor on the Debt Securities, its or their creditors, or its or
their property, and to collect and receive any money or other property payable
or deliverable on any such claims, and to distribute the same after the
deduction of its charges and expenses; and any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized by each of the holders of
Debt Securities to make such payments to the Trustee, and, in the event that
the Trustee shall consent to the making of such payments directly to the Debt
Securityholder,
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78
to pay to the Trustee any amounts owing the Trustee under Section 8.06 up to
the date of such distribution.
All rights of action and of asserting claims under this Indenture, or
under any of the Debt Securities of any series, may be enforced by the Trustee
without the possession of any of the Debt Securities of such series, or the
production thereof on any trial or other proceeding relative thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall be for
the ratable benefit of the holders of the Debt Securities of such series.
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79
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Debt Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting
the Debt Securities or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Debt Securityholder in any such
proceeding.
SECTION 7.03. APPLICATION OF MONEY COLLECTED BY TRUSTEE. Any money
collected by the Trustee pursuant to this Article with respect to a series of
Debt Securities shall be applied in the order following, at the date or dates
fixed by the Trustee for the distribution of such money, upon presentation of
the several Debt Securities of such series, and stamping thereon the payment,
if only partially paid, and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts owing the Trustee under
Section 8.06;
SECOND: In case the principal on none of the Outstanding
Debt Securities of such series shall have become due and be unpaid,
to the payment of interest, if any, which has become due and is
unpaid on the Debt Securities of such series, in the order of the
maturity of the installments of such interest, with interest (to the
extent permitted by applicable law and to the extent
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80
that such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate borne by the Debt Securities or at
such other rate as may be provided in the Certified Resolution under
Section 2.02 relating to such series or any supplemental indenture
under which such series of Debt Securities is issued (such payments
to be made ratably to the Persons entitled thereto);
THIRD: In case the principal of any of the Outstanding
Debt Securities of such series shall have become due, by declaration or
otherwise, to the payment of the whole amount then owing and unpaid
upon the Debt Securities of such series for principal, premium, if
any, and interest, if any, with interest on the overdue principal and
premium, if any, and (to the extent permitted by applicable law and to
the extent that such interest has been collected by the Trustee) upon
overdue installments of interest at the rate borne by the Debt
Securities of such series or at such other rate as may be provided
in the Certified Resolution under Section 2.02 relating to such series
or any supplemental indenture under which such series of Debt
Securities is issued; and in case such money shall be insufficient to
pay in full the whole amounts so due
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81
and unpaid upon the Debt Securities of such series, then to the
payment of such principal, premium, if any, and interest, if any,
without preference or priority of principal and premium, if any, over
interest, if any, or of interest over principal and premium, if any,
or of any installment of interest over any other installment of
interest, or of any Debt Security of such series over any other Debt
Security of such series, ratably to the aggregate of such principal,
premium, if any, and accrued and unpaid interest, if any; and
FOURTH: To the payment of the remainder, if any, to the
Company, its successors or assigns, or to whosoever may be lawfully
entitled to receive the same, or as a court of competent jurisdiction
may direct.
SECTION 7.04. PROCEEDINGS BY DEBT SECURITYHOLDERS. No
holder of any Applicable Debt Security of any series shall have any right by
virtue of or by availing himself of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture or for the appointment of a receiver or trustee,
or for any other remedy hereunder, in each case with respect to an Event of
Default related to such Applicable Debt Securities, unless such holder
previously shall have given to the Trustee written notice of default with
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82
respect to the Applicable Debt Securities of such series and of the continuance
thereof, as hereinbefore provided, and unless also the holders of not less than
twenty-five percent in aggregate principal amount of such Applicable Debt
Securities then outstanding shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee reasonable indemnity against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trustee for
sixty days after its receipt of such action, suit or proceeding and no
direction inconsistent with such written request shall have been given to the
Trustee during such sixty-day period by the holders of a majority in principal
amount of the outstanding Debt Securities, it being understood and intended,
and being expressly covenanted by the holder of every Debt Security of a series
with every other holder of a Debt Security of such series and the Trustee, that
no one or more holders of Debt Securities of such series shall have any right
in any manner whatever by virtue of or by availing himself or themselves of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of such Debt Securities, or to obtain or seek to obtain priority
over or preference to any other such holder, or to enforce any right under this
Indenture, except in the
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83
manner herein provided and for the equal, ratable and common benefit of all
holders of Debt Securities of such series.
Notwithstanding any other provisions in this Indenture, the right of
any holder of any Debt Security, which is absolute and unconditional, to
receive payment of the principal of, and premium, if any, and interest, if any,
on such Debt Security, on or after the respective due dates expressed in such
Debt Security, or to institute suit for the enforcement of any such payment on
or after such respective dates shall not be impaired or affected without the
consent of such holder.
SECTION 7.05. PROCEEDINGS BY TRUSTEE. In case an Event of Default
shall occur and be continuing hereunder with respect to any Applicable Debt
Securities, the Trustee may in its discretion proceed to protect and enforce
the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either by suit in equity or by action at law or by proceeding
in bankruptcy or otherwise, whether for the specific enforcement of any
covenant or agreement contained in this Indenture or in aid of the exercise of
any power granted in this Indenture with respect to such Applicable Debt
Securities, or to enforce any
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84
other legal or equitable right vested in the Trustee by this Indenture or by
law.
SECTION 7.06. REMEDIES CUMULATIVE AND CONTINUING. All powers
and remedies given this Article Seven to the Trustee or to the holders of
Debt Securities of any series shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Debt Securities of such series,
by judicial proceedings or otherwise, to enforce the performance or observance
of the covenants and agreements contained in this Indenture, and no delay or
omission of the Trustee or of any holder of any of the Debt Securities of a
series to exercise any right or power accruing upon any default occurring and
continuing as aforesaid shall impair any such right or power, or shall be
construed to be a waiver of any such default or an acquiescence therein; and,
subject to the provisions of Section 7.04, every power and remedy given by this
Article Seven or by law to the Trustee or to the Debt Securityholders of a
series may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Debt Securityholders of such series.
SECTION 7.07. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS
BY MAJORITY OF DEBT SECURITYHOLDERS. The holders of
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a majority in aggregate principal amount of the Debt Securities of any series
at any time outstanding shall have the right to direct the time, method, and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to the Debt
Securities of such series; PROVIDED, HOWEVER, that (subject to the provisions
of Section 8.01) the Trustee shall have the right to decline to follow any such
direction if the Trustee being advised by counsel determines that the action or
proceeding so directed may not lawfully be taken or if the Trustee in good
faith by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees and/or Responsible Officers shall determine
that the action or proceedings so directed would involve the Trustee in
personal liability or would be unduly prejudicial to the holders of Debt
Securities of such series not joining in such direction. Prior to any
declaration accelerating the maturity of the Debt Securities of any series, the
holders of a majority in aggregate principal amount of the Debt Securities of
such series at the time outstanding may, on behalf of the holders of all of the
Debt Securities of such series, waive any past default or Event of Default
hereunder with respect to such series and its consequences except a default in
the payment of the principal of, premium, if nay,
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or interest, if any, on any of the Debt Securities of such series, or in
respect of a covenant or provision hereof which under Article XI cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security of such series affected. Upon any such waiver the Company, the
Trustee and the holders of the Debt Securities of such series shall be restored
to their former positions and rights hereunder, respectively; but no such
waiver shall extend to any subsequent or other default (as defined in Section
7.08) or Event of Default or impair any right consequent thereon. Whenever any
default or Event of Default hereunder shall have been waived as permitted
by this Section 7.07, said default or Event of Default shall for all purposes
of the Debt Securities of such series and this Indenture be deemed to have been
cured and to be not continuing.
SECTION 7.08. NOTICE OF DEFAULTS. The Trustee shall, within
ninety days after the occurrence of a default (as hereinafter defined) with
respect to the Debt Securities of any series, mail to all holders of Debt
Securities of such series, as the names and addresses of such holders appear
upon the Debt Security register, notice of all such defaults known to the
Trustee, unless such default shall have been cured before the giving of such
notice (the term "default" for the purpose of this Section 7.08 being hereby
defined to
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be any event which is, or after notice or lapse of time or both would become,
an Event of Default with respect to Debt Securities of such series); and
provided that, except in the case of default in the payment of the principal
of, premium, if any, or interest, if any, on any of the Debt Securities of such
series, the Trustee shall be protected in withholding such notice if and so
long as the board of directors or trustees, the executive committee, or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interests of the
Debt Securityholders of such series.
SECTION 7.09. UNDERTAKING TO PAY COSTS. All parties to this
Indenture agree, and each holder of any Debt Security by his acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require,
in any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any part
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 7.09
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shall not apply to any suit instituted by the Trustee, to any suit instituted
by any Debt Securityholder, or group of Debt Securityholders, holding in the
aggregate more than ten percent in principal amount of the Debt Securities of
any series outstanding, or to any suit instituted by any holder of a Debt
Security of any series for the enforcement of the payment of the principal of,
premium, if any, or interest, if any, on any Debt Security of such series on or
after the due date expressed in such Debt Security.
SECTION 7.10. WAIVER OF STAY OR EXTENSION LAWS. The Company
covenants and agrees (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
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ARTICLE EIGHT
Concerning the Trustee
----------------------
SECTION 8.01. DUTIES AND RESPONSIBILITIES OF TRUSTEE. The
Trustee prior to the occurrence of an Event of Default and after the curing of
all Events of Default which may have occurred and is continuing, undertakes to
perform such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default of occurred and is continuing (which
has not been cured or waived) the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default which may have
occurred:
(1) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this
Indenture, and the Trustee
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shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture;
but, int he case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture; (b) the Trustee shall not be
liable for any error of judgment made in good faith by a
Responsible Officer or Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
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(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of the holders of not less than a majority in principal
amount of the Debt Securities of any series at the time Outstanding
determined as provided in Section 9.04 relating to the time, method,
and place of conducting any proceeding for any remedy available to the
Trustee with respect to the Debt Securities of such series, or
exercising any trust or power conferred upon the Trustee with respect
to the Debt Securities of such series under this Indenture; and
(d) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
SECTION 8.02. RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as
otherwise provided in Section 8.01:
(a) the Trustee may rely and shall be protected in acting upon
any resolution, certificate, statement,
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instrument, opinion, report, notice, request, consent, order, bond,
debenture or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors
may be evidenced to the Trustee by a Certified Resolution;
(c) the Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of
Counsel;
(d) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Debt Securityholders pursuant to the
provisions of this Indenture, unless such Debt Securityholders shall
have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred therein or
thereby;
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93
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture;
(f) prior to the occurrence of an Event of Default with
respect to any series of Debt Securities hereunder and after the
curing or waiving of all Events of Default with respect to such series
of Debt Securities, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture or other paper or document with
respect to such series of Debt Securities, unless requested in writing
to do so by the holders of not less than a majority in principal
amount of Debt Securities of such series then outstanding; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee,
not reasonably assured to the Trustee by the security afforded to it
by the terms of this Indenture, the Trustee may require reasonable
indemnity against such expenses or liability as a condition to so
proceeding;
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(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder directly or by or through
agents or counsel, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or counsel appointed
with due care by it hereunder; and
(h) the Trustee shall not be deemed to have knowledge or
notice of any Event of Default or defaults hereunder unless a
Responsible Officer of the Trustee shall have actual knowledge thereof
or unless the holders of not less than twenty-five percent of the
outstanding Debt Securities of any series as to which there exists as
Event of Default or default gives notice of such Event of Default or
default.
SECTION 8.03. RESPONSIBILITY FOR RECITALS, ETC. The recitals
contained herein and in the Debt Securities (except in the Trustee's
certificate of authentication) shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Debt Securities. The Trustee shall not be accountable for
the use or application by the Company of any Debt Securities or the proceeds
thereof.
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SECTION 8.04. TRUSTEE, PAYING AGENT OR DEBT SECURITY REGISTRAR
MAY OWN DEBT SECURITIES. The Trustee, any paying agent, Debt Security
registrar or any other agent of the Company in its individual or any other
capacity, may become the owner or pledgee of Debt Securities with the same
rights it would have if it were not Trustee, paying agent, Debt Security
registrar or such other agent.
SECTION 8.05. MONEY TO BE HELD IN TRUST. Subject to the
provisions of Section 13.04, all money received by the Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
it was received. Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law.
SECTION 8.06. COMPENSATION AND EXPENSES OF TRUSTEE. The
Company agrees to pay to the Trustee from time to time, and the Trustee shall
be entitled to, reasonable compensation (which to the extent permitted by law
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust), and the Company will pay or reimburse the Trustee
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of
this Indenture (including the reasonable
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compensation and the expenses and disbursements of its counsel and of all
Persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence or bad faith. The Company also agrees
to indemnity the Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on the part of
the Trustee and arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim of
liability in the premises. The obligations of the Company under this Section
8.06 to compensate the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder. Such additional indebtedness shall be secured by a lien prior to
that of the Debt Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the holders of
particular Debt Securities.
SECTION 8.07. OFFICERS' CERTIFICATE AS EVIDENCE. Except as
otherwise provided in Section 8.01, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter
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be proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or bad faith on the part of the
Trustee, be deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Trustee, and such Certificate, in the absence of
negligence or bad faith on the part of the Trustee, shall be full warrant to
the Trustee for any action taken or omitted by it under the provisions of this
Indenture upon the faith thereof.
SECTION 8.08. CONFLICTING INTEREST OF TRUSTEE. (a) If the
Trustee has or shall acquire any conflicting interest, as defined in this
Section 8.08, it shall, within ninety days after ascertaining that it has such
conflicting interest, either eliminate such conflicting interest or resign in
the manner and with the effect specified in Section 8.10.
(b) In the event that the Trustee shall fail to comply with
the provisions of subsection (a) of this Section 8.08, the Trustee shall,
within ten days after the expiration of such ninety-day period, transmit notice
of such failure to all holders of Debt Securities, as the names and addresses of
such holders appear upon the Debt Security register.
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(c) For the purpose of this Section 8.08 the Trustee shall be
deemed to have a conflicting interest if:
(1) the Trustee is trustee under another indenture
under which any other securities, or certificates of
interest or participation in any other securities, of the
Company, are outstanding, unless such other indenture is a
collateral trust indenture under which the only collateral
consists of Debt Securities issued under this Indenture;
provided that there shall be excluded from the operation of
this paragraph this Indenture in respect of all series of
Debt Securities issued hereunder, and any other indenture or
indentures under which other securities, or certificates of
interest or participation in other securities, of the Company
are outstanding if (i) this Indenture and such other
indenture or indentures are wholly unsecured and such other
indentures are hereafter qualified under the Trust Indenture
Act of 1939, unless the Securities and Exchange Commission
shall have
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found and declared by order pursuant to subsection (b) of Section 305
or subsection (c) of Section 307 of the Trust Indenture Act of 1939
that differences exist between the provisions of this Indenture and
the provisions of such other indenture or indentures which are so
likely to involve a material conflict of interest as to make it
necessary in the public interest or for the protection of investors to
disqualify the Trustee from acting as such under this Indenture and
such other indenture or indentures, or (ii) the Company shall have
sustained the burden of proving, on application to the Securities and
Exchange Commission and after opportunity for hearing thereon, that
the trusteeship under this Indenture and such other indenture or
indentures is not so likely to involve a material conflict of interest
as to make it necessary in the public interest or for the protection
of investors to disqualify the Trustee from acting as such under one
of such indentures;
(2) the Trustee or any of its directors or executive officers
is an obligor upon the
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100
Debt Securities of any series issued under this Indenture or
an underwriter for the Company;
(3) the Trustee directly or indirectly controls or is
directly or indirectly controlled by or is under direct or
indirect common control with the Company or an underwriter for
the Company;
(4) the Trustee or any of its directors or executive
officers is a director, officer, partner, employee,
appointee, or representative of the Company, or of an
underwriter (other than the Trustee itself) for the Company
who is currently engaged in the business of underwriting,
except that (A) one individual may be a director and/or an
executive officer of the Trustee and a director and/or an
executive officer of the Company, but may not be at the same
time an executive officer of both the Trustee and the Company;
(B) if and so long as the number of directors of the Trustee
in office is more than nine, one additional individual may be
a director and/or an executive officer of the Trustee and a
director of the Company; and (C) the Trustee may be designated
by the Company or by any underwriter for the Company
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to act in the capacity of transfer agent, registrar, custodian, paying
agent, fiscal agent, escrow agent, or depositary, or in any other
similar capacity, or, subject tot he provisions of paragraph (1) of
this subsection (c), to act as trustee whether under an indenture or
otherwise;
(5) ten percent or more of the voting securities of
the Trustee is beneficially owned either by the Company or by
any director, partner, or executive officer thereof, or twenty
percent or more of such voting securities is beneficially
owned, collectively, by any two or more of such Persons; or
ten percent or more of the voting securities of the Trustee is
beneficially owned either by an underwriter for the Company or
by any director, partner, or executive officer thereof, or is
beneficially owned, collectively, by any two or more such
Persons;
(6) the Trustee is the beneficial owner of, or holds
as collateral security for an obligation which is in default,
(A) five percent or more of the voting securities, or ten
percent or more of any other class of security, of the
Company, not including the Debt Securities issued under this
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102
Indenture and securities issued under any other indenture
under which the Trustee is also trustee, or (B) ten percent
or more of any class of security of an underwriter for the
Company;
(7) the Trustee is the beneficial owner of, or holds
as collateral security for an obligation which is in default,
five percent or more of the voting securities of any Person
who, to the knowledge of the Trustee, owns ten percent or more
of the voting securities of, or controls directly or
indirectly or is under direct or indirect common control with,
the Company;
(8) the Trustee is the beneficial owner of, or holds
as collateral security for an obligation which is in default,
ten percent or more of any class of security of any Person
who, to the knowledge of the Trustee, owns fifty percent or
more of the voting securities of the Company; or
(9) the Trustee owns on May 15 in any calendar year,
in the capacity of executor, administrator, testamentary or
inter vivos trustee, guardian, committee or conservator, or in
any other similar capacity, an aggregate of twenty-five
percent or more of the voting
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103
securities, or of any class of security, of any Person, the beneficial
ownership of a specified percentage of which would have constituted a
conflicting interest under paragraph (6), (7) or (8) of this
subsection (c). As to any such securities of which the Trustee
acquired ownership through becoming executor, administrator or
testamentary trustee of an estate which included them, the provisions
of the preceding sentence shall not apply, for a period of two years
from the date of such acquisition, to the extent that such securities
included in such estate do not exceed twenty-five percent of such
voting securities or twenty-five percent of any such class of
security. Promptly after May 15, in each calendar year, the Trustee
shall make a check of its holdings of such securities in any of the
above-mentioned capacities as of such May 15. If the Company fails to
make payment in full of principal of or the premium, if any, or
interest, if any, on any of the Debt Securities when and as the same
becomes due and payable, and such failure continues for thirty days
thereafter, the Trustee shall make a prompt check of its holdings of
such
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securities in any of the above-mentioned capacities as of
the date of the expiration of such thirty-day period and,
after such date, notwithstanding the foregoing provisions of
this paragraph (9), all such securities so held by the
Trustee, with sole or joint control over such securities
vested in it, shall, but only so long as such failure shall
continue, be considered as though beneficially owned by the
Trustee for the purposes of paragraph (6), (7) and (8) of
this subsection (c).
The specifications of percentages in paragraphs (5) to (9),
inclusive, of this subsection (c) shall not be construed as indicating that the
ownership of such percentages of the securities of a Person is or is not
necessary or sufficient to constitute direct or indirect control for the
purposes of paragraph (3) or (7) of this subsection (c).
For the purposes of paragraph (6), (7), (8) and (9) of this
subsection (c) only, (A) the terms "security" and "securities" shall include
only such securities as are generally known as corporate securities, but shall
not include any note or other evidence of indebtedness issued to evidence an
obligation to repay money lent to a Person by
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one or more banks, trust companies or banking firms, or any certificate of
interest or participation in any such note or evidence of indebtedness; (B) an
obligation shall be deemed to be in default when a default in payment of
principal shall have continued for thirty days or more and shall not have been
cured; and (C) the Trustee shall not be deemed to be the owner or holder of (i)
any security which it holds as collateral security (as trustee or otherwise)
for an obligation which is not in default as defined in clause (B) above, or
(ii) any security which it holds as collateral security under this Indenture,
irrespective of any default hereunder, or (iii) any security which it holds as
agent for collection, or as custodian, escrow agent, or depositary, or in any
similar representative capacity.
Except as provided in the next preceding paragraph hereof, the
word "security" or "securities" as used in this Indenture shall mean any note,
stock, treasury stock, bond, debenture, evidence of indebtedness, certificate
of interest or participation in any profit-sharing agreement, collateral-trust
certificate pre-organization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas or other mineral rights,
or, in general, any interest or instrument
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commonly known as a "security" or any certificate of interest or participation
in, temporary or interim certificate for, receipt for, guarantee of, or warrant
or right to subscribe to or purchase, any of the foregoing.
(d) For the purposes of this Section 8.08:
(1) The term "underwriter" when used with reference
to the Company shall mean every Person who, within three years
prior to the time as of which the determination is made, has
purchased form the Company with a view to, or has offered or
sold for the Company in connection with, the distribution of
any security of the Company outstanding at such time, or has
participated or has had a direct or indirect participation in
any such undertaking, or has participated or has had a
participation in the direct or indirect underwriting of any
such undertaking, but such term shall not include a Person
whose interest was limited to a commission from an underwriter
or dealer not in excess of the usual and customary
distributors' or sellers' commission.
(2) The term "director" shall mean any director of a
corporation or any individual performing similar functions
with respect to any
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organization whether incorporated or unincorporated.
(3) The term "Person" shall mean an individual, a
corporation, a partnership, an association, a joint-stock
company, a trust, an unincorporated organization, or a
government or political subdivision thereof. As used in this
paragraph, the term "trust" shall include only a trust where
the interest or interests of the beneficiary or beneficiaries
are evidenced by a security.
(4) The term "voting security" shall mean any
security presently entitling the owner or holder thereof to
vote in the direction or management of the affairs of a
Person, or any security issued under or pursuant to any trust,
agreement or arrangement whereby a trustee or trustees or
agent or agents for the owner or holder of such security are
presently entitled to vote in the direction or management of
the affairs of a Person.
(5) The term "Company" shall mean any obligor upon
the Debt Securities.
(6) The term "executive officer" shall mean the
president, every vice president, every trust
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officer, the cashier, the secretary, and the treasurer of a
corporation, and any individual customarily performing similar
functions with respect to any organization whether
incorporated or unincorporated, but shall not include the
chairman of the board of directors.
