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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1995
REGISTRATION NO. 33-63457
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COOPER INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
OHIO 31-4156620
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
</TABLE>
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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)
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Copies to:
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<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>
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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. / /
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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
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.
SUBJECT TO COMPLETION
DATED DECEMBER 12, 1995
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<S> <C>
PROSPECTUS [COOPER LOGO]
15,000,000 DECSSM
(DEBT EXCHANGEABLE FOR COMMON STOCKSM)
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 , 1996. 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. If the Maturity Price is less than the Initial
Price, the amount receivable at maturity will be less than the price paid for
the DECS, in which case an investment in the DECS will result in a loss equal to
the decline in the market value of the Wyman-Gordon Common Stock. If the
Maturity Price is greater than the Initial Price but less than $ per share,
Cooper will retain all of the appreciation in the market value of the Wyman-
Gordon Common Stock, and if the Maturity Price is greater than $ per share,
holders of the DECS will realize % of the appreciation above $ per share.
Cooper may only exercise its option to pay outstanding DECS in cash from the
proceeds of its sale of common stock of Cooper. The DECS will be an unsecured
obligation of Cooper ranking pari passu with all of its other unsecured and
unsubordinated indebtedness. As of September 30, 1995, Cooper had no
indebtedness by its terms ranking senior to the DECS, $151.8 million of
indebtedness effectively ranking senior to the DECS because it is secured or
issued by consolidated subsidiaries, $1,233.4 million of indebtedness ranking
pari passu with the DECS, and $690.5 million of indebtedness subordinated to the
DECS. 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." The DECS have been approved for
listing on the New York Stock Exchange ("NYSE") under the symbol "CXW."
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.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COOPER(1)(2)
<S> <C> <C> <C>
Per DECS.............................. $ $ $
Total (3)............................. $ $ $
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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 $775,000.
(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.
<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 THE NYSE, 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.
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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; (vii)
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 dated August
14, 1995; and Quarterly Report on Form 10-Q for the quarter ended September 30,
1995 dated November 13, 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.
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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 and, if Wyman-Gordon is insolvent or bankrupt,
could result in a total loss. Holders of DECS, therefore, bear the full risk of
a decline in the value of the Wyman-Gordon Common Stock prior to Maturity.
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 of $ . 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. For example, if the Maturity Price is $ , the
DECS holders will receive $ at maturity. 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 November 22, 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
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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.
IMPACT OF THE DECS ON THE MARKET FOR THE WYMAN-GORDON 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 Wyman-Gordon Common Stock. For example, the price of the Wyman-Gordon 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 Wyman-Gordon Common Stock at the maturity of the DECS, by
possible sales of Wyman-Gordon Common Stock by investors who view the DECS as a
more attractive means of equity participation in Wyman-Gordon and by hedging or
arbitrage trading activity that may develop involving the DECS and the
Wyman-Gordon Common Stock.
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, among others, a merger or consolidation in which Wyman-Gordon is
not the surviving or resulting corporation, a sale or other transfer of all or
substantially all of the assets of Wyman-Gordon and the liquidation,
dissolution, winding up or bankruptcy of Wyman-Gordon as well as 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 have been approved for listing on the NYSE under the symbol "CXW."
However, there can be no assurance that the DECS will not later be delisted or
that trading in the DECS on the NYSE will not be suspended. In the event of
delisting or suspension of trading on such market, Cooper will apply for
quotation on another trading market or for listing of the DECS on another
national securities exchange. If the DECS are not listed or traded on any
securities exchange or trading market, or if trading of the DECS
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is suspended, 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."
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
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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."
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.
7
<PAGE> 9
In connection with the Stock Purchase Agreement, Cooper and Wyman-Gordon
entered into the Investment Agreement, dated as of January 10, 1994, as amended
by Amendment dated as of May 26, 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).
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.
8
<PAGE> 10
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 November 28, 1995)................................ 15 1/8 12 1/4
</TABLE>
As of November , 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 November , 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.
9
<PAGE> 11
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 nine-month periods
ended September 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 nine-month periods ended September 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>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------
1995(1)(2) 1994(1) 1994(1) 1993(1) 1992(1) 1991 1990
---------- ---------- -------- ---------- ---------- -------- --------
(IN MILLIONS WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues.................................... $3,597.7 $3,348.1 $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................................ 207.4 207.3 292.8 299.0 239.6 231.2 265.3
Income from discontinued operations
net of taxes.............................. -- 0.3 0.3 68.1 121.7 162.0 96.1
Charge for discontinued operations.......... (186.6) (313.0) (313.0) -- -- -- --
Cumulative effect on prior years of changes
in accounting principles.................. -- -- -- -- (590.0) -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......................... $ 20.8 $ (105.4) $ (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.............................. $ 1.83 $ 1.47 $ 2.10 $ 2.15 $ 1.64 $ 1.60 $ 1.94
Income (loss) from discontinued
operations.............................. (1.65) (2.74) (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)......................... $ .18 $ (1.27) $ (0.64) $ 2.75 $ (2.48) $ 3.04 $ 2.81
======== ======== ======== ======== ======== ======== ========
Fully diluted --
Income from continuing operations before
cumulative effect of changes in
accounting
principles.............................. $ 1.76 $ 1.47 $ 2.10 $ 2.15 $ 1.64 $ 1.60 $ 1.94
======== ======== ======== ======== ======== ======== ========
Net income (loss)......................... $ .18 $ (1.27) $ (0.64) $ 2.75 $ (2.48) $ 3.01 $ 2.81
======== ======== ======== ======== ======== ======== ========
Cash dividends.............................. $ 0.99 $ 0.99 $ 1.32 $ 1.32 $ 1.24 $ 1.16 $ 1.08
Book value.................................. 15.40 16.71 17.50 19.76 18.63 22.93 21.23
Balance Sheet Data (at the end of period):
Total assets................................ $5,776.1 $6,064.4 $6,400.7 $6,361.7 $6,551.4 $5,951.1 $6,019.1
Long-term debt.............................. 1,882.0 1,254.6 1,361.9 883.4 1,369.8 1,033.3 1,238.5
Stockholders' Equity........................ 1,660.4 2,694.1 2,741.1 3,009.6 2,862.6 3,319.0 3,042.0
Other Data (unaudited):
Ratio of earnings to fixed charges(3)....... 3.8x 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) 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.
10
<PAGE> 12
DESCRIPTION OF THE DECS
The DECS are a series of debt securities ("Debt Securities"), to be issued
under an Indenture dated as of , 1995 between Cooper and Texas
Commerce Bank National Association, as trustee (the "Trustee"), 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"). 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. As of September 30, 1995,
Cooper had no indebtedness senior to the DECS, $151.8 million of indebtedness
effectively ranking senior to the DECS because it is secured or issued by
consolidated subsidiaries, $1,233.4 million of indebtedness ranking pari passu
with the DECS, and $690.5 million of indebtedness subordinated to the DECS. 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 or (c) if the
Maturity Price is less than or equal to the Initial Price, one share of
Wyman-Gordon Common Stock per DECS. Accordingly, the value of the Wyman-Gordon
Common Stock to be received by holders of the DECS (or as discussed below, the
cash equivalent to be received in lieu of such shares) at Maturity will not
necessarily equal the principal amount of such DECS. For example, if the
Maturity Price of the Wyman-Gordon Common Stock is less than the Initial Price,
the 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
11
<PAGE> 13
loss and, if Wyman-Gordon is insolvent or bankrupt, could result in a total
loss. 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 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. Although it is Cooper's current intention to deliver
Wyman-Gordon Common Stock at Maturity, Cooper intends to consider all relevant
economic and market factors in determining whether to deliver cash or shares of
Wyman-Gordon Common Stock at Maturity. Such factors will include, among others,
Cooper's liquidity and prevailing tax rates at Maturity. Cooper does not believe
that any one of such factors is more important in its consideration.
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.
The Indenture contains a covenant by Cooper to the effect that should
Cooper exercise its option to pay all outstanding DECS in cash, such cash must
be provided by the proceeds from a sale by Cooper of its common stock. Such sale
of common stock by Cooper must have occurred not more than 540 days prior to the
notice by Cooper to holders of DECS of its election to deliver cash in lieu of
Wyman-Gordon Common Stock.
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
12
<PAGE> 14
number of shares of Wyman-Gordon Common Stock or amount of cash (if Cooper
elects to pay the DECS in cash):
<TABLE>
<CAPTION>
NUMBER OF
MATURITY PRICE SHARES
OF WYMAN-GORDON OF WYMAN-GORDON
COMMON STOCK COMMON STOCK AMOUNT OF CASH
- --------------- --------------- --------------
<S> <C> <C>
</TABLE>
As the foregoing chart illustrates, if at Maturity, the Maturity Price is
greater than or equal to $ , Cooper is obligated to deliver .
shares of Wyman-Gordon Common Stock per DECS, resulting in Cooper receiving %
of the appreciation in market value above $ and the DECS holder
receiving % of the appreciation in market value above $ . If at
Maturity, the Maturity Price is greater than $ and less than
$ , Cooper is obligated to deliver only that fraction of a share of
Wyman-Gordon Common Stock equal to $ , resulting in Cooper retaining
all appreciation in the market value of the Wyman-Gordon Common Stock from
$ to $ . If at Maturity, the Maturity Price is less than
or equal to $ , Cooper is obligated to deliver one share of
Wyman-Gordon Common Stock per DECS, regardless of the market price of such
share, resulting in the DECS holder realizing the entire loss on the decline in
market value of the Wyman-Gordon Common Stock.
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 interest
may be made at the option of Cooper by check mailed or, in the case of a holder
of an aggregate of at least DECS, by wire transfer 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 office of the Trustee, located at 55 Water
Street, North Building, Room 234, Windows 20 and 21, New York, New York.
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
13
<PAGE> 15
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 (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
14
<PAGE> 16
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, winding up or bankruptcy 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 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.
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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 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.
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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 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
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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 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
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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 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.
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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 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
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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.
LISTING
The DECS have been approved for listing on the NYSE under the symbol "CXW."
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. Cooper
has not, however, received an opinion of counsel with respect to the specific
tax consequences of owning or disposing of the DECS in light of the
uncertainties described below.
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 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
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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 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"
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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 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.
23
<PAGE> 25
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.
In connection with the offering of the DECS, Cooper or an affiliate
thereof, referred to herein as the "Lender," and Salomon intend to enter into a
Securities Loan Agreement (the "Securities Loan Agreement") which provides that,
subject to certain restrictions and with the agreement of the Lender, Salomon
may from time to time borrow, return and reborrow shares of Wyman-Gordon Common
Stock from the Lender (the "Borrowed Securities"); provided, however, that the
number of Borrowed Securities at any time may not exceed 750,000 shares in the
twelve-month period beginning December , 1995; 1,000,000 shares in the
twelve-month period beginning December , 1996; and 1,250,000 in the
twelve-month period beginning December , 1997, subject to adjustment to
provide anti-dilution protection. The Securities Loan Agreement contains
limitations on the amount of Borrowed Securities which Salomon can borrow on any
day and from time to time and requires Salomon to return Borrowed Securities
within a specified period of time from the date of borrowing and prior to any
record date. The Securities Loan Agreement is intended to facilitate
market-making activity in the DECS by Salomon. Salomon may from time to time
offer shares of Wyman-Gordon Common Stock borrowed from the Lender under the
Securities Loan Agreement directly to one or more purchasers at negotiated
prices, at market prices prevailing at the time of sale or at prices related to
such market prices, in connection with such market-making activities. The
availability of shares of Wyman-Gordon Common Stock under the Securities Loan
Agreement, if any, at any time is not assured and any such availability does not
assure market-making activity with respect to the DECS and any market-making
actually engaged in by Salomon may
24
<PAGE> 26
cease at any time. The foregoing description of the Securities Loan Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Agreement, a copy of which is filed as an exhibit to the Registration
Statement of which the Prospectus is a part.
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.
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 September 30, 1995, 1,027,600 shares of Wyman-Gordon Common Stock
(representing 2.9% of the issued and outstanding shares of Wyman-Gordon Common
Stock) were owned by accounts over which an affiliate of Schroder Wertheim & Co.
Incorporated exercises discretionary authority.
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.
25
<PAGE> 27
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.
26
<PAGE> 28
***************************************************************************
* *
* 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,
Dated December 12, 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.
In connection with market-making activities in the DECS, Salomon Brothers Inc.
("Salomon") may, subject to certain limitations, from time to time borrow,
return and reborrow up to 1,250,000 shares of Common Stock from Cooper. Salomon
is not under any obligation to engage in any market-making transactions with
respect to the DECS, and any market-making in the DECS actually engaged in by
Salomon may cease at any time. In addition, 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> 29
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 Annual Report on Form 10-K/A 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> 30
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> 31
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 2,
1994 1994 1995 1995 1995
------------ ----------- -------- -------- ------------
(000'S, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C>
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
designed 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> 32
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 relatively 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. No assurances can be given that
such strategic initiatives will be successful in producing long-term
profitability. See "Risk Factors -- History of Recent Losses."
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> 33
<TABLE>
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 based on the Company's
audited and unaudited financial statements. The following tables should be read
in conjunction with the Consolidated Financial Statements, related notes and
other financial information included elsewhere in this Prospectus.
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
---------------------------- ------------------------------------------
SEPTEMBER 2, SEPTEMBER 3, JUNE 3, MAY 28, DECEMBER 31,
1995 1994 1995 1994 (1) 1993 (2)
------------- ------------ ------------ ------------ ------------
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
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. EBITDA is presented
because it may be used as one indicator of a company's ability to service
debt. The Company believes that EBITDA, while providing useful information,
should not be considered in isolation or as a substitute for net income as
an indicator of operating performance or as an alternative to cash flow as a
measure of liquidity, in each case determined in accordance with generally
accepted accounting principles.
</TABLE>
6
<PAGE> 34
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> 35
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 prices 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. During the past year the Company
has experienced a doubling of the delivery times for its principal raw
materials, nickel-based alloys and titanium alloys. Due to these and other
factors, significant increases in the prices or scarcity of supply 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.
8
<PAGE> 36
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
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. Pursuant to the
Rights Agreement the Company has issued Rights (as defined herein) which provide
that under certain circumstances each holder of a Right will have the right to
receive a number of shares of common stock of an Acquiring Person (as defined
herein) having a market value of two times the Exercise Price (as defined
herein) of the Right. 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. See "Description of the Company's Capital Stock --
Rights Agreement." 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
9
<PAGE> 37
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 creates certain obstacles
to a takeover of the Company. See "Restrictions on Voting Control" below.
RESTRICTIONS ON VOTING CONTROL
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,
includes provisions (i) requiring Cooper to vote its shares of Common Stock as
recommended by the Company's Board of Directors or at Cooper's option in the
same proportion to votes of the other shareholders, (ii) restricting Cooper's
ability to sell or encumber its shares of Common Stock, and (iii) preventing
Cooper from joining in any proxy contest, making any proposal with respect to
the acquisition of any securities or assets of the Company, initiating or
soliciting proxies for the approval of any shareholder proposals, and tendering
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." Such "standstill" agreements give the Company's Board of Directors
effective voting control over 47% of the Company's outstanding shares of Common
Stock which could make it substantially more difficult for owners of shares of
Common Stock to affect the outcome of shareholder votes.
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.
<TABLE>
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.
<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 November 28, 1995)............................. 15 1/8 12 1/4
</TABLE>
On November , 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.
10
<PAGE> 38
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,
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> 39
<TABLE>
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."
<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> 40
<TABLE>
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.
<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)
------------ ------------ -------- -------- ------------ ------------ ------------ -------------
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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> 41
[FN]
- ---------------
(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. The presentation of
EBITDA is presented because it may be used as one indicator of a company's
ability to service debt. The Company believes that EBITDA, while providing
useful information, should not be considered in isolation or as a
substitute for net income as an indicator of operating performance or as an
alternative to cash flow as a measure of liquidity, in each case determined
in accordance with generally accepted accounting principles.
14
<PAGE> 42
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.
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<PAGE> 43
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
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<PAGE> 44
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.
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<PAGE> 45
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.
The increase in the Company's working capital of $10.9 million to $103.9
million as of September 2, 1995 from $93.1 million as of June 3, 1995 resulted
primarily from net income of $5.1 million, an increase in income taxes and other
of $2.8 million, net reductions of fixed assets of $4.3 million and net proceeds
from the issuance of Common Stock of $0.6 million, offset by a net increase in
other assets of $0.6 million and a decrease in long-term restructuring,
integration, disposal and environmental of $0.8 million.
Earnings before interest, taxes, depreciation, amortization and changes in
accounting principles ("EBITDA") was $30.2 million in fiscal year 1995. EBITDA
increased $8.2 million to $11.8 million in the first quarter of fiscal year 1996
from $3.6 million in the first quarter of fiscal year 1995. This improvement
reflects primarily the $8.4 million improvement in the Company's net income in
the first quarter of fiscal year 1996 as compared to the first quarter of fiscal
year 1995.