The percentages of voting securities and other securities
specified in this Section 8.08 shall be calculated in accordance with the
following provisions:
(A) A specified percentage of the voting securities
of the Trustee, the Company or any other Person referred to in
this Section 8.08 (each of whom is referred to as a "Person"
in this paragraph) means such amount of the outstanding voting
securities of such Person as entitles the holder or holders
thereof to cast such specified percentage of the aggregate
votes which the holders of all the outstanding voting
securities of such Person are entitled to cast in the
direction or management of the affairs of such Person.
(B) A specified percentage of a class of securities
of a Person means such percentage of
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the aggregate amount of securities of the class outstanding.
(C) The term "amount", when used in regard to
securities, means the principal amount if relating to
evidences of indebtedness, the number of shares if relating to
capital shares, and the number of units if relating to any
other kind of security.
(D) The term "outstanding" means issued and not held
by or for the account of the issuer. The following securities
shall not be deemed outstanding within the meaning of this
definition:
(i) Securities of an issuer held in a sinking
fund relating to securities of the issuer of the same
class;
(ii) Securities of an issuer held in a sinking
fund relating to another class of securities of the
issuer, if the obligation evidence by such other
class of securities is not in default as to principal
or interest or otherwise;
(iii) Securities pledged by the issuer thereof as
security for an obligation of the issuer not in
default as to principal or interest or otherwise;
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(iv) Securities held in escrow if placed in
escrow by the issuer thereof; PROVIDED, HOWEVER, that any
voting securities of an issuer shall be deemed outstanding if
any Person other than the issuer is entitled to exercise the
voting rights thereof.
(E) A security shall be deemed to be of the same
class as another security if both securities confer upon the
holder or holders thereof substantially the same rights and
privileges; PROVIDED, HOWEVER, that, in the case of secured
evidences of indebtedness, all of which are issued under a
single indenture, differences in the interest rates or
maturity dates of various series thereof shall not be deemed
sufficient to constitute such series different classes, and
PROVIDED, FURTHER, that, in the case of unsecured evidences of
indebtedness, differences in the interest rates or maturity
dates thereof shall not be deemed sufficient to constitute
them securities of different classes, whether or not they are
issued under a single indenture.
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SECTION 8.09. ELIGIBILITY OF TRUSTEE. The Trustee hereunder
shall at all times be a corporation organized and doing business under the laws
of the United States or any State or Territory thereof or of the District of
Columbia authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least five million dollars, subject to
supervision or examination by Federal, State, Territorial, or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 8.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 8.09. the Trustee
shall resign immediately in the manner and with the effect specified in Section
8.10.
SECTION 8.10. RESIGNATION OR REMOVAL OF TRUSTEE. (a) The
Trustee may at any time resign with respect to the Debt Securities of one or
more series by giving written notice of such resignation to the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
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successor Trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor Trustee. If no successor
Trustee shall have been so appointed and have accepted appointment within sixty
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction or the appointment of a successor
Trustee, or any holder of a Debt Security of such series who has been a bona
fide holder of a Debt Security or Debt Securities of such series for at least
six months may, subject to the provisions of Section 7.09, on behalf of himself
and all others similarly situated, petition any such court for the appointment
of a successor Trustee. Such court may thereupon, after such notice, if any,
as it may deem proper and prescribe, appoint a successor Trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the
provisions of subsection (a) of Section 8.08 after written
request therefor by the Company or by any Debt Securityholder
who has been a bona fide holder of a Debt Security or Debt
Securities for at least six months, or
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(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.09 and shall fail
to resign after written request therefor by the Company or by
any such Debt Securityholder, or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or
its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then in any such case, the Company may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor Trustee, or, subject to the
provisions of Section 7.09, any Debt Securityholder who has been a bona fide
holder of a Debt Security or Debt Securities for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may, thereupon, after such notice, if any, as it
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may deem proper and prescribe, remove the Trustee and appoint a successor
Trustee.
(c) The holders of a majority in aggregate principal amount of
the Debt Securities of a series at the time Outstanding may at any time remove
the Trustee as to that series and appoint a successor Trustee as to that series.
(d) Any resignation or removal of the Trustee and any
appointment of a successor Trustee pursuant to any of the provisions of this
Section 8.10 shall become effective upon acceptance of appointment by the
successor Trustee as provided in Section 8.11.
(e) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid to the
holders of Debt Securities as their names and addresses appear in the register.
Each such notice shall include the name of the successor Trustee and the
address of its principal corporate trust office. If the Company fails to give
such notice within ten days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be given, at the
expense of the Company.
SECTION 8.11. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any
successor Trustee appointed as provided in Section 8.10
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shall execute, acknowledge and deliver to the Company and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Trustee
herein; but nevertheless, on the written request of the Company or of the
successor Trustee, the Trustee ceasing to act shall, upon payment of any
amounts then due it pursuant to the provisions of Section 8.06, execute and
deliver an instrument transferring to such successor Trustee all the rights and
powers of the Trustee so ceasing to act. Upon request of any such successor
Trustee, the Company shall execute any and all instruments in writing in order
more fully and certainly to vest in and confirm to such successor Trustee all
such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain
a lien upon all property or funds held or collected by such Trustee to secure
any amounts then due it pursuant to the provisions of Section 8.06.
No successor Trustee shall accept appointment as provided in
this Section 8.11 unless at the time of such
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acceptance such successor Trustee shall be qualified under the provisions of
Section 8.08 and eligible under the provisions of Section 8.09.
In case of the appointment hereunder of a successor Trustee
with respect to the Debt Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with respect to the
Debt Securities of one or more series shall execute and deliver an indentures
supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary
or desirable to transfer and confirm to, and to vest in, each successor Trustee
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Debt Securities of that or those series to which the appointment of such
successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Debt Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and
duties of the retiring Trustee with respect to the Debt Securities of that or
those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
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the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Debt Securities of that or those
series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee (subject
to the provisions of Section 8.06) shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder with respect to the Debt Securities of that or those series to which
the appointment of such successor Trustee relates, and upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and
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confirming to such successor trustee all rights, powers and trusts referred to
in this subsection.
SECTION 8.12. SUCCESSION BY MERGER, ETC. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder without the execution or filing
of any paper or any further act on the part of any of the parties hereto.
In case at the time such successor Trustee shall succeed to
the trusts created by this Indenture with respect to one or more series of Debt
Securities, any of such Debt Securities shall have been authenticated but not
delivered, any such successor Trustee may adopt the certificate of
authentication of any predecessor Trustee and deliver such Debt Securities so
authenticated; and in case at that time any of the Debt Securities shall not
have been authenticated, any successor Trustee may authenticate such Debt
Securities either in the name of any predecessor hereunder or in the name of
the successor Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in such Debt Securities or in this Indenture
provided that the
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certificate of the Trustee shall have; PROVIDED, HOWEVER, that the right to
adopt the certificate of authentication of any predecessor Trustee or
authenticate Debt Securities in the name of any predecessor Trustee shall
apply only to its successor or successors by merger, conversion or
consolidation.
SECTION 8.13. LIMITATION ON RIGHTS OF TRUSTEE AS A CREDITOR. (a)
Subject to the provisions of subsection (b) of this Section 8.13, if the Trustee
shall be or shall become a creditor, directly or indirectly, secured or
unsecured, of the company or of any other obligor on the Debt Securities within
four months prior to a default, then, unless and until such default shall be
cured, the Trustee shall set apart and hold in a special account for the benefit
of the Trustee individually, the holders of the Debt Securities, and the holders
of other indenture securities (as defined in paragraph (2) of subsection (c) of
this Section 8.13):
(1) an amount equal to any and all reductions in the amount
due and owing upon any claim as such creditor in respect of principal
or interest, effected after the beginning of such four-month period
and valid as against the Company and its other creditors, except any
such reduction resulting from the receipt or
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disposition of any property described in paragraph (2) of this
subsection, or from the exercise of any right of set-off which the
Trustee could have exercised if a petition in bankruptcy had been
filed by or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any
claim as such creditor, either as security therefor, or in
satisfaction or composition thereof, or otherwise, after the beginning
of such four-month period, or an amount equal to the proceeds of any
such property, if disposed of, subject, however, to the rights, if
any, of the Company and its other creditors in such property or such
proceeds.
Nothing herein contained, however, shall affect the right of
the Trustee:
(A) to retain for its own account (i) payments made on account
of any such claim by any Person (other than the Company) who is liable
thereon, and (ii) the proceeds of the bona fide sale of any such claim
by the Trustee to a third Person, and (iii) distributions made in
cash, securities, or other property in respect of claims filed against
the Company in bankruptcy or receivership or in proceedings for
reorganization
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pursuant to the Federal Bankruptcy Code or applicable state law;
(B) to realize, for its own account, upon any property held by
it as security for any such claim, if such property was so held prior
to the beginning of such four-month period;
(C) to realize, for its own account, but only to the extent of
the claim hereinafter mentioned, upon any property held by it as
security for any such claim, if such claim was created after the
beginning of such four-month period and such property was received as
security therefor simultaneously with the creation thereof, and if the
Trustee shall sustain the burden of proving that at the time such
property was so received the Trustee had no reasonable cause to
believe that a default, as defined in subsection (c) of this Section
8.13, would occur within four months; or
(D) to receive payment on any claim referred to in paragraph
(B) or (C), against the release of any property held as security for
such claim as provided in such paragraph (B) or (C), as the case may
be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property
substituted after the beginning of such four-month
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period for property held as security at the time of such substitution shall, to
the extent of the fair value of the property released, have the same status as
the property released, and, to the extent that any claim referred to in any of
such paragraphs is created in renewal of or in substitution for or for the
purpose of repaying or refunding any pre-existing claim of the Trustee as such
creditor, such claim shall have the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and
property held in such special account and the proceeds thereof shall be
apportioned among the Trustee, the Debt Securityholders and the holders of other
indenture securities in such manner that the Trustee, the Debt Securityholders
and the holders of other indenture securities realize, as a result of payments
form such special account and payments of dividends on claims filed against the
Company in bankruptcy or receivership or in proceedings for reorganization
pursuant to the Federal Bankruptcy Code or applicable state law, the same
percentage of their respective claims, figured before crediting to the claim of
the Trustee anything on account of the receipt by it from the Company of the
funds and property in such special account and before crediting to the
respective claims of the Trustee, the Debt Securityholders, and the holders
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of other indenture securities dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
Federal bankruptcy Code or applicable state law, but after crediting thereon
receipts on account of the indebtedness represented by their respective claims
from all sources other than form such dividends and from the funds and property
so held in such special account. As used in this paragraph, with respect to
any claim, the term "dividends" shall include any distribution with respect to
such claim, in bankruptcy or receivership or in proceedings for reorganization
pursuant to the Federal Bankruptcy Code or applicable state law, whether such
distribution is made in cash, securities, or other property, but shall not
include any such distribution with respect to the secured portion, if any, of
such claim. The court in which such bankruptcy, receivership, or proceeding
for reorganization is pending shall have jurisdiction (i) to apportion among
the Trustee, the Debt Securityholders and the holders of other holders of other
indenture securities, in accordance with the provisions of this paragraph, the
funds and property held in such special account and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in
<PAGE> 134
124
determining the fairness of the distributions to be made to the Trustee, the
Debt Securityholders and the holders of other indenture securities with respect
to their respective claims, in which event it shall not be necessary to
liquidate or to appraise the value of any securities or other property held in
such special account or as security for any such claim or to make a specific
allocation of such distributions as between the secured and unsecured portions
of such claims, or otherwise to apply the provisions of this paragraph as a
mathematical formula.
Any Trustee who has resigned or been removed after the
beginning of such four-month period shall be subject to the provisions of this
subsection (a) as though such resignation or removal had not occurred. If any
Trustee has resigned or been removed prior to the beginning of such four-month
period, it shall be subject to the provisions of this subsection (a) if and
only if the following conditions exist:
(i) the receipt of property or reduction of claim which would
have given rise to the obligation to account, if such Trustee had
continued as trustee, occurred after the beginning of such four-month
period; and
<PAGE> 135
125
(ii) such receipt of property or reduction of claim occurred
within four months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a)
this Section 8.13 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under
any indenture, or any security or securities having a maturity of one
year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court
of competent jurisdiction, or by this Indenture, for the purpose of
preserving any property which shall at any time be subject to the lien
of this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advance and of the
circumstances surrounding the making thereof is given to the
debentureholders at the time and in the manner provided in Section
6.04 with respect to reports pursuant to subsections (a) and (b)
thereof, respectively;
(3) disbursements made in the ordinary course of business in
the capacity of trustee under an indenture,
<PAGE> 136
126
transfer agent, registrar, custodian, paying agent, fiscal agent or
depositary, or other similar capacity;
(4) an indebtedness created as a result of services rendered
or premises rented; or an indebtedness created as a result of goods
or securities sold in a cash transaction as defined in subsection (c)
of this Section 8.13; (5) the ownership of stock or of other
securities of a corporation organized under the provisions of Section
25(a) of the Federal Reserve Act, as amended, which is directly or
indirectly a creditor of the Company; or (6) the acquisition,
ownership, acceptance or negotiation of any drafts, bills of
exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in subsection (c)
of this Section 8.13.
(c) As used in this Section 8.13:
(1) the term "default" shall mean any failure to make payment
in full of the principal of, premium, if any, or interest, if any,
upon any of the Debt Securities or upon the other indenture
securities when and as such principal or interest becomes due and
payable;
<PAGE> 137
127
(2) the term "other indenture securities" shall mean
securities upon which the Company is an obligor (as defined in the
Trustee Indenture Act of 1939) outstanding under any other indenture
(A) under which the Trustee is also trustee, (B) which contains
provisions substantially similar to the provisions of subsection (a)
of this Section 8.13 and (C) under which a default exists at the time
of the apportionment of the funds and property held in such special
account;
(3) the term "cash transaction" shall mean any transaction in
which full payment for goods or securities sold is made within seven
days after delivery of the goods or securities in currency or in
checks or other orders drawn upon banks or bankers and payable upon
demand;
(4) the term "self-liquidating paper" shall mean any draft,
bill of exchange, acceptance or obligation which is made, drawn,
negotiated or incurred by the Company for the purpose of financing the
purchase, processing, manufacture, shipment, storage or sale of goods,
wares or merchandise and which is secured by documents evidencing
title to, possession of, or a lien upon, the goods, wares or
merchandise and which is secured by documents evidencing title to,
possession
<PAGE> 138
128
of, or a lien upon, the goods, wares or merchandise or the receivables
or proceeds arising from the sale of the goods, wares or merchandise
previously constituting the security; provided that the security is
received by the Trustee simultaneously with the creation of the
creditor relationship with the company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation;
(5) the term "Company" shall mean any obligor upon the
Debt Securities.
ARTICLE NINE
Concerning the Debt Securityholders
-----------------------------------
SECTION 9.01. ACTION BY DEBT SECURITYHOLDERS. Whenever in
this Indenture it is provided that the holders of a specified percentage in
aggregate principal amount of the Debt Securities of any series may take any
action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the holders of such specified percentage
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Debt Securityholders in person or
by agent or proxy appointed in writing, or (b) by the record of the holders of
such
<PAGE> 139
129
Debt Securities voting in favor thereof at any meeting of such Debt
Securityholders duly called and held in accordance with the provisions of
Article Ten, or (c) by a combination of such instrument or instruments
and any such record of such a meeting of such Debt Securityholders.
SECTION 9.02. PROOF OF EXECUTION BY DEBT SECURITYHOLDERS.
Subject to the provisions of Sections 8.01, 8.02 and 10.05, proof of the
execution of any instrument by a Debt Securityholder or his agent or proxy
shall be sufficient if made in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee. The ownership of Debt Securities shall be proved
by the Debt Security register or by a certificate of the Debt Security
registrar.
The record of any Debt Securityholders' meeting shall be
proved in the manner provided in Section 10.06.
SECTION 9.03. WHO DEEMED ABSOLUTE OWNERS. Prior to due
presentment for registration of transfer of any Debt Security, the Company, the
Trustee, or the paying agent and any Debt Security registrar may deem the
Person in whose name any Debt Securities shall be registered upon the Debt
Security register to be, and may treat him as, the absolute owner of such Debt
Security (whether or not such Debt Security shall be overdue and
notwithstanding any notation of ownership or
<PAGE> 140
130
other writing on such Debt Security) for the purpose of receiving payment of or
on account of the principal of, premium, if any, and interest, if any, on such
Debt Security and for all other purposes; and neither the Company nor the
Trustee nor any paying agent nor any Debt Security registrar shall be affected
by any notice to the contrary. All such payments so made to any registered
holder for the time being, or upon his order shall be valid, and, to the
extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for money payable upon any such Debt Security.
SECTION 9.04. COMPANY-OWNED DEBT SECURITIES DISREGARDED. In
determining whether the holders of the requisite aggregate principal amount of
Debt Securities have concurred in any request, demand, authorization, notice,
direction, consent or waiver under the Indenture, Debt Securities which are
owned by the Company or any other obligor on the Debt Securities or by any
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Company or any other obligor on the Debt
Securities shall be disregarded and deemed not to be outstanding for the
purpose of any such determination; provided that for the purposes of
determining whether the Trustee shall be protected in relying on any such
request,
<PAGE> 141
131
demand, authorization, notice, direction, consent or waiver, only Debt
Securities which the Trustee knows are so owned shall be so disregarded. Debt
Securities so owned which have bene pledged in good faith may be regarded as
outstanding for the purposes of this Section 9.04 if the pledgee shall
establish to the satisfaction of the Trustee the pledgee's right to vote such
Debt Securities and that the pledgee is not a Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company or any such other obligor. In the case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall be
full protection to the Trustee.
SECTION 9.05. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND.
At any time prior to (but not after) the evidencing to the Trustee, as provided
in Section 9.01, of the taking of any action by the holders of the percentage
in aggregate principal amount of the Debt Securities of any series specified in
this Indenture in connection with such action, any holder of a Debt Security
the serial number of which is shown by the evidence to be included in such Debt
Securities the holders of which have consented to such action may, by filing
written notice of the Trustee at its principal office and upon proof of holding
as provided in Section 9.02, revoke such action so far as concerns such Debt
Security.
<PAGE> 142
132
Except as aforesaid any such action taken by the holder of any Debt Security of
any series shall be conclusive and binding upon such holder and upon all future
holders and owners of such Debt Security and of any Debt Security issued in
exchange or substitution therefor, irrespective of whether or not any notation
in regard thereto is made upon such Debt Security.
ARTICLE TEN
Debt Securityholders' Meetings
------------------------------
SECTION 10.01. PURPOSES OF MEETINGS. A meeting of Debt
Securities may be called at any time and from time to time pursuant to the
provisions of this Article Ten for any of the following purposes:
(1) to give any notice of the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the waiving of
any default hereunder and its consequences, or to take any other
action authorized to be taken by Debt Securityholders pursuant to any
of the provisions of Article Seven;
(2) to remove the Trustee and appoint a successor Trustee
pursuant to the provisions of Article Eight;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.02; or
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133
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Debt Securities under any other provision of this Indenture or
under applicable law.
SECTION 10.02. CALL OF MEETINGS BY TRUSTEE. The Trustee may
at any time call a meeting of Debt Securityholders to take any action specified
in Section 10.01, to be held at such time and at such place in the City and
State of New York or in the City of Houston, Texas, as the Trustee shall
determine. Notice of every meeting of the Debt Securityholders, setting forth
the time and place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be mailed to holders of Debt Securities of all
series that may be affected by the action proposed to be taken at the meeting
at their addresses as they shall appear on the Debt Security register. Such
notice shall be mailed not less than twenty nor more than ninety days prior to
the date fixed for the meeting.
SECTION 10.03. CALL OF MEETINGS BY COMPANY OR DEBT
SECURITYHOLDERS. In case at any time the Company, pursuant to a resolution of
its Board of Directors, or the holders of at least ten percent in aggregate
principal amount of the Debt Securities then outstanding of all series that may
be
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134
affected by the action proposed to be taken at the meeting, shall have
requested the Trustee to call a meeting of Debt Securityholders of all series
that may be so affected by written request setting forth in reasonable detail
the action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within twenty days after receipt of such
request, then the Company or such Debt Securityholders may determine the time
and the place in New York, New York, or in Houston, Texas for such meeting and
may call such meeting to take any action authorized in Section 10.01, by
mailing notice thereof as provided in Section 10.02.
SECTION 10.04. QUALIFICATIONS FOR VOTING. To be entitled to
vote at any meeting of Debt Securityholders a Person shall (a) be a holder of
one or more Debt Securities of a series affected by the action proposed to be
taken at the meeting or (b) be a Person appointed by an instrument in writing
as a proxy by a holder of one or more such Debt Securities. The only
Persons who shall be entitled to be present or to speak at any meeting of Debt
Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
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135
SECTION 10.05. REGULATIONS. Notwithstanding any other
provisions of this Indenture, the Trustee may make such reasonable regulations
as it may deem advisable for any meeting of Debt Securityholders, in regard to
proof of the holding of Debt Securities and of the appointment of proxies, and
in regard to the appointment and duties of inspectors of votes, the submission
and examination of proxies, certificates and other evidence of the right
to vote, and such other matters concerning the conduct of the meeting as it
shall deem fit.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Debt Securityholders as provided in Section 10.03, in which
case the Company or the Debt Securityholders calling the meeting, as the case
may be, shall in like manner appoint a temporary chairman. A permanent
chairman and a permanent secretary of the meeting shall be elected by a
majority vote of the meeting.
Subject to the provisions of Section 9.04, at any meeting each
Debt Securityholder of a series or proxy shall be entitled to one vote for each
$1,000 principal amount (or corresponding denomination if the Debt Securities
are not in U.S. dollars) (or such other principal amount equal to the
<PAGE> 146
136
authorized minimum denomination) of Debt Securities of such series held or
represented by him; PROVIDED, HOWEVER, that no vote shall be cast or counted at
any meeting in respect of any Debt Security challenged as not outstanding and
ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Debt Securities
of such series held by him or instruments in writings as aforesaid duly
designating him as the Person to vote on behalf of other Debt Securityholders
of such series. Any meeting of Debt Securityholders duly called pursuant to
the provisions of Section 10.02 or 10.03 may be adjourned from time to time by
a majority of those present, whether or not constituting a quorum, and the
meeting may be held as so adjourned without further notice.
SECTION 10.06. VOTING. The vote upon any resolution
submitted to any meeting of Debt Securityholders of a series or all series to be
affected thereby, as the case may be, shall be by written ballots on which
shall be subscribed the signatures of the holders of Debt Securities of such
series or of their representatives by proxy and the serial number or numbers
of the Debt Securities of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and
<PAGE> 147
137
who shall make and file with the secretary of the meeting their verified
written reports in duplicate of all votes cast at the meeting. A record in
duplicate of the proceedings of each meeting of Debt Securityholders shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was mailed as provided in Section 10.02. The record shall show the
serial numbers of the Debt Securities voting in favor of or against any
resolution. The record shall be signed and verified by the affidavits of
the permanent chairman and secretary of the meeting and one of the duplicates
shall be delivered to the Company and the other to the Trustee to be preserved
by the Trustee.
Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
ARTICLE ELEVEN
Supplemental Indentures
-----------------------
SECTION 11.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
DEBT SECURITYHOLDERS. The Company, when authorized by the resolutions of the
Board of Directors, and the Trustee may from time to time and at any time
enter into an
<PAGE> 148
138
indenture or indentures supplemental hereto for one or more of the following
purposes:
(a) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and obligations of
the Company pursuant to Article Twelve hereof;
(b) to add to the covenants of the Company such further Events
of Default, covenants, restrictions or conditions, for the protection
of the holders of the Debt Securities of any series as the Board of
Directors of the Company shall consider to be for the protection of
the holders of Debt Securities of such series, and to make the
occurrence or the occurrence and continuance of an Event of
Default or a default in any of such additional covenants, restrictions
or conditions a default or an Event of Default permitting the
enforcement of all or any of the several remedies provided in this
Indenture as herein set forth; PROVIDED, HOWEVER, that in respect of
any such additional Event of Default, covenant, restriction or
condition such supplemental indenture may provide for a particular
period of grace after default (which period may be shorter or longer
than that allowed in the case of other defaults) or may
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139
provide for an immediate enforcement upon such default or Event of
Default or may limit the remedies available to the Trustee upon such
default or Event of Default;
(c) to cure an ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture or
Debt Securities of a series which may be defective or inconsistent
with any other provision contained herein or in any supplemental
indenture or Debt Securities of a series, or to make such other
provisions in regard to matters or questions arising under this
Indenture or any supplemental indenture or Debt Securities of a series
which shall not adversely affect the interests of the holders of the
Debt Securities;
(d) to provide for the issuance of a particular series of
Debt Securities in bearer form with or without interest coupons;
(e) to provide for beneficial ownership of all or a portion of
a particular series of Debt Securities to be evidenced by electronic
book-entry (i) at a Depositary, (ii) on the records of the Company,
its agent or a third party other than a Depositary, with the Company,
its agent or a third party holding a certificate or certificates
representing such Debt Securities or portion
<PAGE> 150
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thereof, or (iii) any combination of (i) and (ii); provision may be
made that beneficial owners shall not have the right to obtain
certificates for such Debt Securities or portion thereof;
(f) at the Company's option, to set forth some or all the
terms of the Debt Securities of a particular series in lieu of setting
forth such terms in a Certified Resolution pursuant to Section 2.02;
(g) to provide for the appointment of a successor Trustee with
respect to one or more series of Debt Securities pursuant to Section
8.11; or
(h) to provide for an authenticating agent for the Trustee.
The Trustee is hereby authorized to join with the Company in
the execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be therein contained and to
accept the conveyance, transfer and assignment of any property thereunder, but
the Trustee shall not be obligated to, but may in its discretion, enter into
any such supplemental indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of
this Section 11.01 may be executed by the
<PAGE> 151
141
Company and the Trustee without the consent of the holders of any of the
Debt Securities at the time outstanding, notwithstanding any of the provisions
of Section 11.02.
SECTION 11.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF
DEBT SECURITYHOLDERS. With the consent (evidenced as provided in Section 9.01)
of the holders of not less than a majority in aggregate principal amount of the
Debt Securities at the time outstanding of each series to be affected, the
Company, when authorized by a resolution of its Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act of 1939 as in force at the date of the execution thereon)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of any supplemental
indenture or Debt Securities of a Series or of modifying in any manner the
rights of the holders of the Debt Securities of such series to be affected;
PROVIDED, HOWEVER, that no such supplemental indenture shall (i) change the
fixed maturity (which term shall not include payments due pursuant to an
sinking, purchase or analogous fund) of any Debt Securities, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce
<PAGE> 152
142
any premium payable upon the redemption thereof, without the consent of the
holder of each Debt Security so affected, or (ii) reduce the aforesaid
percentage of Debt Securities of any series, the consent of the holders of
which is required for any such supplemental indenture, without the consent of
the holders of all Debt Securities of such series then outstanding.
Upon the request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by the Secretary or any
Assistant Secretary of the Company authorizing the execution of any such
supplemental indentures, and upon the filing with the Trustee of evidence of
the consent of Debt Securityholders as aforesaid, the Trustee shall join with
the Company in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Debt Securityholders
under this Section 11.02 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall
approve the substance thereof.
<PAGE> 153
143
SECTION 11.03. EFFECT OF SUPPLEMENTAL INDENTURE. Any supplemental
indenture executed pursuant to the provision of this Article Eleven shall
comply with the Trust Indenture Act of 1939, as then in effect. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article Eleven, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitation of
rights, obligations, duties and immunities under this Indenture of the Trustee,
the Company and the holders of all of the Debt Securities or of the Debt
Securities of any series affected, as the case may be, shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 11.04. NOTATION ON DEBT SECURITIES. Debt Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to the provisions of this Article Eleven may, but need not, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company or the Trustee shall so determine, new
Debt Securities so modified as to conform, in the opinion of the Trustee and
the Board of
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144
Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared and executed by the Company,
authenticated by the Trustee and delivered in exchange for the Debt Securities
then outstanding.
SECTION 11.05. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE
FURNISHED TRUSTEE. The Trustee, subject to the provisions of Section 8.01 and
8.02, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article Eleven.
ARTICLE XII
Consolidation, Merger, Conveyance or Transfer.
----------------------------------------------
SECTION 12.01. COMPANY MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merger into any other corporation or
convey or transfer its properties and assets substantially as an entirety to
any Person, unless:
(1) the corporation formed by such consolidation or into which
the Company is merged or the Person which acquired by conveyance or
transfer the properties and assets of the Company substantially as an
entirety shall be a corporation organized and existing under the laws
of the United States of America or any State or
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the District of Columbia, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the
principal of, premium, if any, and interest, if any, on all the
Debt Securities and the performance or observance of every covenant of
this Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time,
or both, would become an Event of Default, shall have occurred and be
continuing and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such supplemental
indenture comply with this Article Twelve and that all conditions
precedent herein provided for relating to such transaction have been
complied with; PROVIDED, HOWEVER, the Opinion of Counsel shall not be
required to include any opinion with respect to the condition set
forth in paragraph (2) of this Section 12.01.
<PAGE> 156
146
SECTION 12.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any
consolidation or merger, or any conveyance or transfer of the properties and
assets of the Company substantially as an entirety in accordance with Section
12.01, the successor corporation by such consolidation or into which the
Company is merged or to which such conveyance or transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein; and in the event of any such
conveyance or transfer, the Company (which term shall for this purpose mean the
Person named as the "Company" in the first paragraph of this instrument or any
successor corporation which shall have theretofore become such in the manner
prescribed in Section 12.01) shall be discharged from all liability under this
Indenture and in respect of the Debt Securities and may be dissolved and
liquidated.
ARTICLE XIII
Satisfaction and Discharge of Indenture or Certain
--------------------------------------------------
Covenants.
----------
SECTION 13.01. Satisfaction and Discharge of Indenture. When (a) the
Company shall deliver to the Trustee for cancelation all Debt Securities of a
series
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147
theretofore authenticated (other than any Debt Security of such series which
shall have been destroyed, lost or stolen and which shall have been placed or
paid as provided in Section 2.06) and not theretofore canceled; or (b) all the
Debt Securities of such series not theretofore canceled or delivered to the
Trustee for cancelation shall have become due and payable, or are by their
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds sufficient to pay at maturity or upon redemption all
of the Debt Securities of such series (other than any Debt Securities of such
series which shall have been mutilated, destroyed, lost or stolen and which
shall have been replaced or paid as provided in Section 2.06) not theretofore
canceled or delivered to the Trustee for cancelation, including principal and
premium, if any, and interest, if any, due or to become due to such date of
maturity or redemption date, as the case may be, but excluding, however, the
amount of any money for the payment of the principal of and premium, if any, or
interest, if any, on the Debt Securities of such series (1) theretofore
deposited with the Trustee with respect to Debt Securities of such series and
repaid by the Trustee to the Company in accordance with the provisions of
Section 13.05 or (2) paid
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148
with respect to Debt Securities of such series to any State or to the District
of Columbia pursuant to its unclaimed property or similar laws, and if in
either case the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect with respect to the Debt Securities of such series except as to
(A) the rights of Holders of Debt Securities of such series to receive solely
from funds deposited by the Company with the Trustee, in trust as
described above in this Section 13.01, payment of the principal of, premium, if
any, and the interest, if any, on such Debt Securities when such payments are
due; (b) the Company's obligations with respect to such Debt Securities under
Section 2.05, 2.06, 5.02 and 13.03; and (C) the rights, powers, duties and
immunities of the Trustee hereunder, and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel each stating
that all conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with and at the cost and
expense of the Company, shall execute such instruments as may be requested by
the Company acknowledging satisfaction of and discharging this Indenture with
respect to such series of Debt Securities. Notwithstanding the satisfaction
and discharge of this Indenture with respect to any series of
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Debt Securities, the obligations of the Company to the Trustee under Section
8.06 shall survive.
SECTION 13.02. DEFEASANCE UPON DEPOSIT OF MONEY, U.S. GOVERNMENT
OBLIGATIONS OR ELIGIBLE OBLIGATIONS. At the Company's option either (a) the
Company shall be deemed to have been discharged (as defined below) from its
obligations with respect to any series of Debt Securities on the ninety-first
day after the applicable conditions set forth below have been satisfied or (b)
the Company shall cease to be under any obligations to comply with any term,
provision or condition set forth in Sections 5.05, 5.06 and 12.01 with respect
to any series of Debt Securities and any other covenants provided in a Certified
Resolution delivered to the Trustee pursuant to Section 2.02(A) hereof or an
indenture supplemental hereto with respect to such series of Debt Securities at
any time after the applicable conditions set forth below have been satisfied:
(1) the Company shall have deposited or cause to be deposited
irrevocably with the Trustee as trusts funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of the Debt Securities of such series (A) money in an
amount, or (B) U.S. Government Obligations and/or Eligible
Obligations which through the payment of interest and
<PAGE> 160
150
principal in respect thereof in accordance with their terms will
provide, not later than one business day before the due date of any
payment, money in an amount, or (C) a combination of (A) and (B),
sufficient, in the opinion (with respect to (A) and (B)) of a
nationally recognized firm of independent public accounts selected
by the Company expressed in a written certification thereof
delivered to the Trustee, to pay and discharge each installment of
principal (including mandatory sinking fund payments) of, premium,
if any, and interest, if any, on, the Outstanding Debt Securities of
such series on the dates such installments of principal, premium, if
any, and interest, if any, are due (taking into account any
redemption pursuant to optional sinking fund payments notice of
which redemption is provided to the Trustee at the time of
the deposit referred to in this paragraph (1);
(2) if the Debt Securities of such series are then listed on the
New York Stock Exchange, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Company's
exercise of its option under this paragraph would not cause such
Debt Securities to be delisted;
<PAGE> 161
151
(3) no Event of Default with respect to the Debt Securities of
such series under Section 7.01(a), 7.01(b), 7.01(c), 7.01(e) or
7.01(f) of this Indenture shall have occurred and be continuing on
the date of such deposit and the Company shall have furnished an
Officers' Certificate to such effect;
(4) the Company shall have delivered to the Trustee (a) an
Opinion of Counsel or (b) a ruling from, or published by, the
Internal Revenue Service, whichever of (a) or (b) the Company shall
determine, to the effect that Holders of the Debt Securities of such
series will not recognize income, gain or loss for Federal income
tax purposes as a result of the Company's exercise of its option
under this Section 13.02 and will be subject to Federal income tax
on the same amount and in the same manner and at the same time as
would have been the case if such option had not been exercised.
"Discharged" means, for purposes of this Section 13.02, that the Company shall
be deemed to have paid and discharged the entire indebtedness represented by,
and obligations under, the Debt Securities of such series and to have satisfied
all the obligations under this Indenture relating to the Debt Securities
<PAGE> 162
152
of such series (and the Trustee, at the expense of the Company, shall execute
such instruments as may be requested by the Company acknowledging the same),
except (A) the rights of Holders of Debt Securities of such series to receive,
solely from the trust fund described in clause (1) above, payment of the
principal, premium, if any, and the interest, if any, on such Debt Securities
when such payments are due; (B) the Company's obligations with respect to such
debentures under Sections 2.05, 2.06, 5.02 and 13.03; and (c) the rights,
powers, duties and immunities of the Trustee hereunder. Notwithstanding the
satisfaction and discharge of this Indenture with respect to any series of Debt
Securities, the obligations of the Company to the Trustee under Section 8.06
shall survive.
SECTION 13.03. DEPOSITED MONEY, U.S. GOVERNMENT OBLIGATIONS AND
ELIGIBLE OBLIGATIONS TO BE HELD IN TRUST BY TRUSTEE. All money, U.S. Government
Obligations and Eligible Obligations deposited with the Trustee pursuant to
Section 13.01 or 13.02 and with respect to U.S. Government Obligations and
Eligible Obligations, the principal and interest in respect thereof, shall be
held irrevocably in trust and applied by it to the payment in accordance with
the provisions of the Debt Securities and this Indenture, either directly or
through any paying agent (including the Company
<PAGE> 163
153
if acting as its own paying agent), to the holders of the particular Debt
Securities for the payment or redemption of which such money has been deposited
with the Trustee, of all sums due and to become due thereon for principal,
premium, if any, and interest, if any, but such money need not be segregated
from other funds except to the extent required by law. The Trustee shall
promptly pay to the Company, upon written request of the Company, any excess
money, U.S. Government Obligations or Eligible Obligations held by the Trustee
at any time.
SECTION 13.04. PAYING AGENT TO REPAY MONEY HELD. Upon the satisfaction
and discharge of this Indenture, all money then held by any paying agent of the
Debt Securities (other than the Trustee) shall, upon demand of the Company, be
repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such money.
SECTION 13.05. RETURN OF UNCLAIMED AMOUNTS. Notwithstanding anything
to the contrary contained in this Indenture (including, but not limited to, the
provisions of Section 13.03), any amounts deposited with or paid to the Trustee
for payment of any portion of the principal of (which term shall for these
purposes include payments due pursuant to any sinking, purchase or analogous
fund),
<PAGE> 164
154
premium, if any, or interest, if any, on the Debt Securities and not applied by
remaining unclaimed by the holders of such Debt Securities for two years after
the date upon which such portion of the principal of, premium, if any, or
interest, if any, on such Debt Securities, as the case may be, shall have become
due and payable, shall be repaid to the Company by the Trustee on demand; and
the holder of any of such Debt Securities shall thereafter look only to the
Company for any payment which such holder may be entitled to collect.
Notwithstanding the foregoing, the Trustee, before being required to make any
such repayment, may at the expense and at the written request of the Company,
mail to such holder or cause to be published once a week for two successive
weeks (in each case on any day of the week) in a newspaper printed in the
English language and customarily published at least once a day at least five
days in each calendar week and of general circulation in the City and State of
New York, a notice that said amounts have not been so applied and that after a
date named herein any unclaimed balance of said amounts then remaining will be
promptly returned to the Company.
<PAGE> 165
155
ARTICLE XIV
Immunity of Incorporators, Stockholders
---------------------------------------
Officers and Directors.
-----------------------
SECTION 14.01. INDENTURE AND DEBT SECURITIES SOLELY CORPORATE
OBLIGATIONS. No recourse for the payment of the principal of, premium, if any,
or interest, if any, on any Debt Security, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any supplemental
indenture, or in any Debt Security, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Debt Securities.
<PAGE> 166
156
ARTICLE XV
Miscellaneous Provisions.
-------------------------
SECTION 15.01. PROVISIONS BINDING ON COMPANY'S SUCCESSORS. All the
covenants, stipulations, promises and agreements in this Indenture contained by
the Company shall bind its successors and assigns whether so expressed or not.
SECTION 15.02. OFFICIAL ACTS BY SUCCESSOR CORPORATION. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
SECTION 15.03. ADDRESSES FOR NOTICES, ETC. Any notice or demand which
by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Debt Securities on the Company shall
be deemed to have been sufficiently given or served, for all purposes, if given
or served in writing (until another address is filed by the Company with the
Trustee) to Cooper Industries, Inc., Suite 40000, 1001 Fannin, Houston, Texas
77002, Attention: Treasurer. Any notice, direction, request or demand by any
Debt Securityholder to or upon the Trustee shall be deemed to have been
sufficiently given or
<PAGE> 167
157
served, for all purposes, if given or served in writing at the principal office
of the Trustee which at the date of this Indenture is 600 Travis, 8th Floor,
Houston, Texas 77002, Attention: Vice President.
SECTION 15.04. NEW YORK CONTRACT. This Indenture and each Debt
Security shall be deemed to be a contract made under the laws of the State of
New York, and for all purposes shall be construed in accordance with the laws of
the said State without regard to conflicts of laws principles (other than
Section 5-1401 of the New York General Obligation Law).
SECTION 15.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Upon
any application or demand by the Company to the Trustee to take any action under
any of the provisions of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered
to the Trustee with respect to compliance with a condition or covenant provided
for in this Indenture shall include (A) a statement that the Person making such
certificate or opinion has read such covenant or
<PAGE> 168
158
condition; (B) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; (C) a statement that in the opinion of such
Person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (D) a statement as to whether or not, in
the opinion of such Person, such condition or covenant has been complied with.
SECTION 15.06. LEGAL HOLIDAYS. In any case where the date of maturity
of interest on or principal of the Debt Securities of any series or the date
fixed for redemption of any Debt Security of any series shall be in the City and
State of New York a Saturday, a Sunday, or a day on which banking institutions
are authorized by law to close,then payment of such interest on or principal and
premium, if any, need not be made on such date but may be made on the next
succeeding day not in such city a Saturday, a Sunday, nor a day on which banking
institutions are authorized by law to close with the same force and effect as if
made on the date of maturity or the date fixed for redemption and no interest
shall accrue for the period from and after such date.
<PAGE> 169
159
SECTION 15.07. TRUST INDENTURE ACT TO CONTROL. If and to the extent
that any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by any of
the Sections 310 and 317, inclusive, of the Trust Indenture Act of 1939, such
required provision shall control.
SECTION 15.08. DEBT SECURITIES CONTROLLING IN THE EVENT OF
INCONSISTENCIES BETWEEN INDENTURE AND DEBT SECURITIES. If the provisions of any
series of Debt Securities issued hereunder are inconsistent or conflict with the
provisions of this Indenture, the provisions of the Debt Securities of such
series shall be controlling with respect to such series.
SECTION 15.09. TABLE OF CONTENTS, HEADINGS, ETC. The table of contents
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 15.10. EXECUTION IN COUNTERPARTS. This Indenture may be
executed in any number of counterparts, each of which shall be an original but
such counterparts shall together constitute by one and the same instrument.
<PAGE> 170
160
THE TEXAS COMMERCE BANK National Association hereby accepts the trusts
in this Indenture declared and provided, upon the terms and conditions
hereinabove set forth.
IN WITNESS WHEREOF, Cooper Industries, Inc., has caused this Indenture
to be signed by its Chairman of the Board, its President, its Chief Financial
Officer, one of its Vice Presidents or its Treasurer, and its corporate seal to
be affixed hereunto, and the same to be attested by its Secretary or an
Assistant Secretary and Texas Commerce Bank National Association, has caused
this Indenture to be signed by one of its Vice Presidents, has caused its
corporate seal to be affixed hereunto, and the same to be attested by its
Secretary or an Assistant Secretary, as of the day and year first written above.
Cooper Industries, Inc.
By _______________________
Name:
Title:
Attest:
By ________________________
Name:
Title:
<PAGE> 171
161
(SEAL)
TEXAS COMMERCE BANK
National Association
as Trustee
By _______________________
Name:
Title:
Attest:
By ________________________
Name:
Title:
(SEAL)
<PAGE> 1
EXHIBIT 4.2
=====================================================================
COOPER INDUSTRIES, INC.
TO
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Trustee
____________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of [ ], 1995
____________________
DEBT SECURITIES
Supplemental to Indenture dated as of [ ], 1995
=====================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE
dated as of [ ], 1995 (this "Supplemental Indenture"),
made and entered into by and between COOPER INDUSTRIES, INC.,
a corporation organized and existing under the laws of the
State of Ohio having its principal office at 1001 Fannin,
Houston, Texas 77002 (the "Company"), and TEXAS COMMERCE BANK
National Association, a national banking association duly
organized and existing under the laws of the United States,
as trustee (the "Trustee").
WHEREAS the Company entered into an Indenture dated as of [ ],
1995 (the "Basic Indenture") with the Trustee, for the purposes of issuing
its unsecured debentures, notes or other evidences of indebtedness to be issued
in one or more series (the "Debt Securities"), in such principal amount or
amounts as may from time to time be authorized by or pursuant to the authority
granted in one or more resolutions of the Board of Directors of the Company;
WHEREAS the Company proposes to issue a series of Debt Securities
denominated its "[ ]% Exchangeable Notes Due [ ], 1998" representing
up to 16,500,000 of its "Debt Exchangeable for Common Stock[SM]" (such Debt
Securities being referred to herein as the "DECS[SM]"), the principal amount at
Maturity of which is mandatorily exchangeable into shares of Common Stock, par
value $1.00 per share ("WGC Common Stock"), of Wyman-Gordon Company ("WGC"),
or, at the option of the Company, cash, in either case at the Exchange Rate as
described herein;
WHEREAS Section 11.01(c) and (f) of the Basic Indenture provide that
without the consent of the Holders of Debt Securities, the Company, when
authorized by Board Resolution, and the Trustee may enter into one or more
indentures supplemental to the Basic Indenture, in form satisfactory to the
Trustee, (a) to cure any ambiguity or to correct or supplement any provision
contained therein or in any supplemental indenture or to make such other
provisions in regard to matters or questions arising under the Basic Indenture
or any supplemental indenture and (b) to set forth some or all of the terms of
Debt Securities of a particular series; provided that any action taken pursuant
to clause (a) above shall not adversely affect the interests of the Holders of
Debt Securities of any series;
<PAGE> 3
2
affect the interests of the Holders of Debt Securities of any series in
any material respect;
WHEREAS the entry into this Supplemental Indenture by the parties
hereto is in all respects authorized by the provisions of the Basic Indenture;
and
WHEREAS all things necessary to make this Supplemental Indenture a
valid agreement of the Company in accordance with its terms have been done.
NOW, THEREFORE, and in consideration of the premises and purchase of
the Debt Securities by the Holders thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders, without
preference, priority or distinction of any of the Debt Securities over any
of the others by reason of difference in series or priority in time of
issuance, negotiation or maturity thereof, or otherwise except as otherwise
provided in the Basic Indenture or this Supplemental Indenture, as follows:
SECTION 1. The Basic Indenture is hereby amended by amending Section
2.02 of the Basic Indenture by (i) adding as a new subparagraph (A)(i)(q) the
following: "(q) the obligation, if any, of the Company to permit the conversion
or exchange of the Debt Securities of such series into other securities
(whether or not issued by, or the obligation of, the Company), and the terms
and conditions upon which such conversion or exchange shall be effected
(including, without limitation, the initial conversion or exchange price or
rate, the conversion or exchange period and any other provision in addition to
or in lieu of those set forth in this Indenture relative to such obligation;
and"; and by (ii) renumbering current subparagraphs (A)(i)(q) and (A)(i)(r)
of Section 2.02 to new subparagraphs (A)(i)(r) and (A)(i)(s), respectively.