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. The
projects undertaken for the integration of Cameron into the Company include (i)
consolidating the manufacture of rotating parts for jet engines from the
Company's Grafton, Massachusetts facility into Cameron's Houston facility, while
the Grafton facility has been focused on the production of large airframe
structures and large turbine parts, (ii) closing of one of the two Cameron
forging plants in Houston, (iii) closing the Company's ring-roll and hammer
forging operations at its Worcester, Massachusetts facility and (iv) adopting
the best manufacturing practices of the Company and Cameron. As a result of such
projects, the Company has eliminated duplicative facilities, improved
manufacturing efficiencies, improved inventory management and realized cost
reductions. 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.
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<PAGE> 46
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 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. WGRC is a separate corporate entity from the Company
and its other subsidiaries with its own separate creditors. WGRC purchases
accounts receivable from the Company and certain other selling subsidiaries
("Sellers") and using those receivables as collateral borrows from the lending
banks. WGRC's creditors have a claim on its assets prior to those assets
becoming available to any creditors of any of the Sellers. Borrowings are
subject to a formula which is dependent upon certain reserves relating to the
accounts receivable purchased by WGRC and bear interest at fluctuating rates
tied to Eurodollar rates or the lending banks' prime rates. 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
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<PAGE> 47
$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.
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
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<PAGE> 48
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.
The Company for several years maintained a program of company-owned life
insurance ("COLI") for certain of its employees. As of September 2, 1995 the
Company is named as beneficiary on approximately 1,650 COLI 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.
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<PAGE> 49
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. At the time of the Acquisition in May 1994
Cameron and the Company's Forgings operations employed a combined total of 2,030
people. As of October 31, 1995 this number had been reduced by 9.4% to 1,840.
The Company estimates that this reduction in personnel and the Company's ability
to increase production with fewer employees as evidenced by the increase in
revenues per employee has resulted in improved operating results. See
"Prospectus Summary" on page 4. Areas where the Company has combined
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<PAGE> 50
operations include sales and marketing, testing, research and development and
management information systems.
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 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 hammer forging operations and is in the
process of closing its ring-roll 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.
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<PAGE> 51
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 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 relatively low commercial aircraft deliveries and to
benefit from increases in delivery rates. However, the Company's results of
operations could be adversely affected by a variety of factors. See "Risk
Factors". 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
------------------- ----------------------------------------------------------------------------------
SEPTEMBER 2, 1995 DECEMBER 31, DECEMBER 31,
------------------- JUNE 3, 1995 MAY 28, 1994 1993 1992
---------------- ---------------- ---------------- ----------------
% OF % OF % OF % OF % OF
REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL
--------- ------- -------- ----- -------- ----- -------- ----- -------- -----
(000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
24
<PAGE> 52
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.
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.
25
<PAGE> 53
CUSTOMERS
<TABLE>
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:
<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
------- ------- -------- ------- ------- ------- ------- ------- ------- -------
(000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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. Because of the relatively small number of customers for some of the
Company's principal products, those customers exercise significant influence
over the Company's prices and other terms of trade.
The Company has 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, engineering, 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.
26
<PAGE> 54
<TABLE>
The Company's firm backlog in the various markets served by the Company has
been as follows:
<CAPTION>
SEPTEMBER 2, 1995 JUNE 3, 1995 MAY 28, 1994
------------------- ------------------- -------------------
% OF % OF % OF
BACKLOG TOTAL BACKLOG TOTAL BACKLOG TOTAL
--------- ----- --------- ----- --------- -----
(000'S OMITTED, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
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 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.
27
<PAGE> 55
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.
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.
28
<PAGE> 56
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 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.
29
<PAGE> 57
FACILITIES
<TABLE>
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.
<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
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.
30
<PAGE> 58
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. The Company's most significant raw materials consist of nickel
and titanium alloys. Its principal suppliers of nickel alloys include Special
Metals Corporation, Teledyne Allvac Corporation, and Carpenter Technologies
Corporation. Its principal suppliers of titanium alloys are Titanium Metals
Corporation of America, Oregon Metallurgical Corp., and Refractory Metals, Inc.
Each of these suppliers has experienced increases in the market prices of the
elements (e.g. nickel, titanium, cobalt), that they use in fabricating their
products. The Company often has fixed-price contracts with its suppliers.
Because the Company's suppliers generally have alternative markets for their
products where they may have greater ability to increase their prices,
production has in some cases been diverted to alternative markets. As a result
the Company's lead time for deliveries from its suppliers has expanded from 20
weeks to 40 weeks in the case of titanium alloys and from 22 weeks to 44 weeks
in the case of nickel-based alloys. The Company has sought price increases and
other financial considerations from its customers which would permit it to
increase the price it pays to suppliers; and is considering producing a greater
amount of its requirements in its own facilities, including the Australian Joint
Venture; and has sought alternative sources of supply such as from the Republics
formerly comprising the Soviet Union. In addition, the Company, its customers
and suppliers have undertaken active programs for supply chain management which
should reduce the overall lead times.
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.
<TABLE>
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:
<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
31
<PAGE> 59
with the union representing most of its factory workforce in Houston, Texas. The
strike involved approximately 505 union personnel. Because of the short nature
of the strike and the fact that the Company was able to continue to operate the
plant with non-union personnel, the strike did not have a significant impact on
the Company's operations.
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 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
32
<PAGE> 60
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. As a result 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 if the NRC requires
it to take these actions. However, 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 $6.0 and $7.0 million in cleanup
expenses upon the planned sale of its Worcester, Massachusetts facility to
remedy certain contamination discovered on-site.
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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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...................... 54 President, Chief Executive Officer and Director
Andrew C. Genor...................... 53 Vice President, Chief Financial Officer and
Treasurer
Sanjay N. Shah....................... 45 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...................... 58 Director
Warner S. Fletcher................... 50 Director
Robert G. Foster..................... 57 Director
Russell E. Fuller.................... 69 Director
M Howard Jacobson.................... 62 Director
Judith S. King....................... 61 Director
George S. Mumford, Jr. .............. 67 Director
H. John Riley, Jr. .................. 55 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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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. Mr. Whelan is a Director of SIFCO Industries, Inc.
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 Pharmaceuticals, 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> 63
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 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 market price of the
Common Stock on the Closing Date was $6.25 per share.
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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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 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 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 Common Stock continuously from
and after May 26, 1995, unless such group acquires beneficial ownership of
additional shares of 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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<PAGE> 69
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
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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<PAGE> 70
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 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 registration rights, Cooper and the Company
will indemnify each other against certain liabilities, including certain
liabilities under the Securities Act.
The description of the Stock Purchase Agreement and the Investment
Agreement is a summary of the material terms thereof. Copies of the Stock
Purchase Agreement and the Investment Agreement have been filed as exhibits to
the Registration Statement of which this Prospectus is a part.
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 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
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<PAGE> 71
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 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
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<PAGE> 72
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
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.
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<PAGE> 73
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 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
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<PAGE> 74
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.
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<PAGE> 75
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.
<TABLE>
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:
<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
Common Stock or any securities convertible into or exchangeable for, or warrants
to acquire 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.
In connection with the DECS Offering, Cooper or an affiliate thereof,
referred to herein as the "Lender", and Salomon Brothers Inc ("Salomon") intend
to enter into a Securities Loan Agreement (the "Securities Loan Agreement")
which provides that, subject to certain restrictions and with the agreement of
the Lender, Salomon may from time to time borrow, return and reborrow shares of
Common Stock from the Lender (the "Borrowed Securities"); provided, however,
that the number of Borrowed Securities at any time may not exceed 750,000 shares
in the twelve-month period beginning December , 1995; 1,000,000 shares in the
twelve-month period beginning December , 1996; and
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<PAGE> 76
1,250,000 in the twelve-month period beginning December , 1997, subject to
adjustment to provide antidilution protection. The Securities Loan Agreement
contains limitations on the amount of Borrowed Securities that Salomon can
borrow on any day and from time to time and requires Salomon to return Borrowed
Securities within a specified period of time from the date of borrowing and
prior to any record date. The Securities Loan Agreement is intended to
facilitate market-making activity in the DECs by Salomon. Salomon may from time
to time offer shares of Common Stock borrowed from the Lender under the
Securities Loan Agreement directly to one or more purchasers at negotiated
prices, at market prices prevailing at the time of sale or at prices related to
such market prices, in connection with such market making activities. The
availability of shares of Common Stock under the Securities Loan Agreement, if
any, at any time is not assured and any such availability does not assure
market-making activity with respect to the DECs and any market-making actually
engaged in by Salomon may cease at any time. The foregoing description of the
Securities Loan Agreement does not purport to be complete and is qualified in
its entirety by reference to the Agreement, a copy of which is filed as an
exhibit to the Registration Statement of which the Prospectus is a part.
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 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 September 30, 1995, 1,027,600 shares of Common Stock (representing
2.9% of the issued and outstanding shares of Common Stock) were owned by
accounts over which an affiliate of Schroder Wertheim & Co. Incorporated
exercises discretionary authority.
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
49
<PAGE> 77
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
November 22, 1995, Mr. Whitney was the beneficial owner of 3,145 shares of
Common Stock of the Company and held options to purchase 103,000 shares of
Common Stock. The Underwriters have been represented by Cravath, Swaine & Moore.
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.
50
<PAGE> 78
<TABLE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<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>
51
<PAGE> 79
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> 80
<TABLE>
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<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, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
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> 81
<TABLE>
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<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> 82
<TABLE>
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<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> 83
<TABLE>
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<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> 84
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> 85
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 %
---------- --- ----------- --- -------- --- -------- ---
($000'S OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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. On a periodic basis, the company estimates
the future undiscounted cash flows of the businesses to which the costs of
acquired businesses in excess of net assets acquired relate in order to ensure
that the carrying value of such intangible asset has not been impaired.
F-7
<PAGE> 86
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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:
<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
----------- ------------
(000'S OMITTED,
EXCEPT PER-SHARE DATA)
<S> <C> <C>
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> 87
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
--------- ---------
(000'S OMITTED)
<S> <C> <C>
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> 88
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
D. INVENTORIES
Inventories consisted of the following:
<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> 89
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> 90
<TABLE>
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.
<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> 91
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> 92
<TABLE>
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:
<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> 93
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 and established a
$3,500,000 purchase accounting reserve related to environmental issues at
Cameron. 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. As of June 3, 1995, aggregate environmental reserves
amounted to $16,967,000 and have been provided for expected cleanup expenses
estimated between $6,000,000 and $7,000,000 upon the planned sale of a facility,
certain environmental issues at Cameron amounting to approximately $3,500,000
and the exposures noted in the following paragraphs, which include certain
capitalizable amounts for environmental management and remediation projects.
Pursuant to an agreement entered into with the U.S. Air Force upon the
acquisition of 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> 94
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
FIVE MONTHS DECEMBER 31,
YEAR ENDED ENDED ---------------------
JUNE 3, 1995 MAY 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> 95
<TABLE>
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:
<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> 96
<TABLE>
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<CAPTION>
MAY 28, 1994
-----------------------------------------
ASSETS ACCUMULATED
EXCEEDING BENEFITS
ACCUMULATED EXCEEDING
BENEFITS ASSETS TOTAL
----------- ----------- ---------
(000'S OMITTED)
<S> <C> <C> <C>
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.
<TABLE>
U.K. PENSION PLAN
Pension expense for the U.K. pension plan included the following:
<CAPTION>
YEAR ENDED
JUNE 3, 1995
---------------
(000'S OMITTED)
<S> <C>
Service cost.............................................. $ 692
Interest cost............................................. 1,189
Expected return on assets................................. (1,084)
-------
Net pension expense..................................... $ 797
=======
</TABLE>
F-18
<PAGE> 97
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
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:
<CAPTION>
JUNE 3, 1995
---------------
(000'S OMITTED)
<S> <C>
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> 98
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.
<TABLE>
Net periodic benefit expense consists of the following components:
<CAPTION>
FIVE MONTHS
YEAR ENDED ENDED YEAR ENDED
JUNE 3, MAY 28, DECEMBER 31,
1995 1994 1993
---------- ----------- ------------
(000'S OMITTED)
<S> <C> <C> <C>
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>
<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:
<CAPTION>
JUNE 3, MAY 28,
1995 1994
-------- --------
(000'S OMITTED)
<S> <C> <C>
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> 99
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
The benefit (provision) for income taxes is at a rate other than the
federal statutory tax rate for the following reasons:
<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>
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.
<TABLE>
The principal components of deferred tax assets and liabilities were as
follows:
<CAPTION>
JUNE 3, 1995 MAY 28, 1994
------------ ------------
(000'S OMITTED)
<S> <C> <C>
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> 100
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> 101
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
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:
<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> 102
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 enters into various foreign exchange contracts to manage its
foreign exchange risks. Through its foreign currency hedging activities, the
company seeks to minimize the risk that the eventual cash flows resulting from
purchase and sale transactions denominated in other than the functional currency
of the operating unit will be affected by changes in exchange rates. Foreign
currency transaction exposures generally are the responsibility of the company's
individual operating units to manage as an integral part of their business. The
company hedges its foreign currency transaction exposures based on judgment,
generally through the use of forward exchange contracts. Gains and losses on the
company's foreign currency transaction hedges are recognized as an adjustment to
the underlying hedged transactions. Deferred gains and losses on foreign
exchange contracts were not significant at June 3, 1995. The company had foreign
exchange contracts totalling $11,600,000 at June 3, 1995. Such contracts include
forward contracts of $9,100,000 for the sale of U.K. pounds and $2,500,000 for
the purchase of U.K. pounds. 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.
F-24
<PAGE> 103
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
<TABLE>
Certain information on a geographic basis follows:
<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> 104
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
Selected quarterly financial data for fiscal 1995 and fiscal 1994 were as
follows:
<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)
<FN>
- ---------------
(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.
</TABLE>
F-26
<PAGE> 105
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............................. 22
Management........................... 34
Relationship between the Company and
Cooper............................. 36
Description of the Company's Capital
Stock.............................. 43
Common Stock Ownership of Cooper..... 48
Plan of Distribution................. 48
Legal Matters........................ 50
Experts.............................. 50
Index to Consolidated Financial
Statements......................... 51
</TABLE>
15,000,000 SHARES
WYMAN-GORDON COMPANY
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
[LOGO]
PROSPECTUS
DATED , 1995
<PAGE> 106
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............ 9
Use of Proceeds........................ 9
Selected Financial Data................ 10
Description of the DECS................ 11
Certain United States Federal Income
Tax Considerations................... 21
Plan of Distribution................... 24
ERISA Matters.......................... 25
Legal Matters.......................... 26
Experts................................ 26
Prospectus Relating to Common Stock of
Wyman-Gordon Company............Appendix A
</TABLE>
15,000,000 DECSSM
(DEBT EXCHANGEABLE FOR
COMMON STOCKSM)
COOPER INDUSTRIES, INC.
% EXCHANGEABLE NOTES
DUE , 1998
LOGO
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
SCHRODER WERTHEIM & CO.
PROSPECTUS
DATED 1995
<PAGE> 107
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, the National Association of Securities Dealers, Inc. Fee and
the NYSE Listing Fee).
<TABLE>
<S> <C>
Commission Registration Fee...................................... $ 71,121
National Association of Securities Dealers, Inc. Fee............. $ 9,375
NYSE Listing Fee................................................. $ 44,025
Printing and Engraving........................................... $105,000
Legal Fees and Expenses.......................................... $305,000
Accounting Fees and Expenses..................................... $ 17,500
Trustee Fees..................................................... $ 6,500
Rating Agency Fees............................................... $210,000
Blue Sky Fees and Expenses....................................... $ 2,000
Miscellaneous.................................................... $ 4,479
--------
Total.................................................. $775,000
========
</TABLE>
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.
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.
</TABLE>
II-1
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
-------- -------
<S> <C> <C>
12.1 -- Calculation of Ratios of Earnings to Fixed Charges (incorporated by
reference to Cooper's Form 10-Q for the quarter ended September 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.**
25.1 -- Statement of Eligibility and Qualification on Form T-1 of Texas
Commerce Bank National Association.**
99.1 -- Stock Purchase Agreement, dated as of January 10, 1994, between Cooper
Industries, Inc. and Wyman-Gordon Company.**
99.2 -- Investment Agreement, dated as of January 10, 1994, between Cooper
Industries, Inc. and Wyman-Gordon Company (incorporated by reference
to Schedule 13D of Cooper Industries, Inc. with respect to its
ownership of Wyman-Gordon Company Common Stock, dated June 1, 1994).**
99.3 -- Amendment, dated May 26, 1994, to Investment Agreement dated as of
January 10, 1994, between Cooper Industries, Inc. and Wyman-Gordon
Company.**
99.4 -- Form of PSA Master Securities Loan Agreement.**
</TABLE>
- ---------------
** Previously filed.
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.
II-2
<PAGE> 109
(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-3
<PAGE> 110
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 December 11, 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.
<TABLE>
<S> <C> <C>
/s/ ROBERT CIZIK Director and Chairman December 11, 1995
- --------------------------------------------- of the Board
Robert Cizik
/s/ H. JOHN RILEY, Jr. Director, President and December 11, 1995
- --------------------------------------------- Chief Executive Officer
H. John Riley, Jr.
/s/ D. BRADLEY MCWILLIAMS Senior Vice President, December 11, 1995
- --------------------------------------------- Finance (Chief Financial
D. Bradley McWilliams Officer)
/s/ TERRY A. KLEBE Vice President and December 11, 1995
- --------------------------------------------- Controller (Chief
Terry A. Klebe Accounting Officer)
Director December 11, 1995
- ---------------------------------------------
Warren L. Batts
* Director December 11, 1995
- ---------------------------------------------
Clifford J. Grum
* Director December 11, 1995
- ---------------------------------------------
Linda A. Hill
Director December 11, 1995
- ---------------------------------------------
Harold S. Hook
Director December 11, 1995
- ---------------------------------------------
Constantine S. Nicandros
* Director December 11, 1995
- ---------------------------------------------
Frank A. Olson
</TABLE>
II-4
<PAGE> 111
<TABLE>
<S> <C> <C>
* Director December 11, 1995
- ---------------------------------------------
John D. Ong
* Director December 11, 1995
- ---------------------------------------------
Sir Ralph H. Robins
- --------------------------------------------- Director December 11, 1995
A. Thomas Young
Karen E. Herbert by signing her name hereto,
does hereby execute the Registration
Statement on behalf of the directors and
officers of the Registrant indicated above by
asterisks, pursuant to powers of attorney
duly executed by such directors and officers
and filed as exhibits to the Registration
Statement.
*By /s/ KAREN E. HERBERT December 11, 1995
- ---------------------------------------------
Karen E. Herbert
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 112
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<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 September 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.**
25.1 -- Statement of Eligibility and Qualification on Form T-1 of Texas
Commerce Bank National Association.**
99.1 -- Stock Purchase Agreement, dated as of January 10, 1994, between Cooper
Industries, Inc. and Wyman-Gordon Company.**
99.2 -- Investment Agreement, dated as of January 10, 1994, between Cooper
Industries, Inc. and Wyman-Gordon Company (incorporated by reference
to Schedule 13D of Cooper Industries, Inc. with respect to its
ownership of Wyman-Gordon Company Common Stock, dated June 1, 1994).**
99.3 -- Amendment, dated May 26, 1994, to Investment Agreement dated as of
January 10, 1994, between Cooper Industries, Inc. and Wyman-Gordon
Company.**
99.4 -- Form of PSA Master Securities Loan Agreement.**
</TABLE>
- ---------------
** Previously filed.
<PAGE> 1
EXHIBIT 1.1
COOPER INDUSTRIES, INC.
15,000,000 DECS(SM) (DEBT EXCHANGEABLE FOR COMMON STOCK(SM))
% Exchangeable Notes Due , 1998
(Subject to Exchange into Shares of Common Stock,
Par Value $1.00 Per Share, of Wyman-Gordon Company)
UNDERWRITING AGREEMENT
New York, New York
December , 1995
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
SCHRODER WERTHEIM & CO. INCORPORATED
As Representatives for each of the several
Underwriters named in Schedule 1 hereto
c/o SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Cooper Industries, Inc., an Ohio corporation ("Cooper"),
proposes to sell to the Underwriters named in Schedule 1 hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, an aggregate amount of 15,000,000 DECS (Debt Exchangeable for
Common Stock) consisting of its % Exchangeable Notes Due
, 1998 (referred to herein as the "Firm DECS"), which are registered
under the registration statement referred to in Section 2 of this Agreement.
The DECS are to be issued under an indenture dated as of December , 1995, as
supplemented by a First Supplemental Indenture dated as of December , 1995
between Cooper and Texas Commerce Bank National Association, as trustee (the
"Trustee") (as supplemented from time to time, the "Indenture"). In addition,
the Underwriters will have an option to purchase from Cooper up to an
additional 1,500,000 DECS on the terms and for the purposes set forth in
Section 3 of this Agreement (the "Option DECS"). The Firm DECS and the Option
DECS, if purchased, are hereinafter collectively referred to as the "DECS".
In connection with the foregoing and pursuant to the
Investment Agreement dated as of January 10, 1994,
<PAGE> 2
2
between Cooper and Wyman-Gordon Company (the "Investment Agreement"),
Wyman-Gordon Company, a Massachusetts corporation ("WGC"), has filed with the
Securities and Exchange Commission (the "Commission") a registration statement
with respect to 16,500,000 shares of the common stock of WGC, par value $1.00
per share (the "WGC Common Stock"), for sale by Cooper as a selling stockholder
(to the extent it shall so elect to deliver WGC Common Stock to holders of the
DECS at maturity thereof pursuant to the terms of the DECS), which registration
statement is referred to in Section 1 of this Agreement.
1. Representations, Warranties and Agreements of Wyman-Gordon
Company. WGC makes the following representations, warranties and agreements
for the benefit of the Underwriters and Cooper:
(a) WGC meets the requirements for the use of Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"). A
registration statement on Form S-3, including a preliminary
prospectus, relating to the WGC Common Stock has (i) been prepared by
WGC in conformity with the requirements of the Securities Act and the
rules and regulations (the "Rules and Regulations") of the Commission
thereunder and (ii) been filed with the Commission and become
effective under the Securities Act. Such registration statement and
prospectus may have been amended or supplemented from time to time
prior to the date of this Agreement; any such amendment to the
registration statement was so prepared and filed and any such
amendment has become effective. Copies of such registration statement
and prospectus, any such amendment or supplement and all documents
incorporated by reference therein which were filed with the Commission
on or prior to the date of this Agreement (including a complete
conformed copy of the registration statement and of each amendment
thereto for counsel for the Underwriters) have been delivered by WGC
to the Representatives and to Cooper and its counsel. Such
registration statement and prospectus, as amended or supplemented,
together with any registration statement filed pursuant to Rule 462(b)
of the Rules and Regulations relating to the offering covered by the
initial WGC registration statement (file number 33-63459) (a "Rule
462(b) WGC Registration Statement") are herein referred to as the "WGC
Registration Statement" and the "WGC Prospectus". As used in this
Agreement, "Effective Time" with respect
<PAGE> 3
3
to the WGC Registration Statement means each date and time as of which
the WGC Registration Statement, the most recent post-effective
amendment thereto, if any, and any Rule 462(b) WGC Registration
Statement was declared effective by the Commission; "Effective Date"
with respect to the WGC Registration Statement means the date of the
Effective Time; "Preliminary WGC Prospectus" means such prospectus
included in the WGC Registration Statement, or amendments thereof,
before it became effective under the Securities Act and any prospectus
filed with the Commission by WGC with the consent of the
Representatives pursuant to Rule 424(a) of the Rules and Regulations;
"WGC Registration Statement" means such registration statement, as
amended at the Effective Time, including all information contained in
the final prospectus filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations in accordance with Section 6(a) of this
Agreement and deemed to be a part of such registration statement as of
the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules
and Regulations and including any Rule 462(b) WGC Registration
Statement; and "WGC Prospectus" means such final prospectus, as first
filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations and attached as Appendix A to the
CBE Prospectus (as hereinafter defined). Any reference herein to the
WGC Registration Statement, any Preliminary WGC Prospectus or the WGC
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed with the Commission on or prior to the date of this
Agreement and any reference to the terms "amend", "amendment" or
"supplement" with respect to the WGC Registration Statement, any
Preliminary WGC Prospectus or the WGC Prospectus shall be deemed to
refer to and include the filing of any document with the Commission
deemed to be incorporated by reference therein after the date of this
Agreement. WGC has not been advised that or obtained knowledge that
the Commission has issued any order preventing or suspending the use
of any Preliminary WGC Prospectus.
(b) The WGC Registration Statement conforms, and the WGC
Prospectus and any further amendments or supplements thereto will,
when they become effective or are filed with the Commission, as the
case may be, conform in all material respects to the requirements of
the Securities Act and the Rules and Regulations and do
<PAGE> 4
4
not and will not, as of the applicable Effective Date (as to the WGC
Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the WGC Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that
no representation or warranty is made as to (i) information contained
in or omitted from the WGC Registration Statement or the WGC
Prospectus in reliance upon and in conformity with written information
furnished to WGC through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein and (ii) information
contained in or omitted from the WGC Prospectus in reliance upon and
in conformity with the information furnished to WGC by Cooper in
writing specifically for inclusion therein.
(c) The documents incorporated by reference in the WGC
Registration Statement or the WGC Prospectus, when they were filed
with the Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), conformed, and any documents so filed
and incorporated by reference after the date of this Agreement and on
or before the First Delivery Date (as hereinafter defined) will, when
they are filed with the Commission, conform, in all material respects
to the requirements of the Securities Act and the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder.
(d) WGC and each of Wyman-Gordon Forgings, Inc., a Delaware
corporation, Wyman-Gordon Limited, an English corporation;
Wyman-Gordon Investment Castings, Inc., a Delaware corporation;
Precision Founders, Inc., a California corporation; Wyman-Gordon
Composite Technologies, Inc., a California corporation; and Scaled
Composites, Inc., a California corporation (each a "WGC Subsidiary"
and collectively the "WGC Subsidiaries") have been duly incorporated
and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification and in which the failure to so qualify
would or could reasonably be
<PAGE> 5
5
expected to have a material adverse effect on the business,
properties, financial position, stockholders' equity or results of
operations of WGC and its subsidiaries as a whole, and have the
corporate power and authority necessary to own or hold their
respective properties and to conduct the businesses in which they are
engaged in the manner in which they are currently being conducted; and
none of the subsidiaries of WGC, other than the WGC Subsidiaries, is a
"significant subsidiary", as such term is defined in Rule 405 of the
Rules and Regulations.
(e) WGC has an authorized capitalization as set forth in the
WGC Prospectus, and all of the issued shares of capital stock of WGC
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in
the WGC Prospectus; and all of the issued shares of capital stock of
each WGC Subsidiary have been duly and validly authorized and issued
(except for directors' qualifying shares and except that WGC owns
approximately 88% of Wyman-Gordon Composite Technologies, Inc., which,
in turn, owns 100% of the outstanding capital stock of Scaled
Composites, Inc.) and are fully paid, nonassessable and are owned
directly or indirectly by WGC, free and clear of all liens,
encumbrances, equities or claims.
(f) This Agreement has been duly authorized, executed and
delivered by WGC.
(g) The execution, delivery and performance of this Agreement
by WGC and the consummation by WGC of the transactions contemplated
hereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which WGC or any of its subsidiaries is a party or by
which WGC or any of its subsidiaries is bound or to which any of the
property or assets of WGC or any of its subsidiaries is subject which
would individually or in the aggregate have a material adverse effect
on the business, properties, financial position, stockholders' equity
or results of operations of WGC and its subsidiaries taken as a whole,
nor will such actions result in any violation of the provisions of the
charter or by-laws of WGC or any of its subsidiaries or any statute or
any order, rule or regulation of any court or governmental
<PAGE> 6
6
agency or body having jurisdiction over WGC or any of its subsidiaries
or any of their properties or assets; and no consent, approval,
authorization or order of, or filing or registration with, any court
or governmental agency or body, is required for the execution,
delivery and performance of this Agreement and the consummation by WGC
of the transactions contemplated hereby, except as have been obtained
under the Securities Act and the Exchange Act and such as may be
required under applicable state securities laws and such other
approvals as have been duly obtained or made and are in full force and
effect.
(h) Except for the Investment Agreement, there are no
contracts, agreements or understandings between WGC and any person
granting such person the right to require WGC to file a registration
statement under the Securities Act with respect to any securities of
WGC owned or to be owned by such person or to require WGC to include
such securities in the securities registered pursuant to the WGC
Registration Statement or in any securities being registered pursuant
to any other registration statement filed by WGC under the Securities
Act.
(i) Neither WGC nor any of its subsidiaries has sustained,
since the date of the latest financial statements included in the WGC
Prospectus, any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, which would or could reasonably be expected to have a
material adverse effect on the business, properties, financial
position, stockholders' equity or results of operations of WGC and its
subsidiaries as a whole; and, since such date, there has not been any
change in the capital stock or long-term debt of WGC or any of its
subsidiaries (otherwise than as set forth or contemplated in the WGC
Prospectus) or any material adverse change in or affecting, or any
adverse development which materially affects, the business,
properties, financial position, stockholders' equity or results of
operations of WGC and its subsidiaries as a whole, otherwise than as
set forth or contemplated in the WGC Prospectus.
(j) The audited financial statements (including the related
notes and supporting schedules) filed as part of the WGC Registration
Statement or included in
<PAGE> 7
7
the WGC Prospectus present fairly in all material respects the
financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved, except as otherwise stated therein.
The unaudited financial statements of WGC included in the WGC
Prospectus and the WGC Registration Statement and the related notes
and supporting schedules are, in all material respects accurately
presented and prepared on a basis consistent with WGC's audited
financial statements and the books and records of WGC, subject to
normally recurring changes resulting from year-end audit adjustments,
and have been prepared in accordance with the instructions to Form
10-Q under the Exchange Act.
(k) Except as described in the WGC Prospectus, there are no
legal or governmental proceedings pending to which WGC or any of its
subsidiaries is a party or of which any property of WGC or any of the
WGC Subsidiaries is the subject which, if determined adversely to WGC
or any of its subsidiaries, would or could reasonably be expected to
have a material adverse effect on the business, properties, financial
position, stockholders' equity or results of operations of WGC and the
WGC Subsidiaries taken as a whole; and to the actual knowledge of WGC,
no such proceedings are threatened by governmental authorities or by
others.
(l) There are no contracts or other documents which are
required to be filed as exhibits to the WGC Registration Statement by
the Securities Act or by the Rules and Regulations which have not been
filed as exhibits to the WGC Registration Statement.
(m) Except as described in the WGC Prospectus since the date
as of which information is given in the WGC Prospectus, WGC has not
(i) issued or granted any rights to acquire any securities (other than
grants of stock options to directors or employees in the ordinary
course) or (ii) declared or paid any dividend on its capital stock.
(n) WGC is not in violation of its charter or by-laws, and no
WGC Subsidiary is in violation of any material provision of its
charter or by-laws.
<PAGE> 8
8
(o) Neither WGC nor any of its subsidiaries (i) is in default,
and no event has occurred which, with notice or lapse of time or both,
would constitute a default, in the due performance or observance of
any term, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties or assets is subject or (ii) is in violation of any law,
ordinance, governmental rule, regulation or court decree to which it
or its property or assets may be subject or has failed to obtain any
license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or
to the conduct of its business except, in the case of clauses (i) and
(ii), for those defaults, violations or failures which, either
individually or in the aggregate, would not or could not reasonably be
expected to have a material adverse effect on the business,
properties, financial position, stockholders' equity or results of
operations of WGC and its subsidiaries taken as a whole.
(p) The WGC Common Stock has been approved for listing on The
Nasdaq Stock Market's National Market ("Nasdaq").
(q) WGC is not required to be registered, and is not
regulated, as an "investment company" as such term is defined under
the Investment Company Act of 1940.
(r) WGC has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the shares of WGC Common
Stock to facilitate the sale or resale of the DECS.
2. Representations, Warranties and Agreements of Cooper
Industries, Inc. Cooper represents, warrants and agrees that:
(a) A registration statement on Form S-3, including a
preliminary prospectus, relating to the DECS has (i) been prepared by
Cooper in conformity with the requirements of the Securities Act, the
Rules and Regulations thereunder and the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"), and (ii) been filed with the
Commission and become
<PAGE> 9
9
effective under the Securities Act. Such registration statement and
prospectus may have been amended or supplemented from time to time
prior to the date of this Agreement; any such amendment to the
registration statement was so prepared and filed and any such
amendment has become effective. Copies of such registration statement
and prospectus, any such amendment or supplement and all documents
incorporated by reference therein which were filed with the Commission
on or prior to the date of this Agreement (including one complete
conformed copy of the registration statement and of each amendment
thereto for counsel for the Underwriters) have been delivered to the
Representatives and WGC and its counsel. Such registration statement
and prospectus, as amended or supplemented, together with any
registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations relating to the offering covered by the initial Cooper
registration statement (file number 33-63457) (a "Rule 462(b) Cooper
Registration Statement"), are herein referred to as the "CBE
Registration Statement" and the "CBE Prospectus". As used in this
Agreement, "Effective Time" with respect to the CBE Registration
Statement means each date and time as of which the CBE Registration
Statement, the most recent post-effective amendment thereto, if any,
and any Rule 462(b) Cooper Registration Statement was declared
effective by the Commission; "Effective Date" with respect to the CBE
Registration Statement means the date of the Effective Time;
"Preliminary CBE Prospectus" means such prospectus included in the CBE
Registration Statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the
Commission by Cooper, with the consent of the Representatives in
accordance with Section 7 of this Agreement, pursuant to Rule 424(a)
of the Rules and Regulations; "CBE Registration Statement" means such
registration statement, as amended at the Effective Time, including
all information contained in the final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations in
accordance with Section 7(a) of this Agreement and deemed to be a part
of such registration statement as of the Effective Time pursuant to
paragraph (b) of Rule 430A of the Rules and Regulations and including
any Rule 462(b) Cooper Registration Statement; and "CBE Prospectus"
means such final prospectus, as first filed with the Commission as
part of the CBE Registration Statement pursuant to paragraph (1) or
(4) of
<PAGE> 10
10
Rule 424(b) of the Rules and Regulations. Any reference herein to the
CBE Registration Statement, any Preliminary CBE Prospectus or the CBE
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein which were filed with the Commission
on or prior to the date of this Agreement and any reference to the
terms "amend", "amendment" or "supplement" with respect to the CBE
Registration Statement, any Preliminary CBE Prospectus or the CBE
Prospectus shall be deemed to refer to and include the filing of any
document with the Commission deemed to be incorporated by reference
therein after the date of this Agreement. Cooper has not been advised
that or obtained knowledge that the Commission has issued any order
preventing or suspending the use of any Preliminary CBE Prospectus.