SECTION 2. The Basic Indenture is hereby amended, solely with respect
to a series of securities that consists of DECS, as follows:
(a) By amending Section 1.01 to add new definitions thereto, in the
appropriate alphabetical sequence, as follows:
"Business Day" for purposes of the DECS has the meaning specified in
Section 16.01.
<PAGE> 4
3
"Closing Price" has the meaning specified in
Section 16.01.
"Extraordinary Cash Dividend" has the meaning
specified in Section 16.03.
"Initial Price" has the meaning specified in
Section 16.01.
"Maturity" or "Maturity Date" means [ ].
"Maturity Price" has the meaning specified in
Section 16.01.
"NASDAQ" has the meaning specified in
Section 16.01.
"Reorganization Event" has the meaning specified
in Section 16.03.
"Threshold Appreciation Price" has the meaning
specified in Section 16.01.
"Trading Day" has the meaning specified in
Section 16.01.
"Transaction Value" has the meaning specified in
Section 16.03.
"WGC" has the meaning specified in Section 16.01.
"WGC Common Stock" has the meaning specified in
Section 16.01.
"WGC Successor" has the meaning specified in
Section 16.03.
(b) By amending Section 11.02 of the Basic
Indenture by adding to the end thereof the following:
"or change the terms under which the DECS are
exchangeable as set forth in Article Sixteen".
(c) By adding the following Article Sixteen:
"ARTICLE SIXTEEN
Exchange of Decs
----------------
SECTION 16.01. EXCHANGE AT MATURITY. At
Maturity, the principal amount payable with respect to each
DECS shall be automatically and mandatorily exchanged into a
number of
<PAGE> 5
4
shares of Common Stock, par value $1.00 ("WGC Common Stock"),
of Wyman-Gordon Company ("WGC") at the Exchange Rate (as defined
below). As a result, Holders of the DECS may not receive a payment
representing the principal amount of such DECS. The
"Exchange Rate" is equal to, subject to adjustment as a
result of certain dilution events relating to the WGC Common
Stock as provided for in Section 16.03, (a) if the Maturity
Price (as defined below) is greater than or equal to $[ ]
per share of WGC Common Stock (the "Threshold Appreciation
Price"), [ ] shares of WGC Common Stock per DECS, (b) if
the Maturity Price is less than the Threshold Appreciation
Price but is greater than [ ] per share of WGC Common
Stock (the "Initial Price"), a fractional share of WGC
Common Stock per DECS so that the value thereof (determined
at the Maturity Price) is equal to the Initial Price (such
fractional share being calculated to the nearest 1/10,000th
of a share or, if there is not a nearest 1/10,000th of a
share, to the next highest 1/10,000th of a share) and (c) if
the Maturity Price is less than or equal to the Initial
Price, one share of WGC Common Stock per DECS. No
fractional shares of WGC Common Stock will be issued at
Maturity as provided in Section 16.02. Notwithstanding the
foregoing, the Company may, at its option in lieu of
delivering shares of WGC Common Stock, deliver cash in an
amount (calculated to the nearest 1/100th of a dollar per
DECS or, if there is not a nearest 1/100th of a dollar, then
to the next higher 1/100th of a dollar) equal to the value
of such number of shares of WGC Common Stock at the Maturity
Price. In determining the amount of cash deliverable in
exchange for the DECS in lieu of shares of WGC Common Stock
pursuant to the prior sentence hereof, if more than one DECS
shall be surrendered for exchange at one time by the same
Holder, the amount of cash which shall be delivered upon
exchange shall be computed on the basis of the aggregate
number of DECS so surrendered at Maturity.
The "Maturity Price" is defined as the average
Closing Price per share of WGC Common Stock on the
20 Trading Days immediately prior to, but not including, the
Maturity Date. The "Closing Price" of any security on any
date of determination means the closing sale price (or, if
no closing price is reported, the last reported sale price)
of such security on The Nasdaq Stock Market's National
Market ("Nasdaq") on such date or, if such security is not
listed for trading on the Nasdaq on any such date, as
reported in the composite transactions for the principal
United States securities exchange on which such security is
so listed, or if such
<PAGE> 6
5
security is not so listed on a United States national or
regional securities exchange, as reported by the National
Association of Debt Securities Dealers, Inc. Automated
Quotation System, or, if such security is not so reported,
the last quoted bid price for such security in the
over-the-counter market as reported by the National
Quotation Bureau or similar organization, or, if such bid
price is not available, the market value of such security on
such date as determined by a nationally recognized
independent investment banking firm retained for this
purpose by the Company. A "Trading Day" is defined as a day
on which the security the Closing Price of which is being
determined (A) is not suspended from trading on any national
or regional securities exchange or association or over-the-
counter market at the closing of business and (B) has traded
at least once on the national or regional securities
exchange or association or over-the-counter market that is
the primary market for the trading of such security.
"Business Day" means any day that is not a Saturday, a
Sunday or a day on which the Nasdaq, banking institutions or
trust companies in The City of New York are authorized or
obligated by law or executive order to close.
SECTION 16.02. NO FRACTIONAL SHARES. No
fractional shares or scrip representing fractional shares of
WGC Common Stock shall be issued or delivered upon the
exchange at Maturity of any DECS. If more than one DECS
shall be surrendered for exchange at one time by the same
Holder, the number of full shares of WGC Common Stock which
shall be delivered upon exchange, in whole or in part, as
the case may be, shall be computed on the basis of the
aggregate number of DECS so surrendered at Maturity.
Instead of any fractional share of WGC Common Stock which
would otherwise be deliverable upon exchange of any DECS at
Maturity, the Company, through any applicable Paying Agent,
shall make a cash payment in respect of such fractional
interest in an amount equal to the value of such fractional
shares at the Maturity Price. The Company shall, upon
exchange of any DECS, provide cash to any applicable paying
agent in an amount equal to the cash payable with respect to
any fractional shares of WGC Common Stock deliverable upon
exchange of such DECS, and the Company shall retain such
fractional shares of WGC Common Stock.
SECTION 16.03. ADJUSTMENT OF EXCHANGE RATE.
(a) ADJUSTMENT FOR DISTRIBUTIONS, RECLASSIFICATIONS, ETC.
<PAGE> 7
6
The Exchange Rate shall be subject to adjustment from time
to time as follows:
(i) If WGC shall:
(A) pay a dividend or make a
distribution with respect to the WGC Common Stock
in shares of such stock;
(B) subdivide or split the outstanding
shares of WGC Common Stock into a greater number
of shares;
(C) combine the outstanding shares of
WGC Common Stock into a smaller number of shares;
or
(D) issue by reclassification of shares
of WGC Common Stock any shares of common stock of
WGC;
then, in any such event, the Exchange Rate in effect
immediately prior to such event shall be adjusted so
that the holder of any DECS shall thereafter be entitled to
receive, upon mandatory exchange of the principal amount of
such DECS at Maturity, as set forth in Section 16.01, the
number of shares of WGC Common Stock which such holder would
have owned or been entitled to receive immediately following
any event described above had such DECS been exchanged
immediately prior to such event or any record date with
respect thereto. Each such adjustment shall become
effective at the opening of business on the Business Day
next following the record date for determination of holders
of WGC Common Stock entitled to receive such dividend or
distribution in the case of a dividend or distribution and
shall become effective immediately after the effective date
in the case of a subdivision, split, combination or
reclassification. Each such adjustment shall be made
successively.
(ii) If WGC shall, after the date hereof, issue
rights or warrants to all holders of WGC Common Stock
entitling them to subscribe for or purchase shares of
WGC Common Stock (other than rights to purchase WGC
Common Stock pursuant to a plan for the reinvestment of
dividends or interest) at a price per share less than
the current market price of WGC Common Stock
(determined for purposes of this clause (ii) as the
average Closing Price per share of WGC Common Stock on
<PAGE> 8
7
the 20 Trading Days immediately prior to the date such
rights or warrants are issued), then in each case the
Exchange Rate shall be adjusted by multiplying the
Exchange Rate in effect immediately prior to the date
of issuance of such rights or warrants, by a fraction,
of which the numerator shall be the number of shares of
WGC Common Stock outstanding on the date of issuance of
such rights or warrants, immediately prior to such
issuance, plus the number of additional shares of WGC
Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and of which the
denominator shall be the number of shares of WGC Common
Stock outstanding on the date of issuance of such
rights or warrants, immediately prior to such issuance,
plus the number of additional shares of WGC Common
Stock which the aggregate offering price of the total
number of shares of WGC Common Stock so offered for
subscription or purchase pursuant to such rights or
warrants, would purchase at such current market price
(calculated as the average Closing Price per share of
WGC Common Stock on the 20 Trading Days immediately
prior to the date such rights or warrants are issued),
which shall be determined by multiplying such total
number of shares by the exercise price of such rights
or warrants and dividing the product so obtained by
such current market price. Such adjustment shall
become effective at the opening of business on the
Business Day next following the record date for the
determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of WGC
Common Stock are not delivered after the expiration of
such rights or warrants, the Exchange Rate shall be
readjusted to the Exchange Rate which would then be in
effect had such adjustments for the issuance of such
rights or warrants been made upon the basis of delivery
of only the number of shares of WGC Common Stock
actually delivered. Each such adjustment shall be made
successively.
(iii) If WGC shall pay a dividend or make a
distribution to all holders of WGC Common Stock of
evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to
in subparagraph (i) above or any ordinary periodic cash
dividends that do not constitute Extraordinary Cash
Dividends (as defined in clause (vi) below)) or shall
issue to all holders of WGC Common Stock rights or
warrants to subscribe for or purchase any of its
<PAGE> 9
8
securities (other than those referred to in
subparagraph (ii) above), then in each such case, the
Exchange Rate shall be adjusted by multiplying the
Exchange Rate in effect on the record date mentioned
below, by a fraction of which the numerator shall be
the current market price per share of the WGC Common
Stock on the record date for the determination of
stockholders entitled to receive such dividend or
distribution (such current market price being
determined for purposes of this clause (iii) as the
average Closing Price per share of WGC Common Stock on
the 20 Trading Days immediately prior to such record
date), and of which the denominator shall be such
current market price per share of WGC Common Stock less
the fair market value (as determined by the Board of
Directors of the Company, whose determination shall be
conclusive, and described in a resolution adopted with
respect thereto) as of such record date of the portion
of the assets or evidences of indebtedness so
distributed or of such subscription rights or warrants
applicable to one share of WGC Common Stock. Each such
adjustment shall become effective on the opening of
business on the Business Day next following the record
date for the determination of stockholders entitled to
receive such dividend or distribution. Each such
adjustment shall be made successively.
(iv) Any shares of WGC Common Stock issuable in
payment of a dividend shall be deemed to have been
issued immediately prior to the close of business on
the record date for such dividend for purposes of
calculating the number of outstanding shares of WGC
Common Stock under subparagraph (ii) above.
(v) All adjustments to the Exchange Rate shall be
calculated to the nearest 1/10,000th of a share of WGC
Common Stock (or if there is not a nearest 1/10,000th
of a share to the next lower 1/10,000th of a share).
No adjustment in the Exchange Rate shall be required
unless such adjustment would require an increase or
decrease of at least one percent therein; PROVIDED,
HOWEVER, that any adjustments which by reason of this
subparagraph are not required to be made shall be
carried forward and taken into account in any
subsequent adjustment. If an adjustment is made to the
Exchange Rate pursuant to subparagraph (i), (ii) or
(iii) of this Section 16.03(a), an adjustment shall
also be made to the Maturity Price solely to determine
which
<PAGE> 10
9
of paragraphs (a), (b) or (c) of the definition
of Exchange Rate in Section 16.01 will apply at
Maturity. The required adjustment shall be determined
by multiplying the Maturity Price by the number
determined under subparagraph (i), (ii) or (iii) by
which the then existing Exchange Rate was multiplied to
adjust such rate. This subparagraph (v) shall be so
used to adjust the definition of Maturity Price only as
such term is used for the first time in each of
subparagraphs (a), (b) and (c) of the definition of
Exchange Rate.
(vi) For purposes of the foregoing, the term
"Extraordinary Cash Dividend" shall mean, with respect
to any consecutive 365-day period, any cash dividend
with respect to WGC Common Stock the amount of which,
together with the aggregate amount of all other such
cash dividends on the WGC Common Stock occurring in
such 365-day period, exceeds on a per share basis 10%
of the average of the Closing Prices per share of the
WGC Common Stock over such 365-day period, and for
purposes of applying the formula set forth in
clause (iii) above, the fair market value of such
dividends being calculated pursuant to such
clause (iii) shall be equal to (x) the aggregate amount
of such cash dividend together with the amounts of such
other cash dividends occurring in such period minus
(y) the aggregate amount of such other cash dividends
occurring in such period for which a prior adjustment
in the Exchange Rate was previously made under this
Section 16.03(a). In making the determinations
required by the foregoing sentence, the amount of cash
dividends paid on a per share basis shall be
appropriately adjusted to reflect the occurrence during
such period of any event described in Section 16.03(a).
(b) ADJUSTMENT FOR CONSOLIDATION, MERGER OR OTHER
REORGANIZATION EVENT. In the event of (i) any consolidation
or merger of WGC, or any surviving entity or subsequent
surviving entity of WGC (a "WGC Successor"), with or into
another entity (other than a merger or consolidation in
which WGC is the continuing corporation and in which the WGC
Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other
property of WGC or another corporation), (ii) any sale,
transfer, lease or conveyance to another corporation of the
property of WGC, or any WGC Successor as an entirety or
substantially as an entirety, (iii) any statutory exchange
of securities of WGC or any
<PAGE> 11
10
WGC successor with another corporation (other than in
connection with a merger or acquisition) or (iv) any
liquidation, dissolution or winding up of WGC or any WGC
Successor (any such event, a "Reorganization Event"), the
Exchange Rate used to determine the amount payable upon
exchange at Maturity for each DECS will be adjusted
to provide that each holder of DECS will receive at
Maturity cash in an amount equal to (a) if the
Transaction Value (as defined below) is greater than or
equal to the Threshold Appreciation Price, [ ]
multiplied by the Transaction Value, (b) if the Transaction
Value is less than the Threshold Appreciation Price but
greater than the Initial Price, the Initial Price and (c) if
the Transaction Value is less than or equal to the Initial
Price, the Transaction Value. "Transaction Value" means
(x) for any cash received in any such Reorganization Event,
the amount of cash received per share of WGC Common Stock,
(y) for any property other than cash or securities received
in any such Reorganization Event, an amount equal to the
market value at Maturity of such property received per share
of WGC Common Stock as determined by a nationally recognized
independent investment banking firm retained for this
purpose by the Company and (z) for any securities received
in any such Reorganization Event, an amount equal to the
average Closing Price per share of such securities on the 20
Trading Days immediately prior to Maturity, multiplied by
the number of such securities received for each share of WGC
Common Stock. Notwithstanding the foregoing, in lieu of
delivering cash as provided above, the Company may at its
option deliver an equivalent value of securities or other
property received in such Reorganization Event, determined
in accordance with clause (y) or (z) above, as applicable.
The kind and amount of securities into which the DECS shall
be exchangeable after consummation of such transaction shall
be subject to adjustment as described in paragraph (a) above
following the date of consummation of such transaction.
SECTION 16.04. NOTICE OF ADJUSTMENT AND CERTAIN
OTHER EVENTS. (a) Whenever the Exchange Rate is adjusted
as herein provided, the Company shall:
(i) forthwith compute the adjusted Exchange Rate
in accordance with Section 16.03 and prepare a
certificate signed by an officer of the Company setting
forth the adjusted Exchange Rate, the method of
calculation thereof in reasonable detail, and the facts
requiring such adjustment and upon which such
adjustment is based, which certificate shall be
<PAGE> 12
11
conclusive, final and binding evidence of the
correctness of the adjustment, and file such
certificate forthwith with the Trustee for the DECS;
and
(ii) within 10 Business Days following the
occurrence of an event that permits or requires an
adjustment to the Exchange Rate pursuant to
Section 16.03 (or if the Company is not aware of such
occurrence, as soon as practicable after becoming so
aware), provide written notice to the Trustee and to
the Holders of the Outstanding DECS of the occurrence
of such event and a statement in reasonable detail
setting forth the method by which the adjustment to the
Exchange Rate was determined and setting forth the
revised Exchange Rate per DECS, provided, that such
notice need only disclose the factor by which the
Maturity Price is to be multiplied pursuant to
Section 16.03(a)(v) in order to determine the Exchange
Rate at Maturity, it being understood that, until
Maturity, the Exchange Rate itself cannot be
determined.
(b) In case at any time while any of the DECS are
outstanding the Company receives notice that:
(i) WGC shall declare a dividend (or any other
distribution) on or in respect of the WGC Common Stock
to which Section 16.03(a)(i) or (ii) shall apply (other
than any cash dividends and distributions, if any, paid
from time to time by WGC that do not constitute
Extraordinary Cash Dividends);
(ii) WGC shall authorize the issuance to all
holders of WGC Common Stock of rights or warrants to
subscribe for or purchase shares of WGC Common Stock or
any other subscription rights or warrants;
(iii) there shall occur any conversion or
reclassification of WGC Common Stock (other than a
subdivision or combination of outstanding shares of
such WGC Common Stock) or any consolidation, merger or
reorganization to which WGC is a party and for which
approval of any stockholders of WGC is required, or the
sale or transfer of all or substantially all of the
assets of WGC; or
<PAGE> 13
12
(iv) there shall occur the voluntary or
involuntary dissolution, liquidation or winding up of
WGC;
then the Company shall promptly cause to be delivered to the
Trustee and any applicable Paying Agent and filed at the
office or agency maintained for the purpose of exchange of
DECS at Maturity in the Borough of Manhattan, in The City of
New York by the Trustee (or any applicable Paying Agent),
and shall promptly cause to be mailed to the Holders of DECS
at their last addresses as they shall appear upon the
registration books of the Debt Security Registrar, at least
10 days before the date hereinafter specified (or the
earlier of the dates hereinafter specified, in the event
that more than one is specified), a notice stating (x) the
date on which a record is to be taken for the purpose of
such dividend, distribution or grant of rights or warrants,
or, if a record is not to be taken, the date as of which the
holders of WGC Common Stock of record to be entitled to such
dividend, distribution or grant of rights or warrants are to
be determined, or (y) the date, if known by the Company, on
which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected
to become effective.
(c) On or prior to seven Business Days preceding
the Maturity Date of the DECS, the Company will provide
notice to the Holders of record of the DECS and to the
Trustee and will publish a notice in a daily newspaper of
national circulation stating whether the Company has
irrevocably elected to deliver WGC Common Stock or cash (or
any other property or securities that may be delivered
pursuant to Section 16.03(b)) upon the mandatory exchange of
the principal amount of the DECS in accordance with
Section 16.01.
SECTION 16.05. TAXES. (a) The Company will pay
any and all documentary, stamp, transfer or similar taxes
that may be payable in respect of the transfer and delivery
of WGC Common Stock pursuant hereto; PROVIDED, HOWEVER, that
the Company shall not be required to pay any such tax which
may be payable in respect of any transfer involved in the
delivery of WGC Common Stock in a name other than that in
which the DECS so exchanged were registered, and no such
transfer or delivery shall be made unless and until the
Person requesting such transfer has paid to the Company the
amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
<PAGE> 14
13
(b) The parties hereto hereby agree, and each
Holder of a DECS by its purchase of a DECS hereby agrees:
(i) to treat, for U.S. federal income tax
purposes, each DECS as a unit (the "unit
characterization") consisting of (A) a debt obligation
(the "Exchange Note") with a fixed principal amount
equal to the principal amount of the DECS, bearing
interest at the stated interest rate, and with the
principal amount unconditionally payable at Maturity,
and (B) a forward purchase contract (the "Purchase
Contract") pursuant to which the Holder agrees to use
the principal payment due on the Exchange Note to
purchase, at Maturity, the WGC Common Stock which
the Holder is entitled to receive at that time (subject
to the Company's right to deliver cash in lieu of such
WGC Common Stock;
(ii) to include in income as interest, in accordance
with its method of accounting, all payments made with respect
to the DECS that are denominated as interest and to include
any original issue discount in income on the basis of the
allocation described in paragraph (iii) below (in the case of
an initial purchaser) or on the basis of a similar method
(in the case of a subsequent purchaser);
(iii) in the case of an initial purchaser, to
allocate the entire purchase price of a DECS to the
Exchange Note and to allocate no part thereof to the
Purchase Contract, unless the stated interest on the DECS represents
a yield that is lower than the Company's normal cost of issuing
debt with a similar term to the DECS (the "Company's Mid-Term Borrowing
Rate"), in which case each Holder agrees to allocate to the Exchange Note
an amount, less than the principal amount of the Exchange Note, calculated
by discounting the cash flows relating to the Exchange Note at a rate
equal to the Company's Mid-Term Borrowing Rate, and to allocate to the
Purchase Contract the remainder of the purchase price of the DECS; and
(iv) to file all U.S. federal, state and local
income and franchise tax returns consistent with the
unit characterization and the foregoing methods (unless
required otherwise by an applicable taxing authority).
SECTION 16.06. SHARES FREE AND CLEAR. The
Company hereby warrants that upon any exchange of a DECS
for WGC Common Stock at Maturity pursuant to this Indenture,
the Holder of a DECS shall receive all rights held by the
Company in the WGC Common Stock for which such DECS is at
such time exchangeable pursuant to this Indenture, free and
clear of any and all liens, claims, charges and encumbrances
other than any liens, claims, charges and encumbrances which
may have been placed on any WGC Common Stock by Wyman-Gordon
or the prior owner thereof, prior to the time such WGC Common
Stock was acquired by the Company. Except as provided in
Section 16.05(a), the Company will pay all taxes and charges
with respect to the delivery of WGC Common Stock delivered
in exchange for DECS hereunder. In addition, the Company
further warrants that any WGC Common Stock so delivered in
exchange for DECS hereunder shall be free of any transfer
restrictions (other
<PAGE> 15
14
than such as are solely attributable to any Holder's status
as an affiliate of WGC).
SECTION 16.07. CANCELLATION OF DEBT SECURITY.
Upon receipt by the Trustee of DECS delivered to it for
exchange under this Article Fourteen, the Trustee shall
cancel and dispose of the same as provided in Section 2.08.