(b) The CBE Registration Statement conforms, and the CBE
Prospectus and any further amendments or supplements thereto will,
when they become effective or are filed with the Commission, as the
case may be, conform in all material respects to the requirements of
the Securities Act, the Rules and Regulations thereunder and the Trust
Indenture Act and do not and will not, as of the applicable effective
date (as to the CBE Registration Statement and any amendment thereto)
and as of the applicable filing date (as to the CBE Prospectus and any
amendment or supplement thereto) contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided that no representation or warranty is made as to (i)
information contained in or omitted from the CBE Registration
Statement or the CBE Prospectus in reliance upon and in conformity
with written information furnished to Cooper through the
Representatives by or on behalf of any Underwriter specifically for
inclusion therein, (ii) information contained in or omitted from the
WGC Prospectus (attached as Appendix A to the CBE Prospectus), other
than information furnished to WGC by Cooper in writing specifically
for inclusion therein and (iii) that part of the CBE Registration
Statement which shall constitute the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of the Trustee.
(c) The documents incorporated by reference in the CBE
Registration Statement or the CBE Prospectus
<PAGE> 11
11
(excluding the WGC Prospectus included as Appendix A thereto), when
they became effective or were filed with the Commission, as the case
may be, under the Exchange Act conformed, and any documents so filed
and incorporated by reference after the date of this Agreement and on
or before the First Delivery Date will, when they are filed with the
Commission, conform, in all material respects to the requirements of
the Securities Act and the Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder.
(d) The audited consolidated financial statements of Cooper
and its consolidated subsidiaries incorporated by reference in the CBE
Registration Statement and the CBE Prospectus present fairly, in all
material respects the consolidated financial position of Cooper and
its consolidated subsidiaries as of the dates indicated and the
consolidated results of its operations and its cash flows for the
periods therein specified; and said financial statements have been
prepared in accordance with generally accepted principles of
accounting, applied on a consistent basis throughout the periods
involved. The unaudited consolidated financial statements of Cooper
incorporated by reference in the CBE Prospectus and the CBE
Registration Statement and the related notes present fairly, subject
to normal recurring adjustments, the financial information included
therein and comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
(e) Cooper and each of its Principal Subsidiaries (as defined
in paragraph (g) below) have been duly incorporated, are validly
existing and in good standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business and
are in good standing as foreign corporations in each jurisdiction in
which their respective ownership of property or the conduct of their
respective businesses requires such qualification (except where the
failure so to qualify would not be material to Cooper and its
subsidiaries taken as a whole), and have the corporate power and
authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged in the manner in
which they are currently being conducted.
<PAGE> 12
12
(f) The Indenture and the DECS have been duly authorized; the
Indenture has been duly qualified under the Trust Indenture Act; and
the Indenture, when the First Supplemental Indenture is duly executed
and delivered, and the DECS, when they are duly executed,
authenticated, issued and delivered as contemplated hereby and by the
Indenture, will constitute valid and legally binding obligations of
Cooper enforceable against Cooper in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(g) Neither Cooper nor any of Cooper (Great Britain) Ltd.,
Cooper Power Systems, Inc., Cooper Industries (Canada) Inc.,
McGraw-Edison Company or Champion Spark Plug Company (the "Principal
Subsidiaries") is in violation of its corporate charter or by-laws or
in default under any agreement, indenture or instrument, the effect of
which violation or default would be material to Cooper and its
subsidiaries taken as a whole.
(h) This Agreement has been duly authorized, executed and
delivered by Cooper.
(i) Neither the issuance or sale of the DECS, nor the
execution, delivery and performance of this Agreement and the
Indenture by Cooper and the consummation by Cooper of any other
transactions contemplated hereby will conflict with, or result in a
breach or violation of, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the assets of Cooper or any of
its subsidiaries pursuant to the terms of, or constitute a default
under, any agreement, indenture or instrument to which Cooper or any
of its subsidiaries is a party or by which it or its properties is
bound, or result in a violation of the provisions of the corporate
charter or by-laws of Cooper or any of its subsidiaries [or any order,
rule or regulation (applicable to Cooper, any of its subsidiaries or
any of their respective properties) of any court or governmental
agency having jurisdiction over Cooper, any of its subsidiaries or
their respective properties], the effect of any of which would be
material to Cooper and its subsidiaries taken as a whole.
<PAGE> 13
13
(j) Cooper has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of Cooper
to facilitate the sale or resale of the DECS.
(k) Cooper beneficially owns, and, immediately prior to
delivery to the holders of DECS in accordance with the terms of the
Indenture, will own 16,500,000 shares of WGC Common Stock, free and
clear of all liens, encumbrances, equities or claims, except for such
liens, encumbrances, equities or claims as may be imposed by the
Investment Agreement.
3. Purchase of the DECS by the Underwriters. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, Cooper hereby agrees to issue and sell
15,000,000 DECS, severally and not jointly, to the Underwriters, and each of
the Underwriters, severally and not jointly, agrees to purchase the number of
DECS set forth opposite that Underwriter's name on Schedule 1 hereto, at a
price of $[ ] per DECS.
In addition, Cooper grants to the Underwriters an option to
purchase up to an additional 1,500,000 DECS at a price of $[ ] per DECS.
Such option is granted solely for the purpose of covering over-allotments in
the sale of DECS and is exercisable by the Underwriters as provided in Section
5 of this Agreement. Option DECS shall be purchased severally for the account
of the Underwriters in proportion to the number of the Firm DECS set forth
opposite the names of such Underwriters in Schedule 1 hereto.
Cooper shall not be obligated to deliver any of the DECS to be
delivered on the First Delivery Date or the Second Delivery Date (as defined
below), as the case may be, except upon payment for all the DECS to be
purchased on such Delivery Date as provided herein.
4. Offering of DECS by the Underwriters. (a) Upon
authorization by the Representatives of the release of the Firm DECS, the
several Underwriters propose to offer the Firm DECS for sale upon the terms and
conditions set forth in the CBE Prospectus.
5. Delivery of and Payment for the DECS. Delivery of and
payment for the DECS shall be made at the
<PAGE> 14
14
office of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New
York, New York, at 10:00 A.M., New York City time, on the third full business
day following the date of this Agreement or at such other date or place as
shall be determined by agreement between the Representatives and Cooper. This
date and time are sometimes referred to herein as the "First Delivery Date".
On the First Delivery Date, Cooper shall deliver or cause to be delivered
certificates representing the DECS to the Representatives for the account of
each Underwriter against payment by wire transfer of immediately available
funds to Chase Manhattan Bank, New York, New York, for credit to the account of
Cooper Industries, Inc. account number . Time shall be of the
essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each Underwriter
hereunder. The DECS will be prepared in definitive form and in such authorized
denominations and registered in such names as the Representatives may request
in writing at least one full business day prior to the First Delivery Date and
will be made available for checking and packaging at the office at which they
are to be delivered on the First Delivery Date not later than 2:00 P.M., New
York City time, on the business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of
this Agreement, the option granted in Section 3 of this Agreement may be
exercised by written notice being given to Cooper (with a copy to WGC) by the
Representatives. Such notice shall set forth the aggregate amount of Option
DECS as to which the option is being exercised, the names in which the Option
DECS are to be registered, the denominations in which the Option DECS are to be
issued and the date and time, as determined by the Representatives, when the
Option DECS are to be delivered; provided, however, that this date and time
shall not be earlier than the First Delivery Date nor earlier than the second
business day after the date on which the option shall have been exercised nor
later than the third business day after the date on which the option shall have
been exercised unless the Representatives and Cooper shall otherwise agree.
The date and time the Option DECS are delivered are sometimes referred to
herein as the "Second Delivery Date", and the First Delivery Date and the
Second Delivery Date are sometimes each referred to herein as a "Delivery
Date".
Delivery of and payment for the Option DECS shall be made at
the office of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New
York, New York (or at such
<PAGE> 15
15
other place as shall be determined by agreement among the Representatives and
Cooper), at 10:00 A.M., New York City time, on the Second Delivery Date. On
the Second Delivery Date, Cooper shall deliver or cause to be delivered the
certificates representing the Option DECS to the Representatives for the
account of each Underwriter against payment by wire transfer of immediately
available funds to Chase Manhattan Bank, New York, New York, for credit to the
account of Cooper Industries, Inc. account number . Time shall be
of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each Underwriter
hereunder. The Option DECS will be prepared in definitive form and in such
authorized denominations and registered in such names as the Representatives
may require in the aforesaid written notice and will be made available for
checking and packaging at the office at which they are to be delivered on the
Second Delivery Date not later than 2:00 P.M., New York City time, on the
business day prior to the Second Delivery Date.
6. Further Agreements of WGC. WGC agrees:
(a) To prepare the WGC Prospectus in a form approved by the
Representatives and Cooper (which approval shall not be unreasonably
withheld) and to file such WGC Prospectus pursuant to Rule 424(b)
under the Securities Act not later than the close of business of the
Commission on the second business day following the execution and
delivery of this Agreement or, if applicable, such earlier time as may
be required by Rule 430A(a)(3) under the Securities Act; to make no
further amendment or any supplement to the WGC Registration Statement
or to the WGC Prospectus except as permitted herein (other than any
document required to be filed under the Exchange Act which upon filing
is deemed to be incorporated by reference therein); to furnish the
Representatives and Cooper at or prior to the filing thereof a copy of
any such document which upon filing is deemed to be incorporated by
reference in the WGC Registration Statement or the WGC Prospectus; to
advise the Representatives and Cooper, promptly after it receives
notice thereof, of the time when the WGC Registration Statement, or
any amendment thereto, or any Rule 462(b) WGC Registration Statement
has been filed or becomes effective or any supplement to the WGC
Prospectus or any amended WGC Prospectus has been filed and to furnish
the Representatives and Cooper with copies thereof; to advise the
<PAGE> 16
16
Representatives and Cooper promptly after it receives notice thereof,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary WGC Prospectus or
the WGC Prospectus, of the suspension of the qualification of the WGC
Common Stock for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or
of any request by the Commission for the amending or supplementing of
the WGC Registration Statement or the WGC Prospectus or for additional
information; and, in the event of the issuance of any stop order or of
any order preventing or suspending the use of any Preliminary WGC
Prospectus or the WGC Prospectus or suspending any such qualification,
to use promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Underwriters, Cooper,
counsel for the Underwriters and counsel to Cooper a conformed copy of
the WGC Registration Statement as originally filed with the
Commission, and each amendment thereto, and any Rule 462(b) WGC
Registration Statement filed with the Commission, including all
consents and exhibits filed therewith, and, so long as delivery of a
prospectus by an Underwriter may be required by the Securities Act, as
many copies of each Preliminary WGC Prospectus and the WGC Prospectus
and any supplement thereto as the Representatives and Cooper may
reasonably request; and to furnish to the Representatives and Cooper
at or prior to the filing thereof a copy of any document which upon
filing is deemed incorporated by reference in the WGC Registration
Statement or the WGC Prospectus;
(c) If, at any time when a prospectus relating to the WGC
Common Stock is required to be delivered under the Securities Act,
including whenever the CBE Prospectus relating to the DECS is required
to be delivered under the Securities Act, any event occurs as a result
of which the WGC Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it
shall be necessary to amend the WGC Registration Statement or
supplement the WGC Prospectus to comply with the Securities Act or the
Exchange Act or the respective rules and regulations of
<PAGE> 17
17
the Commission thereunder, WGC promptly will (i) prepare and file with
the Commission subject to paragraph (e) of this Section 6, an
amendment or supplement which will correct such statement or omission
or effect such compliance and (ii) supply any supplemented WGC
Prospectus to the Representatives and Cooper in such quantities as the
Representatives and Cooper may reasonably request;
(d) To file promptly with the Commission any amendment to the
WGC Registration Statement or the WGC Prospectus or any supplement to
the WGC Prospectus that may, in the judgment of WGC or the
Representatives, be required by the Securities Act or requested by the
Commission;
(e) Prior to filing with the Commission (i) any amendment to
the WGC Registration Statement or supplement to the WGC Prospectus or
(ii) any WGC Prospectus pursuant to Rule 424 of the Rules and
Regulations, to furnish a copy thereof to the Representatives, Cooper,
counsel for the Underwriters and counsel for Cooper and obtain the
consent of the Representatives and Cooper to the filing, which consent
will not be unreasonably withheld;
(f) As soon as practicable after the Effective Date, to make
generally available to WGC's security holders and to deliver to the
Representatives and Cooper an earnings statement of WGC and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Securities Act and the Rules and Regulations (including, at the
option of WGC, Rule 158);
(g) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the WGC Common Stock
for offering as described in the WGC Prospectus under the securities
laws of such jurisdictions as the Representatives may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the offering of the WGC Common Stock being made in
connection with the offering by Cooper of the DECS; provided that in
connection therewith WGC shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction or to subject itself to taxation in respect of doing
business
<PAGE> 18
18
in any jurisdiction in which it is not otherwise so subject;
(h) For a period of 90 days from the date of the WGC
Prospectus, not to (i) offer for sale, sell or otherwise dispose of,
directly or indirectly, any shares of WGC Common Stock or permit the
registration under the Securities Act of any shares of WGC Common
Stock (other than (x) the WGC Common Stock offered pursuant to the CBE
Prospectus and the WGC Prospectus and (y) shares issued pursuant to
employee benefit plans, qualified stock option plans or other employee
compensation plans existing on the date hereof), (ii) sell or grant
options, rights or warrants with respect of any shares of WGC Common
Stock (other than the grant of options pursuant to option plans
existing on the date hereof), or (iii) offer for sale, sell or
otherwise dispose of, directly or indirectly, any securities
convertible, exchangeable or exercisable into WGC Common Stock,
without, in any case, the prior written consent of the
Representatives; and
(i) To take such action as may be reasonably necessary to
comply with the rules and regulations of Nasdaq in respect of the
listing and offering of the WGC Common Stock in connection with the
offering by Cooper of the DECS.
(j) To deliver to Cooper, copies of the opinions, comfort
letters and certificates specified in Section 3.5(e) of the Investment
Agreement.
7. Further Agreements of Cooper. Cooper covenants and agrees
with each Underwriter that:
(a) Cooper will cause the CBE Prospectus to be filed pursuant
to Rule 424(b) under the Securities Act not later than the close of
business of the Commission on the second business day following the
execution and delivery of this Agreement or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the
Securities Act and will notify the Representatives and WGC promptly of
such filing. During the period in which a prospectus relating to the
DECS is required to be delivered under the Securities Act, Cooper will
notify the Representatives and WGC promptly of the time when the CBE
Registration Statement, or any amendment thereto, or any Rule 462(b)
Cooper Registration Statement has been filed or becomes
<PAGE> 19
19
effective or any supplement to the CBE Prospectus or any amended CBE
Prospectus has been filed and of any request by the Commission for any
amendment of or supplement to the CBE Registration Statement or the
CBE Prospectus or for additional information; Cooper will prepare and
file with the Commission, promptly upon the request of the
Representatives, any amendments or supplements to the CBE Registration
Statement or the CBE Prospectus which are required by the Securities
Act in connection with the distribution of the DECS by the
Underwriters; Cooper will file no amendment or any supplement to the
CBE Registration Statement or to the CBE Prospectus (other than any
document required to be filed under the Exchange Act which upon filing
is deemed to be incorporated by reference therein) or any Rule 462(b)
Cooper Registration Statement to which the Representatives shall
reasonably object by notice to Cooper after having been furnished a
copy a reasonable time prior to the filing thereof; and Cooper will
furnish to the Representatives and WGC at or prior to the filing
thereof a copy of any document which upon filing by Cooper is deemed
to be incorporated by reference in the CBE Registration Statement or
the CBE Prospectus.
(b) Cooper will advise the Representatives, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance by
the Commission of any stop order suspending the effectiveness of the
CBE Registration Statement or preventing or suspending the use of any
Preliminary CBE Prospectus or the CBE Prospectus, of the suspension of
the qualification of the DECS for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings
for any such purpose; and it will promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such a stop order should be issued.
(c) Within the time during which a prospectus relating to the
DECS is required to be delivered under the Securities Act, Cooper will
comply as far as it is able with all requirements imposed upon it by
the Securities Act and the Rules and Regulations, so far as necessary
to permit the continuance of sales of or dealings in the DECS as
contemplated by the provisions hereof and the CBE Prospectus. If
during such period any event occurs as a result of which the CBE
Prospectus as then amended or supplemented would
<PAGE> 20
20
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading,
or if during such period it shall be necessary to amend or supplement
the CBE Registration Statement or the CBE Prospectus to comply with
the Securities Act or the Exchange Act or the respective rules and
regulations of the Commission thereunder, Cooper promptly will notify
the Representatives and will amend or supplement the CBE Registration
Statement or the CBE Prospectus (at the expense of Cooper) so as to
correct such statement or omission or effect such compliance.
(d) Cooper will use its best efforts to qualify the DECS for
offering and sale under the securities laws of such jurisdictions as
the Representatives reasonably designate, and to maintain such
qualifications in effect so long as required to complete the
distribution of the DECS, except that Cooper shall not be required in
connection therewith to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would
subject it to general or unlimited service of process in any
jurisdiction where it is not now so subject.
(e) Cooper will furnish to WGC and to the Underwriters and to
counsel for the Underwriters conformed copies of the CBE Registration
Statement and copies of each Preliminary CBE Prospectus and the CBE
Prospectus (including all documents incorporated by reference therein
and all consents and exhibits filed therewith), and all amendments and
supplements to the CBE Registration Statement, each Preliminary CBE
Prospectus and the CBE Prospectus which are filed with the Commission
during the period in which a prospectus relating to the DECS is
required to be delivered under the Securities Act (including all
documents filed with the Commission during such period which are
deemed to be incorporated by reference therein), in each case in such
quantities as the Representatives or WGC may from time to time
reasonably request.
(f) So long as any of the DECS are outstanding, Cooper agrees
to furnish to the Representatives upon your request (i) copies of any
reports furnished by Cooper to its security holders generally and (ii)
any reports and financial statements filed by or on behalf
<PAGE> 21
21
of Cooper with the Commission or any national securities exchange.
(g) Cooper will make generally available to its security
holders and will deliver to the Representatives and WGC as soon as
practicable after the Effective Date, but in any event not later than
15 months after the end of Cooper's current fiscal quarter, an
earnings statement of Cooper and its subsidiaries (which need not be
audited) covering a 12-month period beginning after the date upon
which the CBE Prospectus is filed pursuant to Rule 424 under the
Securities Act which shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 under the Securities Act.
(h) For a period of 90 days from the date of the CBE
Prospectus, except as contemplated by the Master Securities Loan
Agreement, dated as of , 1995 between Cooper and Salomon
Brothers Inc (the "Loan Agreement"), Cooper will not (i) offer for
sale, sell or otherwise dispose of, directly or indirectly, any shares
of WGC Common Stock or request the registration under the Securities
Act of any shares of WGC Common Stock (other than the WGC Common Stock
offered pursuant to the CBE Prospectus and the WGC Prospectus), (ii)
sell or grant options, rights or warrants with respect of any shares
of WGC Common Stock, or (iii) offer for sale, sell or otherwise
dispose of, directly or indirectly, any securities convertible,
exchangeable or exercisable into WGC Common Stock, without, in any
case, the prior written consent of the Representatives.
(i) Cooper will use its best efforts to cause an application
for the listing of the DECS on the New York Stock Exchange (the
"NYSE") and for the registration of the DECS under the Exchange Act to
become effective and to take such other action as may be necessary to
comply with the rules and regulations of the NYSE in respect of the
listing of the DECS on the NYSE.
8. Expenses. WGC and Cooper agree to pay (a) the costs
incident to the authorization, issuance, sale and delivery of the DECS and any
taxes payable in that connection; (b) the costs incident to the preparation,
printing and filing under the Securities Act of each of the CBE Registration
Statement and the WGC Registration Statement and any amendments and exhibits
thereto; (c) the
<PAGE> 22
22
costs of distributing (i) the CBE Registration Statement and the WGC
Registration Statement, each as originally filed and all amendments thereto and
any post-effective amendments thereto (including, in all cases, exhibits), (ii)
any Preliminary WGC Prospectus, the WGC Prospectus and any amendment or
supplement to the WGC Prospectus, all as provided in this Agreement, and (iii)
any Preliminary CBE Prospectus, the CBE Prospectus and any amendment or
supplement to the CBE Prospectus, all as provided in this Agreement; (d) the
costs of reproducing and distributing this Agreement; (e) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of sale of the DECS; (f) any applicable
stock exchange listing or other fees for the DECS; (g) the fees and expenses of
filings, if any, with foreign securities administrators and of qualifying each
of the DECS and the WGC Common Stock under the securities laws of the several
jurisdictions as provided in Sections 6(g) and 7(d) of this Agreement,
respectively, of determining the legality of the DECS for purchases as provided
in Section 7(d) of this Agreement and of preparing, printing and distributing a
Blue Sky Memorandum and legal investment memorandum (including related fees and
expenses of counsel to the Underwriters); and (h) all other costs and expenses
incident to the performance of the obligations of WGC and Cooper under this
Agreement, to be apportioned in accordance with the terms and provisions of the
Letter Agreement, dated as of October 11, 1995, between WGC and Cooper;
provided that except as provided in this Section 8 and in Section 13 of the
Agreement, the Underwriters shall pay their own costs and expenses, including
the costs and expenses of their counsel, any transfer taxes on the DECS which
they may sell and the expenses of advertising any offering of DECS made by the
Underwriters, and Cooper shall pay any transfer taxes payable in connection
with its sale of DECS to the Underwriters.
9. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when
made and on each Delivery Date, of the representations and warranties of WGC
and Cooper contained herein, to the performance by WGC and Cooper in all
material respects of their respective obligations hereunder, and to each of the
following additional terms and conditions:
(a) No stop order suspending the effectiveness, in whole or in
part, of either of the CBE Registration Statement or the WGC
Registration Statement shall have
<PAGE> 23
23
been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in either of the
CBE Registration Statement or the WGC Registration Statement or either
of the CBE Prospectus or the WGC Prospectus or otherwise shall have
been complied with to your reasonable satisfaction.
(b) The Underwriters shall have received from Cravath, Swaine
& Moore such opinion or opinions dated such Delivery Date, with
respect to the issuance and sale of the DECS, the CBE Registration
Statement and the CBE Prospectus, the WGC Registration Statement and
the WGC Prospectus, and other related matters as the Underwriters may
reasonably require, and WGC and Cooper shall have furnished to such
counsel all documents and information that they may reasonably request
to enable them to pass upon such matters.
(c) Wallace F. Whitney, Jr., Esq., Vice President, General
Counsel and Clerk of WGC shall have furnished to the Representatives
his written opinion, addressed to the Underwriters and dated such
Delivery Date, substantially in the form of Exhibit A attached hereto.
(d) Cooper shall have furnished to the Representatives the
opinions of Skadden, Arps, Slate, Meagher & Flom, counsel for Cooper,
addressed to the Underwriters and dated such Delivery Date,
substantially in the forms of Exhibit B and Exhibit C attached hereto.
(e) Diane K. Schumacher, Esq., Senior Vice President, General
Counsel and Secretary of Cooper, shall have furnished to the
Representatives her written opinion, addressed to the Underwriters and
dated such Delivery Date, substantially in the form of Exhibit D
attached hereto.
(f) Each of WGC and Cooper shall have furnished to the
Representatives (i) a letter of Ernst & Young LLP, addressed to the
Underwriters and dated the date of this Agreement substantially in the
forms of Exhibit E and Exhibit F attached hereto and (ii) a letter of
Ernst & Young LLP, addressed to the Underwriters and dated such
Delivery Date confirming as of such date the matters contained in the
letter referred to in clause (i) above.
<PAGE> 24
24
(g) WGC shall have furnished to the Representatives a
certificate, addressed to the Underwriters and dated such Delivery
Date, of its Chairman of the Board of Directors or its President and
its Chief Financial Officer to the effect that the signers of such
certificate have carefully examined the WGC Registration Statement,
the WGC Prospectus and this Agreement and that:
(i) the representations and warranties of WGC in this
Agreement are true and correct in all material respects on and
as of such Delivery Date with the same effect as if made on
such Delivery Date and WGC has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Delivery Date;
(ii) no stop order suspending the effectiveness of the
WGC Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to WGC's knowledge,
threatened; and
(iii) since the date of the most recent financial
statements included in the WGC Prospectus (exclusive of any
supplement thereto), there has been no material adverse change
in the condition (financial or other), earnings, business or
properties of WGC and its subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in
the WGC Prospectus (exclusive of any supplement thereto).
(h) Cooper shall have furnished to the Representatives a
certificate, addressed to the Underwriters and dated such Delivery
Date, of the Chairman of the Board of Directors, President or any Vice
President and of the Treasurer or an Assistant Treasurer of Cooper, to
the effect that the signers of such certificate have carefully
examined the CBE Registration Statement, the CBE Prospectus and this
Agreement and that:
(i) the representations and warranties of Cooper in
this Agreement are true and correct in all material respects
on and as of such Delivery Date with the same effect as if
made on such
<PAGE> 25
25
Delivery Date and Cooper has complied with all the agreements
and satisfied all the conditions on its part to be performed
or satisfied at or prior to such Delivery Date;
(ii) no stop order suspending the effectiveness of the
CBE Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to Cooper's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the CBE Prospectus (exclusive of any
supplement thereto) there has been no material adverse change
in the condition (financial or other), earnings, business or
properties of Cooper and its subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in
the CBE Prospectus (exclusive of any supplement thereto).
(i) Subsequent to the date and time that this Agreement is
executed and delivered by the parties hereto (the "Execution Time"),
or, if earlier, the dates as of which information is given in the WGC
Registration Statement (exclusive of any amendment thereof) and the
WGC Prospectus (exclusive of any supplement thereto), there shall not
have been (i) any change or decrease specified in the letter or
letters furnished by WGC referred to in paragraph (f) of this Section
9 or (ii) any change, or any development involving a prospective
change, in or affecting the business or properties of WGC and its
subsidiaries the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the reasonable judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the DECS as
contemplated by the CBE Registration Statement (exclusive of any
amendment thereof) and the CBE Prospectus (exclusive of any supplement
thereto).
(j) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of WGC's debt securities by any
"nationally recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Securities Act) or any notice
given of any intended or potential decrease
<PAGE> 26
26
in any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change.
(k) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the CBE Registration Statement
(exclusive of any amendment thereof) and the CBE Prospectus (exclusive
of any supplement thereto), there shall not have been (i) any change
or decrease specified in the letter or letters furnished by Cooper
referred to in paragraph (f) of this Section 9 or (ii) any change, or
any development involving a prospective change, in or affecting the
business or properties of Cooper and its subsidiaries the effect of
which, in any case referred to in clause (i) or (ii) above, is, in the
reasonable judgment of the Representatives, so material and adverse as
to make it impractical or inadvisable to proceed with the offering or
delivery of the DECS as contemplated by the CBE Registration Statement
(exclusive of any amendment thereof) and the CBE Prospectus (exclusive
of any supplement thereto).
(l) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of Cooper's debt securities by
any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Securities Act) or any
notice given of any intended or potential decrease in any such rating
or of a possible change in any such rating that does not indicate the
direction of the possible change.
(m) Subsequent to the Execution Time, there shall not have
occurred any of the following: (i) trading in Cooper's common stock
shall have been suspended by the Commission or the NYSE, trading in
WGC Common Stock shall have been suspended by the Commission or Nasdaq
or trading in securities generally on the NYSE, the American Stock
Exchange, Nasdaq or the over-the-counter market shall have been
suspended or limited or minimum prices shall have been established on
any of such exchanges or such markets by the Commission, by such
exchange or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been
declared either by Federal or New York State authorities, (iii) the
United States shall have become engaged in hostilities, there shall
have been an escalation in hostilities involving
<PAGE> 27
27
the United States or there shall have been a declaration of a national
emergency or war by the United States or similar crisis or calamity or
(iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the reasonable judgment of the
Representatives, impracticable or inadvisable to proceed with the
delivery of the DECS.
(n) The DECS shall be approved for listing by the NYSE subject
to official notice of issuance.
(o) Prior to such Delivery Date, Cooper and WGC shall have
furnished to the Representatives such further information,
certificates and documents as the Representatives may reasonably
request.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement which are not attached hereto as exhibits
shall be deemed to be in compliance with the provisions hereof only if they are
in form and substance reasonably satisfactory to counsel for the Underwriters.
10. Indemnification and Contribution. (a) (i) WGC shall
indemnify and hold harmless each Underwriter, the directors, officers,
employees and agents of each Underwriter and each person, if any, who controls
any Underwriter within the meaning of either the Securities Act or the Exchange
Act, from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to the offering of the WGC Common
Stock in connection with the offering of the DECS), to which such Underwriter,
any such director, officer, employee or agent or such controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (A) any
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary WGC Prospectus, the WGC Registration Statement or the WGC
Prospectus or in any amendment or supplement thereto or (B) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse
each Underwriter, each such director, officer, employee or agent and each such
controlling person
<PAGE> 28
28
for any legal or other expenses reasonably incurred by any such Underwriter,
any such director, officer, employee or agent or any such controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that WGC shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary WGC Prospectus, the WGC Registration
Statement or the WGC Prospectus or in any such amendment or supplement in
reliance upon and in conformity with written information furnished to WGC by
Cooper, or by the Representatives by or on behalf of any Underwriter,
specifically for inclusion therein; and provided further, that WGC shall not be
liable to any Underwriter under the indemnity agreement in this paragraph with
respect to any Preliminary WGC Prospectus or WGC Prospectus to the extent that
any such loss, claim, damage or liability of such Underwriter results from the
fact that such Underwriter sold DECS to a person as to whom it shall be
established that there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the WGC Prospectus as then amended or
supplemented (excluding documents incorporated by reference) in any case where
such delivery is required by the Securities Act if WGC has previously furnished
copies thereof in sufficient quantity to such Underwriter and the loss, claim,
damage or liability of such Underwriter results from an untrue statement
contained in, or omission of a material fact from, the Preliminary WGC
Prospectus or the WGC Prospectus which was corrected in the WGC Prospectus as
then amended or supplemented (excluding documents incorporated by reference).
The foregoing indemnity agreement is in addition to any liability which WGC may
otherwise have.
(ii) Cooper shall indemnify and hold harmless each Underwriter,
the directors, officers, employees and agents of each Underwriter and each
person, if any, who controls any Underwriter within the meaning of either the
Securities Act or the Exchange Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which any
Underwriter, any such director, officer, employee or agent or any such
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (A) any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary WGC Prospectus, the WGC
<PAGE> 29
29
Registration Statement or the WGC Prospectus or in any amendment or supplement
thereto or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with the written information furnished to WGC
by Cooper specifically for inclusion therein, and shall reimburse each
Underwriter, each such director, officer, employee or agent and any such
controlling person for any legal or other expenses reasonably incurred by any
such Underwriter, any such director, officer, employee or agent or any such
controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that Cooper shall not be liable to
any Underwriter under the indemnity agreement in this paragraph with respect to
any Preliminary WGC Prospectus or WGC Prospectus to the extent that any such
loss, claim, damage or liability of such Underwriter results from the fact that
such Underwriter sold DECS to a person as to whom it shall be established that
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the WGC Prospectus as then amended or supplemented (excluding
documents incorporated by reference) in any case where such delivery is
required by the Securities Act if WGC has previously furnished copies thereof
in sufficient quantity to such Underwriter and the loss, claim, damage or
liability of such Underwriter results from an untrue statement contained in, or
omission of a material fact from, the Preliminary WGC Prospectus or the WGC
Prospectus which was corrected in the WGC Prospectus as then amended or
supplemented (excluding documents incorporated by reference). The foregoing
indemnity agreement is in addition to any liability which Cooper may otherwise
have.
(iii) WGC shall indemnify and hold harmless Cooper, the directors,
officers, employees and agents of Cooper and each person, if any, who controls
Cooper within the meaning of either the Securities Act or the Exchange Act,
and, solely with respect to information furnished to WGC by Cooper in writing
specifically for inclusion therein, Cooper shall indemnify and hold harmless
WGC, the directors, officers, employees and agents of WGC and each person, if
any, who controls WGC within the meaning of either the Securities Act or the
Exchange Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to,
<PAGE> 30
30
any loss, claim, damage, liability or action relating to the offering of the
WGC Common Stock in connection with purchases and sales of the DECS), to which
the indemnified party, any such director, officer, employee or agent of such
indemnified party or such controlling person of such indemnified party may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (A) any
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary WGC Prospectus, the WGC Registration Statement or the WGC
Prospectus or in any amendment or supplement thereto or (B) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse
each such indemnified party, each such director, officer, employee or agent of
such indemnified party and each such controlling person of such indemnified
party for any legal or other expenses reasonably incurred by any such
indemnified party, any such director, officer, employee or agent of such
indemnified party or any such controlling person of such indemnified party in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred.
The foregoing indemnity agreement is in addition to any liability which WGC or
Cooper, as the case may be, may otherwise have.