SECTION 16.08. LIMITATIONS ON TRADING DURING
CERTAIN DAYS. The Company hereby agrees that it will not,
and it will cause each of its Majority-Owned Subsidiaries
(as defined below) not to, buy or sell shares of WGC Common
Stock for their own account during the 20 Trading Days prior
to the Maturity Date of the DECS. For purposes hereof,
"Majority-Owned Subsidiary" with respect to the Company
means a subsidiary more than 50% of whose outstanding
securities representing the right, other than as affected by
events of default, to vote for the election of directors, is
owned by the Company and/or one or more of the Company's
other Majority-Owned Subsidiaries.
SECTION 16.09. RULES GOVERNING EXCHANGE AT MATURITY.
The parties hereto hereby agree, and each Holder of a DECS by
its purchase of a DECS hereby agrees, that upon the exchange at
Maturity of a DECS for shares of WGC Common Stock, the delivery
of such shares shall, to the extent applicable, occur (i) on the floor
of, or (ii) pursuant to any applicable rules and regulations promulgated
by, The Nasdaq Stock Market's National Market ("Nasdaq") or, if
WGC Common Stock is not listed for trading on Nasdaq on the date
of any such exchange, the exchange, board of trade or similar
institution on which public market quotations or prices of WGC
Common Stock are made at the time of such exchange.
SECTION 16.10. RULES GOVERNING TRADING OF DECS. The parties
hereto agree, and each Holder of a DECS by its purchase of a DECS hereby
agrees, that DECS shall be traded only pursuant to rules and regulations
of any self-regulatory organization (as defined in Section 3(a) of
the Exchange Act) which are filed with the SEC pursuant to Section
19(b) of the Exchange Act.
(d) By amending the table of contents of the
Basic Indenture to reflect the additions described in sub
sections (a) and (c) of this Section 2.
SECTION 3. The form of DECS attached hereto as
Exhibit A is hereby adopted, pursuant to Section 11.01(f) of
the Indenture, as a form of Debt Securities of a series that
consists of DECS.
SECTION 4. The Basic Indenture, as supplemented
and amended by this Supplemental Indenture and all other
indentures thereto, is in all respects ratified and
confirmed, and the Basic Indenture, this Supplemental
Indenture and all indentures supplemental thereto shall be
read, taken and construed as one and the same instrument.
SECTION 5. If any provision hereof limits,
qualifies or conflicts with another provision hereof which
is required to be included in this Supplemental Indenture by
any of the provisions of the Trust Indenture Act, such
required provision shall control.
SECTION 6. All covenants and agreements in this
Supplemental Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.
<PAGE> 16
15
SECTION 7. In case any provision in this
Supplemental Indenture or in the Debt Securities of any
series shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining
provisions (or of the other series of Debt Securities) shall
not in any way be affected or impaired thereby. In the event
that the Company elects to deliver cash in lieu of WGC
Common Stock at Maturity, the Company shall not deliver cash
to any Holder if delivery of cash to such Holder would
violate applicable law. If the Company elects to deliver
cash in lieu of WGC Common Stock at Maturity, the Company
will be obligated to deliver cash with respect to all,
but not less than all, of the shares of WGC Common Stock
that would otherwise be deliverable; provided, however,
that the Company will deliver WGC Common Stock to any Holder
if in the Company's determination the delivery of cash to
such Holder may violate applicable law.
SECTION 8. Nothing in this Supplemental
Indenture, expressed or implied, shall give to any Person,
other than the parties hereto and their successors
hereunder, and the Holders of each series of Debt Securities
any benefit or any legal or equitable right, remedy or claim
under this Supplemental Indenture.
SECTION 9. This Supplemental Indenture and each
Debt Security of any series shall be deemed to be a contract
made under the laws of the State of New York and this
Supplemental Indenture and each such Debt Security shall be
governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of laws principles
(other than Section 5-1401 of the New York General Obligation Law).
SECTION 10. All capitalized terms used in this
Supplemental Indenture not otherwise defined herein that are
defined in the Basic Indenture shall have the meanings set forth
therein.
SECTION 11. This Supplemental Indenture may be
executed in any number of counterparts, each of which shall
be an original; but such counterparts shall together
constitute but one and the same instrument.
SECTION 12. The recitals contained herein and in
the Debt Securities, except the certificate of
authentication of the Trustee thereon, shall be taken as
statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of the
Basic Indenture, this
<PAGE> 17
16
Supplemental Indenture or of the Debt Securities and shall
not be accountable for the use or application by the
Company of the Debt Securities or the proceeds thereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Supplemental Indenture to be duly executed, and their
respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
COOPER INDUSTRIES, INC.
by__________________________
[ ]
Attest:
__________________
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Trustee
by__________________________
Name:
Title:
Attest:
__________________
<PAGE> 18
EXHIBIT A
NO.
CUSIP NO. [ ]
[Form of Face of DECS]
COOPER INDUSTRIES, INC.
DECS[SM] (Debt Exchangeable for Common Stock[SM])
[ ]% Exchangeable Note due [ ], 1998
(Subject to Exchange at Maturity into Shares of
Common Stock, Par Value $1.00 Per Share, of
Wyman-Gordon Company)
COOPER INDUSTRIES, INC., an Ohio corporation (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
__________ or registered assigns, the principal sum of ____________ DOLLARS (or
$[ ] for each Debt Exchangeable for Common Stock (each, a "DECS")
represented by this note) on [ ], 1998 (subject to the mandatory
exchange provisions at Maturity described below), and to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) thereon from
[ ], 1995, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for on [ ], [ ],
[ ] and [ ] in each year, commencing [ ], 1995, at
the rate per annum specified in the title of this note computed quarterly for
each Holder (a) in the case of the first quarterly interest payment payable on
[ ], 1995, $[ ] per DECS multiplied by the aggregate number of DECS
registered in such Holder's name and (b) in the case of each quarterly interest
payment thereafter, $[ ] per DECS multiplied by the aggregate number of
DECS registered in such Holder's name (in each of (a) and (b), calculated to
the nearest 1/100th of a dollar or, if there is not a nearest 1/100th of a
dollar, then to the next higher 1/100th of a dollar), until the principal
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in said Indenture, be paid to the Person in whose name this DECS (or
one or more Predecessor Securities) is registered at the close of business on
the last day of the month next preceding such Interest Payment Date. In any
case where such Interest Payment Date shall not be a Business Day, then
(notwithstanding any other provision of said Indenture or
<PAGE> 19
2
this DECS) payment of such interest need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on such date, and, if such payment is so made, no interest shall accrue
for the period from and after such date. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the registered
Holder on [ ], [ ], [ ] or [ ], as the
case may be, and may be paid to the Person in whose name this DECS (or one or
more Predecessor Securities) is registered at the close of business on a record
date for the payment of such interest to be fixed by the Trustee for the DECS,
notice whereof shall be given to Holders of DECS not less than 10 days prior to
such record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
the DECS may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
At Maturity, the principal amount of this DECS will be mandatorily
exchanged into a number of shares of common stock, par value $1.00 per share
("WGC Common Stock"), of Wyman-Gordon Company ("WGC") at the Exchange Rate (as
defined below) and, as a result, the Holder of this DECS will not necessarily
receive an amount equal to the principal amount hereof. The "Exchange Rate" is
equal to, subject to adjustment as a result of certain dilution events relating
to the WGC Common Stock as provided for in the Indenture, (a) if the Maturity
Price (as defined below) is greater than or equal to $[ ] per share of WGC
Common Stock (the "Threshold Appreciation Price"), [ ] shares of WGC
Common Stock per DECS, (b) if the Maturity Price is less than the Threshold
Appreciation Price but is greater than $[ ] per share of WGC Common Stock
(the "Initial Price"), a fractional share of WGC Common Stock per DECS so that
the value thereof (determined at the Maturity Price) is equal to the Initial
Price (such fractional share being calculated to the nearest 1/10,000th of a
share or, if there is not a nearest 1/10,000th of a share, to the next higher
1/10,000th of a share) and (c) if the Maturity Price is less than or equal to
the Initial Price, one share of WGC Common Stock per DECS. No fractional
shares of WGC Common Stock will be issued at Maturity as provided in the
Indenture. Notwithstanding the foregoing, the Company may, at its option in
lieu of delivering shares of WGC Common Stock, deliver cash in an amount equal
to the value of such number
<PAGE> 20
3
of shares of WGC Common Stock at the Maturity Price as provided in the
Indenture.
The "Maturity Price" is defined as the average Closing Price per share
of WGC Common Stock on the 20 Trading Days immediately prior to Maturity. The
"Closing Price" of any security on any date of determination means the closing
sale price (or, if no closing price is reported, the last reported sale price)
of such security on The Nasdaq Stock Market's National Market ("Nasdaq") on
such date or, if such security is not listed for trading on Nasdaq on any such
date, as reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, or if such security is
not so listed on a United States national or regional securities exchange, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System, or, if such security is not so reported, the last quoted bid
price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. A "Trading Day" is defined as a Business Day on which
the security the Closing Price of which is being determined (A) is not
suspended from trading on a national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or the over-the-counter market that is the primary market for the
trading of such security. "Business Day" means any day that is not a Saturday,
a Sunday or a day on which the NYSE, banking institutions or trust companies in
The City of New York, New York are authorized or obligated by law or executive
order to close.
Interest on this DECS will be payable, and delivery of WGC Common Stock
(or, at the Company's option, cash in an amount equal to the value of such WGC
Common Stock) in exchange for the principal amount of this DECS at Maturity
will be made upon surrender of this DECS, at the office or agency of the
Company maintained for that purpose in The City of New York, New York, and
payment of interest on (and, if the Company elects not to deliver WGC Common
Stock upon exchange at Maturity, the cash equivalent thereof payable upon
exchange for the principal amount of) this DECS will be made by check in such
coin or currency of the United States
<PAGE> 21
4
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear on the Securities Register.
ADDITIONAL PROVISIONS OF THIS DECS ARE CONTAINED ON THE REVERSE HEREOF
AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH IN
THIS PLACE.
<PAGE> 22
5
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee for this DECS by manual signature, this DECS shall not
be entitled to any benefit under the Indenture, or be valid or obligatory for
any purpose.
DECS and Debt Exchangeable for Common Stock are service marks of
Salomon Brothers Inc.
IN WITNESS WHEREOF, COOPER INDUSTRIES, INC., has caused this instrument
to be duly executed under its corporate seal.
Dated:
COOPER INDUSTRIES, INC.,
by:
_______________________
Name:
Title:
Attest: ____________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and
referred to in the within-mentioned Indenture.
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as
Trustee,
by:
____________________
Authorized Signatory
<PAGE> 23
[Form of Reverse of DECS]
COOPER INDUSTRIES, INC.
[ ]% Exchangeable Note due [ ], 1998
(Subject to Exchange at Maturity into Shares of
Common Stock, Par Value $1.00 Per Share,
of Wyman-Gordon Company)
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY.
This DECS is one of a duly authorized issue of debentures, notes or
other evidences of indebtedness (hereinafter called the "Securities") of the
Company of the series hereinafter specified, which series is limited to DECS,
all such Securities issued and to be issued under an indenture dated as of
[ ], 1995, between the Company and Texas Commerce Bank National
Association, as Trustee, as supplemented by a First Supplemental Indenture
dated as of [ ], 1995, between the Company and Texas Commerce
Bank National Association, as Trustee (herein collectively, the "Indenture"),
pursuant to which the Company has designated Texas Commerce Bank National
Association as Trustee for the DECS, to which Indenture and all other
indentures supplemental thereto reference is hereby made for a statement of the
rights and limitation of rights thereunder of the Holders of the Securities and
of the rights, obligations, duties and immunities of the Trustee for each
series of Securities and of the Company, and the terms upon which the
Securities are and are to be authenticated and delivered. As provided in the
Indenture, the Securities may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may be denominated
in currencies other than U.S. Dollars, (including composite currencies), may
mature at different times, may bear interest, if any, at different rates, may
be subject to different redemption provisions, if any, may be subject to
<PAGE> 24
2
different sinking, purchase or analogous funds, if any, may be subject to
different covenants and Events of Default and may otherwise vary as in the
Indenture provided or permitted. The DECS is one of a series of the Securities
designated as [ ]% Exchangeable Notes Due [ ], 1998.
The DECS may not be redeemed prior to Maturity Date.
The provisions contained in the Indenture for legal defeasance and
discharge of the entire principal of all the Securities of any series (or of
certain covenants in the Indenture) upon compliance by the Company with certain
conditions set forth therein will not be applicable to the DECS.
If an Event of Default with respect to the DECS, as defined in the
Indenture, shall occur and be continuing, the principal of all DECS may be
declared due and payable and therefore will result in the mandatory exchange of
the principal amount thereof for WGC Common Stock (or, at the Company's option,
cash), all in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities at the time
Outstanding of each series to be affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities of any series at the time Outstanding, on
behalf of the Holders of all the Securities of such series, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences with respect to such
series. Any such consent or waiver by the Holder of this DECS shall be
conclusive and binding upon such Holder and upon all future Holders of this
DECS and of any DECS issued upon the transfer hereof or in exchange therefor or
in lieu hereof whether or not notation of such consent of waiver is made upon
this DECS.
<PAGE> 25
3
No reference herein to the Indenture and no provision of this DECS or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this DECS
at the times, place and rate, and in the manner, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, this DECS is transferable on the Security Register of the
Company, upon surrender of this DECS for registration of transfer at the office
or agency of the Company to be maintained for that purpose in The City of New
York, New York, or at any other office or agency of the Company maintained for
that purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing and
thereupon one or more new DECS, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
No service charge shall be made for any such transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with the registration of such
transfer or exchange, other than certain exchanges not involving any transfer.
Certain terms used in this Security which are defined in the
Indenture have the meanings set forth therein.
This Security shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York without regard to conflicts
of laws principles (other than Section 5-1401 of the New York General
Obligation Law).
The Company, the Trustee for the DECS and any agent of the Company or
such Trustee may treat the Person in whose name this DECS is registered as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this DECS be overdue, and neither the
Company, such Trustee nor any such agent shall be affected by notice to the
contrary.
<PAGE> 26
4
_________________________
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -- ______ Custodian _______
(Cust) (Minor)
TEN ENT - as tenants by the entireties Under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right _________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR TAXPAYER I.D.
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of assignee)
__________________________________________________________________________________________________________________
the within DECS and all rights thereunder, hereby irrevocably constituting and appointing
__________________________________________________________________________________________________________________
attorney to transfer said DECS on the books of the Company, with full power of substitution in the premises.
Dated:_____________
______________________________________________________________________
NOTICE: The signature to this assignment must correspond with
the name as written up on the face of the within DECS in every
particular, without alteration or enlargement or any change whatever.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Cooper Industries,
Inc. for the registration of three-year notes of Cooper Industries, Inc.
exchangeable into Wyman-Gordon Company common stock, par value $1.00 per share,
and to the incorporation by reference therein of our report dated January 23,
1995, with respect to the consolidated financial statements of Cooper
Industries, Inc. for the year ended December 31, 1994, included as Appendix A to
the Cooper Industries, Inc. Proxy Statement for the Annual Meeting of
Shareholders held on April 25, 1995, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
Houston, Texas
October 13, 1995
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)______
_______________
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
74-0800980
(I.R.S. Employer
Identification No.)
712 MAIN STREET 77002
HOUSTON, TEXAS (Zip Code)
(Address of principal
executive offices)
___________________
COOPER INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
OHIO 31-4156620
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 FANNIN, SUITE 4000 77002
HOUSTON, TEXAS (Zip Code)
(Address of principal
executive offices)
EXCHANGEABLE NOTES DUE 1998
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of The Federal Reserve System, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
(See Note on Page 5.)
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES
OF THE TRUSTEE:
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(A) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
(B) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM
THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B)(1) OF THE
ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE,
INCLUDING A STATEMENT AS TO HOW THE INDENTURE SECURITIES WILL RANK AS
COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
<PAGE> 3
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE OR REPRESENTATIVE
OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON
HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COL. C
------------- -------------- ------------ -----------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COL. C
------------- -------------- ------------ ------------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY THE
TRUSTEE.
COL. A COL. B COL. C COL. D
WHETHER THE AMOUNT OWNED PERCENTAGE OF
SECURITIES BENEFICIALLY OR HELD VOTING SECURITIES
ARE VOTING AS COLLATERAL SECURITY REPRESENTED BY
OR NONVOTING FOR OBLIGATIONS AMOUNT GIVEN
TITLE OF CLASS SECURITIES IN DEFAULT IN COL. C
-------------- ------------- ---------------------- ------------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
<PAGE> 4
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH
UNDERWRITER ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR HELD PERCENT OF CLASS
NAME AS COLLATERAL SECURITY REPRESENTED BY
OF ISSUER AND AMOUNT FOR OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS SECURITIES DEFAULT BY TRUSTEE IN COL. C
-------------- ---------- ---------------------- -----------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR
OR (2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON:
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR HELD PERCENT OF CLASS
NAME AS COLLATERAL SECURITY REPRESENTED BY
OF ISSUER AND AMOUNT FOR OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS SECURITIES DEFAULT BY TRUSTEE IN COL. C
-------------- ---------- ----------------------- ------------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON
ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR HELD PERCENT OF CLASS
NAME AS COLLATERAL SECURITY REPRESENTED BY
OF ISSUER AND AMOUNT FOR OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS SECURITIES DEFAULT BY TRUSTEE IN COL. C
-------------- ---------- ---------------------- -----------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
<PAGE> 5
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
COL. A COL. B COL. C
NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DATE DUE
------------ ----------- --------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(A) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There is not, nor has there been, a default with respect to the
securities under this indenture. (See Note on Page 5.)
(B) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There has not been a default under any such indenture or series. (See
Note on Page 5.)
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
Not applicable.
<PAGE> 6
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY.
<TABLE>
<S> <C> <C>
.1 __ A copy of the articles of association of the trustee as now in effect.
#2 __ A copy of the certificate of authority of the trustee to commence business.
*3 __ A copy of the authorization of the trustee to exercise corporate trust powers.
4 __ A copy of the existing by-laws of the trustee.
5 __ Not applicable.
*6 __ The consent of the trustee required by Section 321(b) of the Act.
7 __ A copy of the latest report of condition of the requirements of its supervising or examining
trustee published pursuant to law or the authority.
8 __ Not applicable.
9 __ Not applicable.
- -------------
</TABLE>
. Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to
the Form S-3 File No. 33-56195.
# Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as an exhibit
to the Form S-3 File No. 33-42814.
* Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits
to the Form S-11 File No. 33-25132.
_______________________________
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Items 2 and 13, the
answers to said Items are based on incomplete information. Such Items may,
however, be considered as correct unless amended by an amendment to this Form
T-1.
<PAGE> 7
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE
TRUSTEE, TEXAS COMMERCE BANK NATIONAL ASSOCIATION, A NATIONAL BANKING
ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF
AMERICA, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF
HOUSTON AND STATE OF TEXAS, ON THE 26TH DAY OF SEPTEMBER, 1995.
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ Leah E. Foshee
-------------------------
Leah E. Foshee
Assistant Vice President and Trust Officer
<PAGE> 8
EXHIBIT 4
BYLAWS
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
__________
SECTION 1: MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETINGS. The annual meeting of the shareholders of
the Association for the election of directors and for the transaction of such
other business as properly may come before such meeting, shall be held at the
principal banking office of the Association in Houston, Texas, or such other
place authorized by the Board of Directors ("Board"), at 10:30 a.m. on the
Wednesday before the third Tuesday in January or as soon thereafter as
practicable if, for any reason, the meeting cannot be held at such time or on
such date. The Chairman of the Board ("Chairman") and the Secretary of the
Association shall act as Chairman and Secretary, respectively, of the meeting.
SECTION 1.2. SPECIAL MEETINGS. Special meetings of the shareholders of
the Association may be called by the Chairman or upon the direction of a
majority of the Board.
SECTION 1.3. NOTICE. Unless otherwise provided by law or by the Articles
of Association, a notice of the time, place and purpose of every annual and
special meeting of the shareholders shall be given by first class mail, postage
prepaid, mailed at least ten days prior to the date of such meeting to each
shareholder of record at the shareholder's address as shown on the books of the
Association.
SECTION 1.4. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of the Association shall act as proxy. Proxies shall be valid only for the
meeting specified therein and any adjournments thereof.
SECTION 1.5. VOTING RIGHTS. Except as otherwise provided by law or these
Bylaws, each shareholder shall be entitled to one vote for each share of stock
held, and a majority of votes cast shall decide each matter submitted for a
vote.
SECTION 1.6. RECORD DATE. The record date for determining those
shareholders who shall have the right to receive notice of and to vote at
meetings of shareholders shall be set by the Board or, if the Board fails to
set such date, by the Chairman. The record date shall be not less than ten
and not more than fifty days prior to the date of the meeting.
SECTION 2: DIRECTORS
SECTION 2.1. NUMBER. Unless applicable law shall permit a greater number,
the Board of the Association shall consist of such number of persons, not less
than five nor more than twenty-five, as from time to time shall be fixed and
determined by a majority of the full Board or by resolution of a majority of
the outstanding shares of stock of the Association at the annual or any special
meeting of the shareholders.
- --------------------------------------------------------------------------------
Adopted January 11, 1995 Page 1 of 6
<PAGE> 9
SECTION 2.2. TERM. The directors of the Association shall hold office
until the annual meeting of shareholders next following their election and
until their successors have been elected and qualified unless removed according
to the provisions of the Articles of Association or these Bylaws.
SECTION 2.3. VACANCIES. Subject to the provisions of Section 2.1, any
vacancies occurring on the Board for any reason may be filled by a vote of a
majority of the remaining directors, and any director so appointed shall hold
office until the next annual meeting of shareholders or until a successor is
elected.
SECTION 2.4. ANNUAL MEETINGS. Following the annual meeting of the
shareholders, the Chairman or the Secretary of the meeting shall notify the
directors-elect of their election, and they shall meet promptly for the
purposes of electing officers of the Association for the ensuing year and for
the transaction of such organizational and other business as properly may come
before the meeting.
SECTION 2.5. REGULAR MEETINGS. Regular meetings of the Board shall be
held without notice at 10:30 a.m., or at such other time as the Chairman may
prescribe, on the Wednesday before the third Tuesday of each January, April,
July and October. Two other regular meetings of the Board also shall be held
each calendar year on such other dates and at such times as the Chairman may
prescribe, with notice of such meetings to be given to each member of the Board
by telegram, letter, telephone, telecopy or in person. Such meetings shall be
held at the principal office of the Association. If any regular meeting of the
Board shall fall upon a holiday, the meeting shall be held at the time and
place specified in this Section on the next banking business day unless some
other date shall be designated by a majority of the Board. A special meeting
may be held in lieu of a regular meeting in any given calendar month.