(iv) Cooper shall indemnify and hold harmless each Underwriter,
the directors, officers, employees and agents of each Underwriter and each
person, if any, who controls any Underwriter within the meaning of either the
Securities Act or the Exchange Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to
purchases and sales of the DECS), to which such Underwriter, any such director,
officer, employee or agent or such controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage, liability
or action arises out of, or is based upon, (A) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary CBE
Prospectus, the CBE Registration Statement or the CBE Prospectus or in any
amendment or supplement thereto or (B) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse each
Underwriter, each such director, officer, employee or agent
<PAGE> 31
31
and each such controlling person for any legal or other expenses reasonably
incurred by any such Underwriter, any such director, officer, employee or agent
or any such controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that Cooper shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission (x) made in any
Preliminary CBE Prospectus, the CBE Registration Statement or the CBE
Prospectus or in any such amendment or supplement in reliance upon and in
conformity with written information furnished to Cooper by the Representatives
by or on behalf of any Underwriter specifically for inclusion therein or (y)
made in any Preliminary WGC Prospectus (attached as Appendix A to a Preliminary
CBE Prospectus), the WGC Registration Statement or the WGC Prospectus (attached
as Appendix A to the CBE Prospectus) or in any such amendment or supplement
thereto, other than with respect to the information referred to in paragraph
(a)(ii); and provided further, that Cooper shall not be liable to any
Underwriter under the indemnity agreement in this paragraph with respect to any
Preliminary CBE Prospectus or CBE Prospectus to the extent that any such loss,
claim, damage or liability of such Underwriter results from the fact that such
Underwriter sold DECS to a person as to whom it shall be established that there
was not sent or given, at or prior to the written confirmation of such sale, a
copy of the CBE Prospectus as then amended or supplemented (excluding documents
incorporated by reference) in any case where such delivery is required by the
Securities Act if Cooper has previously furnished copies thereof in sufficient
quantity to such Underwriter and the loss, claim, damage or liability of such
Underwriter results from an untrue statement contained in, or omission of a
material fact from, the Preliminary CBE Prospectus or the CBE Prospectus which
was corrected in the CBE Prospectus as then amended or supplemented (excluding
documents incorporated by reference). The foregoing indemnity agreement is in
addition to any liability which Cooper may otherwise have.
(b) (i) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless Cooper, each of its directors (including any person
who, with his or her consent, is named in the CBE Registration Statement as
about to become a director of Cooper), each of its officers who signed the CBE
Registration Statement, and each person, if
<PAGE> 32
32
any, who controls Cooper within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action
in respect thereof, to which Cooper or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (A) any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary CBE Prospectus, the CBE Registration
Statement or the CBE Prospectus or in any amendment or supplement thereto or
(B) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to Cooper by or on
behalf of any Underwriter through the Representatives specifically for
inclusion therein, and shall reimburse Cooper and any such director, officer or
controlling person for any legal or other expenses reasonably incurred by
Cooper or any such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Underwriter may
otherwise have to Cooper or any such director, officer or controlling person.
(ii) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless WGC, each of its directors (including any person
who, with his or her consent, is named in the WGC Registration Statement as
about to become a director of WGC), each of its officers who signed the WGC
Registration Statement, and each person, if any, who controls WGC within the
meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which WGC or
any such director, officer or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (A) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary WGC
Prospectus, the WGC Registration Statement or the WGC Prospectus or in any
amendment or supplement thereto or (B) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue
<PAGE> 33
33
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to WGC by or on behalf of any
Underwriter through the Representatives specifically for inclusion therein, and
shall reimburse WGC and any such director, officer or controlling person for
any legal or other expenses reasonably incurred by WGC or any such director,
officer or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which any Underwriter may otherwise have to WGC or
any such director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 10 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party under Section 10(a) or (b)
above unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party,
to assume the defense thereof with counsel satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of
its election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under Section 10(a) or (b)
for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the Representatives shall have the right
to employ counsel to represent jointly the Representatives and those other
Underwriters and their respective controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Underwriters against WGC or Cooper, as applicable, under this Section 10
if, in the reasonable judgment of the Representatives, it is advisable for the
Representatives and those other Underwriters and their respective controlling
persons to be
<PAGE> 34
34
jointly represented by separate counsel (it being understood that WGC or
Cooper, as the case may be, shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in
the same jurisdiction arising out of the same allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (other than local counsel which shall be engaged only for purposes of
appearing with such counsel in such jurisdictions in which such firm of
attorneys is not licensed to practice)), and in that event the fees and
expenses of such separate counsel shall be paid by WGC or Cooper, as the case
may be.
(d) If the indemnification provided for in this Section 10
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 10(a) or (b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect thereof,
(i) if the indemnification relates to the Underwriters as an indemnifying or
indemnified party, (x) in such proportion as shall be appropriate to reflect
the relative benefits received by Cooper or WGC, as applicable, on the one hand
and the Underwriters on the other from the offering of the DECS or (y) if the
allocation provided by clause (i)(x) above is not permitted by applicable law
or if the indemnified party failed to give the notice required under Section
10(c), in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i)(x) above but also the relative fault of
Cooper or WGC, as applicable, on the one hand and the Underwriters on the other
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations or (ii) if the indemnification relates to
Cooper and WGC as the respective indemnifying and indemnified parties (or vice
versa), in such proportion as shall be appropriate to reflect the relative
fault of Cooper or WGC, as applicable, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable principles. The
relative benefits received by Cooper or WGC, as applicable, on the one hand and
the Underwriters on the other with respect to such offering shall be deemed to
be in the same proportions as the total net proceeds from the offering of the
DECS
<PAGE> 35
35
pursuant to the CBE Registration Statement (before deducting expenses) received
by Cooper bears to the total underwriting discounts and commissions received by
the Underwriters with respect to the DECS purchased under this Agreement, in
each case as set forth in the table on the cover page of the CBE Prospectus
and, as between WGC and the Underwriters, WGC shall be deemed for this purpose
to have received such total net proceeds as received by Cooper. The relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by Cooper, WGC or the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Cooper, WGC and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 10(d) were to be determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section
10(d) shall be deemed to include, for purposes of this Section 10(d), any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 10(d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the DECS underwritten by it and distributed to the public was offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 10(d) are several in proportion to their respective,
underwriting obligations and not joint.
(e) The Underwriters severally confirm that the statements
with respect to the public offering of the DECS set forth on the cover page of,
and under the caption "Plan of Distribution" in, the CBE Prospectus and on the
cover page of and under the caption "Plan of Distribution" in the WGC
Prospectus are correct and constitute the only information furnished in writing
to Cooper or WGC,
<PAGE> 36
36
respectively, by or on behalf of any Underwriter through the Representatives
specifically for inclusion in the CBE Registration Statement and the CBE
Prospectus or the WGC Registration Statement and the WGC Prospectus,
respectively.
(f) The agreements contained in this Section 10 and the
representations, warranties and agreements of WGC in Sections 1 and 6 of this
Agreement, and of Cooper in Sections 2 and 7 of this Agreement, shall survive
the delivery of the DECS and shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement or any investigation made
by or on behalf of any indemnified party.
11. Defaulting Underwriters. If, on either Delivery Date,
any Underwriter defaults in the performance of its obligations under this
Agreement, the remaining non-defaulting Underwriters shall be obligated to
purchase the DECS which the defaulting Underwriter agreed but failed to
purchase on such Delivery Date in the respective proportions which the number
of the Firm DECS set forth opposite the name of each remaining non-defaulting
Underwriter in Schedule 1 hereto bears to the total number of the Firm DECS set
forth opposite the names of all the remaining non-defaulting Underwriters in
Schedule 1 hereto; provided, however, that the remaining non-defaulting
Underwriters shall not be obligated to purchase any of the DECS on such
Delivery Date if the total number of DECS which the defaulting Underwriter or
Underwriters agreed but failed to purchase on such date exceeds 9.09% of the
total number of DECS to be purchased on such Delivery Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase more than 110% of
the number of DECS which it agreed to purchase on such Delivery Date pursuant
to the terms of Section 3 of this Agreement. If the foregoing maximums are
exceeded, the remaining non-defaulting Underwriters, or those other
underwriters satisfactory to the Representatives who so agree, shall have the
right, but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all the DECS to be purchased on such Delivery Date. If
the remaining Underwriters or other underwriters satisfactory to the
Representatives do not elect to purchase the DECS which the defaulting
Underwriter or Underwriters agreed but failed to purchase, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or
Cooper or WGC, except that WGC and Cooper will continue to be liable for the
payment of expenses to the extent set forth in Section 8 of this Agreement.
<PAGE> 37
37
Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have to Cooper for damages caused by its
default. If other underwriters are obligated or agree to purchase the DECS of
a defaulting or withdrawing Underwriter, either the Representatives or Cooper
may postpone the Delivery Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for Cooper or counsel for the
Underwriters may be necessary in the CBE Registration Statement, the CBE
Prospectus or in any other document or arrangement.
12. Termination. The obligations of the Underwriters
hereunder may be terminated by the Representatives by giving notice as
hereinafter specified to Cooper (with a copy to WGC) prior to delivery of and
payment for the Firm DECS if, prior to that time, (i) Cooper or WGC shall have
failed, refused or been unable to perform, in any material respect, any
agreement on its part to be performed hereunder or (ii) any of the events
described in Section 9(i), 9(j), 9(k), 9(l) or 9(m) of this Agreement shall
have occurred. Any such termination shall be without liability of any party to
any other party except that the provisions of Sections 10 and 13 of this
Agreement shall at all times be effective. If the Representatives elect to
terminate this Agreement as provided in this Section 12, the Representatives
shall promptly notify Cooper by telephone or telegram, confirmed by letter
(with a copy to WGC).
13. Reimbursement of Underwriters' Expenses. If (a) Cooper
shall fail to tender the DECS for delivery to the Underwriters for any reason
permitted under this Agreement or (b) the Underwriters shall decline to
purchase the DECS for any reason permitted under this Agreement (including the
termination of this Agreement pursuant to Section 12 of this Agreement), WGC
and Cooper shall reimburse the Underwriters for the reasonable fees and
expenses of their counsel and for such other out-of-pocket expenses as shall
have been incurred by them in connection with this Agreement and the proposed
purchase of the DECS, and upon demand WGC and Cooper shall pay the full amount
thereof to the Representatives. If this Agreement is terminated pursuant to
Section 11 of this Agreement by reason of the default of one or more of the
Underwriters, neither WGC nor Cooper shall be obligated to reimburse any
Underwriter on account of those expenses.
14. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
<PAGE> 38
38
(a) if to the Underwriters, shall be delivered or sent by
mail, telex or facsimile transmission to Salomon Brothers Inc, Seven
World Trade Center, New York, New York 10048, Attention: Legal
Department;
(b) if to WGC, shall be delivered or sent by mail, telex or
facsimile transmission to Wyman-Gordon Company, 244 Worcester Street,
Grafton, Massachusetts 01536-8001, Attention: General Counsel;
(c) if to Cooper, shall be delivered or sent by mail, telex or
facsimile transmission to Cooper Industries, Inc., 1001 Fanin, Suite
4000, Houston, Texas 77001 Attention: General Counsel;
provided, however, that any notice to an Underwriter pursuant to Section 10(c)
of this Agreement shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its acceptance
telex to the Representatives, which address will be supplied to any other party
hereto by the Representatives upon request. Any such statements, requests,
notices or agreements shall take effect at the time of receipt thereof. Cooper
and WGC shall be entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Underwriters by the Representatives.
15. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Underwriters, WGC, Cooper
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of WGC and Cooper
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control any Underwriter within the meaning of
Section 15 of the Securities Act and (B) the indemnity agreement of the
Underwriters contained in Section 10 shall be deemed to be for the benefit of
directors of Cooper or WGC, as applicable, officers of Cooper or WGC, as
applicable, who have signed the CBE Registration Statement or the WGC
Registration Statement, as applicable, and any person controlling Cooper or
WGC, as applicable. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this
Section 15, any legal or equitable right, remedy or claim under or in respect
of this Agreement or any provision contained herein.
<PAGE> 39
39
16. Definition of the Terms "Business Day" and "Subsidiary".
For purposes of this Agreement, (a) "business day" means any day on which the
NYSE is open for trading and (b) "subsidiary" has the meaning set forth in Rule
405 of the Rules and Regulations.
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
18. Counterparts. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
19. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement among
Cooper, WGC and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
COOPER INDUSTRIES, INC.
By:________________________________
Name:
Title:
WYMAN-GORDON COMPANY
By:________________________________
Name:
Title:
<PAGE> 40
40
Accepted:
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
SCHRODER WERTHEIM & CO. INCORPORATED
For itself and as Representatives
for each of the several Underwriters
named in Schedule 1 hereto
By: SALOMON BROTHERS INC
By:_________________________
Authorized Representative
<PAGE> 41
SCHEDULE 1
<TABLE>
<CAPTION>
Number of
Underwriters DECS
-----------
<S> <C>
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merrill Lynch & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schroder Wertheim & Co. Incorporated . . . . . . . . . . . . . . . . . . .
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000,000
===========
</TABLE>
<PAGE> 42
EXHIBIT A
December , 1995
Salomon Brothers Inc
Merrill Lynch & Co.
Schroder Wertheim & Co. Incorporated
c/o Salomon Brothers Inc
Seven World Trade Center
New York, NY 10048
Ladies and Gentlemen:
I am General Counsel for Wyman-Gordon Company, a Massachusetts
corporation (the "Company"), and have acted as its counsel in connection with
the public offering of 16,500,000 shares (the "Shares") of Common Stock, par
value $1.00 per share, (the "Common Stock") that are mandatorily exchangeable
at the option of Cooper Industries, Inc., an Ohio corporation ("Cooper") upon
the maturity of Coopers % Exchangeable Notes Due December , 1998 (the
"DECS") being issued by Cooper pursuant to the Underwriting Agreement, dated
December , 1995 (the "Underwriting Agreement"), among you, as representatives
of the several underwriters (the "Underwriters"), the Company and Cooper.
This opinion is being furnished to you pursuant to Section
9(c) of the Underwriting Agreement. Capitalized terms used but not defined
herein shall have the meanings set forth in the Underwriting Agreement.
In my capacity as counsel to the Company, I have examined (i)
signed copies of the Company's Registration Statement on Form S-3 (File No.
33-63459) relating to the Shares as filed with the Securities and Exchange
Commission (the "Commission") on October 17, 1995 under the Securities Act of
1933, as amended (the "Act") as amended by Amendment No. 1 thereto filed with
the Commission on November 24, 1995, Amendment No. 2 thereto filed with the
Commission on November 30, 1995, and Amendment No. 3 thereto filed with the
Commission on December , 1995, including information deemed to be a part of
the Registration Statement at the time of effectiveness pursuant to Rule 430A
of the General Rules and Regulations under the Act (the "Rules and
Regulations") (such Registration Statement as so amended, being hereinafter
referred to as the "Registration Statement"); and (ii) the final prospectus
relating to the Shares in the form filed with the Commission on December ,
<PAGE> 43
2
1995, pursuant to Rule 424(b) of the Rules and Regulations (such final
prospectus being hereinafter referred to as the "Prospectus"). I have also
examined, among other things, the Restated Articles of Organization of the
Company (the "Articles"), the By-laws of the Company (the "By-laws"), the
corporate records of the Company, and the Underwriting Agreement. In addition,
as to matters of fact not directly within my actual knowledge, I have examined
and relied upon certificates of officers of the Company, certificates and
telegrams of certain public officials and such other records and instruments
and made such investigations, as I have considered necessary and proper in
order that I may render an informed opinion in connection with the matters
hereinafter set forth. I have assumed the genuineness of all signatures
(except those of the Company) on, and the authenticity of, all documents and
instruments submitted to me as originals and the conformity to original
documents of all documents submitted to me as copies, (ii) due authorization,
execution and delivery by the parties thereto, other than the Company and its
subsidiaries, of all such documents and instruments examined by me, and (iii)
that, to the extent that any such documents and instruments purport to
constitute agreements of such other parties, they constitute valid and binding
obligations of such other parties. As to matters involving the application of
laws of any jurisdiction other than the Commonwealth of Massachusetts or the
United States, to the extent I deemed proper I have relied upon the opinions of
other counsel of good standing who I believe to be reliable. Copies of such
opinions have been delivered to you.
Based upon the foregoing, I am of the opinion that:
(i) Each of the Company and Wyman-Gordon Forgings, Inc., a
Delaware corporation; Wyman-Gordon Limited, an English corporation;
Wyman-Gordon Investment Castings, Inc., a Delaware corporation;
Precision Founders, Inc., a California corporation; Wyman-Gordon
Composite Technologies, Inc., a California corporation; and Scaled
Composites, Inc., a California corporation (each a "Subsidiary" and
collectively the "Subsidiaries") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction in which it is chartered or organized, with full
corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and is duly
<PAGE> 44
3
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification except where the failure to be so qualified would not
have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
(ii) All the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except as otherwise set forth in
the Prospectus or on Schedule A hereto, all outstanding shares of
capital stock of the Subsidiaries are owned by the Company either
directly or through wholly owned Subsidiaries free and clear of any
perfected security interest and, to my knowledge, after due inquiry,
any other security interests, claims, liens or encumbrances.
(iii) The Company's authorized equity capitalization is as
set forth in the Prospectus and the Common Stock conforms to the
description thereof contained in the Prospectus.
(iv) To my knowledge, after due inquiry, there is no pending
or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its Subsidiaries of a character required to be
disclosed in the Registration Statement which is not adequately
disclosed in the Prospectus, and there is no franchise, contract or
other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit,
which is not described or filed as required;
(v) The Registration Statement has become effective under the
Securities Act. Any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b). To the
best of my knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for
that purpose have been instituted or threatened. The Registration
Statement, as of its effective date, and the Prospectus, as of its
date, appeared on their face to be appropriately responsive in all
material respects to the requirements
<PAGE> 45
4
of the Act and the Rules and Regulations, except that, in each case, I
express no opinion as to the financial statements, schedules and other
financial or statistical information and data included in or excluded
from the Registration Statement and the Prospectus or incorporated by
reference in the Registration Statement;
(vi) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company;
(vii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated herein, except such as have been
obtained under the Securities Act and such as may be required under
the blue sky laws of any jurisdiction in connection with the purchase
and distribution of the DECS by the Underwriters and such other
approvals as have been obtained;
(viii) Neither the exchange of the Common Stock at maturity
of the DECS nor the consummation of any other of the transactions
contemplated by the Underwriting Agreement nor the fulfillment of the
terms thereof to be performed by the Company will conflict with,
result in a breach or violation of, or constitute a default under any
law or the Articles or By-laws of the Company or the terms of any
indenture or other agreement or instrument known to me and to which
the Company or any of its Subsidiaries is a party or bound or any
judgment, order or decree known to me to be applicable to the Company
or any of its Subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its Subsidiaries;
(ix) Other than Cooper, no holders of securities of the
Company have contractual rights to the registration of such securities
under the Registration Statement;
(x) The offering of the Shares pursuant to the Registration
Statement and the Prospectus and the compliance by the Company with
all of the provisions of the Underwriting Agreement and the
consummation of the transactions contemplated thereby will not
conflict with or result in a breach or violation of, or
<PAGE> 46
5
constitute a default (with or without due notice or lapse of time or
both) under (a) the Articles or By-laws, (b) any loan or credit
agreement, indenture, deed of trust, mortgage, note or other agreement
or instrument relating to borrowed money known to me and to which the
Company or any of its Subsidiaries is a party or bound or (c) any
judgment, order or decree known to me to be applicable to the Company
or any of its Subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its Subsidiaries, except in
the case of clause (b) for such conflicts, breaches, violations or
defaults (i) as to which requisite waivers or consents have been
obtained, (ii) the obtaining of which would have been waived by the
other parties thereto, (iii) which would not, individually or in the
aggregate, have a material adverse effect on the condition (financial
or other), business, prospects or results of operations of the Company
and its Subsidiaries taken as a whole, and (iv) as have otherwise been
disclosed in the Prospectus, nor will such action conflict with or
violate any statute, rule, regulation, order, judgment or decree
applicable to the Company or its Subsidiaries or by which the Company
or its Subsidiaries is bound or to which any of the property or assets
of the Company or its Subsidiaries is subject except for such
conflicts or violations which would not, individually or in the
aggregate, have a material adverse effect on the condition (financial
or other), business, prospects or results of operations of the Company
and its Subsidiaries taken as a whole.
(xi) To my knowledge, no consent, approval, authorization or
order of or qualification, registration or filing with, any
Massachusetts or U.S. Federal regulatory body or authority having
jurisdiction over the Company is required to be obtained by the
Company for the consummation of the transactions contemplated by the
Underwriting Agreement, other than (a) as disclosed in the Prospectus,
(b) such as have been obtained under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and (c) such as
may be required under the blue sky laws of any jurisdiction in
connection with the offering of the Shares pursuant to the
Registration Statement and the Prospectus.
(xii) The Company is not required to be registered,
<PAGE> 47
6
and is not regulated, as an "investment company" as such term is
defined under the Investment Company Act of 1940.
I have participated in conferences with officers and
representatives of the Company, representatives of the independent public
accountants of the Company, representatives of Cooper and with your
representatives and your counsel at which the contents of the Registration
Statement and the Prospectus were discussed. Based on such participation and
review as well as my position as Vice President, General Counsel and Clerk of
the Company, no information has come to my attention that causes me to believe
that (i) the Registration Statement, as the time it became effective, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) the Prospectus, as of its date and as of the date hereof
contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. In making the above
statement, I am not passing upon and do not assume responsibility for the
accuracy, completeness or fairness of the statements contained therein, and I
have not independently verified the accuracy, completeness or fairness of such
statements. In addition, and without limiting the foregoing I express no
opinion or belief as to financial statements, schedules and other financial and
statistical data included therein or excluded therefrom or incorporated by
reference therein.
I am a member of the bar of the Commonwealth of Massachusetts.
I do not intend to nor do I express any opinion as to matters governed by any
laws other than the laws of the Commonwealth of Massachusetts and the Federal
laws of the United States of America.
This opinion is rendered to you and is for your benefit in
your capacity as representatives of the Underwriters in connection with the
closing under the
<PAGE> 48
7
Underwriting Agreement. This opinion is not to be circulated, quoted or
otherwise relied upon by any person without my prior written consent.
Very truly yours,
Wallace F. Whitney, Jr.
Vice President,
General Counsel and Clerk
<PAGE> 49
EXHIBIT B
[Letterhead of Skadden, Arps, Slate, Meagher & Flom]
December , 1995
Salomon Brothers Inc
Merrill Lynch & Co.
Schroder Wertheim & co. Incorporated
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Re Underwritten Public Offering of %
Exchangeable Notes Due , 1998 of
Cooper Industries, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Cooper Industries, Inc.,
an Ohio corporation (the "Company"), in connection with the underwritten public
offering by the Company of its % Exchangeable Notes Due , 1998 (the
"DECS") pursuant to the Underwriting Agreement, dated December , 1995 (the
"Underwriting Agreement"), among you, as representatives of the several
underwriters (the "Underwriters"), the Company and Wyman-Gordon Company
("WGC"). The DECS are exchangeable by the Company at their maturity for shares
of common stock, par value $1.00 per share, of WGC (the "Common Stock") as
described in the Registration Statement referred to below.
This opinion is being furnished to you pursuant to Section
9(d) of the Underwriting Agreement.
In connection with this opinion, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Company's Registration Statement on Form S-3 (File No.
33-63457) relating to 16,500,000 DECS as filed with the Securities and Exchange
Commission (the "Commission") on October 17, 1995 under the Securities Act of
1933, as amended (the "Act"), as amended by Amendment No. 1 thereto filed with
the Commission on November 24, 1995, Amendment No. 2 thereto filed with the
Commission on November 30, 1995 and Amendment No. 3 thereto filed with the
Commission on December , 1995, including information deemed to be a part of
the Registration Statement at the time of effectiveness
<PAGE> 50
2
pursuant to Rule 430A of the General Rules and Regulations under the Act (the
"Rules and Regulations") (such Registration Statement as so amended, being
hereinafter referred to as the "Registration Statement"); (ii) the final
prospectus relating to the DECS in the form filed with the Commission on
December , 1995 pursuant to Rule 424(b) of the Rules and Regulations (such
final prospectus being hereinafter referred to as the "Prospectus"); (iii) an
executed copy of the Indenture, dated as of December , 1995, between the
Company and Texas Commerce Bank National Association, as Trustee (the
"Trustee"); (iv) the form of the DECS; (v) an executed copy of the Underwriting
Agreement; and (vi) conformed copies of the Statement of Eligibility and
Qualification on Form T-1 of the Trustee filed as an exhibit to the
Registration Statement (the "Form T-1"). We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such records
of the Company and such agreements, certificates of public officials,
certificates of officers or other representatives of the Company and others,
and such other agreements, documents, instruments, certificates and records as
we have deemed necessary or appropriate as a basis for the opinions set forth
below.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of executed documents, we have assumed that the parties thereto had
the power, corporate or other, to enter into and perform all obligations
thereunder and have also assumed (a) the due authorization by all requisite
action, corporate or other, execution and delivery by such parties of such
documents and the taking of all other requisite action by the parties thereto
and (b) except as to the Company with respect to the Indenture and the DECS,
the validity and binding effect thereof. As to any facts material to the
opinions expressed herein which were not independently established or verified,
we have relied upon oral or written statements and representations of officers
and other representatives of the Company and others.
In rendering the opinions set forth in paragraphs (ii) and
(iii) below, we have assumed that (a) the execution and delivery by the Company
of the Indenture and the DECS
<PAGE> 51
3
and the performance by the Company of its obligations thereunder do not and
will not violate or conflict with any agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject or any applicable judgment, order
or decree and (b) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by the Underwriting Agreement, except such as have
been obtained under the Act and such as may be required under the blue sky laws
of any jurisdiction in connection with the purchase and distribution of the
DECS by the Underwriters and such other approvals as have been obtained.
Members of our firm are admitted to the bar in the State of
New York and we do not express any opinion as to the laws of any other
jurisdiction other than the laws of the United States of America to the extent
referred to specifically herein.
Based upon and subject to the foregoing, we are of the opinion
that:
(i) The DECS conform in all material respects to the
description thereof contained in the Prospectus.
(ii) The Indenture has been qualified under the Trust
Indenture Act of 1939, as amended, and constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, except to the extent that the
enforceability thereof may be limited by (a) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other laws now or
hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(iii) When executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the
Underwriters pursuant to the Underwriting Agreement, the DECS will be
legal, valid and binding obligations of the Company entitled to the
benefits of the Indenture enforceable against the Company in
accordance with their terms, except to the extent that enforceability
thereof may be limited by
<PAGE> 52
4
(a) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at
law or in equity).
(iv) The Registration Statement, as of its effective date,
and the Prospectus, as of its date, appeared on their face to be
appropriately responsive in all material respects to the requirements
of the Act and the Rules and Regulations, except that, in each case,
we express no opinion as to: (a) the financial statements, schedules
and other financial or statistical information or data included in or
excluded from the Registration Statement and the Prospectus, (b) the
documents filed by WGC with the Commission pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in the Registration Statement, and (c) the
Form T-1, and we do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement and the Prospectus except to the extent set
forth in paragraph (i) above.
We have been advised by the Commission that the Registration
Statement was declared effective under the Act at on December , 1995, and,
to our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued under the Act and no proceedings
therefor have been instituted or are pending before the Commission; any
required filing of the Prospectus has been made in the manner and within the
time period required by Rule 424(b) of the Rules and Regulations.
In addition, we have participated in conferences with officers
and other representatives of the Company and WGC, representatives of the
independent public accountants for the Company and with your representatives
and your counsel at which the contents of the Registration Statement and the
Prospectus and related matters were discussed. Because the primary purpose of
our professional engagement was not to establish or confirm factual matters or
financial, accounting or statistical matters and because of the wholly or
partially nonlegal character of many of the statements contained in the
Registration Statement and the Prospectus, we are not passing upon, and do not
assume any
<PAGE> 53
5
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus and we make no
representation that we have independently verified the accuracy, completeness
or fairness of such statements (other than to the extent set forth in paragraph
(i) hereof). Without limiting the foregoing, we assume no responsibility for,
and have not independently verified, the accuracy, completeness or fairness of
the financial statements and schedules and other financial and statistical data
included in or excluded from the Registration Statement, and we have not
examined the accounting, financial or statistical records from which such
financial statements, schedules and data are derived. We note that, although
certain portions of the Registration Statement (including financial statements
and schedules) have been included therein on the authority of "experts" within
the meaning of the Act, we are not such experts with respect to any portion of
the Registration Statement including, without limitation, such financial
statements or schedules or other financial or statistical data included
therein.
On the basis of the foregoing, but without independent check
or verification (except as aforesaid), we confirm to you that no information
has come to our attention which has caused us to believe that the Registration
Statement, at the time it became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus, as of the date hereof, contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that we
express no opinion or belief as to (i) the exhibits (other than Exhibit 5) to
the Registration Statement and (ii) the documents filed by WGC pursuant to the
Exchange Act and incorporated by reference therein.
This opinion is furnished to you solely for your benefit in
connection with the closing today under the Underwriting Agreement and is not
to be used, circulated, quoted or otherwise referred to for any other purpose
or relied upon by any other person without our express written permission.
Very truly yours,
<PAGE> 54
EXHIBIT C
[Letterhead of Skadden, Arps, Slate, Meagher & Flom]
, 1995
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
SCHRODER WERTHEIM & CO. INCORPORATED
As Representatives for each of
the Underwriters Listed on
Schedule I to the Underwriting Agreement
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
We have acted as tax counsel to Cooper Industries, Inc., a
corporation organized under the laws of Ohio (the "Company"), in connection
with the issuance and sale by the Company of its % Exchangeable Notes Due 199
, the principal amount of which is mandatorily exchangeable at maturity into
shares of common stock, par value $1.00 per share, of Wyman-Gordon Company, a
corporation organized under the laws of Massachusetts (or, at the Company's
option, cash) (the "DECS") described in the Prospectus dated , 1995
(the "Prospectus") in the form filed with the Securities and Exchange
Commission on 1995. You have requested our opinion regarding the
discussion of certain Federal income tax consequences of an investment in the
DECS by U.S. Holders (as defined in the Prospectus), which discussion is set
forth under the heading "Certain Federal Income Tax Considerations" in the
Prospectus.
In rendering our opinion, we have reviewed the Prospectus and
such other materials as we have deemed necessary or appropriate as a basis for
our opinion. In addition, we have considered the applicable provisions of the
Internal Revenue Code of 1986, as amended, Treasury regulations, pertinent
judicial authorities, rulings of the Internal Revenue Service, and such other
authorities as we have considered relevant.
Based upon the foregoing, it is our opinion that, under
current law, the discussion presented under the heading "Certain Federal Income
Tax Considerations" in the Prospectus, although general in nature, is an
accurate summary of the material Federal income tax consequences
<PAGE> 55
2
relevant to an investment in the DECS by U.S. Holders. The Federal income tax
consequences of an investment in the DECS by a U.S. Holder will depend upon
that holder's particular situation and we express no opinion as to the
completeness of the discussion set forth in "Certain Federal Income Tax
Considerations" as applied to any particular holder.
The opinion is being furnished, pursuant to Section 9(d) of
the Underwriting Agreement, dated 1995, among the Company, Wyman-Gordon
Company and you, in connection with the closing under the Underwriting
Agreement occurring on 1995. This opinion is solely for your benefit
and is not to be used, circulated, quoted or otherwise referred to for any
purpose without our express written permission.
Very truly yours,
<PAGE> 56
EXHIBIT D
[Letterhead of Cooper Industries, Inc.]
, 1995
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
SCHRODER WERTHEIM & CO. INCORPORATED
c/o SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
I have acted as counsel for Cooper Industries, Inc., an Ohio
corporation (the "Company"), in connection with the underwritten public
offering by the Company of % Exchangeable Notes Due , 199 (the "DECS")
pursuant to the Underwriting Agreement, dated , 1995 (the
"Underwriting Agreement"), among you, as representatives of the several
underwriters (the "Underwriters"), the Company and Wyman-Gordon Company
("WGC"). The DECS are exchangeable by the Company at their maturity for shares
of common stock, par value $1.00 per share, of WGC (the "WGC Common Stock") as
described in the CBE Registration Statement referred to below.
This opinion is being furnished to you pursuant to Section 9
(e) of the Underwriting Agreement. Capitalized terms used but not defined
herein shall have the meanings set forth in the Underwriting Agreement.
In my capacity as counsel, I have examined (i) signed copies
of the Company's Registration Statement on Form S-3 (File No. 33- )
relating to 16,500,000 DECS as filed with the Securities and Exchange
Commission (the "Commission") on , 1995, under the Securities Act of
1933, as amended (the "Act") [list amendments if applicable], including
information deemed to be a part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A of the General Rules and Regulations under
the Act (the "Rules and Regulations") (such Registration Statement as so
amended, being hereinafter referred to as the "CBE Registration Statement") ;
and
<PAGE> 57
(ii) the final prospectus relating to the DECS in the form filed with the
Commission on , 1995, pursuant to Rule 424(b) of the Rules and
Regulations (such final prospectus being hereinafter referred to as the "CBE
Prospectus"). I have also examined, among other things, the corporate records
of the Company, the form of the DECS, the Underwriting Agreement, the Indenture
and conformed copies of the Statement of Eligibility and Qualification on Form
T-1 of the Trustee filed as an exhibit to the CBE Registration Statement (the
"Form T-1"). In addition, as to matters of fact not directly within my actual
knowledge, I have examined and relied upon certificates of officers of the
Company, certificates and telegrams of certain public officials and such other
records and instruments and made such investigations, as I have considered
necessary and proper in order that I may render an informed opinion in
connection with the matters hereinafter set forth. I have assumed the
genuineness of all signatures (except those of the Company) on, and the
authenticity of, all documents and instruments submitted to me as originals and
the conformity to original documents of all documents submitted to me as
copies, (ii) due authorization, execution and delivery by the parties thereto,
other than the Company and its subsidiaries, of all such documents and
instruments examined by me, and (iii) that, to the extent that any such
documents and instruments purport to constitute agreements of such other
parties, they constitute valid and binding obligations of such other parties.
Based upon the foregoing, I am of the opinion that:
(i) The Company and its Principal Subsidiaries have been duly
incorporated and are existing corporations in good standing under the
laws of their respective jurisdictions of incorporation, with
corporate power and authority to own or lease their properties and to
transact all business conducted by them as described in the CBE
Prospectus; the Company and its Principal Subsidiaries are duly
qualified to do business as foreign corporations in good standing in
all other jurisdictions in which their respective ownership or lease
of property or the conduct of their respective businesses requires
such qualification, except to the extent that the failure to be so
qualified or to be in good standing, considering all such cases in the
aggregate, would not have a material adverse effect on the business,
properties, financial
<PAGE> 58
3
position or results of operations of the Company and its Principal
Subsidiaries taken as a whole.
(ii) All the outstanding shares of capital stock of each
Principal Subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable, and, except as otherwise set
forth in the CBE Prospectus, all outstanding shares of capital stock
of the Principal Subsidiaries are owned by the Company either directly
or through wholly owned subsidiaries free and clear of any perfected
security interest and, to the best of my knowledge, after due inquiry,
any other security interests, claims, liens or encumbrances.