SECTION 2.6. SPECIAL MEETINGS. Special meetings of the Board may be
called either by the Chairman, or in his absence, by the President, or in his
absence, by any of the Vice Chairmen of the Board, or at the request of three
or more directors. Each member of the Board shall be given notice by telegram,
letter, telephone, telecopy or in person stating the time, place and purpose of
each such meeting.
SECTION 2.7. QUORUM. For the transaction of business, a quorum of the
Board shall consist of not less than a majority of the entire Board then in
office. If, at the time fixed for any meeting, a quorum is not present, the
directors in attendance may adjourn the meeting from time to time until a
quorum is obtained. The majority of those directors present and voting at any
meeting of the Board shall decide each matter considered.
SECTION 2.8. ADVISORY DIRECTORS. The Board may appoint such advisory
directors as it may deem appropriate, each of whom shall hold office until the
next annual meeting of the directors following their elections. The advisory
directors of the Association shall have the right to attend the meetings of the
Board held each January, April, July and October and to advise with the Board
concerning the affairs of the Association, but advisory directors shall not
have the right to vote.
SECTION 2.9. RETIREMENT OF DIRECTORS. No person shall be elected to
serve as a director or an advisory director of the Association who has attained
70 years of age at the
- --------------------------------------------------------------------------------
Adopted January 11, 1995 Page 2 of 6
<PAGE> 10
time of such election except in accordance with this Section. Any person
currently serving on the Board of the Bank who had attained 71 years of age by
April 17, 1985 shall be exempt from the provisions of this Section. In
addition, any former chief executive officer of Texas Commerce Bancshares, Inc.
shall be exempt from this Section for the ten years following such person's
retirement from such position. Any director or advisory director of the
Association who, during his or her term of office, ceases to be eligible under
the foregoing provisions to be elected to such office may continue to serve the
remainder of his or her term of office until the next annual meeting of
shareholders.
SECTION 3: OFFICERS
SECTION 3.1. CHAIRMAN. There shall be a Chairman, as designated by the
Board. The Chairman shall preside at all meetings of the Board. The Chairman
shall preside at all meetings of the Loan and Discount Committee at which the
Chairman is present, unless the Chairman shall elect to delegate this duty and
responsibility to another officer. The Chairman shall have supervision over
and exercise general executive and administrative powers relating to all of the
operations and business of the Association. The Chairman shall from time to
time assign all officers of this Association their respective powers, duties
and responsibilities and shall have and exercise such other powers and duties as
from time to time may be conferred upon or assigned to the Chairman.
SECTION 3.2. PRESIDENT. The President shall be a member of the Board.
The President shall have and may exercise any and all other powers and duties
pertaining by law, regulation or practice to the office of president or imposed
by these Bylaws. The President shall perform such executive and administrative
duties as may be assigned to the President by the Board, and in the case of the
absence or inability of the Chairman to act, the President shall perform the
duties of the Chairman during such absence or inability.
SECTION 3.3. VICE CHAIRMAN. The Board may appoint one or more of its
directors as Vice Chairmen. During the absence of the Chairman and the
President, the Vice Chairmen, in the order of their seniority as Vice Chairmen,
shall preside at the meetings of the Board. Each Vice Chairman shall perform
such executive and administrative duties as may be assigned to such Vice
Chairman by the Chairman.
SECTION 3.4. EXECUTIVE TRUST OFFICER. There shall be an Executive Trust
Officer of the Association, appointed by the Board, whose duties shall be to
manage, supervise and direct all of the activities of the Trust Department.
The Board may appoint other trust officers as it may deem appropriate with such
duties as may be designated by the Board or by the Executive Trust Officer.
SECTION 3.5. SECRETARY AND ASSISTANT SECRETARIES. The Board shall appoint
a Secretary, or other designated officer, who shall be secretary of the Board
and of the Association and shall keep accurate minutes of all meetings. The
Secretary shall attend to the giving of all notices required by these Bylaws;
shall be custodian of the corporate seal, records, documents and papers of the
Association; shall have and may exercise any and all other powers and
- --------------------------------------------------------------------------------
Adopted January 11, 1995 Page 3 of 6
<PAGE> 11
duties pertaining by law, regulation or practice, to the office of secretary or
cashier, or imposed by these Bylaws; and shall perform such duties as may be
assigned from time to time by the Board or the Chairman. The Board may appoint
one or more Assistant Secretaries and/or a Cashier, and each of the Assistant
Secretaries and Cashier so appointed shall have the same authority provided by
these Bylaws to the Secretary and such other duties as may be assigned by the
Board or the Chairman.
SECTION 3.6. OTHER OFFICERS. The Board may appoint one or more Executive
Vice Presidents, one or more Senior Vice Presidents, one or more Vice
Presidents, and such other officers with such titles as may from time to time
be deemed appropriate for the transaction of the business of the Association.
Each such officer shall have such duties as from time to time may be assigned to
such officer by the Chairman.
SECTION 3.7. TERM OF OFFICE. The Chairman, the Vice Chairmen and the
President shall hold their offices for the current year for which the Board, of
which they are members or advisory members, was elected unless they shall
resign, become disqualified or be removed. Such officers may be removed by the
Board with or without cause. Any vacancy occurring in such offices shall be
filled by the Board. All other persons shall hold the offices to which they
are elected subject to removal by the Chairman or by the Board.
SECTION 3.8. RECORDS OF THE ASSOCIATION. The Secretary shall be
responsible for the minute books of the Association, the organizational papers
of the Association, the Articles of Association, the returns of elections, the
Bylaws, the proceedings of regular and special meetings of the Board and of the
shareholders and the reports of the committees of the Board. The minutes of
each meeting shall be signed by either the Secretary or an Assistant Secretary
or the person acting in such capacity in the absence of the Secretary or an
Assistant Secretary and approved by the officer presiding at such meeting.
SECTION 4: COMMITTEES
SECTION 4.1. BOARD COMMITTEES. Each year at its annual organizational
meeting and at such other times as it deems necessary, the Board shall appoint
such committees, consisting of directors and/or advisory directors, as it deems
appropriate, specifying the authority and responsibilities of each such
committee. Such committees shall include at least those committees as are
required by law. Any advisory director appointed to a committee shall have the
right to attend meetings of the committee and to advise the committee but shall
not have the right to vote.
SECTION 4.2. MANAGEMENT COMMITTEES. Not less than annually the Chairman
shall appoint such management committees and subcommittees, comprised of
officers and/or employees of the Association, as the Chairman deems
appropriate, and those committees shall have such powers and responsibilities,
not inconsistent with these Bylaws or any resolution of the Board, as the
Chairman may specify.
SECTION 4.3. MINUTES. Each committee shall keep minutes of its meetings,
which shall be filed with the Secretary or an Assistant Secretary.
- --------------------------------------------------------------------------------
Adopted January 11, 1995 Page 4 of 6
<PAGE> 12
SECTION 4.4. QUORUM. At least half of the members of a committee shall be
required to constitute a quorum for the transaction of such committee's
business unless a greater number shall be specifically required in the case of
a Board committee by resolution or in the case of a management committee by the
Chairman.
SECTION 5: STOCK
SECTION 5.1. TRANSFER OF SHARES. The capital stock of the Association
shall be transferable on the stock certificate books of the Association, and
all such transfers shall be recorded therein.
SECTION 5.2. CERTIFICATES REPRESENTING SHARES. Certificates representing
shares of capital stock of the Association shall be in the form approved by the
Board and shall be signed manually or by facsimile signature by the Chairman,
the President, any Vice Chairman, Executive Vice President or Senior Vice
President, and by the Secretary, an Assistant Secretary, or the Cashier. In
case any officer who has signed or whose facsimile signature has been placed
upon the form of certificate shall have ceased to be such officer before such
certificate is issued, such certificate may be issued with the same effect as
if the officer were such officer at the date of issuance.
SECTION 6: SEAL
The seal of this Association shall be in such form as may be from time to
time prescribed by the Board. Each of the Secretary, the Assistant Secretaries
and such officers of the Association as the Board may direct shall have
authority to affix the corporate seal of this Association to any document
requiring such seal and to attest the same.
SECTION 7: EXECUTION OF INSTRUMENTS
All agreements, indentures, mortgages, deeds, conveyances, transfers,
certificates, declarations, receipts, discharges, releases, satisfactions,
settlements, petitions, schedules, accounts, affidavits, bonds, checks, drafts,
undertakings, proxies and other instruments or documents may be signed,
executed, acknowledged, verified, delivered or accepted in the name of and on
behalf of the Association by such officers as the Board may from time to time
direct or, if the Board has not directed, then by such officers as the Chairman
from time to time directs. The provisions of this Section 7 are supplementary
to any other provision of these Bylaws.
SECTION 8: BANKING HOURS
Except as otherwise provided by law, the Association shall be open for
business on such days of the week and during such hours as the Chairman or his
designee may direct.
SECTION 9: INDEMNIFICATION
The Association shall indemnify and advance expenses to all directors,
advisory directors, officers, employees and agents of the Association, and to
all persons who are or were serving at the request of the Association as a
director, advisory director, officer, partner, venturer, proprietor,
- --------------------------------------------------------------------------------
Adopted January 11, 1995 Page 5 of 6
<PAGE> 13
trustee, employee, agent or similar functionary of another corporation,
association, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise to the maximum extent allowed by the Texas
Business Corporation Act or other applicable state law, Federal banking law
and/or regulations.
SECTION 10: AMENDMENTS TO BYLAWS
These Bylaws may be amended, altered or repealed at any meeting of the
Board by a vote of a majority of the full Board. In addition, the
Association's shareholders may repeal, alter or amend these Bylaws even though
the Bylaws also may be amended or repealed by the Board.
- --------------------------------------------------------------------------------
Adopted January 11, 1995 Page 6 of 6
<PAGE> 14
EXHIBIT 7
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
Federal Financial OMB Number: 1557-0081
Institutions Examination
Council Expires March 31, 1996
- --------------------------------------------------------------------------------
/1/
Please refer to page i,
[LOGO APPEARS HERE] Table of Contents, for
the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES -- FFIEC 031
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1995 (950630)
-----------
(RCRI 9989)
This report is required by law: 12 U.S.C. (S)324 (State member banks); 12
U.S.C. (S)1817 (State nonmember banks); and 12 U.S.C. (S)161 (National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Kenneth L. Tilton, EVP & Controller
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are
true to the best of my knowledge and belief.
/s/ Kenneth L. Tilton
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
July 28, 1995
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it
has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ Marc J. Shapiro
- --------------------------------------------------------------------------------
Director (Trustee)
/s/ Alan R. Buckwalter, III
- --------------------------------------------------------------------------------
Director (Trustee)
/s/ Robert C. Hunter
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
FDIC Certificate Number | 0 | 3 | 2 | 6 | 3 |
---------------------
(RCRI 9050)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency.
<PAGE> 15
FFIEC 031
Page 2
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI -- Income Statement...................................... RI-1, 2, 3
Schedule RI-A -- Changes in Equity Capital........................... RI-4
Schedule RI-B -- Charge-offs and Recoveries and Changes in Allowance
for Loan and Lease Losses........................................... RI-4, 5
Schedule RI-C -- Applicable Income Taxes by Taxing Authority......... RI-5
Schedule RI-D -- Income from International Operations................ RI-6
Schedule RI-E -- Explanations........................................ RI-7, 8
</TABLE>
DISCLOSURE OF ESTIMATED BURDEN
THE ESTIMATED AVERAGE BURDEN ASSOCIATED WITH THIS INFORMATION COLLECTION IS 31.6
HOURS PER RESPONDENT AND IS ESTIMATED TO VARY FROM 15 TO 225 HOURS PER RESPONSE,
DEPENDING ON INDIVIDUAL CIRCUMSTANCES. BURDEN ESTIMATES INCLUDE THE TIME FOR
REVIEWING INSTRUCTIONS, GATHERING AND MAINTAINING DATA IN THE REQUIRED FORM, AND
COMPLETING THE INFORMATION COLLECTION, BUT EXCLUDE THE TIME FOR COMPILING AND
MAINTAINING BUSINESS RECORDS IN THE NORMAL COURSE OF A RESPONDENT'S ACTIVITIES.
COMMENTS CONCERNING THE ACCURACY OF THIS BURDEN ESTIMATE AND SUGGESTIONS FOR
REDUCING THIS BURDEN SHOULD BE DIRECTED TO THE OFFICE OF INFORMATION AND
REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET, WASHINGTON, D.C. 20503, AND
TO ONE OF THE FOLLOWING:
SECRETARY
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551
LEGISLATIVE AND REGULATORY ANALYSIS DIVISION
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C. 20219
ASSISTANT EXECUTIVE SECRETARY
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
REPORT OF CONDITION
<TABLE>
<S> <C>
Schedule RC -- Balance Sheet..................................... RC-1, 2
Schedule RC-A -- Cash and Balances Due From Depository
Institutions.................................................... RC-3
Schedule RC-B -- Securities...................................... RC-3, 4, 5
Schedule RC-C -- Loans and Lease Financing Receivables:
Part I. Loans and Leases....................................... RC-6, 7
Part II. Loans to Small Businesses and Small Farms
(included in the forms for June 30 only)...................... RC-7a, 7b
Schedule RC-D -- Trading Assets and Liabilities (to be
completed only by selected banks)............................... RC-8
Schedule RC-E -- Deposit Liabilities............................. RC-9, 10, 11
Schedule RC-F -- Other Assets.................................... RC-11
Schedule RC-G -- Other Liabilities............................... RC-11
Schedule RC-H -- Selected Balance Sheet Items for Domestic
Offices......................................................... RC-12
Schedule RC-I -- Selected Assets and Liabilities of IBFs......... RC-13
Schedule RC-K -- Quarterly Averages.............................. RC-13
Schedule RC-L -- Off-Balance Sheet Items......................... RC-14, 15, 16
Schedule RC-M -- Memoranda....................................... RC-17, 18
Schedule RC-N -- Past Due and Nonaccrual Loans, Leases, and
Other Assets.................................................... RC-19, 20
Schedule RC-O -- Other Data for Deposit Insurance
Assessments..................................................... RC-21, 22
Schedule RC-R -- Risk-Based Capital.............................. RC-23, 24
Optional Narrative Statement Concerning the Amounts Reported
in the Reports of Condition and Income.......................... RC-25
</TABLE>
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J -- Repricing Opportunities (sent only to and to be completed only
by savings banks)
For information or assistance, National and State nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC(3342), Monday through Friday between 8:00
a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-1
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Consolidated Report of Income
for the period January 1, 1995-June 30, 1995
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
----------
| I480 | (-
------------ --------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ----------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate ................................................... | 4011 96,410 | 1.a.(1)(a)
(b) Loans to depository institutions ............................................... | 4019 2,141 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ............ | 4024 3,677 | 1.a.(1)(c)
(d) Commercial and industrial loans ................................................ | 4012 182,693 | 1.a.(1)(d)
(e) Acceptances of other banks ..................................................... | 4026 0 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................. | 4054 7,612 | 1.a.(1)(f)(1)
(2) Other ...................................................................... | 4055 58,128 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ......................... | 4056 7,688 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ........................................................ | 4503 86 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations ..................................................... | 4504 1,345 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ............................................ | 4058 44,838 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... | 4059 6,647 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases ..................................................................... | 4505 6,446 | 1.b.(1)
(2) Tax-exempt leases .................................................................. | 4307 0 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ................................................................ | 4105 142 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... | 4106 0 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations .... | 4027 84,476 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................. | 4506 10 | 1.d.(2)(a)
(b) Tax-exempt securities .......................................................... | 4507 10 | 1.d.(2)(b)
(3) Other domestic debt securities ..................................................... | 3657 9,712 | 1.d.(3)
(4) Foreign debt securities ............................................................ | 3658 0 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) .......................... | 3659 1,466 | 1.d.(5)
e. Interest income from trading assets .................................................... | 4069 467 | 1.e.
----------------------
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-2
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
----------------
Dollar Amounts in Thousands | Year-to-date |
- ----------------------------------------------------------------------------------- --------------
<S> <C> <C> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 70,711 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 584,705 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 15,538 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 11,999 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 49,257 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 16,646 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 71,200 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 5,954 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 17,156 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury trading | ////////////////// |
liabilities and other borrowed money ................................ | 4185 23,708 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 828 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 14,629 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 226,915 | 2.f.
---------------------------
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 357,790 | 3.
---------------------------
4. Provisions: | ////////////////// |
---------------------------
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 0 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
---------------------------
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 55,976 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 68,996 | 5.b.
c. Trading gains (losses) and fees from foreign exchange transactions .. | 4075 9,243 | 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 0 | 5.d.
e. Other gains (losses) and fees from trading assets and liabilities ... | 4077 8,249 | 5.e.
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 39,067 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 41,106 | 5.f.(2)
---------------------------
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 222,637 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 19 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 2,260 | 6.b.
---------------------------
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 197,282 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 56,882 | 7.b.
c. Other noninterest expense* .......................................... | 4092 159,127 | 7.c.
---------------------------
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 413,291 | 7.d.
---------------------------
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// |---------------------------
| ////////////////// | RIAD 4301 | 169,415 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 64,032 | 9.
---------------------------
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
(item 8 minus 9) ....................................................... | ////////////////// |---------------------------
| ////////////////// | RIAD 4300 | 105,383 | 10.
-------------------------------------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-3
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
----------------
| Year-to-date |
------ --------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- --------------------------------------------------------------------------- --------------------
<S> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |
(item 11.a minus 11.b) ............................................ | ////////////////// |---------------------------
| ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 105,383 | 12.
-------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------
| 1481 |
----------------
Memoranda | Year-to-date |
------ --------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------ --------------------
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 300 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 5,803 | M.2.
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above ........ | 4309 0 | M.3.
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Taxable equivalent adjustment to "Income (loss) before income taxes and extraordinary | ////////////////// |
items and other adjustments" (item 8 above) ..................................................... | 1244 0 | M.4.
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 8,867 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition......................... | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(included in Schedule RI, items 5.c and 5.e): | //// Bil Mil Thou |
a. Interest rate exposures....................................................................... | 8757 8,249 | M.8.a.
b. Foreign exchange exposures.................................................................... | 8758 9,243 | M.8.b.
c. Equity security and index exposures........................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures................................................................. | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.................................................... | 8761 (2,305)| M.9.a.
b. Net (increase) decrease to interest expense................................................... | 8762 (305)| M.9.b.
c. Other (noninterest) allocations............................................................... | 8763 (15,489)| M.9.c.
----------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
5
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-3
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
----------
| I483 | (-
------------ --------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------ --------------------
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1994, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,654,472 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,654,472 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 105,383 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 0 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 100,000 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 31,680 | 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 8,335 | 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 1,699,870 | 14.
----------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
----------
| I486 | (-
--------------------------------- --------
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
-------------------- --------------------
| Calendar year-to-date |
-----------------------------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------ -------------------- --------------------
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 684 | 4661 6,924 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 0 | 4665 0 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 13,805 | 4617 3,076 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 0 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,245 | 4666 179 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 4,465 | 4667 1,965 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 2 | 6.
7. All other loans .......................................................... | 4644 955 | 4628 352 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 0 | 4668 0 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 21,154 | 4605 12,498 | 9.
-------------------------------------------
</TABLE>
6
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-5
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RI-B--Continued
Part I. Continued
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
-------------------------------------------
| Calendar year-to-date |
Memoranda ------------------------------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------ -------------------- --------------------
<S> <C> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-8, part I, items 4 and 7, above............................... | 5409 4 | 5410 413 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-8, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development...................................... | 3582 97 | 3583 5,393 | M.5.a.
b. Secured by farmland.................................................... | 3584 0 | 3585 10 |
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit...................... | 5411 0 | 5412 0 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties....... | 5413 542 | 5414 816 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties.............. | 3588 6 | 3589 5 | M.5.d.
e. Secured by nonfarm nonresidential properties........................... | 3590 39 | 3591 700 | M.5.e
-------------------------------------------
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION> ----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1994, Reports of Condition and Income.......... | 3124 306,710 | 1.
2. Recoveries (must equal part I, item 9, column 8 above)......................................... | 4605 12,498 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above).................................. | 4635 21,154 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 0 | 4.
5. Adjustments* (see instructions for this schedule).............................................. | 4815 0 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b)...................................................................................... | 3123 298,054 | 6.
--------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION> ---------
| 1489 | (-
------------ --------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C> <C>
1. Federal........................................................................................ | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign........................................................................................ | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b)............. | 4770 N/A | 4.
----------------------------
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
--------------------------------------------------
</TABLE>
7
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-6
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
----------
| I492 | (-
------ --------
| Year-to-date |
------ --------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
----------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda ----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
----------------------
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
----------------
| Year-to-date |
------ --------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
--------------------
</TABLE>
8
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-7
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
<TABLE>
<CAPTION> ----------
| I495 | (-
------ --------
| Year-to-date |
------ --------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 31,809 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
------------- CHECK PRINTING INCOME
d. | TEXT 4461 | | 4461 5,945 | 1.d.
----------- ------------------------------------------------------------------------------
e. | TEXT 4462 | | 4462 | 1.e.
----------- ------------------------------------------------------------------------------
f. | TEXT 4463 | | 4463 | 1.f.
-------------------------------------------------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 30,617 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
| ////////////////// |
------------- FDIC ASSESSMENT | ////////////////// |
e. | TEXT 4464 | | 4464 16,701 | 2.e.
----------- ------------------------------------------------------------------------------
f. | TEXT 4467 | | 4467 | 2.f.
----------- ------------------------------------------------------------------------------
g. | TEXT 4468 | | 4468 | 2.g.
-------------------------------------------------------------------------------------------
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
-------------
a. (1) | TEXT 4469 | | 4469 | 3.a.(1)
---------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
------------- ----------------------------
b. (1) | TEXT 4487 | | 4487 | 3.b.(1)
---------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
------------- ----------------------------
c. (1) | TEXT 4489 | | 4489 | 3.c.(1)
---------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
----------------------------
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
-------------
a. | TEXT 4492 | | 4492 | 4.a.
----------- ------------------------------------------------------------------------------
b. | TEXT 4493 | | 4493 | 4.b.
-------------------------------------------------------------------------------------------
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
-------------
a. | TEXT 4494 | | 4494 | 5.a.
----------- ------------------------------------------------------------------------------
b. | TEXT 4495 | | 4495 | 5.b.
-------------------------------------------------------------------------------------------
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
-------------
a. | TEXT 4496 | | 4496 | 6.a.
----------- ------------------------------------------------------------------------------
b. | TEXT 4497 | | 4497 | 6.b.
-------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-8
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RI-E--Continued
<TABLE>
<CAPTION> ----------------
| Year-to-date |
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
| ////////////////// |
------------- CAPITAL INJECTION | ////////////////// |
a. | TEXT 4498 | | 4498 8,335 | 7.a.
----------- ------------------------------------------------------------------------------
b. | TEXT 4499 | | 4499 | 7.b.
-------------------------------------------------------------------------------------------
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
| ////////////////// |
------------- | ////////////////// |
a. | TEXT 4521 | | 4521 | 8.a.
----------- ------------------------------------------------------------------------------
b. | TEXT 4522 | | 4522 | 8.b.
------------------------------------------------------------------------------------------- ---------------------
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | (-
----------------------
at its option, any other significant items affecting the Report of Income):
---
No comment | | (RIAD 4769)
---
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-1
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
__________
<TABLE>
<CAPTION>
----------
| C400 | (-
------------ --------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 1,867,776 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 5,108 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 1,478,168 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 1,474,774 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 3,933,225 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 46,812 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 11,055,861 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 298,054 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
----------------------------
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 10,757,807 | 4.d.
5. Trading assets (from Schedule RC-D) ........................................................ | 3545 37,594 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 543,785 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 39,100 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 9,318 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 517,834 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 414,976 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 21,126,257 | 12.
----------------------
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-2
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
0 3 2 6 3
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION>
---------------------------
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- ----------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) ..... | RCON 2200 15,463,348 | 13.a.
----------------------------
(1) Noninterest-bearing(1) ................................ | RCON 6631 6,113,936 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 9,349,412 | /////////////////////// | 13.a.(2)
----------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 245,587 | 13.b.
----------------------------
(1) Noninterest-bearing ................................... | RCFN 6631 0 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 245,587 | /////////////////////// | 13.b.(2)
----------------------------
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 401,867 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 290,332 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 2,199,969 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 25,430 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With original maturity of one year or less ............................................ | RCFD 2332 64,197 | 16.a.
b. With original maturity of more than one year .......................................... | RCFD 2333 13,728 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 29,464 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 9,318 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 345,000 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 338,147 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 19,426,387 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 0 | 23.
24. Common stock ............................................................................. | RCFD 3230 612,893 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 1,024,675 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 38,196 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 24,106 | 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 1,699,870 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 21,126,257 | 29.
---------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that Number
best describes the most comprehensive level of auditing work performed ----------------
for the bank by independent external auditors as of any date during 1994 ........................... | RCFD 6724 N/A | M.1.
-----------------
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state
chartering authority)
- ------------
</TABLE>
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE> 26
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-3
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
----------
| C405 | (-
--------------------------------- --------
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
-------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- ----------------------------------------------------------------------------- -------------------- --------------------
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 1,621,662 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 1,304,816 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 316,846 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 27,410 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 5,008 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 22,402 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 16,373 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 4,013 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 12,385 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 207,414 | 0090 207,414 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 1,872,884 | 0010 1,872,859 | 5.
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------
Memorandum Dollar Amounts in Thousands RCOW Bil Mil Thou
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 22,302 | M.1.
----------------------
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
| C410 | (-
--------------------------------------------------------------------------- --------
| Held-to-maturity | Available-for-sale |
----------------------------------------- -----------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
-------------------- -------------------- -------------------- --------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -------------------------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 17,966 | 0213 17,948 | 1286 523,470 | 1287 520,711 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 0 | 1298 0 | 2.b.
-------------------------------------------------------------------------------------
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-4
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-B--Continued
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
| Held-to-maturity | Available-for-sale |
----------------------------------------- -----------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
-------------------- -------------------- -------------------- --------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -------------------------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and political subdivisions | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
in the U.S.: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. General obligations ........... | 1676 415 | 1677 434 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ........... | 1681 50 | 1686 50 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and similar obligations ....... | 1694 0 | 1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Pass-through securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
GNMA ...................... | 1698 0 | 1699 0 | 1701 600,752 | 1702 633,592 | 4.a.(1)
(2) Issued by FNMA | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and FHLMC ................. | 1703 681,088 | 1705 684,170 | 1706 264,723 | 1707 268,367 | 4.a.(2)
(3) Other pass-through | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities................. | 1709 0 | 1710 0 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (include CMOs, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
REMICs, and stripped | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Issued or guaranteed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
by FNMA, FHLMC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
or GNMA ................... | 1714 474,740 | 1715 466,015 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
by MBS issued or | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
guaranteed by FNMA, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
FHLMC, or GNMA............. | 1718 3,948 | 1719 3,999 | 1731 3,234 | 1732 3,227 | 4.b.(2)
(3) All other mortgage- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
backed securities.......... | 1733 0 | 1734 0 | 1735 0 | 1736 0 | 4.b.(3)
5. Other debt securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Other domestic debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities .................... | 1737 299,941 | 1738 303,110 | 1739 0 | 1741 0 | 5.a.
b. Foreign debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities .................... | 1742 0 | 1743 0 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Investments in mutual | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
funds.......................... | ////////////////// | ////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
with readily determin- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
able fair values............... | ////////////////// | ////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities(1).................. | ////////////////// | ////////////////// | 1752 48,877 | 1753 48,877 | 6.c.
7. Total (sum of items 1 | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
through 6) (total of | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
column A must equal | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Schedule RC, item 2.a) | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(total of column D must | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
item 2.b)......................... | 1754 1,478,148 | 1771 1,475,726 | 1772 1,441,056 | 1773 1,474,774 | 7.
-------------------------------------------------------------------------------------
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-5
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Memoranda -----------
| C412 | (-
----------- ---------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,503,429 | M.1.
2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in nonaccrual status):| ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 18,356 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 269,878 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 1,077,505 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 1,549,360 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 2,895,097 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 8,948 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 0 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 8,948 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 2,904,045 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2) (included in | ////////////////// |
Memorandum item 2.b.(5) above) ................................................................ | 5519 0 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer)................................................................................... | 1778 0 | M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost.............................................................................. | 8780 0 | M.8.a.
b. Fair value.................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost.............................................................................. | 8782 0 | M.9.a.
b. Fair value.................................................................................. | 8783 0 | M.9.b.
----------------------
</TABLE>
_____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
15
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-6
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
<TABLE>
<CAPTION>
Do not deduct the allowance for loan and lease losses from amounts ----------
reported in this schedule. Report total loans and leases, net of unearned | C415 | (-
--------------------------------- --------
income. Exclude assets held in trading accounts. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
-------------------- --------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- ---------------------------------------------------------------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate .......................................... | 1410 2,291,350 | ////////////////// | 1.
a. Construction and land development .................................. | ////////////////// | 1415 401,156 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ...................................................... | ////////////////// | 1420 19,637 | 1.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit .................. | ////////////////// | 1797 0 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ..................................... | ////////////////// | 5367 571,956 | 1.c.(2)(a)
(b) Secured by junior liens .................................... | ////////////////// | 5368 241,722 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties .......... | ////////////////// | 1460 142,189 | 1.d.
e. Secured by nonfarm nonresidential properties ....................... | ////////////////// | 1480 914,690 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. .................................... | ////////////////// | 1505 8,146 | 2.a.
(1) To U.S. branches and agencies of foreign banks ................. | 1506 5,682 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. .......................... | 1507 5,464 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ....................... | 1517 199 | 1517 199 | 2.b.
c. To banks in foreign countries ...................................... | ////////////////// | 1510 46,073 | 2.c.
(1) To foreign branches of other U.S. banks ........................ | 1513 0 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................ | 1516 49,329 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers ... | 1590 94,942 | 1590 94,942 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ...................................... | 1763 4,971,419 | 1763 4,911,761 | 4.a.
b. To non-U.S. addressees (domicile) .................................. | 1764 169,934 | 1764 87,789 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ...................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks ................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ........ | ////////////////// | 1975 1,642,966 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................ | 2008 113,750 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans). | 2011 1,529,216 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................ | 2081 229,242 | 2081 222,942 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) .......................................................... | 2107 45,339 | 2107 45,339 | 8.
9. Other loans ........................................................... | 1563 1,360,165 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured). | ////////////////// | 1545 220,867 | 9.a.
b. All other loans (exclude consumer loans) ........................... | ////////////////// | 1564 1,139,298 | 9.b.
10. Lease financing receivables (net of unearned income) .................. | ////////////////// | 2165 189,830 | 10.
a. Of U.S. addressees (domicile) ...................................... | 2182 150,082 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) .................................. | 2183 39,748 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ....... | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a). | 2122 11,055,861 | 2122 10,901,502 | 12.
-------------------------------------------
</TABLE>
16
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-7
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
-------------------- --------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- ----------------------------------------------------------------------------- -------------------- --------------------
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
---------------------
(1) To U.S. addressees (domicile) ................................... | 1687 0 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to | ////////////////// |
individuals for household, family, and other personal expenditures).. | 8691 219,755 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addresses (domicile) included in Memorandum item 2.b | ////////////////// |
above................................................................ | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 380,095 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 314,268 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 1,773,030 | M.3.a.(3)
(4) Over five years ................................................. | 0357 987,700 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 3,455,093 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 4,205,101 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 2,729,135 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 456,144 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 45,669 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 7,436,049 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 10,891,142 | M.3.c.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 265,490 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above)| 5369 185,025 | M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// |---------------------
residential properties (included in Schedule RC-C, part I, item | ////////////////// | RCON Bil Mil Thou |
---------------------
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 185,968 | M.6.
-------------------------------------------
</TABLE>
_____________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE> 31
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-7a
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of
Condition.
Report the number and amount currently outstanding as of June 30 of business
loans with "original amounts" of $1,000,000 or less and farm loans with
"original amounts" of $500,000 or less. The following guidelines should be used
to determine the "original amount" of a loan: (1) for loans drawn down under
lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan
commitment was most recently approved, extended, or renewed prior to the report
date. However, if the amount currently outstanding as of the report date
exceeds this size, the "original amount" is the amount currently outstanding on
the report date. (2) For loan participations and syndications, the "original
amount" of the loan participation or syndication is the entire amount of the
credit originated by the lead lender. (3) For all other loans, the "original
amount" is the total amount of the loan at origination or the amount currently
outstanding as of the report date, whichever is larger.
Loans to Small Businesses
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar
volume of your bank's "Loans secured by nonfarm nonresidential properties" in domestic
offices reported in Schedule RC-C, part I, item 1.e, column B, and all or substantially ------------
all of the dollar volume by your bank's "Commercial and industrial loans to | C418 | (-
U.S. addressees" in domestic offices reported in Schedule RC-C, part I, item 4.a, ------------ -----------
column B, have original amounts of $100,000 or less (If your bank has no loans | RCON YES NO |
outstanding in both of these two loan categories, place an "X" in the box ------------------------
marked "NO" and go to item 5; otherwise, see instructions for further information).......... | 6999 | |////| X | 1.
------------------------
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip items 2.a
and 2.b, complete items 3 and 4 below, and go to item 5.
--------------------
2. Report the total number of loans currently outstanding for each of the | Number of Loans |
following Schedule RC-C, part I, loan categories: |------------------ |
a. "Loans secured by nonfarm nonresidential properties" in domestic |RCON |//////////// |
offices reported in Schedule RC-C, part I, item 1.e, ----- |
column B............................................................ |5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic |////////////////// |
offices reported in Schedule RC-C, part I, item 4.a, column B....... |5563 N/A | 2.b.
--------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
-------------------- --------------------
Dollar Amounts in Thousands | RCON | /////////// | RCON Bil Mil Thou |
- ------------------------------------------------------------------------------ -------------------- --------------------
<S> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm | ////////////////// | ////////////////// |
nonresidential properties" in domestic offices reported in Schedule RC-C, | ////////////////// | ////////////////// |
part I, item 1.e, column B (sum of items 3.a through 3.c must be less | ////////////////// | ////////////////// |
than or equal to Schedule RC-C, part I, item 1.e, column B): | ////////////////// | ////////////////// |
a. With original amounts of $100,000 or less ............................. | 5564 1,012 | 5565 35,740 | 3.a.
b. With original amounts of more than $100,000 through $250,000 .......... | 5566 770 | 5567 80,401 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ........ | 5568 867 | 5569 263,113 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | ////////////////// | ////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | ////////////////// | ////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less than | ////////////////// | ////////////////// |
or equal to Schedule RC-C, part I, item 4.a, column B): | ////////////////// | ////////////////// |
a. With original amounts of $100,000 or less ............................. | 5570 13,107 | 5571 229,145 | 4.a.
b. With original amounts of more than $100,000 through $250,000 .......... | 5572 1,649 | 5573 155,671 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ........ | 5574 1,575 | 5575 467,997 | 4.c.
-------------------------------------------
</TABLE>
17a
<PAGE> 32
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-7b
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-C--Continued
Part II. Continued
<TABLE>
<S> <C>
Agricultural Loans to Small Farms
5. Indicate in the appropriate box at the right whether all or substantially all of the dollar
volume of your bank's "Loans secured by farmland (including farm residential and other
improvements)" in domestic offices reported in Schedule RC-C, part I, item 1.b, column B,
and all or substantially all of the bank's "Loans to finance agricultural production
and other loans to farmers" in domestic offices reported in Schedule RC-C, part I, item 3,
column B, have original amounts of $100,000 or less (If your bank has no loans outstanding YES NO
in both of these two loan catagories, place an "X" in the box marked "NO" and do not -----------------------
complete items 7 and 8; otherwise, see instructions for further information).............. | 6860 | |////| X | 5.
------- ---------------
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip items
6.a and 6.b and complete items 7 and 8 below.
</TABLE>
<TABLE>
<S> <C> <C>
---------------------
6. Report the total number of loans currently outstanding for each of the | Number of Loans |
following Schedule RC-C, part I, loan categories: |------------------ |
a. "Loans secured by farmland (including farm residential and other |RCON |//////////// |
improvements)" in domestic offices reported in Schedule RC-C, part ------ |
I, item 1.b, column B .............................................. |5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" | ///////////////// |
in domestic offices reported in Schedule RC-C, part I, item 3, | ///////////////// |
column B ........................................................... |5577 N/A | 6.b.
--------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
-------------------- --------------------
Dollar Amounts in Thousands | RCON | /////////// | RCON Bil Mil Thou |
- ------------------------------------------------------------------------------ -------------------- --------------------
<S> <C> <C>
7. Number and amount currently outstanding of "Loans secured by farmland | ////////////////// | ////////////////// |
(including farm residential and other improvements)" in domestic offices | ////////////////// | ////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | ////////////////// | ////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | ////////////////// | ////////////////// |
column B): | ////////////////// | ////////////////// |
a. With original amounts of $100,000 or less ............................. | 5578 20 | 5579 568 | 7.a.
b. With original amounts of more than $100,000 through $250,000 .......... | 5580 10 | 5581 1,077 | 7.b.
c. With original amounts of more than $250,000 through $500,000 .......... | 5582 7 | 5583 1,583 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | ////////////////// | ////////////////// |
production and other loans to farmers" in domestic offices reported in | ////////////////// | ////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | ////////////////// | ////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | ////////////////// | ////////////////// |
a. With original amounts of $100,000 or less ............................. | 5584 223 | 5585 5,042 | 8.a.
b. With original amounts of more than $100,000 through $250,000 .......... | 5586 39 | 5587 3,302 | 8.b.
c. With original amounts of more than $250,000 through $500,000 .......... | 5588 31 | 5589 6,057 | 8.c.
-------------------------------------------
</TABLE>
17b
<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-8
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION> ---------
| C420 | (-
----------------- --------
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 1,269 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 420 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 6,882 | 3.
4. Mortgage-backed securities in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS).................................................. | RCON 3535 0 | 4.c.
c. All other mortgage-backed securities...................................................... | RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 29,023 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 0 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 37,594 | 12.
---------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------
| ///////// Bil Mil Thou |
<S> <C> <C> <C>
LIABILITIES ---------------------------
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 25,430 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 25,430 | 15.
---------------------------
</TABLE>
18
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-9
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
----------
| C425 | (-
------------------------------------------------------ --------
| | Nontransaction |
| Transaction Accounts | Accounts |
----------------------------------------- --------------------
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
-------------------- -------------------- --------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
- ---------------------------------------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 6,592,648 | 2240 4,808,795 | 2346 8,308,163 | 1.
2. U.S. Government ...................................... | 2202 58,669 | 2280 58,516 | 2520 7 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 108,779 | 2290 30,512 | 2530 37,050 | 3.
4. Commercial banks in the U.S. ......................... | 2206 217,422 | 2310 217,422 | ////////////////// | 4.
a. U.S. branches and agencies of foreign banks ....... | ////////////////// | ////////////////// | 2347 0 | 4.a.
b. Other commercial banks in the U.S. ................ | ////////////////// | ////////////////// | 2348 239 | 4.b.
5. Other depository institutions in the U.S. ............ | 2207 14,019 | 2312 14,019 | 2349 0 | 5.
6. Banks in foreign countries ........................... | 2213 28,853 | 2320 28,853 | ////////////////// | 6.
a. Foreign branches of other U.S. banks .............. | ////////////////// | ////////////////// | 2367 0 | 6.a.
b. Other banks in foreign countries .................. | ////////////////// | ////////////////// | 2373 0 | 6.b.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 2,755 | 2300 2,755 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 94,983 | 2330 94,983 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 7,118,128 | 2210 5,255,855 | 2385 8,345,220 | 9.
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ........................ | 6835 887,324 | M.1.a.
b. Total brokered deposits .................................................................... | 2365 0 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 .......................................... | 2343 0 | M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ....................... | 2344 0 | M.1.c.(2)
d. Total deposits denominated in foreign currencies ........................................... | 3776 1,006 | M.1.d.
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) .. | 5590 122,094 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) .................................................. | 6810 1,835,510 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................ | 0352 2,797,897 | M.2.a.(2)
b. Total time deposits of less than $100,000 .................................................. | 6648 2,872,978 | M.2.b.
c. Time certificates of deposit of $100,000 or more ........................................... | 6645 815,233 | M.2.c.
d. Open-account time deposits of $100,000 or more ............................................. | 6646 23,602 | M.2.d.
3. All NOW accounts (included in column A above) ................................................. | 2398 1,862,273 | M.3.
----------------------
</TABLE>
19
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-10
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
| Deposit Totals for FDIC Insurance Assessments ______________________ |
| Dollar Amounts in Thousands | RCON Bil Mil Thou | |
-------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
| 4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C) |/////////////////// | |
| (must equal Schedule RC, item 13.a) ......................................................... | 2200 15,463,348 | M.4. |
| | ////////////////// | |
| a. Total demand deposits (must equal item 9, column B) ...................................... | 2210 5,255,855 | M.4.a.|
| b. Total time and savings deposits(1) (must equal item 9, column A plus item 9, column C | ////////////////// | |
| minus item 9, column B) .................................................................. | 2350 10,207,493 | M.4.b.|
| ---------------------- |
| ____________
|
| (1) For FDIC insurance assessment purposes, "total time and savings deposits"
| consists of nontransaction accounts and all transaction accounts other
| than demand deposits.
|
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more | ////////////////// |
(included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing | ////////////////// |
frequency of:(1) | ////////////////// |
a. Three months or less ....................................................................... | 0359 143,110 | M.5.a.
b. Over three months through 12 months (but not over 12 months) ............................... | 3644 1,552,887 | M.5.b.
6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1) | ////////////////// |
a. Fixed rate time certificates of deposit of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 2761 460,073 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | 2762 250,239 | M.6.a.(2)
(3) Over one year through five years ....................................................... | 2763 89,858 | M.6.a.(3)
(4) Over five years ........................................................................ | 2765 0 | M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of | ////////////////// |
Memorandum items 6.a.(1) through 6.a.(4)) .............................................. | 2767 800,170 | M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing frequency of:| ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4568 15,063 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4569 0 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4571 0 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | 4572 0 | M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum of | ////////////////// |
Memorandum items 6.b.(1) through 6.b.(4)) .............................................. | 4573 15,063 | M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items 6.a.(5) | ////////////////// |
and 6.b.(5)) (must equal Memorandum item 2.c. above) ....................................... | 6645 815,233 | M.6.c.
----------------------
</TABLE>
_____________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-11
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
<TABLE>
<CAPTION>
------------------------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 245,587 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs) ... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 245,587 | 7.
----------------------
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
----------
| C430 | (-
----------------- --------
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 81,050 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 51,750 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 0 | 3.
4. Other (itemize amounts that exceed 25% of this item) ......................................... | RCFD 2168 282,176 | 4.
------------- Net Swap Interest Receivable ___________________________
a. | TEXT 3549 | | RCFD 3549 | 91,578 | /////////////////////// | 4.a.
----------- ----------------------------------------------------
b. | TEXT 3550 | | RCFD 3550 | | /////////////////////// | 4.b.
----------- ----------------------------------------------------
c. | TEXT 3551 | | RCFD 3551 | | /////////////////////// | 4.c.
-----------------------------------------------------------------
---------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 414,976 | 5.
---------------------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum ---------------------------
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
---------------------------
</TABLE>
Schedule RC-G--Other Liabilities
__________
<TABLE>
<CAPTION>
----------
| C435 | (-
----------------- --------
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 26,255 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 266,046 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 765 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize amounts that exceed 25% of this item) ......................................... | RCFD 2938 45,081 | 4.
------------- Trading Security Purchase Fails ----------------------------
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
----------- 31,606
b. | TEXT 3553 | | RCFD 3553 | | /////////////////////// | 4.b.
----------- ----------------------------------------------------
c. | TEXT 3554 | | RCFD 3554 | | /////////////////////// | 4.c.
-----------------------------------------------------------------
---------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 338,147 | 5.
---------------------------
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income
taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-12
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
| C440 | (-
------------ --------
| Domestic Offices |
--------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................. | 2155 9,318 | 1.
2. Bank's liability on acceptances executed and outstanding ...................................... | 2920 9,318 | 2.
3. Federal funds sold and securities purchased under agreements to resell ........................ | 1350 3,980,037 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase .................... | 2800 692,199 | 4.
5. Other borrowed money .......................................................................... | 3190 77,925 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2941 93,104 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) | 2192 20,970,950 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and | ////////////////// |
IBFs) | 3129 19,177,976 | 9.
----------------------
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ----------------------
| RCON Bil Mil Thou |
--------------------
10. U.S. Treasury securities ..................................................................... | 1779 538,677 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................. | 1785 0 | 11.
12. Securities issued by states and political subdivisions in the U.S. ........................... | 1786 465 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA .......................................... | 1787 1,583,047 | 13.a.(1)
(2) Other pass-through securities ......................................................... | 1869 0 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA .......................................... | 1877 474,740 | 13.b.(1)
(2) All other mortgage-backed securities .................................................. | 2253 7,175 | 13.b.(2)
14. Other domestic debt securities ............................................................... | 3159 299,941 | 14.
15. Foreign debt securities ...................................................................... | 3160 0 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ............................................................... | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values ............................. | 3162 0 | 16.b.
c. All other equity securities ............................................................... | 3169 48,877 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) ........ | 3170 2,952,922 | 17.
----------------------
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------- --------------------
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank ............................ | 3051 N/A | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank .............................. | 3059 N/A | M.2.
----------------------
</TABLE>
22
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-13
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
----------
| C445 | (-
------------ --------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) .................. | 2133 N/A | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ...................................................................................... | 2076 N/A | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) ..... | 2077 N/A | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ...................................... | 2898 N/A | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ........................................................................ | 2379 N/A | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ...... | 2381 N/A | 6.