(iii) The DECS conform to the description thereof contained
in the CBE Prospectus.
(iv) The Indenture has been duly authorized, executed and
delivered by the Company.
(v) The DECS have been duly authorized by requisite corporate
action on the part of the Company.
(vi) To the best of my knowledge, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Company or
any of its subsidiaries of a character required to be disclosed in the
CBE Registration Statement which is not adequately disclosed in the
CBE Prospectus.
(vii) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
(viii) To the best of my knowledge, no consent, approval,
authorization or order of or qualification, registration or filing
with, any Ohio or U.S. Federal regulatory body or authority having
jurisdiction over the Company is required to be obtained by the
Company for the consummation of the transactions contemplated by the
Underwriting Agreement, other than (a) as disclosed in the CBE
Prospectus, (b) such as have been obtained under the Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
(c) such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
DECS by the Underwriters, as to
<PAGE> 59
4
which I express no opinion, and (d) as would not have a material
adverse effect on the ability of the Company to consummate the
transactions contemplated by the Underwriting Agreement.
(ix) Neither the execution and delivery of the Indenture, the
issue and sale of the DECS, nor the consummation of any other of the
transactions contemplated by the Underwriting Agreement nor the
fulfillment of the terms thereof will conflict with or result in a
breach or violation of, or constitute a default (with or without due
notice or lapse of time or both) under, (a) the charter or by-laws of
the Company, (b) any loan or credit agreement, indenture, deed of
trust, mortgage, note or other agreement or instrument relating to
borrowed money known to me and to which the Company or any of its
subsidiaries is a party or bound or (c) any judgment, order or decree
known to me to be applicable, to the Company or any of its
subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company,
or any of its subsidiaries, except in the case of clause (b) for such
conflicts, breaches, violations or defaults (i) as to which requisite
waivers or consents have been obtained, (ii) the obtaining of which
has been waived by the other parties thereto, (iii) which would not,
individually or in the aggregate, have a material adverse effect on
the condition (financial or other), business, prospects or results of
operations of the Company and its subsidiaries taken as a whole, and
(iv) as have otherwise been disclosed in the Prospectus, nor will such
action conflict with or violate any Ohio corporate or United States
Federal law, rule, regulation, order, judgment or decree applicable to
the Company or its subsidiaries or by which the Company or its
subsidiaries is bound or to which any of the property or assets of the
Company or its subsidiaries is subject except for such conflicts or
violations which would not, individually or in the aggregate, have a
material adverse effect on the condition (financial or other),
business, prospects or results of operations of the Company and its
subsidiaries taken as a whole.
(x) To the best of my knowledge, no holders of securities of
the Company have rights to the registration of such securities under
the CBE Registration Statement.
<PAGE> 60
5
(xi) The CBE Registration Statement, as of its effective date,
and the CBE Prospectus, as of its date, appeared on their face to be
appropriately responsive in all material respects to the requirements
of the Act and the rules and regulations of the Commission thereunder,
except that, in each case, I express no opinion as to: (i) the
financial statements, schedules and other financial or statistical
information and data included in or excluded from the CBE Registration
Statement and the CBE Prospectus, (ii) the documents filed by WGC
pursuant to the Exchange Act and incorporated by reference in the
Registration Statement, and (iii) the Form T-1, and I do not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the CBE Registration Statement and the CBE
Prospectus.
I have been advised by the Commission that the CBE
Registration Statement was declared effective under the Act at on
1995, and to my knowledge, no stop order suspending the effectiveness of the
CBE Registration Statement has been issued under the Act and no proceedings
therefor have been instituted or are pending before the Commission.
Furthermore, pursuant to Rule 424(b) of the Rules and Regulations, any required
filing of the CBE Prospectus or any supplement thereto has been made in the
manner and within the time period required by Rule 424(b).
I have participated in conferences with officers and
representatives of the Company, representatives of the independent public
accountants of the Company, representatives of WGC and with your
representatives and your counsel at which the contents of the CBE Registration
Statement and the CBE Prospectus were discussed. Based on such participation
and review as well as my position as Senior Vice President, General Counsel and
Secretary of the Company, no information has come to my attention that causes
me to believe that (i) the CBE Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the Prospectus, as of its date and
as of the date hereof, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. In making the above statement, I am not passing upon and do not
assume responsibility for the
<PAGE> 61
6
accuracy, completeness or fairness of the statements contained therein,
and other than as stated in paragraph (iii) above, I have not independently
verified the accuracy, completeness or fairness of such statements. In
addition, and without limiting the foregoing I express no opinion or belief as
to (w) financial statements, schedules and other financial and statistical data
included therein or excluded therefrom, (x) the WGC Prospectus attached as
Appendix A to the CBE Prospectus included in the CBE Prospectus and CBE
Registration Statement, (y) the documents filed by WGC pursuant to the Exchange
Act and incorporated by reference therein, and (z) the Form T-1.
I am a member of the bar of the State of Texas. I do not
intend to nor do I express any opinion as to matters governed by any laws other
than the laws of the State of Texas, the General Corporation Law of the State
of Ohio and the Federal laws of the United States of America.
This opinion is rendered to you and is for your benefit in
your capacity as representatives of the Underwriters in connection with the
closing under the Underwriting Agreement. This opinion is not to be
circulated, quoted or otherwise relied upon by any other person without my
prior written consent.
Very truly yours,
Diane K. Schumacher
Senior Vice President, General
Counsel and Secretary
<PAGE> 62
EXHIBIT E
Dear Sirs:
We have audited the consolidated balance sheet of Cooper
Industries, Inc. (the "Company") as of ; and the related statements of
consolidated results of operations, changes in shareholders' equity, and cash
flows for each of the three years in the period ended , incorporated
by reference in the Company's Annual Report on Form 10-K for the year ended ,
and incorporated by reference in the Registration Statement (No. ) on Form
S-3 filed by the Company under the Securities Act of 1933 (the "Act"); our
report with respect thereto is also incorporated by reference in such
Registration Statement, herein referred to as the "Registration Statement."
In connection with the Registration Statement:
1. We are independent auditors with respect to the Company
within the meaning of the Act and the applicable published rules and
regulations thereunder.
2. In our opinion, the consolidated financial statements
audited by us and incorporated by reference in the Company's Annual Report on
Form 10-K at and incorporated by reference in the Registration Statement,
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Securities Exchange Act of 1934 (the "Exchange
Act") and the related published rules and regulations thereunder.
3. We have not audited any financial statements of the
Company as of any date or for any period subsequent to . The
purpose (and therefore the scope) of our audit for the year ended
was to enable us to express our opinion on the consolidated financial
statements at , and for the year then ended, but not on the
financial statements for any interim period within such year. Therefore, we
are unable to express and do not express an opinion on: the unaudited
consolidated balance sheet at , the unaudited statements of
consolidated results of operations and cash flows for the three-month periods
ended , incorporated by reference in the Registration Statement from
the Company's Quarterly Report on Form 10-Q for the quarter ended
, or on the financial position, results of operations or cash flows
as of any date or for any period subsequent to .
<PAGE> 63
2
4. For purposes of this letter, we have read the minutes of
meetings of the shareholders, the Board of Directors, and the Executive,
Finance and Audit Committees of the Company as set forth in the minute books
through
, officials of the Company having advised us that the minutes of all
such meetings through that date were set forth therein and have carried out
other procedures to as follows:
a. With respect to the three-month periods ended ,
we have:
(1) performed the procedures specified by the
American Institute of Certified Public Accountants for a
review of interim financial information as described in SAS
71, Interim Financial Information, on the unaudited
consolidated financial statements for these periods, described
in 3. above, included in the Company's Quarterly Report on
Form 10-Q for the quarter ended , incorporated by
reference in the Registration Statement; and
(2) inquired of certain officials of the Company who
have responsibility for financial and accounting matters as to
whether the unaudited consolidated financial statements
referred to under a.(1) above comply as to form in all
material respects with the applicable accounting requirements
of the Exchange Act as it applies to Form 10-Q and the related
published rules and regulations.
b. With respect to the period from to ,
we have:
(1) read the unaudited operating results of the
Company for the -month and -month accounting periods ended
and , copies of which are not attached, officials
of the Company having advised us that no consolidated
financial statements as of any date or for any period
subsequent to were available except for the unaudited
operating results for the -month and -month accounting
periods ended ;
(2) inquired of certain officials of the
<PAGE> 64
3
Company who have responsibility for financial and accounting
matters as to whether the unaudited operating results referred
to under b.(1) are stated on a basis substantially consistent
with that of the audited consolidated financial statements
incorporated by reference in the Registration Statement; and
(3) inquired of certain officials of the Company who
have responsibility for financial and accounting matters as to
whether: (i) at , there were any increases in the
long-term debt of the Company and subsidiaries consolidated
(except for any increase which occurs as a result of changes
in the classification of outstanding commercial paper or the
issuance of the Company's
Series Medium Term Notes) or any decreases in
the aggregate amount of the shareholders' equity of the
Company (calculated exclusive of the translation component) as
compared with the amounts shown in the
unaudited consolidated balance sheet incorporated by reference
in the Registration Statement (except in each case, as
applicable, for any decrease which occurs as a result of the
declaration of scheduled dividends on common stock not in
excess of $0.33 per share per quarter, or (ii) for the period
from to , there was any
decrease, as compared with the corresponding period in the
preceding year, in consolidated revenues from continuing
operations, income from continuing operations before Federal
income tax, or in net income of the Company.
The foregoing procedures do not constitute an audit conducted
in accordance with generally accepted auditing standards. Also, they would not
necessarily reveal matters of significance with respect to the comments in the
following paragraph. Accordingly, we make no representations as to the
sufficiency of the foregoing procedures for your purposes.
5. Nothing came to our attention as a result of the foregoing
procedures that caused us to believe that:
a. any material modifications should be made to the unaudited
consolidated financial statements
<PAGE> 65
4
described in 3. above, incorporated by reference in the Registration
Statement, for them to be in conformity with generally accepted
accounting principles;
b. the unaudited consolidated financial statements referred to
in 3. above do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act as it applies
to Form 10-Q and the related published rules and regulations; or
c. (i) at , there were any increases in the
long-term debt of the Company and subsidiaries consolidated (except
for any increase which occurs as a result of changes in the
classification of outstanding commercial paper or the issuance of the
Company's Series Medium Term Notes) or any decreases in
the aggregate amount of the shareholders' equity of the Company
(calculated exclusive of the translation component) as compared with
the amounts shown in the unaudited consolidated balance
sheet incorporated by reference in the Registration Statement (except
in each case, as applicable, for any decrease which occurs as a result
of the declaration of scheduled dividends on common stock not in
excess of $0.33 per share per quarter, or (ii) for the period from
to , there was any decrease, as compared with the
corresponding period in the preceding year, in consolidated revenues
from continuing operations, income from continuing operations before
Federal income tax, or in net income of the Company.
6. For purposes of this letter, we have read the following as
set forth in the Registration Statement on the indicated page.
<TABLE>
<CAPTION>
Item No. Page No. Description
-------- -------- -----------
<S> <C>
a. "Ratio of Earnings to Fixed Charges (Unaudited)." The
amounts in the table.
</TABLE>
7. Our audits of the consolidated financial statements for
the periods referred to in the introductory paragraph of this letter comprised
audit tests and procedures deemed necessary for the purpose of expressing an
opinion on such financial statements taken as a whole. For
<PAGE> 66
5
none of the periods referred to therein, or any other period did we perform
audit tests for the purpose of expressing an opinion on individual balances of
accounts or summaries of selected transactions such as enumerated above and,
accordingly, we do not express an opinion thereon.
8. However, for purposes of this letter, we have performed
the following procedures enumerated below which was applied as indicated with
respect to the information identified in 6. above.
<TABLE>
<CAPTION>
Item in 6. above Procedures and Findings
---------------- -----------------------
<S> <C>
a. Ratio of Earnings to Fixed Charges (Unaudited)
----------------------------------------------
We compared the amounts in the table to a schedule prepared by
the Company and found them to be in agreement.
</TABLE>
9. It should be understood that we make no representations as
to questions of legal interpretation or as to the sufficiency for your purposes
of the procedure enumerated in the preceding paragraph; also, such procedure
would not necessarily reveal any material misstatement of the information
identified in 6. above. Further, we have addressed ourselves solely to the
foregoing data as set forth in the Registration Statement or the Prospectus
included therein, and make no representations as to the adequacy of disclosure
or as to whether any material facts have been omitted.
10. This letter is solely for the information of the
addressees and to assist the underwriters in conducting and documenting their
investigation of the affairs of the Company in connection with the offefing of
the securities covered by the Registration Statement, and it is not to be used,
circulated, quoted, or otherwise referred to within or without the underwriting
group for any other purpose, including, but not limited to, the registration,
purchase or sale of securities, nor is it to be filed with or referred to in
whole or in part in the Registration Statement or any other document, except
that reference may be made to it in
<PAGE> 67
6
the underwriting agreement or any list of closing documents pertaining to the
offering of the securities covered by the Registration Statement.
Very truly yours,
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Skadden, Arps, Slate, Meagher & Flom]
December 11, 1995
Cooper Industries, Inc.
Suite 4000, First City Tower
1001 Fannin
Houston, TX 77002
Re: Registration Statement on Form S-3 of
Cooper Industries, Inc. (file no. 33-63457)
Ladies and Gentlemen:
We have acted as special counsel to Cooper Industries, Inc., an
Ohio corporation (the "Company"), in connection with the public offering
(the "Offering") by the Company of its % Exchangeable Notes Due ,
1998 (the "Notes"). The Notes are to be issued pursuant to the Indenture,
as supplemented by the First Supplemental Indenture (as so supplemented,
the "Indenture"), to be entered into between the Company and Texas Commerce
Bank National Association, as trustee (the "Trustee").
This opinion is being furnished in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as
amended (the "Act").
In connection with this opinion, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Registration Statement on Form S-3 (Registration
No. 33-63457) relating to the Notes, as filed with the Securities and
Exchange Commission (the "Commission") on October 17, 1995, as amended by
Amendment No. 1 thereto, as filed with the Commission on November 24, 1995
and Amendment No. 2 thereto, as filed with the Commission on November 30, 1995
<PAGE> 2
Cooper Industries, Inc.
December 11, 1995
Page 2
(such Registration Statement, as so amended, being hereinafter referred to as
the "Registration Statement"); (ii) the form of the Underwriting Agreement (the
"Underwriting Agreement") proposed to be entered into between the Company,
as issuer, and Salomon Brothers Inc, Merrill Lynch & Co. and Schroder
Wertheim & Co. Incorporated, as representatives of the several underwriters
named therein (the "Underwriters"), filed as an exhibit to the Registration
Statement; (iii) the form of the Indenture filed as an exhibit to the
Registration Statement; (iv) the form of the Notes filed as an exhibit to
the Registration Statement; and (v) the Statement of Eligibility and
Qualification on Form T-1 of the Trustee filed as an exhibit to the
Registration Statement. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such records of
the Company and such agreements, certificates of public officials,
certificates of officers or other representatives of the Company and others
and such other documents, certificates and records as we have deemed
necessary or appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. In
making our examination of executed documents, we have assumed that the
parties thereto had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed (a) the due
authorization by all requisite action, corporate or other, execution and
delivery by such parties of such documents and the taking of all other
requisite action by the parties thereto and (b) except as to the Company
with respect to the Indenture and the Notes, the validity and binding
effect thereof. As to any facts material to the opinions expressed herein
which were not independently established or verified, we have relied upon
oral or written statements and representations of officers and other
representatives of the Company and others.
In rendering the opinion set forth below, we have assumed that (a) the
execution and delivery by the Company of the Indenture and the DECS and the
performance by the Company of its obligations thereunder do not and will not
violate or conflict with any agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the property or
assets of the Company is subject or any applicable, judgment, order or decree
and (b) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated by the Underwriting Agreement, except such as have been obtained
under the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the DECS by
the Underwriters and such other approvals as have been obtained.
<PAGE> 3
Cooper Industries, Inc.
December 11, 1995
Page 3
Members of our firm are admitted to the Bar of the State of New
York and we do not express any opinion as to the laws of any other
jurisdiction.
Based upon and subject to the foregoing, we are of the opinion
that when (i) the Registration Statement has become effective under the Act
and the Indenture has been qualified under the Trust Indenture Act of 1939,
as amended; (ii) the issuance and sale of the Notes has been duly
authorized by requisite corporate action on the part of the Company; (iii)
the Indenture and the Underwriting Agreement have been duly authorized,
executed and delivered; and (iv) the Notes have been duly authorized,
executed and authenticated in accordance with the terms of the Indenture
and delivered to and paid for by the Underwriters as contemplated by the
Underwriting Agreement, the Notes will be valid and binding obligations of
the Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except to the extent
that the enforcement thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws now or
hereafter in effect relating to creditors' rights generally and (2) general
principles of equity (regardless of whether enforceability is considered in
a proceeding at law or in equity).
We hereby consent to the use of our name in the Registration
Statement under the caption "Legal Matters" and to the filing of this
opinion as an exhibit to the Registration Statement. In giving such
consent, we do not thereby admit that we come within the category of
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 3 to the Registration Statement (Form S-3 No. 33-63457) 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
December 7, 1995