</TABLE>
Schedule RC-K--Quarterly Averages (1)
__________
<TABLE>
<CAPTION>
----------
| C455 | (-
----------------- --------
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- ----------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C>
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions ............................... | RCFD 3381 5,035 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ....... | RCFD 3382 2,511,107 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... | RCFD 3383 465 | 3.
4. a. Other debt securities(2) .............................................................. | RCFD 3647 323,564 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . | RCFD 3648 48,877 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic offices | /////////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs ...................... | RCFD 3365 2,315,917 | 5.
6. Loans: | /////////////////////// |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ....................................................................... | RCON 3360 10,301,397 | 6.a.(1)
(2) Loans secured by real estate ...................................................... | RCON 3385 2,294,209 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... | RCON 3386 97,921 | 6.a.(3)
(4) Commercial and industrial loans ................................................... | RCON 3387 4,971,082 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... | RCON 3388 1,626,597 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. | RCFN 3360 166,526 | 6.b.
7. Trading assets ........................................................................... | RCFD 3401 38,830 | 7.
8. Lease financing receivables (net of unearned income) ..................................... | RCFD 3484 191,720 | 8.
9. Total assets(4) .......................................................................... | RCFD 3368 19,012,796 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............. | RCON 3485 1,880,354 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................. | RCON 3486 1,441,645 | 11.a.
b. Other savings deposits ................................................................ | RCON 3487 2,807,850 | 11.b.
c. Time certificates of deposit of $100,000 or more ...................................... | RCON 3345 795,723 | 11.c.
d. All other time deposits ............................................................... | RCON 3469 2,897,631 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. | RCFN 3404 202,585 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs .............. | RCFD 3353 577,025 | 13.
14. Other borrowed money ..................................................................... | RCFD 3355 34,764 | 14.
---------------------------
</TABLE>
_____________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-14
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
<TABLE>
<CAPTION>
----------
| C460 | (-
------------ --------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 0 | 1.a.
b. Credit card lines .......................................................................... | 3815 0 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 431,117 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 245,417 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 6,804,942 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 974,638 | 2.
---------------------------
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 95,653 | ////////////////// | 2.a.
---------------------------
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 77,514 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
---------------------------
others .......................................................... | RCFD 3822 | 2,747 | ////////////////// | 3.a.
---------------------------
4. Commercial and similar letters of credit ...................................................... | 3411 232,405 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 0 | 6.
7. Securities borrowed ........................................................................... | 3432 4,376 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 8,407 | 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold | ////////////////// |
for Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 0 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 0 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 0 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 0 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 191,435 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 190,440 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 781,065 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
------------- ---------------------------
a. | TEXT 3555 | | RCFD 3555 | | ////////////////// | 12.a.
----------- ----------------------------------------------------
b. | TEXT 3556 | | RCFD 3556 | | ////////////////// | 12.b.
----------- ----------------------------------------------------
c. | TEXT 3557 | | RCFD 3557 | | ////////////////// | 12.c.
-----------------------------------------------------------------
d. | TEXT 3558 | | RCFD 3558 | | ////////////////// | 12.d.
----------- ----------------------------------------------------
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 5591 0 | 13.
------------- ---------------------------
a. | TEXT 5592 | | RCFD 5592 | | ////////////////// | 13.a.
----------- ----------------------------------------------------
b. | TEXT 5593 | | RCFD 5593 | | ////////////////// | 13.b.
----------- ----------------------------------------------------
c. | TEXT 5594 | | RCFD 5594 | | ////////////////// | 13.c.
-----------------------------------------------------------------
d. | TEXT 5595 | | RCFD 5595 | | ////////////////// | 13.d.
----------- ----------------------------------------------------
</TABLE>
24
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-15
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
-------------
| C461 |
----------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | days and still |
- ----------------------------------| Contracts | Contracts | | accruing |
Off-balance Sheet Derivatives ----------------------------------------------------------------------------------------
Position Indicators | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14. Gross amounts (e.g., |
notional amounts) (for each | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
column, sum of items 14.a | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
through 14.e must equal | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
sum of items 15, 16.a, | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
and 16.b): | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
a. Futures contracts..........| 3,476,383 | 0 | 0 | 0 | 14.a
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
b. Foward contracts...........| 0 | 337,771 | 0 | 0 | 14.b
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
c. Exchange-traded option | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
contracts: | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
(1) Written options........| 0 | 0 | 0 | 0 | 14.c.(1)
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
(2) Purchased options......| 0 | 0 | 0 | 0 | 14.c.(2)
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
d. Over-the-counter option | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
contracts: | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
(1) Written options........| 345,693 | 7,000 | 0 | 0 | 14.d.(1)
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
(2) Purchased options......| 2,245,693 | 7,000 | 0 | 0 | 14.d.(2)
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
e. Swaps......................| 5,422,455 | 0 | 0 | 20,750 | 14.e.
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
15. Total gross notional amount | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
of derivatives contracts | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
held for trading..............| 2,502,909 | 351,771 | 0 | 20,750 | 15.
| RCFD A126 | RCFD A127 | RCFD 8723 | RCFD 8724 |
16. Total gross notional amount | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
of derivative contracts | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
held for purposes other | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
than trading: | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
a. Contracts marked | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
to market .................| 3,425,000 | 0 | 0 | 0 | 16.a.
| RCFD 8725 | RCFD 8726 | RCFD 8727 | RCFD 8728 |
b. Contracts not marked | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
to market .................| 5,562,315 | 0 | 0 | 0 | 16.b.
| RCFD 8729 | RCFD 8730 | RCFD 8731 | RCFD 8732 |
----------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/94 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-16
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
-------------
| C461 |
----------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and |
__________________________________| Contracts | Contracts | Contracts | Other Contracts |
Off-balance Sheet Derivatives ________________________________________________________________________________________
Position Indicators | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
17. Gross fair values of | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
derivative contracts: | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
a. Contracts held for | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
trading: | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
(1) Gross positive | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
fair value.............| 8733 31,847 | 8734 3,433 | 8735 0 | 8736 2,221 | 17.a.(1)
(2) Gross negative | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
fair value.............| 8737 27,983 | 8738 2,994 | 8739 0 | 8740 1,824 | 17.a.(2)
b. Contracts held for | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
purposes other than | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
trading that are marked | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
to market: | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
(1) Gross positive | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
fair value.............| 8741 0 | 8742 0 | 8743 0 | 8744 0 | 17.b.(1)
(2) Gross negative | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
fair value.............| 8745 0 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
purposes other than | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
trading that are not | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
marked to market: | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
(1) Gross positive | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
fair value.............| 8749 102,803 | 8750 0 | 8751 0 | 8752 0 | 17.c.(1)
(2) Gross negative | //////////////////// | ////////////////// | ////////////////// | /////////////////// |
fair value.............| 8753 68 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------- --------------------
<S> <C>
1-2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ............................................... | 3833 4,993,673 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
---------------------------
exceeding one year conveyed to others ........................... | RCFD 3834 | 9,946 | ////////////////// | M.3.a.
---------------------------
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above ............. | 3377 40,500 | M.4.
5. To be completed for the September report only: | ////////////////// |
Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts | ////////////////// |
outstanding by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles ............................................ | 2741 N/A | M.5.a.
b. Credit cards and related plans ............................................................. | 2742 N/A | M.5.b.
c. All other consumer installment credit (including mobile home loans) ........................ | 2743 N/A | M.5.c.
----------------------
</TABLE>
26
<PAGE> 42
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-17
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
----------
| C465 | (-
------------ --------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders, and their related interests .................................................... | 6164 17,413 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
---------------------------
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 3 | ////////////////// | 1.b.
---------------------------
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) ................... | 3405 1,500 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ..................................................... | 5500 0 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ....................................................... | 5501 0 | 4.b.(1)
(2) Serviced without recourse to servicer .................................................... | 5502 0 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract ................................................. | 5503 0 | 4.c.(1)
(2) Serviced under a special option contract ................................................. | 5504 0 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ........................................... | 5505 0 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) ................................................................... | 2103 6,694 | 5.a.
b. Non-U.S. addressees (domicile) ............................................................... | 2104 2,624 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights .................................................................... | 3164 2,745 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ...................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets ................................................. | 5507 131,307 | 6.b.(2)
c. Goodwill ..................................................................................... | 3163 382,782 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ....................... | 2143 517,834 | 6.d.
e. Intangible assets that have been grandfathered for regulatory capital purposes ............... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to redeem | ////////////////// |
the debt ........................................................................................ | 3295 0 | 7.
----------------------
</TABLE>
_____________
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-18
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-M--Continued
<TABLE>
<CAPTION>
---------------------------
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- -------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ........................ | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ...................... | RCON 5508 6,499 | 8.a.(2)(a)
(b) Farmland in domestic offices ............................................... | RCON 5509 268 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ...................... | RCON 5510 890 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices ......... | RCON 5511 0 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ...................... | RCON 5512 31,443 | 8.a.(2)(e)
(f) In foreign offices ......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ...... | RCFD 2150 39,100 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ........................ | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies .. | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ...... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ............... | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" .............................. | RCFD 3778 0 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds ................................................................. | RCON 6441 6,165,803 | 10.a.
b. Equity securities funds ............................................................ | RCON 8427 5,067 | 10.b.
c. Debt securities funds .............................................................. | RCON 8428 740 | 10.c.
d. Other mutual funds ................................................................. | RCON 8429 67,624 | 10.d.
e. Annuities .......................................................................... | RCON 8430 0 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e above) ........................................................................ | RCFD 8784 4,226,900 | 10.f.
---------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
| |
| ---------------------- |
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
|------------------------------------------------------------------------------------------------- -------------------- |
| <S> <C> <C> |
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
| ---------------------- |
| |
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 44
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-19
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
<TABLE>
<CAPTION>
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4, ----------
column A, as confidential. | C470 | (-
------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
------------------------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | //////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 13,026 | 1247 92,864 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | //////////////////// | ////////////////// | ////////////////// |
acceptances of other banks: | //////////////////// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | //////////////////// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 10 | 2.b.
3. Loans to finance agricultural production and | //////////////////// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1596 | 1597 53 | 1583 6,848 | 3.
4. Commercial and industrial loans: | //////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 13,726 | 1253 62,968 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 40 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | //////////////////// | ////////////////// | ////////////////// |
other personal expenditures: | //////////////////// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 207 | 5385 0 | 5.a.
b. Other (includes single payment, installment, | //////////////////// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 13,980 | 5388 349 | 5.b.
6. Loans to foreign governments and official | //////////////////// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 4,650 | 5461 1,538 | 7.
8. Lease financing receivables: | //////////////////// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 0 | 1259 142 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | //////////////////// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 0 | 9.
------------------------------------------------------------------
</TABLE>
================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
-----------------------------------------------------------------
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
<S> <C> <C> <C> |
10. Loans and leases reported in items 1 |---------------------------------------------------------------|
through 8 above which are wholly or partially | /////////////////// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 19,016 | 5614 63,083 | 10.
a. Guaranteed portion of loans and leases | /////////////////// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 16,341 | 5617 58,683 | 10.a.
-----------------------------------------------------------------
</TABLE>
29
<PAGE> 45
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-20
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-N--Continued
<TABLE>
<CAPTION>
----------
| C473 | (-
------------------------------------------------------ ---------
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
-------------------- --------------------- ---------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ------------------------------------------------------ -------------------- -------------------- ---------------------
<S> <C> <C> <C> |
1. Restructured loans and leases included in | ////////////////// | ////////////////// | ////////////////// |
Schedule RC-N, items 1 through 8, above | ////////////////// | ////////////////// | ////////////////// |
(and not reported in Schedule RC-C, part I, | ////////////////// | ////////////////// | ////////////////// |
Memorandum item 2)............................... | 1658 | 1659 | 1661 6 | M.1.
2. Loans to finance commercial real estate, | ////////////////// | ////////////////// | ////////////////// |
construction, and land development activities | ////////////////// | ////////////////// | ////////////////// |
(not secured by real estate) included in | ////////////////// | ////////////////// | ////////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 15 | 6560 484 | M.2.
-------------------- -------------------- --------------------
3. Loans secured by real estate in domestic offices | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
-------------------- -------------------- --------------------
(included in Schedule RC-N, item 1, above): | ////////////////// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 1,968 | 3492 34,534 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 0 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ////////////////// | ////////////////// | ////////////////// |
1-4 family residential properties and | ////////////////// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 0 | 5400 0 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ////////////////// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 4,508 | 5403 7,580 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ////////////////// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 220 | 3501 482 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 6,330 | 3504 50,268 | M.3.e.
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
|-------------------- --------------------|
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|-------------------- --------------------|
<S> <C> <C> |
4. Interest rate, foreign exchange rate, and other | ////////////////// | ////////////////// |
commodity and equity contracts: | ////////////////// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ////////////////// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
-------------------------------------------
</TABLE>
30
<PAGE> 46
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-21
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-O--Other Data for Deposit Insurance Assessments
__________
<TABLE>
<CAPTION>
----------
| C475 | (-
---------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 N/A | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 0 | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 0 | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 N/A | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 0 | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 0 | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 25,415 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 2,529 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 16 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 0 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
----------------------
----------------------
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, | ////////////////// |
Memorandum item 4.a) ...................................................................... | 2314 80 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
Memorandum item 4.b) ...................................................................... | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 6,701 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
----------------------
- -------------------------------------------------------------------------------------------------------------------------------
| |
|8. To be completed by banks with "Oakar deposits." |
| ---------------------- |
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 N/A | 8. |
| ---------------------- |
| |
- -------------------------------------------------------------------------------------------------------------------------------
----------------------
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
----------------------
</TABLE>
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
31
<PAGE> 47
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-22
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-O--Continued
<TABLE>
<CAPTION>
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for certain | ////////////////// |
reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E ........................ | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E .......................................................................... | A182 50,764 | 11.c.
----------------------
</TABLE>
Memoranda (to be completed each quarter except as noted)
<TABLE>
<CAPTION>
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1) | ////////////////// |
must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposit accounts of $100,000 or less: | ////////////////// |
(1) Amount of deposit accounts of $100,000 or less ........................................ | 2702 8,920,773 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
---------------------------
completed for the June report only) ........................ | RCON 3779 | 1,286,323 | ////////////////// | M.1.a.(2)
---------------------------
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ........... Number | 2710 6,542,575 | M.1.b.(1)
---------------------------
(2) Number of deposit accounts of more than $100,000 ........... | RCON 2722 | 15,715 | ////////////////// | M.1.b.(2)
-------------------------------------------------
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the number of
deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2) above by
$100,000 and subtracting the result from the amount of deposit accounts of more than
$100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or procedure for
RCON YES NO
----------------------
determining a better estimate of uninsured deposits than the estimate described above ..... | 6861| |///| X | M.2.a.
--------------------
X
b. If the box marked YES has been checked, report the estimate of uninsured deposits | RCON Bil Mil Thou |
--------------------
determined by using your bank's method or procedure ....................................... | 5597 N/A | M.2.b.
----------------------
- ------------------------------------------------------------------------------------------------------------------------------
| C477 | (-
Person to whom questions about the Reports of Condition and Income should be directed: ----------
Karen Gatenby, Vice President (713) 216-5263
- ----------------------------------------------------------------------------- -------------------------------------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
</TABLE>
32
<PAGE> 48
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-23
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-R--Risk-Based Capital
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1994,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<S> <C> <C>
------------
| C480 | (-
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed -----------------
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent ---------------------------
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
-----------------------------
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete item 2 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
| and Intermediate | Limited- |
Item 2 is to be completed by all banks. | Term Preferred | Life Capital |
| Stock | Instruments |
-------------------- --------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------ -------------------- --------------------
<S> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | ////////////////// | ////////////////// |
weighted average maturity of at least five years) with a remaining | ////////////////// | ////////////////// |
maturity of: | ////////////////// | ////////////////// |
a. One year or less ...................................................... | 3780 0 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 0 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 0 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 7,000 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 7,000 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 331,000 | 3791 0 | 2.f.
-------------------------------------------
3. Not applicable
-------------------------------------------
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
-------------------- --------------------
4. Assets and credit equivalent amounts of off-balance sheet items assigned | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
-------------------- --------------------
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 1,496,369 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 671,730 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 29,828 | 4.b.
-------------------------------------------
</TABLE>
______________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE> 49
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-24
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Schedule RC-R--Continued
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
|-------------------- --------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------ -------------------- --------------------
<S> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ........................| 3798 693,457 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit .................................................| 3799 40,177 | ////////////////// | 5.a.(2)
(3) All other ..........................................................| 3800 6,864,542 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 270,997 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 567,513 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 35,238 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 10,963,751 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 3,380,503 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 126,772 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 21,424,311 | ////////////////// | 9.
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum
----------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------ -------------------- --------------------
<S> <C>
1. Current credit exposure across all off-balance sheet derivative contracts covered by the | ////////////////// |
risk-basked capital standards ................................................................. | 8764 117,610 |M.1
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
| With a remaining maturity of |
-----------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| One year or less | Over one year | Over five years |
2. Notional principal amounts of | | through five years | |
off-balance sheet derivative -----------------------------------------------------------------------------
contracts(3): | RCFD Tril Bil Mil Thou | RCFD Tril Bil Mil Thou | RCFD Tril Bil Mil Thou |
-----------------------------------------------------------------------------
<S> <C> <C> <C> |
a. Interest rate contracts ........... | 3809 1,805,920 | 8766 5,128,480 | 8767 733,748 | M.2.a.
b. Foreign exchange contracts ........ | 3812 343,796 | 8769 975 | 8770 0 | M.2.b.
c. Gold contracts .................... | 8771 0 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ... | 8774 0 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ......... | 8777 0 | 8778 20,750 | 8779 0 | M.2.e.
f. Equity derivative contracts ....... | A000 0 | A001 0 | A002 0 | M.2.f.
-----------------------------------------------------------------------------
</TABLE>
- --------------------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes
on-balance sheet asset values (or portions thereof) of off-balance sheet
interest rate, foreign exchange rate, and commodity contracts and those
contracts (e.g., futures contracts) not subject to risk-based capital.
Exclude from item 8 margin accounts and accrued receivables as well as any
portion of the allowance for loan and lease losses in excess of the amount
that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
34
<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-25
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1995
<TABLE>
<CAPTION>
Texas Commerce Bank National Association Houston Texas
_______________________________________________________________ __________________________________, ___________________________
Legal Title of Bank City State
<S> <C> <C>
The management of the reporting bank may, if it wishes, sub- the truncated statement will appear as the bank's statement
mit a brief narrative statement on the amounts reported in both on agency computerized records and in computer-file
the Reports of Condition and Income. This optional statement releases to the public.
will be made available to the public, along with the publicly
available data in the Reports of Condition and Income, in re- All information furnished by the bank in the narrative state-
sponse to any request for individual bank report data. How- ment must be accurate and not misleading. Appropriate ef-
ever, the information reported in column A and in all of forts shall be taken by the submitting bank to ensure the
Memorandum item 1 of Schedule RC-N is regarded as confidential statement's accuracy. The statement must be signed, in the
and will not be released to the public. BANKS CHOOSING TO space provided below, by a senior officer of the bank who
SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE thereby attests to its accuracy.
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER
IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES If, subsequent to the original submission, material changes
TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN are submitted for the data reported in the Reports of Condi-
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE tion and Income, the existing narrative statement will be
NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD deleted from the files, and from disclosure; the bank, at its
COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing option, may replace it with a statement, under signature, ap-
not to make a statement may check the "No comment" box below propriate to the amended data.
and should make no entries of any kind in the space provided
for the narrative statement; i.e., DO NOT enter in this space The optional narrative statement will appear in agency
such phrases as "No statement," "Not applicable," "N/A," records and in release to the public exactly as submitted (or
"No comment," and "None." amended as described in the preceding paragraph) by the
management of the bank (except for the truncation of state-
ments exceeding the 750-character limit described above).
THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY
The optional statement must be entered on this sheet. The WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR
statement should not exceed 100 words. Further, regardless RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT
of the number of words, the statement must not exceed 750 SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS
characters, including punctuation, indentation, and standard VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION
spacing between words and sentences. If any submission CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL
should exceed 750 characters, as defined, it will be truncated APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL STATEMENT
at 750 characters with no notice to the submitting bank and SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK.
- ---------------------------------------------------------------------------------------------------------------------------------
No comment | | (RCON 6979) | C471 | C472 |(-
--- -------------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
Signature of Kenneth L. Tilton appears here July 27, 1995
--------------------------------------------- --------------------------------
Signature of Executive Officer of Bank Date of Signature
</TABLE>
35
<PAGE> 51
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/95 ST-BK: 48-3926
Address: P.O. Box 2558
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
-----------
</TABLE>
<TABLE>
<S> <C> <C> <<C>
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- ----------------------------------------------------------------------------------------------------------------------------------
CALL NO. 192 31 06-30-95 | OMB No. For OCC: 1557-0081
CERT: 03263 00373 STBK 48-3926 | OMB No. For FDIC: 3064-0052
TEXAS COMMERCE BANK NATIONAL ASSOCIATION | OMB No. For Federal Reserve: 7100-0036
712 MAIN STREET | Expiration Date: 3/31/96
HOUSTON, TX 77001 |
| SPECIAL REPORT
| (Dollar Amounts in Thousands)
|
------------------------------------------------------------------
| CLOSE OF BUSINESS | FDIC Certificate Number | |
| DATE | | C-700 | (-
| 6/30/9 5 | |0|3|2|6|3| | |
- ----------------------------------------------------------------------------------------------------------------------------------
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- ----------------------------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of
Condition. With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of
credit to their executive officers made since the date of the previous Report of Condition. Data regarding individual loans or
other extensions of credit are not required. If no such loans or other extensions of credit were made during the period, insert
"none" against subitem (a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.)
See Sections 215.2 and 215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation O) for the
definitions of "executive officer" and "extension of credit," respectively. Exclude loans and other extensions of credit to
directors and principal shareholders who are not executive officers.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
----------------------------
a. Number of loans made to executive officers since the previous Call Report date .............. | RCFD 3561 | 0 a.
----------------------------
b. Total dollar amount of above loans (in thousands of dollars) ................................ | RCFD 3562 | 0 b.
-----------------------------
c. Range of interest charged on above loans -------------------------------------------------------
(example: 9 3/4% = 9.75) .......................................... | RCFD 7701 | 0.00 | % to | RCFD 7702 | 0.00 | % c.
-------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT | DATE (Month, Day, Year)
|
|
Signature of Kenneth L. Tilton appears here |
EVP & Controller | July 27, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) | AREA CODE/PHONE NUMBER/EXTENSION
| (TEXT 8904)
Karen Gatenby, Vice President | (713) 216-5263
|
- ----------------------------------------------------------------------------------------------------------------------------------
FDIC 8040/53 (6-95)
</TABLE>
36
